MINUTES OF THE

      SENATE COMMITTEE ON TAXATION

 

      Sixty-seventh Session

      June 17, 1993

 

 

 

The Senate Committee on Taxation was called to order by Chairman Dean A. Rhoads, at 3:40 p.m., on Thursday, June 17, 1993, in Room 224 of the Legislative Building, Carson City, Nevada.  Exhibit A is the Meeting Agenda.  Exhibit B is the Attendance Roster.

 

 

COMMITTEE MEMBERS PRESENT:

 

Senator Dean A. Rhoads, Chairman

Senator Ann O'Connell, Vice Chairman

Senator Randolph J. Townsend

Senator Sue Lowden

Senator Bob Coffin

Senator Ernest E. Adler

 

COMMITTEE MEMBERS ABSENT:

 

Senator Raymond C. Shaffer (Excused)

 

STAFF MEMBERS PRESENT:

 

Kevin Welsh, Deputy Fiscal Analyst

Billie Brinkman, Committee Secretary

 

OTHERS PRESENT:

 

Paul Howarth, President, Howarth and Associates

Jan F. Cahill, Superintendent, White Pine County School District

Dave Purcell, Chief, Division of Assessments Standards, Department of

      Taxation

John O. Swendseid, Swendseid & Stern, Law Partnership

Lisa Reck, Recorder/Auditor, White Pine County

John Chachas, Chairman, Board of White Pine County Commissioners

Jennifer Stern, Swendseid & Stern, Law Partnership

Lucille Lusk, Lobbyist, Nevada Coalition of Concerned Citizens

Janice Wright, Deputy Executive Director, Department of Taxation

Carole Vilardo, Lobbyist, Nevada Taxpayers Association

Marvin Leavitt, Lobbyist, City of Las Vegas

 

Chairman Rhoads announced testimony would be taken at this meeting on Senate Bill (S.B.) 501.

 

SENATE BILL 501:  Directs state board of examiners to establish maximum tax rate for certain counties.

 

Coming forward were Paul Howarth, President, Howarth and Associates; Jan F. Cahill, Superintendent, White Pine County School District; John O. Swendseid and Jennifer Stern, both of Swendseid & Stern, Law Partnership.

 

Mr. Cahill read a prepared introductory statement (Exhibit C) and explained the accompanying packet (Exhibit D, the original is on file in the research library).

 

Chairman Rhoads called for a motion to suspend Senate Standing Rule 92.

 

      SENATOR O'CONNELL MOVED TO SUSPEND SENATE STANDING RULE 92 FOR

      THE REMAINDER OF THE SIXTY-SEVENTH SESSION.

 

      SENATOR TOWNSEND SECONDED THE MOTION.

 

      THE MOTION PASSED.  (SENATORS COFFIN AND SHAFFER WERE ABSENT FOR

      THE VOTE.)

 

      *****

 

Chairman Rhoads returned to the hearing on S.B. 501.  He asked Mr. Cahill what the ultimate actions would be of White Pine County if this measure failed to pass.

 

Mr. Cahill replied the county would face a desperate plight.   But he said he did have some ideas which might resolve the dilemma which were included in Exhibit D.  He pointed out the bond issue was introduced because two of the school buildings in White Pine County were constructed in the early 1900s.  He said the "new" wing of the high school building was constructed in 1953 and that portion of the building is the newest part of the high school.  And he pointed out there was no handicapped accessibility to either building presently occupied by the high school and the middle school.

 

Chairman Rhoads inquired if Mr. Cahill was aware the bond issue would  take the tax rate over the $3.64 tax cap.  Mr. Cahill replied, "No, sir." He said they knew the tax rate would go over the cap in the city of Ruth, but it was agreed before the bond issue was approached, that the mining company would "buy down" the tax rate in Ruth.  He indicated Howarth and Associates were employed to guide the school district through the necessary legal procedures as well as provide the financial information needed. 

 

Mr. Howarth answered questions and explained how the problems came about with the tax cap in White Pine County.  During conversation, Mr. Howarth said that with all the available information presented  to the General Obligation Bond Commission (GOBC),  the bond issue tax rate added to the Ely rate at that time, would have been $3.46, therefore,  a tax rate problem was not anticipated in Ely.

 

Mr. Cahill talked about the dramatic decrease of the assessed valuation in White Pine County which was not predicted.  Senator Adler inquired why the taxable assessed valuation had dropped so dramatically from February to March of this year.

 

Mr. Cahill said Bob Bishop, White Pine County Assessor, had informed him in July, 1992, that White Pine County would have a 2 percent growth factor, which meant that in 1993 there would be $119 million in taxable valuation, up from $117 million in the current fiscal year.  Mr. Cahill informed the committee that on February 15, 1993, he received information from the Nevada Department of Taxation that indicated the taxable valuation would be $118 million.  Mr. Cahill continued, saying on March 15, 1993, he received information that the final adjusted assessed valuation would be $112 million.

 

Dave Purcell, Chief, Division of Assessment Standards, Department of Taxation, came forward to tell the committee that he was the person who projected the final assessed valuations which were used in March, 1993, for the purpose of setting tax rates.  He said the apparent decrease in the assessed valuations was due to a mining company, NERCO, which sold property in White Pine County causing a great reduction.   He said that caused a decrease in the assessed value of between $3.6 million and $3.8 million.  Mr. Purcell explained that in addition, there was a drop in the net proceeds estimated by the mining companies in  White Pine County.  He explained how such a sale had affected the assessed valuation and how taxes were estimated by the Department of Taxation.

 

Further questions were posed by committee members to Mr. Cahill.

 

Mr. Howarth answered questions by referring to a prepared chart (Exhibit E).

 

Mr. Swendseid told the committee his firm had served as bond counsel for the White Pine County School District.  He said there is presently no procedure whereby a vote can be obtained to exceed the tax cap of $3.64.

 

Mr. Howard commented there were no provisions for tax overrides or "pay-as-you-go" taxes.  He suggested the role of the General Obligation Bond Commission (GOBC) could be expanded to have more authority over bond issue reviews.

 

Mr. Cahill discussed the newspaper advertising prior to the vote on the bond issue in November and referred to Exhibit D.

 

Conversation continued between the committee members and Mr. Cahill.

 

Lisa Reck, Auditor, White Pine County, was asked to come forward to answer questions concerning the assessed valuations and the tax rate of White Pine County.  She said her first indication there could be a tax cap problem was February 15, 1993.

 

Senator Adler, in referring to the Nevada Constitution on "Providing a Uniform System of Common Schools," stated, "We have an obligation to maintain a uniform system of education in this state."  He remarked reports on some of the White Pine County Schools Exhibit D showed the buildings are totally inadequate.  He said he believes the state falls under the provision of the Constitution which says "we shall make an appropriation to make certain those schools are taken care of."  Senator Adler added he does not believe providing adequate schools necessarily falls back on a county.  He said he sees an absolute mandate in the Constitution which says in part, "shall support and maintain a system of common schools." Senator Adler stressed his  belief the state was getting dangerously close to providing an unequal system of education between the rural students and the people of Clark County or Washoe County where newer facilities are provided.

 

John Chachas, Chairman, Board of White Pine County Commissioners, came forward to reply to questioning by Senator O'Connell, who posed the question of why no action had been taken sooner concerning the aged school buildings.  Mr. Chachas said his administrative responsibility was to the county, not to the school district.  He said the county, as well as the school district, operated on "management by crisis."

 

Further questioning and discussion ensued.

 

Mr. Cahill stressed to the committee that the fire marshal had recently informed him that if all the regulations and rules were applied, the White Pine High School would have to be closed.  He added that on March 2, 1993, the State Fire Marshal did "red tag" one of the school buildings so that it can no longer be used for school purposes.

 

Discussion continued.

 

Mr. Cahill told the committee that the White Pine County School District, in attempting to find a solution to the present problem, had made a bona fide offer to help "buy down" the tax rate an appropriate amount.

 

Ms. Stern reiterated previous testimony which stated there was a combination of a lot of problems including other tax overrides on the ballot at the same time as the school district's bond issue, as well as the decreased assessed valuation which caused the present problem.  She stressed it was not "just the school district bonds."

 

Ms. Stern went through a handout, "Procedure For Nevada School District General Obligation Voter-Approval Bond Issue" (Exhibit F).  She stated the White Pine School District went through the procedures in the Nevada Revised Statutes (NRS) and met every statutory requirement.

 

Ms. Stern stressed that 58 percent of the voting people voted in favor of the bond issue at the November General Election.  The Board of Trustees of the school district adopted the resolution authorizing the sale of the bonds on January 25, 1993, before there was any notification of a decrease in assessed valuation in the county.

 

Mr. Swendseid explained a handout (Exhibit G) quoting the NRS on bond obligations and tax limitations.  He suggested that an opinion be requested from the attorney general and/or the legislative counsel concerning an interpretation of the referenced statutes.

 

Mr. Chachas came forward to remark on the previous testimony.  He outlined his version of some of the activities prior to the November vote on the bond issue.  He said his concern is how to solve the problem at hand without going over the tax cap of $3.64.

 

Mr. Chachas was questioned concerning the possibility of Magma Copper Company locating in White Pine County.  He said because of the Environmental Impact Study (EIS), that company would probably not come into the county for at least 8 to 12 months.  He said the assessed valuation of the Magma Copper Company would be approximately $240 million.

 

Discussion of a "temporary fix" followed.

 

Mr. Chachas said neither the government entities of White Pine County nor the school district had met for a discussion of the current tax cap problem.

 

Mr. Cahill explained the school district proposed to pay the tax "buy down" with interest received on the bond issue which could be utilized.

 

Discussed ensued.

 

Mr. Cahill explained he believed that the GOBC would not have approved a bond issue if all the information which is now available, had been put before them when the bond resolution was first being discussed.  And he said the school board would probably not have asked for a resolution for the bond issue.

 

Lucille Lusk, Lobbyist, Nevada Coalition of Concerned Citizens, discussed the misconception of ballot questions in reference to the bond issue.  She summed up her remarks by saying, "The concern is simply that S.B. 501 sets a precedent.

 

Janice Wright, Deputy Executive Director, Department of Taxation, remarked the tax rate for Ruth was obviously going to be exceeded by the  referenced bond issue and Ely's tax rate was $3.08.  She said  there is enough revenue available in the final budget of the school district to "buy down" the bond debt.

 

Senator Adler remarked he thought there was a fundamental problem in the rural counties which is not being addressed by the committee.  He referred to the mining operations in the rural areas which could close down at any time, leaving a hole in the assessed valuations.

 

Ms. Wright addressed the question posed by Senator Adler.  She said the real property does remain on the assessment rolls.  She stressed the serious problem in White Pine County was created by one mining company buying out the operation of another mining company at a considerable lower value than what was shown on the assessment roll.  She stressed that when a bond issue is being planned, it is necessary to look at the history of the overall county situation.

 

Mr. Howarth came forward to discuss a 50 cents "pay-as-you-go" rate and he referred to Exhibit E for further explanation.  Discussion ensued between Ms. Wright and Mr. Howarth.  Mr. Howarth said the bond debt rate was estimated to be 38 cents at the time the GOBC approved the bonds.  And he said when the bond rate of 38 cents was added to the then current Ely tax rate, the total was $3.46.

 

Senator O'Connell inquired if the information reviewed by the GOBC is sufficient to prevent the problem presently being faced by White Pine County.  Mr. Howarth replied, "No."  Senator O'Connell requested Mr. Howarth to supply the committee with what he would consider adequate information to be furnished to the GOBC for reviewing purposes.  She indicated the GOBC seemed to be the weakest link in the present scenario.

 

Mr. Howarth said he believed there were at least three things which caused the current tax cap problem in White Pine County:  1) The large operating rate increases in Ely and White Pine County which is confusing; 2) Decrease in the assessed valuation; and 3) The school district's decision to sell a $7 million bond in January versus a $5 million bond so that the high school could be constructed before the elementary school.  He explained those three items combined add up to 60 cents and of that 60 cents, 12 cents comes from the school district.  He added that the bonds are not the only culprit causing the tax cap problem.

 

Carole Vilardo, Lobbyist, Nevada Taxpayers Association, spoke in opposition to S.B. 501.

 

Marvin Leavitt, Lobbyist, City of Las Vegas, inquired if it is a  legally permissible expenditure for a school district to "buy down" a county.  And is it legal for a county to "buy down" a city rate?  Senator Adler indicated he had the same concern.  Mr. Leavitt said he thought a legal opinion was in order and Chairman Rhoads indicated he had asked Loren J. Malkiewich, Legislative Counsel, to  research the legality of "buy downs."

 

Chairman Rhoads announced no action would be taken this date on S.B. 501 because of a lot of unanswered questions at this time.

 

There being no further business to come before the committee, the meeting was adjourned at 5:40 p.m.

 

 

 

 

 

 

 

                                    RESPECTFULLY SUBMITTED:

 

 

 

                                                   

                          Billie Brinkman,

                          Committee Secretary

 

 

 

 

APPROVED BY:

 

 

 

 

                                

Senator Dean A. Rhoads, Chairman

 

 

DATE:                           

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Senate Committee on Taxation

June 17, 1993

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