Carson City (Thursday), May 22, 1997

Senate called to order at 10:14 a.m.
President pro Tempore Jacobsen presiding.
Roll called.
All present.

Prayer by the Chaplain, The Reverend Richard Campbell.
Almighty God, in whom we live, move and have our very being: we come to You this day to acknowledge that the earth and all who dwell within it are precious in Your sight. Take away our selfish pride and bring to our minds Your goodness, so that living together, as Your children, we may enjoy Your gifts and be thankful. We thank You for mountains, fields and woodlands; for oceans and running streams; for villages and cities where Your children live, work and play; and for Your presence with us in all our endeavors. Grant this legislative body insight into Your wisdom today so that their actions may be to Your honor and glory.

Amen.

Pledge of allegiance to the Flag.

Senator Raggio moved that further reading of the Journal be dispensed with, and the President and Secretary be authorized to make the necessary corrections and additions.
Motion carried.

William J. Raggio,

Chairman

Mr. President pro Tempore:
Your Committee on Finance, to which were referred Senate Bills Nos. 181, 380, has had the same under consideration, and begs leave to report the same back with the recommendation: Amend, and do pass as amended.

William J. Raggio,

Chairman

Mr. President pro Tempore:
Your Committee on Judiciary, to which was referred Assembly Bill No. 271, has had the same under consideration, and begs leave to report the same back with the recommendation: Do pass.

Mark A. James,

Chairman

Mr. President pro Tempore:
Your Committee on Natural Resources, to which were referred Assembly Bills Nos. 77, 180, has had the same under consideration, and begs leave to report the same back with the recommendation: Do pass.

Dean A. Rhoads,

Chairman

Assembly Chamber, Carson City, May 21, 1997

To the Honorable the Senate:
I have the honor to inform your honorable body that the Assembly on this day concurred in the Senate amendment to Assembly Bill No. 122.
Also, I have the honor to inform your honorable body that the Assembly on this day passed Assembly Bills Nos. 370, 430, 446, 463.

Jacqueline Sneddon

Assistant Chief Clerk of the Assembly

At 10:42 a.m.
Senator O'Connell presiding.
A presentation of Senate Bill No. 254 was considered.

The Committee of the Whole was addressed by Senator O'Connell.
Senator O'Connell requested that all remarks on Senate Bill No. 254 be entered in the Journal.
Senator O'Connell:

I hope the beginning of this morning isn't an indication as to how this hearing is going to go. When one of the members of our presentation group parked in the garage this morning he was surrounded by military people who would not let him out of the parking garage for the longest time because of the helicopters landing on the legislative grounds. The next thing: when we were going over the presentation, one of our members got an emergency call regarding a bomb threat in one of the court houses. I hope that is not an indication as to how the hearing will continue.
The interim committee on SCR No. 40 was established to study the laws relating to the laws relating to the distribution among local governments of revenue from state and local taxes. The objectives set forth for the committee were as follows:
1. The new tax distribution system be revenue neutral for the affected governments in the first year. The objective further assumed constant or current service levels for each entity.
2. The revenue growth in future years be directed to follow the population growth.
3. The new tax distribution should reduce competition and encourage cooperation between the local governments.
4. Both the criteria and the parameters be established for the creation of new units of local government and for the treatment of any new local government/special district in the distribution formulas.
In order to attain these lofty goals, the people to be chosen for the technical committee had to be Nevada's brightest financial minds. The people chosen certainly lived up to our expectations. They are fiscal analysts Mike Alstoy, Clark County School District; Gary Cords, City of Fallon; Marvin Leavitt, City of Las Vegas; Steve Hanson, City of Henderson; Mary Henderson, Washoe County; Terry Thomas, City of Sparks; Mary Walker, City of Carson City as well as Guy Hobbs, fiscal consultant, Clark County and Michael Pitlock, Executive Director, Department of Taxation, State of Nevada. These outstanding people accomplished the task that we set before them in SCR No. 40. Five of those analysts are here this morning to explain SB No. 254. On your desks should be a packet of additional information on the makeup of the committee as well as the information we will cover this morning. If you really need a lift, I recommend reading Bulletin No. 97-5, the Legislative Counsel Bureau's Law Relating to the Distribution Among Local Governments of Revenue from State and Local Taxes.
Let me draw your attention to the fourth page of the handout, the graphs showing the distribution before and after the passage of SB No. 254. The people making the presentation today are Guy Hobbs, Marvin Leavitt, Mary Walker, Mary Henderson and Michael Pitlock. On the seventh page of the handout, you will find the amendment which will be voted on today. The amendment will be explained along with a section by section discussion of the bill. After our five speakers finish their presentations, we will be happy to address any questions.

Mr. Guy Hobbs:

Thank you, Madam Chair and members of the committee. Chairman O'Connell covered many of the reasons why SCR No. 40 was initiated. The old system of distribution that we had been using since 1981, since the tax shift, was thought to be no longer effectively serving its purpose. The old system was cumbersome. For example, the six revenues on the chart on page 5 of the packet are distributed according to four different formulas some of which use assessed valuation, some of which use population. In some cases, some cities only receive those revenues. In some cases, counties only receive those revenues. In other cases where there are two or more cities in a county, counties do not share in those revenues. The old system has been thought to have little flexibility. The creation of a new city, town or other form of entity is something that can create significant conflict. Also, in one of the fastest growing states, this system should be more responsive than it has been in the past. This was generally pointed out during the last legislative session with SB No. 556, the creation of a new unincorporated town in Clark County, Summerland, and a previously unincorporated town of Spring Valley. There were no mechanisms in the law that would allow for either of those towns to participate in the distribution of the revenues under discussion today. I would draw your attention to page 2 of your packet which outlines the current system as compared to SB No. 254. In summary, SB No. 254 is recommending that six local intergovernmental revenues, specifically, the supplemental city-county relief tax, the basic city-county relief tax, the motor vehicle privilege tax, the cigarette tax, the liquor tax and the real property transfer tax, which had previously been apportioned according to several different formulas, be pooled into a common revenue distribution fund at the county level and be distributed among the local governments within a county according to a single formula. The flowchart on page 4 graphically shows the flow of funds for those six revenue sources prior to SB No. 254 and what they would be if SB No. 254 is adopted.
The revenues from the previously mentioned tax sources will be pooled at the county level for distribution to local governments under a single formula. The base amount of revenue that each local government will receive will be set at a level that recognizes what it received from any or all of those revenues during the prior two fiscal years, fiscal 1995-96 and fiscal 1996-97 will be used to establish the base distribution amounts for each local government. As Chairman O'Connell indicated, this was done to ensure some stability for the local governments transitioning from the old system to the new system. The revenue distribution would not be such a change that it would create a shock for any of the local governments. For counties, cities, towns and special districts, the amount of money that they will receive beyond the base amount will be increased by the Consumer Price Index (CPI) in all subsequent years. This was included to ensure that those local governments that are not growing as rapidly as others at least receive from year to year a constant dollar amount in terms of purchase power to take care of their basic needs.
To the extent that there is revenue in the common distribution fund at the county level from these six sources, above and beyond that amount which is needed to fund the base plus the CPI from year to year, the excess amount of revenue will be distributed among and between the local governments within a county according to a formula which recognizes percentage change in population from year to year and the percentage change in assessed value from year to year calculated on a five-year moving average. The five-year moving average was recommended by the technical committee to smooth out any effects from reappraisal cycles that occur within a county during the course of a year.
There are several other provisions of the bill that would allow for an alternative sharing of revenue within a county if two or more local governments determine that they wish to share the revenue differently between them than the formula otherwise prescribed. There are methods prescribed that would allow for the creation of a new local government, and the new local government would receive a distribution from the common distribution fund if it meets certain criteria. Some of the disincentives in the past for the merger or consolidation of certain units of local governments have been removed. In a sense, we have created incentives for pursuing rational mergers and consolidations of certain local governmental units. There is also an appeal process whereby if any local government feels the base amount set in the formula does not reflect its needs at the base year. There is a one time opportunity to appeal through the Nevada Tax Commission with the Department of Taxation and the Committee on Local Government Finance also reviewing the request ensuring that the base years are set at a level that would reflect a need.
Section 1 through section 3 of SB No. 254 contain the definitions and directories.
Section 4 defines enterprise districts as a governmental entity which is not a county, city or town but also receives funding from one of the six revenue sources that would be combined into the common distribution fund. It also indicates that the executive director shall determine which entities are enterprise districts pursuant to Section 12.5 of SB No. 254.
Section 5 establishes the local government tax distribution fund which is the fund receiving and distributing the proceeds of the six tax sources mentioned on page 5 of the packet.
Section 6 defines as a local government for purposes of this act any county, city or town that receives any funding from any of the taxes included in the fund.
Section 7 defines as a special district for purposes of this act any other entity that receives any revenues from any of the taxes included in the fund other than counties, cities, towns or enterprise districts.
Section 8 repeats the creation of the local government tax distribution fund in the state treasury under the administration of the executive director of the Department of Taxation.
Section 9 establishes any local government, special district or enterprise district that previously received any of the revenues included in the fund will be eligible for a distribution from the fund in the manner prescribed in SB No. 254.
Section 10 establishes that enterprise districts shall receive from the fund an amount equal to what they received in the base year for each succeeding year after the base year. Special districts and local governments shall receive the amount they received in the base year indexed forward by the CPI.
Section 11 contains the essential elements of the formula, the nuts and bolts. It establishes the procedure for allocating revenues on a monthly basis to each of the local governments eligible for a distribution from the fund. The procedure requires the executive director to first allocate money distributable to the enterprise districts and then proceed with the allocation to the local governments and special districts. The formula requires each local government and special district to receive their base year amounts adjusted by the CPI to the extent there are revenues in the fund in excess of the amount necessary to fund the base amounts plus the CPI increase. The excess revenues are to be distributed to the local governments and special districts using statistics relating to annual population growth and growth in assessed value. Local governments, cities, towns an .will have the change in population and the assessed value multiplied by their respective base plus the CPI. A five-year moving average for change in assessed value will be used to smooth the effect of the every fifth year reappraisal cycles. Special districts will have the growth in assessed valuation also using the five-year moving average multiplied by their base plus the CPI. Population would not be used as a statistic for special districts. As previously noted, enterprise districts will receive their base-year amount only in each succeeding year with no CPI, population or assessed value adjustment. If there are not sufficient moneys in the fund to allocate the base plus the CPI to each of the local governments and special districts, the executive director shall use the proportionate distribution used in the prior fiscal year to make the allocation. This section also prescribes procedures for the adjustments to the monthly allocations to ensure each local government and special district receives its full entitlement each year. As before, the executive director will provide estimates of revenue to each local government during the budget preparation process.
Section No. 12 provides a safeguard relating to debt service. If any local government, special district or enterprise district has previously pledged all or part of the revenue affected by SB No. 254 as security for bonded indebtedness, the executive director shall ensure that the affected entity continues to receive an amount at least equal to the amount pledged.
Section No. 13 prohibits enterprise districts from pledging revenue received from the fund for bonded indebtedness. It also prohibits any new governmental entity created between July 1, 1996, and July 1, 1998, from participating in the distribution of revenues from the fund unless the new entity provides police protection and at least two of the three following services: fire protection; construction, repair and maintenance of roads; and parks and recreation.
Section No. 14 establishes two or more local governments within a county may enter into an alternative sharing of revenue that prescribed by the formula, thereby, giving the governments within the county more flexibility.
Section No. 15 provides a mechanism for establishing allocations to the new local governments or special districts created after July 1, 1998. To be eligible to receive a distribution, a new entity would be required to provide police protection and at least two of the three following services: fire protection; construction, repair and maintenance of roads; and parks and recreation. A newly created entity must request the Nevada Tax Commission to establish the initial allocation with the Department of Taxation and the Committee on Local Government Finance also reviewing the request. The notice and hearing procedures for establishing initial allocations are outlined in this section as are the definitions of police protection; fire protection; construction, repair and maintenance of roads; and parks and recreation.
Section No. 16 causes regulations for the determination of population estimates for towns to be added to the current statutes. There was an amendment deleting population estimates for special districts as those are not used in the formula.

Mr. Marvin Leavitt:

Madam Chairman, members of the committee, one of the difficulties of tax bills is they make a subject that is already complex even more complex and difficult to understand and read. The language we sometimes have to use to explain a fairly simple concept becomes very difficult to read once it is put on paper. As an example, Section No. 11 states, "Using the figure calculated pursuant subparagraph (1) to calculate and allocate to each local government an amount equal to the proportion that the figure calculated pursuant to subparagraph (1) bears to the total amount of the figures calculated pursuant to subparagraph (1) of this paragraph and subparagraph (1) of paragraph (b), respectively, for the local governments and special districts located in the same county multiplied by the total amount available in the account." Basically, the concept is to take taxes and distribute them in a manner that is fair to all entities. There are really three areas involved in the new formula. First, each government is allowed to have sufficient money to account for the changes in the value of the dollar in order to allow them to continue their current operation into the next year. This has not existed in current laws. Second, we have some measure to try to determine changes in the size of the government over time. There are probably two measures readily available. One is assessed valuation and the other is population. In the past, we have used these for different formulas, but they have varied from tax to tax. We have some communities with a high residential base, high population, but may also have a small business base and consequently a small assessed valuation. If we use strictly population in this instance, they look very good, but if we use assessed valuation, they come out very poorly, i.e., North Las Vegas. We have other communities with a high assessed valuation base and a low population base. The opposite is true for these communities. Taxes that are distributed based on assessed valuation will benefit these communities, but if population is used as the determining factor, they can be hurt. The plan is to combine population and assessed valuation in such a way to benefit governments whatever their base of growth may be, whether in population or assessed valuation. If we overlay those factors on the technical language then the formula makes sense. You may have to trust that the language in SB No. 254 indeed accomplishes what we say it accomplishes. We have run the formulas based on the language in SB No. 254 hundreds of times. We have tried every scenario we could possibly think of in order to make certain we have not interjected some unfairness to some type of government in this formula.
In Section No. 17 and the next several sections, we include the taxes involved in the fund, i.e., liquor tax, cigarette tax, real property transfer tax, basic city-county relief tax, supplemental city-county relief tax--the tax involved in the tax shift in 1981.
Section No. 21.5 protects the rights of bond holder in order to ensure their contract with a government is not impaired as a result of enacting SB No. 254. In the past, the city-county relief tax has been available to use for the repayment of debt. Each local government in the past received city-county relief tax identified as such. Under SB No. 254, the city-county relief tax will lose its identity when received by the local governments. When it is received at the county level, it has still retained its identity. We want to preserve the rights of bond holders as they exist under present statutes.
SB No. 254 does nothing to change the distribution of taxes between and among counties. In other words, we are not doing anything that changes how much money is available to any one county in the state, SB No. 254 simply relates to what the distribution will be below the county level.
Section No. 22 is executive director language.
Section No. 23 discusses the functions of one government being assumed by another government. This has been a problem throughout Nevada. We have had a number of instances within the state where special districts overlap. In some cases, there can be five overlapping special districts and each one of them provides one service. If there was an overlapping board, the money would not be used the way it is now. One board would determine priorities. SB No. 254 is an attempt to make this change easier to accomplish, combine or even eliminate special districts.
Section No. 26 relates what happens when the sales tax does not equal the projection. In 1981, a supplemental city-county relief tax was used to offset property tax. There was a provision that if the sales tax fell below a certain level then an additional property tax could be levied to offset the loss. This was done with the city-county relief tax. This section is a means by which the same safeguard can be built into the system. Before we would multiply $1.15 by the assessed valuation of the state then compare that figure with the available sales tax. The same formulas will be used except it will now be done at the county level instead of at the state level.
Sections Nos. 31 and 32 include the vehicle privilege tax. The school districts are not included in this formula and will preserve their funding allocation of the vehicle privilege tax under current statute.
Section No. 35 outlines the base-year calculations done on an average of two fiscal years then a multiplication factor applied to bring the total back up to the latest year. Some governments will benefit in the first year; other governments will benefit using the second year. This now becomes a combination of the two. Enterprise districts still use two years as the base. The amendment preserves the right of the incorporated towns to receive the same amount of money they would have received under the provisions of SB No. 556 of the 68^th Session. It also preserves the right to receive the vehicle privilege tax. Some local governments have felt that by using 1981 as the base year, it had put them in a situation whereby they eternally had less money available to them than other local governments because 1981 was not a good year for them to use. For instance, North Las Vegas had a high debt rate and a low operating rate. Since the operation rate was used, they felt this was unfair to them. SB No. 254 provides a one-time appeal opportunity for local governments to have their base increased. It is a "due process" process whereby the other local governments are notified and have the opportunity to respond. The executive director of the Department of Taxation and the Committee on Local Government Finance and finally the Nevada Tax Commission will review the appeals and make a final ruling.
Section No. 36 states once the executive director of the Department of Taxation has determined what districts will be enterprise districts, the executive director will provide notification and due process for them also.
Section No. 37.5 contains an appropriation for implementation of SB No. 254.
Section No. 38 establishes effective dates.
On behalf of the technical committee, I would like to express our appreciation for the work of the legislators involved in this long process. One of the interesting aspects in determining this formula was that we worked out the specifics of the formula before running the numbers in the formula. We tried to determine what would be fair before any numbers were used in the formula. We feel SB No. 254 is a good, fair bill.

Mary Walker:

Thank you, Marvin, Madam Chair and members of the committee. Briefly, I would like to compare the old formula to the new formula. First, the old formula does not follow growth. In order for a local government to provide adequate service levels to its citizens, the funding levels must keep commensurate with the costs. Under the old formula, both the SCCRT and motor vehicle privilege tax was based upon a distribution system which included the 1980-81 tax rate and the recent assessed valuation. By having a distribution system based on an 1980-81 tax rate it kept the distribution fairly stagnant. As certain areas within counties grew, the money was not going to those areas of growth. Therefore, with moneys not going to the growth areas, it was very difficult for local governments to be able to provide the increased demands of service. Under the new formula for revenues above and beyond the base year, the revenues will be distributed based upon each entity proportionate share of growth using a growth factor of assessed valuation and population. Within an entity, the highest proportionate share of the growth will equal the highest proportionate share of new moneys.
We looked at a previous three-year period and compared the old formula and the new formula. Under the old formula, Lander County in 1992-93 had four governments receiving funding. The county itself had the highest increase in assessed valuation and population. Kingston had a decrease in assessed valuation in the amount of 24 percent that year. Yet, Kingston received the highest amount of additional revenues in the amount of a 30 percent increase in revenues while their population and assessed valuation declined. The county had the highest assessed valuation and population received the lowest increase in tax revenues. The old formula does not follow growth within the county.
Douglas County has four governmental entities receiving funding. In 1994-95, Minden had the highest proportionate share of increase of assessed valuation and population of 29 percent. They received the third highest level of increase in revenues. Gardnerville which had the lowest growth had the second highest increase in revenue of almost 15 percent. The new formula will follow growth so that service levels can match the demands of Nevada's citizens.
SB No. 254 should decrease the competition among local governments for new tax dollars. The BCCRT, cigarrette and liquor tax are based upon a system within a county. If a county has no incorporated cities within the county, the basic city-county relief tax will go entirely to the city. If a county has one city, the money is divided between the city and the county. If a county has two cities, all the basic sales tax goes to the cities and none to the county. This has increased the competition among local entities to be formed in order to receive the tax moneys. When a new entity is formed, it should not be based upon how much money the new entity will be receiving but upon the service level needs of its citizens. This will take that competition away.
The last issue is the taxpayer equity issue regarding enterprise districts. Some enterprise districts may be receiving free services, i.e. television, sewer, water, etc., through state subsidies at the expense of other taxpayers not in those enterprise districts but located within the same county. SB No. 254 will freeze the amount of moneys enterprise districts may receive.
Other areas to be addressed later in this session are clarifications to the fuel tax. The formula is over 50 years old and the NRS provisions regarding the fuel tax are over 120 years old.

Mary Henderson (Representing Washoe County):
Thank you, Madame Chair and members of the committee. I think we would all like to thank you all for being so indulgent of your time today since this is a very complex issue for us to go through. Mary Walker and Marvin Leavitt have pretty much hit on the issue of competition for revenues in terms of what that does in creating a new jurisdiction. I think another aspect that this bill really brings forward to us is the elimination of planning and land use and growth decisions by our policymakers, the councils and commissioners within all the counties throughout the state, in terms of a formula. We are making policy decisions under this current formula about those very critical issues based upon distribution of revenues. We should be having the policy drive the formula, not vice versa. I think, when Marv made the statement that we actually created the formula before we ran the numbers, that is very significant because what it creates, many times, for local governments is a situation where we are making decisions based on how we can get revenue versus what is really best for the taxpayers where our master planning is taking us. I can give you a for instance on that: The Lincoln Land Institute, which really studies planning extensively throughout the country, a few years ago I remember a piece they had written talking about what's happened in California since passage of Proposition No. 13 and how local governments are currently making land use decisions based on their ability to bring in revenues. What that has created is shopping centers on almost every other block in California. When you look at the quality of life of a community, the type of community you want to have, policymakers have always been put in a situation where they have had to make those decisions based on revenues. I think, with this change, we can now make those decisions based on what is good for the community. We can have cores of urban development; we can have suburban development and eliminate some of that competition and need to drive the assessed valuation.
Another issue which was extremely important to Washoe County was an alternative method of distributing some of these revenues. For us, it is about $54 million per year among Washoe County and the two cities of Reno and Sparks and some special districts. We know that any formula that you do statewide cannot reflect absolutely what goes on in each individual county. We are all unique and all different. By putting an alternative distribution method in place, what we are giving our local governments is some flexibility to be able to sit down at the table among themselves and decide if there are some critical issues or needs within the community that might need some funding that under the current formula they could not share those revenues. Now, they are going to have the ability to do that and effect their own distribution method within the county. This is very critical. I always use the example of Washoe County and a special district we have, Sun Valley. They have a General Improvement District in Sun Valley which provides a very valuable service to that community in terms of water and sanitation. They will lose some money from SCCRT because they are an enterprise district, but the county itself does not want to take over that function. So, it allows us to enter into an agreement with Sun Valley GID to perhaps subsidize them because we feel that that is a very critical service to a low income area of the county and one that needs to continue. We don't really want to put a burden on the backs of the citizens of Sun Valley. I think that is a critical piece of this.
One thing I would like to talk about, just for a moment. And I would like to particularly thank the chair and Senators Rhoads, Porter and Shaffer and your colleagues in the Assembly for the process we went through as we put this together. In my brief experience as a lobbyist, having been through four sessions, I have sat on a couple of interim committees. I have never before seen the inclusionary direction from the committee, not only from our technical group which represents a very good cross section of local governments in the state, but also to bring in those from special districts and other cities to open up this process so that everyone had an opportunity at the table while we were still in workshops; were still talking about how we would develop the policy and make this recommendation to have input. That is going to continue. I believe Mary shared with you that we are going to continue to look at special districts; we are going to continue fuel tax. These have tremendous impacts on local governments. Fuel tax, for example, on the rural counties. We have always worked very hard to keep this process extremely open to get everyone's input and really try to understand the differences within the state and try to craft this change so that it would reflect that. Although we are not going to get 100 percent, I do not think anyone can complain about the process. It has just been a tremendous experience for all of us to go through and we are all really pleased that you have given us the opportunity as a technical advisory committee to participate in it. I think our cities, counties and special districts throughout the state should feel the same way.

Michael Pitlock (Executive Director of the Department of Taxation):
Madam Chair, members of the committee, for the record I am Michael Pitlock, Executive Direct for the Department of Taxation. I want to talk briefly about the role for the Department of Taxation as it is envisioned in this piece of legislation. You have heard reference, on numerous occasions as Greg and Marvin went through the section by section analysis to a role to be played by either the Executive Director, the Department of Taxation or the Nevada Tax Commission.
There are two major roles the Department of Taxation will be playing in this process. One is as the administrator of the pool of revenue. We are the agency that will be collecting the individual taxes, accounting for those collections, determining the amounts available and actually going through the mechanics of implementing the formula. We are the agency that makes the distributions to all the local governments that receive money out of this fund.
In addition to that ministerial function of making sure that the fund is operating appropriately, we also have a role to play in terms of providing a due process for counties or other local governments to request either alternative distribution formulas, request adjustments to their base on a one-time basis, and also to look at who should be designated as enterprise districts. That is one of the very first functions that we will have to take on because the enterprise districts, once they are so designated by the department, are treated differently in this piece of legislation.
We will also be called upon to analyze and make recommendations when a new governmental entity comes into existence and requests to be funded out of this pool. The reasons that the department was selected as the entity to take on these tasks are the due process procedures that are already in place within the Department of Taxation. Initial determinations and analysis will be done by myself and the department staff along with the assistance from the committee on local government finance. The findings and conclusions from the analyses will be shared by all the local governmental entities and they will have input into that process.
In addition to that process, there is an appellant procedure in place where the decisions would be reviewed by the Nevada Tax Commission. It is at that point then that the decisions would be final. We wanted to make sure that we had a process that all stakeholders could play a role in, that there would be an equal opportunity to participate, provide evidence and participate in the decision rendering process.
There was reference made to the fiscal note that is associated with this bill. In order for the department to carry out those two functions of administering this pool of revenue, performing the analysis and making recommendations with respect to the other alternatives in the legislation, the department will require additional staff and there are costs associated with that. We have provided a detailed fiscal note to this bill. It would require a little over $137 thousand in the first year of the biennium to fund two new positions, equipment and space at the Department of Taxation, and then, in the second year of the biennium, approximately $127 thousand for the ongoing costs of this program.
I entered this process as a member of the advisory committee representing state government. My role I envisioned from the beginning was somewhat as a neutral observer to the process because state government had no financial stake in the outcome of this process. From my vantage point as that independent observer, I was amazed at the efficiency with which all of the competing parties came together in this process. In the beginning, a lot of us were very skeptical that this would turn into a major fight between cities, counties, special districts and what will soon be designated as enterprise districts. The fight never happened. Instead, at every meeting there was a sense of compromise, a sense of purpose where we were all striving for one common goal. I think this body and the Assembly can take some comfort in that process that all voices were heard, all points of view were considered and the end result I believe is truly a bill that is fair to all the local governments in the State of Nevada.
Thank you, very much. That concludes our remarks and I believe that we will be available for any questions that any of the Senators may have.

Senator O'Connell called on Senator Adler:

Senator Adler:
Thank you. I have a question of Mr. Pitlock. How will you deal with a whole harmless county which is shifting from that to regular status such as Storey County? How would that be handled?

Mr. Pitlock:
Senator Adler, this piece of legislation would not alter the mechanism currently in place to deal with situations where a county is potentially moving from guaranteed status to a standing on their own status. Those procedures will remain intact because this bill deals only with what is referred to as the second tier of distribution and does not alter in any way the first tier distributions which are between the counties.

Senator Adler:
Another question. On page 24, we are putting into law the Motor Vehicle Privilege Tax Division. These do not seem to follow any rhyme or reason. Aren't we getting into the same situation that we did on fair share where we are establishing a kind of artificial base that will come back to haunt us later on down the road. I know Carson City gets one percent under this distribution formula, but Eureka gets 3.1 percent. Shouldn't that formula be looked at and adjusted?

Mr. Leavitt:
The numbers are from the existing laws and relates to the division among the counties. This bill does not address that at all.

Senator Adler:
Why are we doing that? It seems like a very inequitable distribution, on page 24.

Mr. Leavitt:
You probably remember, a couple of weeks ago, there was a resolution passed out of this body that relates to the continuation of this work we have been doing. It is this type of thing mentioned. The fuel tax was mentioned. We found that the way in which the fuel tax is allocated is probably very unfair, particularly to the counties that have experienced growth in recent years.

Senator Adler:
Yes, but do you think these percentages are fair? This seems very inequitable. You have counties with very large populations that are getting practically nothing where very small counties are receiving huge percentages.

Mr. Leavitt:
This does not relate to the total of the Vehicle Privilege Tax, but is simply the tax on vehicles engaged in interstate and intercounty operations. So, this is an area that has to be considered. In interstate operations, for example, if they go down Interstate 80 or Interstate 15 in Southern Nevada, we have not done any work on this. Whether it is fair or not I do not know. It is something that needs to be looked at, I'll agree with that.

Senator Adler:
Could we look at this before we pass the bill out and come up with a more fair distribution?

Mr. Leavitt:
On the fuel tax which deals with a similar type area, we have discovered that it is an absolutely major project. Even given the length of time we have had with this bill, we can not really accomplish in the way we think would really be fair. I, myself, would feel really uncomfortable trying to determine anything this complex.

Senator Adler:
How are these numbers now determined? I don't understand how we are arriving at the current percentages. What is the reasoning behind those percentages?

Mr. Hobbs:
Those percentages were actually put into place back in 1981 or 1983.

Senator Adler:
We have had all these problems with the tax of 1981, so why don't we fix this?

Mr. Hobbs:
One of the points, if I might add, one of the objectives set forth by the legislative subcommittee was that the system be revenue neutral for all the local governments in the base year. To achieve that objective, we needed to leave pieces of the former system in place to allow them to be revenue neutral in the base year. That was one of the considerations. The second one, mentioned by Marvin, there were several other points like fuel tax which is very complex on its own merits. And, probably parts of the motor vehicle privilege tax which we do need to spend some additional time looking at. That is one of the reasons I was given to understand that the continuation of the technical committee was under consideration.

Senator Adler:
Could you look at this section in conjunction with the motor vehicle privilege tax and put that in the same bill. This does concern me. I can't make any sense as to how you arrived at these numbers. Since this bill puts them into statute, it kind of carves them into stone. This concerns me.

Mr. Hobbs:
Again, those particular percentages have been in the statute for some period of time, but it does not mean that they are correct. We agreed that elements of the fuel tax distribution and elements of the privilege tax need to be reviewed.

Senator Adler:
Can we review them this session? Or are you saying that we are not going to?

Senator O'Connell:
I must tell you that there have been screaming matches over this formula and that is the reason they were not touched in this bill. There was so much disagreement and there has been ongoing meetings on this very issue. Until we can come to some kind of compromise or resolution, we did not want to say this cannot be done. We felt the best thing was to continue looking at that and then coming to some kind of resolution. It is not that this was overlooked or that it was not identified as a problem. The technical committee is still looking at that, but the inequities between the larger and smaller counties have been tremendous. We know it is a problem. We want to do something about it and that is why we asked to continue on with the committee.

Senator Adler:
Can you at least look at some kind of future adjustment formula?

Senator O'Connell:
That is why we are asking for a continuation of the committee.

Senator Adler:
This looks to me like it starts throwing a huge inequity if we don't address it.

Mr. Pitlock:
Madam Chairman, if I could make an additional comment on this issue. One of the provisions, in this bill, allows for a local government on a one time basis to come in and challenge the base that they are starting from. These percentages feed into what that base number would be. So, a local government who felt that there was a significant enough issue associated with this distribution, does have a mechanism provided for it in this legislation. They could come forward and make their case on changing that. It might not resolve the entire issue, but for that one local government they may be able to justify some relief if there is a significant problem in that area.

Senator Coffin:
The charge of the committee, in SCR 40, was well handled. I could see where one of the comments made by Senator Adler raises an issue which is still in the back of my mind and wasn't addressed. How do you reverse the fair share arguments that were essentially created by the tax shift of eighteen years ago? That can't be done since SCR 40 did not call for that charge. That did a pretty good job within the limitations they were told to do. I think we are going to have to caucus on a county or regional basis to double check with our people to make sure before we go to vote or amend. I hope we have that opportunity. I don't think that the chair, at this present time, could give an answer to Senator Adler's one comment which is a very important comment. If we don't address home rule or the nearest equivalent to home rule as you can get.

Mr. Leavitt:
Madam Chairman, if I might make a comment. One of the things which tie into this subject, as well as the fuel tax, is that we found, when we started to do an examination of the data available, we did not and still do not know the miles of highway that are the responsibility of the individual counties and cities. We found that they have been reporting this for many years, but the methods which they have used to report these things have been very, very inconsistent. We found some that report every highway which is anything from a jeep trail up to a freeway. We found some who do not report unpaved roads. The inconsistencies are so great that we are currently involved in the accumulation of data to try to do this. Since this involves interstate vehicle privilege tax, it kind of ties into this subject that we currently do not have data on. One of the reasons we have put off this part of the project until this next interim, is to try to obtain data that is reliable before we recommend a change in the formulas. Looking at this off the top of your head, it doesn't seem to be inconsistent and unfair to a number of entities. Hopefully, when we are ready to come forth with recommendations, we will have something we feel is adequate and can be defended.

Senator Neal:
I would just like to follow up on the comment made by Senator Adler, but from a different point of view. As I understand, this operation of this new system, you will have a fund in which these six taxes go into including the motor vehicle tax. In order to extract money from that fund, there would be a formula, a formula for the enterprise fund and the formula in which local government would be used. If you proceed from the basis that there are other formulas within the tax structure that impacts the fund and you now set out another formula without examining the effect of that formula upon the new formula, then I am somewhat lost. I do not know what the effect would be. When a local government or a free enterprise district wanted to get money out of this fund and you then multiply the monthly application plus one percent of the average percentage change in the assessed valuation of taxable property over the five immediately preceding years, I don't know what the effect would be upon the formula that still exists. By the same token, if the local government wanted to multiply its monthly base application by one percent plus the sum percentage of the change in the population for the immediately preceding fiscal year and the average percentage change in the assessed valuation of the taxable property for the five immediate preceding years, I don't know what that effect means. Does one city or district get more money because we have not examined that formula in relationship to the new formula we have put into law in order to extract these monies for use in local government and enterprise districts? Maybe someone could explain that to me.
Mr. Leavitt:

Madam Chairman, these formulas as they exist for the distribution of these taxes do not have any effect on any of the other formulas for the distribution of any other taxes. I will give you an example because it can be confusing. For instance, in the distribution of money from this fund, we have used as one of the computations the average percentage change in the assessed valuation of an individual entity over a number of years.

Senator Neal:

How do you calculate that? You are talking about putting the motor vehicle service tax into this fund. Is that correct? In which certain counties receive a portion of that particular money. Are you then saying that before the money goes in, a certain percentage would be extracted out and we only would get what is left to go into this fund?

Mr. Leavitt:

No, the amount of the vehicle privilege tax that is going to any of the individual counties in total is not changing as a result of this act. For instance, the money coming to Clark County as a total county, that money is not changing at all as a result of this act. The only distribution change that can have any effect in the future is the distribution below the county level to the various counties or the various cities and special districts within the county has no change whatsoever on the amount coming to the county as a total.

Senator Neal:

So as I understand from what you are saying, the formula that is set out in Section 24 of the bill, that amount of money would not be touched. What we would do in the future when a city or a district wants to get money from this fund, that other portion of that money would be set aside and would not be touched.

Mr. Leavitt:

In the future, if for instance, we have a creation of a new entity and have a creation of a new city in southern Nevada. I don't know if that will ever happen, but say we do or that we have a combination of entities. If we have a new city created, they go through a process by which they will petition the department of taxation to provide numbers and will go through a process by which we determine and the Nevada Tax Commission eventually has responsibility to do this by which we determine a base for that particular local government, all the other local governments in the county have a chance to respond to that. Because when there is anyone new, then technically everyone else will lose money but they have a chance to respond to that. You then establish a new base for that new local government. When you establish that new base, then it goes into the formula like all the rest of them. In the future you move forward when they get the CPI and their assessed valuation, population growth entered in the formula. Once you establish that it will work for an indefinite period.

Senator Neal:

What you say is correct, and I have to accept that because you are the authority here, but if you happen to be wrong, then we have to bring the chairman to you.

Mr. Leavitt:

Let me just give you some assurance. We have gone back in time and said what if this formula had been enacted five years ago, what would happen to the system? In other words, if it had been enacted five years ago and had applied it over these last years, what would this do to us? We have checked it out in that regard as well as trying to predict some future years and we find the formula seems to work and has not resulted in huge revenue shifts. So we have indeed tried that as one of our mechanisms to try to be as certain as we could because obviously we are concerned to as individual representatives of government because this is the money we live on. We have every assurance we can give ourselves that this formula does indeed work.

Senator Neal:

Now, as I understand under this proposal the tax department, Mr. Pitlock, you have become the new boss in this arrangement, do you not in terms of how these funds would be dispensed and your judgment along with that of the tax commission and that local government would not have any say so in that?

Mr. Pitlock:

The department of taxation currently distributes many of the taxes that are being put into this pool. So, from that perspective, we are already involved in it. As far as any decisions that need to be made to alter the formula or to adjust the base of a particular governmental entity or if a new governmental entity came into existence, the department and its internal procedures was used because it is a mechanism that allows for and requires the voice of all affected parties to be heard in the process. In other words, say for instance, a particular governmental entity within a county came to us on a one-time basis and said we want an adjustment to our base. We will be required to notice every other governmental entity that is potentially affected by that decision so that they could participate in the process. That same holds true for all the other decisions that are initially made by either the executive director or the department and then ultimately reviewed by the tax commission. It is a very open process and that is why it was selected.

Senator Neal:

Just one more question, for those enterprise districts that are in existence at the present time, as I understand the bill, that money now would be pooled up and resdistributed back to them on a formula basis?

Mr. Pitlock:

The money that is currently distributed to them through the existing formula will continue to be distributed to them under the new formula but it will be frozen in amount. They will receive the exact same distribution in the future that they have received in the past from the old formula. They are being held harmless. The issue of enterprise funds, I have to say further is one that the work on that issue is not done. The freezing then at the current level was an interim step until we could fully explore exactly the role that they should play and how they should be treated in this system.

Senator James:

I do not think I have the expertise in this that some of you do. I do have a question that I will put in lay terms. First of all, I commend the work of the committee. I think it is tremendous and should be ongoing. The comment was made that it is revenue neutral which I understand means that there is no tax increase on anybody. What we are trying to do is to allocate more equitably these six taxes among these local governments within a county. What I understand is that if you are doing something more equitably that some may get more than they got before and some may get less. So, you are trying to use population and assessed valuation and balance those two within the formula. I read Section 11 and am totally confused. I do not understand that because I cannot figure that out. I will just have to rely on you that it is fair.
My question is, what assurance is there to the taxpayer that if now my government is going to get more money and yet now I have been more efficient as a government or whatever, and that money should inure to the benefit of the taxpayer in terms of, for instance, lower property taxes because I am getting these other taxes now that are covering the budget and the property taxes which have been higher before now can be lowered. Is there any assurance that if we pass this and we have this new equitable formula, that it is not just equitable among the governments that there is some trickle down effect of this benefit to the taxpayer themselves that they might get lower taxes.
The second question is, you did not specifically deal with gaming taxes and we did pass the bill, Senator O'Connell's bill, that is going to require the study to go and gaming taxes will be part of that study. Could you just answer me as to why gaming taxes are being treated differently and is there the potentiality of putting gaming taxes into this kind of an equitable distribution formula. In the same question with that, is there a way in place that we can if we get more money to a local government, then require some assurance that the taxpayers might get lower property taxes because the government is getting more of its budget paid for with the gaming taxes or the newly allocated taxes.
The final question, for someone to answer, is the comment that was made that there is a disincentive to being removed for consolidation. I would like to know an example of how that is done and how is the disincentive to consolidation of services done with this. How is requiring a new entity which is formed within that time frame to provide services or it can't be formed. Doesn't that run counter to that requirement or to the policy that we are trying to encourage consolidation of services?
Those are the three questions. I hope I did not confuse you too much.

Mr. Leavitt:

The first question relating to reduction in taxes. There is nothing in this bill, first of all, that does that. This bill only relates to the distribution of revenues and how you accomplish it. The goal of the bill is to distribute tax revenues to where the need is the greatest. In other words, you distribute taxes to those that are experiencing population growth. You distribute taxes to those who are experiencing growth in assessed valuation which indicates that you have new areas in a community where you have to provide service. So there is a question as to whether the fact that you are doing this differently, does that provide any room for reduction of other taxes such as property taxes. We have discussed that in the next phase of the project that we are going to look at property taxes in the whole area as to where we determine levels of property taxes and how we determine rates and assessed valuations and all of those things. So, that is still to come. As you know, there has been an amendment to the one bill that requires us to take a look at the reduction of taxes in this next phase. There is nothing in this bill that does that.

Mr. Hobbs:

Senator James, before Mr. Leavitt goes on to answer your second and third questions, I have a slightly different perspective on the answer to your first question about the potential or what impact this piece of legislation would have on the possibility of lowering some tax rates in the future. The goal of changing the formula was to direct these revenues to the local governments that needed them the most, that were experiencing the increases and demands for service. These particular taxes are not something that are directly controlled by the local government. They can't decide to just raise these taxes when they need more revenue. If they are not getting sufficient revenue from these sources to fund the demands for increased service they were left with limited alternatives. One of the alternatives that they always had available was to raise property taxes. If we are successful in diverting more of these taxes to the local governments who are experiencing the increase and demand for services it should take some pressure off them to raise the taxes that they have local control of. I believe that while it is not mandated in any way in this legislation, I think it creates an opportunity, particularly for those local governments who are already bumping up against the property tax cap.

Mr. Leavitt:

On the second question relating to gaming taxes, as to why we don't have gaming taxes included in this bill, we could have included gaming taxes in this bill but the gaming taxes that come to local government is a result of enactment of what is levied by state statute. One is called the county gaming tax although it is actually levied as a result of the statute, that could be included and was just an arbitrary decision not to. There is also what they call a table tax distributed equally among all counties which could also have been included which was again an arbitrary decision not to. The third area is the tax that individual licenses of local governments and they are levied as a result of county or city ordinances. That was not included either. Those three areas could have been included. We did not include the gaming tax. That is still something that we have to look at as a result of the consolidation now of governments. We have language in the bill that provides for the consolidation of entities. The process, essentially, is that it provides that you can combine entities and still retain the tax revenue going to two. We can have one entity assume functions of another entity and still preserve the tax revenue that was received and we did not have of doing that under the existing law. Under the existing law when you lose tax revenue combined, there is not too much reason to combine. This opens up a way where we can get a combination even from cities and counties, special districts and a number of them combining, this provides a mechanism from the tax side that we really have not had in the law before.

Senator Regan:

I would like to remind Mr. Leavitt that some licensees such as myself pay both city and county gaming taxes directly to the city and county involved. They are not shared by the state and they are paid directly to the city and the county. I have a question for Mr. Pitlock. In reviewing the bill, I notice a number of collection fees will now be eliminated to local churches and so forth. I notice your fiscal note. What will be your collection fee for this pool? I think there might be a possibility of making money off the residual that is nondistributed.

Mr. Pitlock:
The individual administrative fees that are associated with the individual taxes which go into this pool are not being changed; however, the most significant of those administrative fees is the one on the sales tax components collected by the Department of Taxation and re-distributed back to local government. There was a bill introduced, earlier in the session, that would require the reduction of that fee from one percent down to one-half of one percent. There was an amendment proposed that changed the effective date of that legislation to July 1, 1999. As far as I know, that bill is proceeding through the process. In addition to that, there was another bill introduced, A. B. 204, which requires a study to be done as to which taxes and fees should be collected by the Department of Taxation. One of the requirements of that study, should that bill pass, is that we take a look at all of the fees which are charged by the department and determine whether or not they are cost based and make recommendations so that they can get on a cost based situation. The issue of fees collected by the state to administer these taxes is being addressed in several other pieces of legislation, but not in this one.

The chairman recognized Senator Titus.

Senator Titus:
Thank you, Madam Chairman. I have a simple question to ask. My district is in an older part of Clark County which includes a lot of the unincorporated townships such as Paradise and Winchester. What I want to know is if this bill takes funds away from those areas and redirect them to the new area thereby reducing services to my district and providing more services to Summerland, Green Valley and the newer parts of town?

Mr. Leavitt:
I don't believe so and I have reason behind that. First of all, under the existing system for the distribution of revenues, almost all of the revenues in this pot are distributed either by population or by assessed value. We are now combining the two. This bill provides that each local government, whether they grow or not, is allowed increased revenue as a result of changes in the consumer price index. That is not in any existing law, so if you have entity which is not growing or growing very little, under existing law they could actually show decreases in revenue on an annual basis. Under this new law, they would at least have the protection that they know that they have CPI protection so they would not receive lower revenue. It is conceivable that if you have a really rapidly growing area, that they can outdistance areas that are not growing, but still you have the guarantee of the CPI which was never guaranteed under the existing law.

Mr. Hobbs:
I was going to make the same point that Marvin did about the reason for including the consumer price index factor in there was to provide some measure of protection for older neighborhoods which were perhaps built up in competition which included areas that were very rapidly growing in percentage terms from year to year. An area that might exemplify that is Clark County would be an area like Mesquite which population wise has not grown dramatically, but in terms of overall assessed valuation, Mesquite has seen tremendous growth in recent years. Those are the kinds of anomalies that the past formula would have rewarded. The proposed formula would perhaps create a little bit more of a level playing field. We did run some simulations, as Marvin mentioned, and have probably run several hundreds of these under different scenarios. Taking the elements of the formula, as it is in the bill draft before you, and applying it to data for fiscal 97-98, what would be differences between the two formulas for areas like Paradise and Winchester, if the formula had been put in place a year ago we would have seen somewhat of a gain in both of those areas for fiscal 97-98. Areas like Mesquite, because of the past reward mechanism for assessed evaluation based distribution without as much consideration given to population, would probably, under the simulation we did, expect to get less under the new formula than under the current system.

Senator Rawson:
I have a couple of questions. I was not going to ask about Summerland until it was brought up. It sounds like, because it is a rapidly growing area, that they might tend to lose some service. Yet, this is an area which has had a re-evaluation and a very high new burden in taxes. The people are upset already. I want to make sure that they are not going to lose as a result of this formula. The second question I have has to do with all the school issues we are dealing with. We have people from the Lake area that want to establish a new county. Without expressing any opinions as to whether we should allow that or not, do you feel that this accommodates this all right. Would it hurt Washoe County, in particular, or any of the surrounding counties if they were to form a new county?

Mr. Hobbs:
In regards to Summerland, it is fortunate that, in the last session, Summerland was created as an unincorporated town and given the ability to share in the distribution formulas. If that had not occurred, Summerland would not have the base at this point to roll up. Summerland's future growth, as compared to some of the other areas, is expected to be pound for pound greater than many of the other unincorporated towns. Looking at the county as a whole and understanding the manner in which the its financial structure works, the revenue that comes into the unincorporated towns goes into the county's general fund which in turn provides service back to each of the unincorporated towns. Under the simulation we mentioned for fiscal years 97-98, Clark County as a whole would have also showed a gain for fiscal 97-98 as compared to the old formula. So, in fact, its ability to provide service to Summerland would have been enhanced under the new formula had it been in place.

Mr. Leavitt:
First of all, this bill does nothing to change the money going to any individual county. It does not have an effect on Washoe County, Douglas County or Carson City if Tahoe County comes to pass. Currently as the governmental structure is, in looking at the Lake area, services are provided by the three counties plus special districts at the lake. This measure would make easier the combination of those special districts into some other form of an entity that could provide services. We would still have, even after that, three counties which make up this area of the lake. That is not changed or accommodated by way of this act.

Mary Henderson:
Thank you, Madam Chair. To Senator Rawson, I think your questions specifically address what would happen if a new county was formed at the Lake and what impact this would have. I am only going to speak for Washoe County. I have not seen the numbers, but with the discussions we have had with Douglas County it would have tremendous impact on Douglas County. For Washoe County, Incline represents approximately 10 to 12 percent of our assessed valuation. Calculations we have run over three sessions, that deal with this issue, basically we are at a wash in the sense of the services we provide at Incline Village and the revenues we generate from that area. As to the school impact, I think you need to look more at the distributive school fund and the impacts it would have on that to the Washoe School District and the viability of creating a separate school district at the Lake. I think that is where the impact is going to occur if the new county is formed.

Senator James:
This is a very quick question for Guy Hobbs and Marvin Leavitt. Would it be possible to place in this formula a requirement that, if a city or a municipality was going to receive windfall by virtue of application of the formula in Section 11 over and above by allocation the amount that they would be required to pay for the services etc. they project for the next fiscal year, that money would have to be refunded to the taxpayers in the form of a property tax reduction? Could that be placed in the formula?

Mr. Hobbs:
I suppose there are ways to craft such a thing. I'll give you an idea of some of the issues we would have to deal with and define to be able to do something like that. First of all, in Clark County for example, some of the cities within Clark County are at their maximum allowed ad valorem level. I believe the City of Las Vegas in fiscal year 97-98 will be beneath what its authorized level to tax is. Clark County's unincorporated towns are beneath what they are authorized to tax at. So, what you have is a situation within Clark County where some of the entities are at their maximum allowed rates to begin with. Other entities are below their maximum allowed rates, so you would have to somehow equalize where they are within that particular structure. In other words, you would not want to impose reductions on an entity which has already their taxes lower than their authorized level. One of the other things we would have to consider is to define what windfall means in percentage terms relative to what type of entity and then create some structure and procedure. I think the first issue which we will be studying over the next biennium is probably one of the more complex taxation related issues which has led to a lot of the discussion on tax equity and various other issues.

Mr. Leavitt:
You must remember that the major implementation of SAG does not take place for another year. Currently, we do not know exactly what the initial effect is going to be on the various entities. We have a year's time to prepare for the implementation.

Senator O'Donnell:
Thank you, Madam Chairman. There is the question then, if you have gone back five years, and have done a historical calculation as to what would happen to the revenues, did you find anywhere in those five years a surplus or windfall in any one of those areas?

Mr. Leavitt:
Again, it is difficult to define what a surplus or windfall is. In the application of the formula, we have not seen wide disparities where someone gets a 30 percent windfall and gets a 20 percent reduction. We have not seen those large disparities. One of the concerns, obviously was, if you had a government that had a 20 percent reduction in one year what would they do. We have not seen those big disparities from the existing system. I would be very surprised if we saw anyone gain huge windfalls as a result of this act. I think we are going to see a more gradual change over a period of time.

Mr. Hobbs:
Senator, in looking at the simulations we have done and looking at the columns that compare the current system to what the proposed system would have done if it were in place, the areas where we saw the biggest gains on a percentage basis were correlated to the faster growing areas. For example, we saw more of a gain in Laughlin which is what we would expect to see as a consequence of the formula. Areas that are growing faster would receive a little more revenue than on the average of the other entities from year to year.

Senator O'Connell:
I would like you to help me to show the appreciation we have for the work of the committee. (APPLAUSE) Thank you, all very much.

President pro Tempore Jacobsen:
Thank you, Senator O'Connell and all those participants who helped with the Committee of the Whole.

Senator Raggio:
Mr. President pro Tempore, also on behalf of the Senate I would like to thank the technical committee who worked on this and members of the committee with Senator O'Connell as Chairman and the time they took in preparation for the presentation this morning.

On the motion of Senator Raggio, the committee did rise, and report back to the Senate.

At 12:20 p.m.
President pro Tempore Jacobsen presiding.
Quorum present.

Mr. President pro Tempore:
Your Committee of the Whole, to which was referred Senate Bill No. 254, has had the same under consideration, and begs leave to report the same back with the recommendation: that the Senate give it further consideration under Order of Business No. 12, Second Reading and Amendment.

Ann O'Connell,

Chairman

By the Committee on Government Affairs:
Senate Bill No. 415--An Act relating to the justice system; requiring the attorney general to represent a justice of the peace or a municipal judge in an action against the justice or judge in his official capacity; requiring the attorney general to conduct certain investigations; authorizing the attorney general to represent a justice of the peace or a municipal judge in certain actions against a county, a city, or a county or city officer or employee; prohibiting the investigation division of the department of motor vehicles and public safety from disclosing to a district attorney or a member of his staff any information concerning investigations relating to such actions under certain circumstances; and providing other matters properly relating thereto.
Senator McGinness moved that the bill be referred to the Committee on Government Affairs.
Motion carried.

By the Committee on Finance:
Senate Bill No. 416--An Act making an appropriation to the Department of Education for the support of charter schools; and providing other matters properly relating thereto.
Senator Raggio moved that the bill be referred to the Committee on Finance.
Motion carried.

By the Committee on Finance:
Senate Bill No. 417--An Act relating to vital statistics; revising the provisions governing the fees for services and copies of records concerning vital statistics; and providing other matters properly relating thereto.
Senator Raggio moved that the bill be referred to the Committee on Finance.
Motion carried.

By the Committee on Finance:
Senate Bill No. 418--An Act relating to veteran affairs; transferring the offices of the Nevada commissioner for veteran affairs and the Nevada deputy commissioner for veteran affairs to the office of the military; and providing other matters properly relating thereto.
Senator Raggio moved that the bill be referred to the Committee on Finance.
Motion carried.

Assembly Bill No. 370.
Senator Rawson moved that the bill be referred to the Committee on Judiciary.
Motion carried.

Assembly Bill No. 430.
Senator Rawson moved that the bill be referred to the Committee on Finance.
Motion carried.

Assembly Bill No. 446.
Senator Rawson moved that the bill be referred to the Committee on Finance.
Motion carried.

Assembly Bill No. 463.
Senator Rawson moved that the bill be referred to the Committee on Finance.
Motion carried.

Senate Bill No. 58.
Bill read second time and ordered to third reading.

Senate Bill No. 254.
Bill read second time.
The following amendment was proposed by the Committee on Government Affairs:
Amendment No. 289.
Amend sec. 4, pages 1 and 2, by deleting lines 17 through 20 on page 1 and lines 1 through 12 on page 2 and inserting:
"Sec. 4. "Enterprise district" means a governmental entity which:
1. Is not a county, city or town;
2. Receives any portion of the proceeds of a tax which is included in the fund; and
3. The executive director determines is an enterprise district pursuant to the provisions of section 12.5 of this act.".
Amend sec. 11, page 5, line 8, by deleting "3" and inserting "4".
Amend the bill as a whole by adding a new section designated sec. 12.5, following sec. 12, to read as follows:
"Sec. 12.5. 1. The executive director shall determine whether a governmental entity is an enterprise district.
2. In determining whether a governmental entity is an enterprise district, the executive director shall consider:
(a) Whether the governmental entity should account for substantially all of its operations in an enterprise fund as defined in NRS 354.517;
(b) The number and type of governmental services that the governmental entity provides;
(c) Whether the governmental entity provides a product or a service directly to a user of that product or service, including, without limitation, water, sewerage, television and sanitation; and
(d) Any other factors the executive director deems relevant.".
Amend sec. 14, page 6, by deleting lines 30 and 31 and inserting:
"3. The governing bodies of two or more local governments or special districts shall not enter into more than one cooperative agreement pursuant to subsection 1 that involves the same local governments or special districts.".
Amend sec. 14, page 7, line 10, by deleting "by unanimous consent".
Amend the bill as a whole by adding a new section designated sec. 18.5, following sec. 18, to read as follows:
"Sec. 18.5. NRS 371.230 is hereby amended to read as follows:
371.230Except as otherwise provided in NRS 371.1035 [,] or 482.180, money collected by the department for privilege taxes and penalties pursuant to the provisions of this chapter must be deposited with the state treasurer to the credit of the motor vehicle fund.".
Amend sec. 21, page 13, line 38, by inserting, after "shall" by inserting "distribute".
Amend sec. 21, page 13, line 41, by deleting ":" and inserting ", to:".
Amend sec. 21, page 13, line 42, by deleting "For".
Amend sec. 21, page 13, line 43, by deleting:
"distribute to each county".
Amend sec. 21, page 14, line 13, by deleting "6." and inserting "5.".
Amend sec. 21, page 14, by deleting line 20 and inserting:
"(b) All other counties, the amount remaining after making".
Amend sec. 21, page 14, line 21, by deleting "county" and inserting:
"of these counties".
Amend sec. 21, page 14, line 32, after "(b)" by inserting:
"of subsection 1".
Amend sec. 21, page 14, line 36, by deleting the comma.
Amend sec. 21, page 14, line 41, by deleting the comma.
Amend sec. 21, page 15, by deleting lines 36 through 41 and inserting:
"assessed valuation of a:
(a) Fire protection district includes property which was transferred from private ownership to public ownership after July 1, 1986, pursuant to:
(1) The Santini-Burton Act, Public Law 96-586; or
(2) Chapter 585, Statutes of Nevada 1985, at page 1866, approved by the voters on November 4, 1986.
(b) Local government includes property which was transferred from private ownership, after July 1, 1997, to property held in trust for an Indian tribe pursuant to the provisions of the Indian Reorganization Act, 25 U.S.C. §§ 461 et seq.".
Amend the bill as a whole by adding a new section designated sec. 21.5, following sec. 21, to read as follows:
"Sec. 21.5. NRS 377.080 is hereby amended to read as follows:
377.0801. A local government or special district which receives revenue [from the supplemental city-county relief tax pursuant to NRS 377.057] pursuant to sections 10, 11 and 12 of this act may pledge not more than 15 percent of that revenue to the payment of any general obligation bond or revenue bond issued by the local government pursuant to chapter 350 of NRS.
2. Any revenue pledged pursuant to subsection 1 for the payment of a general obligation bond issued by a local government pursuant to chapter 350 of NRS shall be deemed to be pledged revenue of the project for the purposes of NRS 350.020.
3. For bonds issued pursuant to this section before July 1, 1998, by a local government, special district or enterprise district:
(a) A pledge of 15 percent of the revenue distributed pursuant to sections 10, 11 and 12 of this act is substituted for the pledge of 15 percent of the revenue distributed pursuant to NRS 377.057, as that section existed on January 1, 1997; and
(b) A local government, special district or enterprise district shall increase the percentage specified in paragraph (a) to the extent necessary to provide a pledge to those bonds that is equivalent to the pledge of 15 percent of the amount that would have been received by that local government, special district or enterprise district pursuant to NRS 377.057, as that section existed on January 1, 1997.
4. As used in this section, unless the context otherwise requires:
(a) "Enterprise district" has the meaning ascribed to it in section 4 of this act.
(b) "Local government" has the meaning ascribed to it in section 6 of this act.
(c) "Special district" has the meaning ascribed to it in section 7 of this act.".
Amend sec. 35, page 26, line 13, by deleting "average".
Amend sec. 35, page 26, line 22, by deleting "average".
Amend sec. 35, page 26, by deleting lines 24 and 25 and inserting:
"3. For the purposes of this section:
(a) For any unincorporated town to which the provisions of subsection 5 of NRS 354.5987, as that section existed on July 1, 1996, applied, the amounts described in subparagraphs (1) and (2) of paragraph (a) of subsection 2 must be adjusted to equal the amounts that could have been received by that unincorporated town but for the provisions of subsection 5 of NRS 354.5987, as that section existed on July 1, 1996.
(b) The fiscal year ending on June 30, 1999, is the initial year of distribution.".
Amend sec. 35, page 26, line 26, by deleting "4." and inserting:
"4. For the fiscal year beginning on July 1, 2000, the executive director of the department of taxation shall increase the amount which would otherwise be allocated pursuant to subsection 2 of section 10 of this act to each unincorporated town that was created after July 1, 1980, and before July 1, 1997, for which the Nevada tax commission established the allowed revenue from taxes ad valorem or basic ad valorem revenue pursuant to subsection 4 of NRS 354.5987, as that section existed on July 1, 1996, by an amount equal to the amount of basic privilege tax that would have been distributed to the unincorporated town:
(a) Pursuant to NRS 482.181, as if the provisions of NRS 482.181 which existed on July 1, 1996, were still in effect; and
(b) As if the tax rate for the unincorporated town for the fiscal year beginning on July 1, 1980, were a rate equal to the average tax rate levied for the fiscal year beginning on July 1, 1980, by other unincorporated towns included in the same common levy authorized by NRS 269.5755 which were in existence on July 1, 1980.
5. The additional amount of money allocated to an unincorporated town pursuant to subsection 4 must continue to be treated as a regular part of the amount allocated to the unincorporated town for the purposes of determining the allocation for the town pursuant to subsection 2 of section 10 of this act for all future years.
6.".
Amend sec. 37, page 28, line 26, by deleting:
"September 15, 1997," and inserting:
"January 1, 1998,".
Amend sec. 37, page 28, by deleting lines 27 through 30 and inserting:
"of the department of taxation shall:
(a) Notify each governmental entity he determines is an enterprise district pursuant to section 12.5 of this act of that determination; and
(b) Calculate the amount each enterprise district will receive pursuant to subsection 1 of section 10 of this act.
2. Any governmental entity that the executive director determines is an enterprise district pursuant to section 12.5 of this act may appeal that determination to the Nevada tax commission on or before April 1, 1998. The governing body of the governmental entity must notify each of the other local governments and special districts that is located in the same county of the appeal.
3. The Nevada tax commission shall convene a hearing on the appeal and issue an order confirming or reversing the decision of the executive director on or before July 1, 1998.
4. As used in this section:
(a) "Enterprise district" has the meaning ascribed to it in section 4 of this act.
(b) "Local government" has the meaning ascribed to it in section 6 of this act.
(c) "Special district" has the meaning ascribed to it in section 7 of this act.".
Amend the bill as a whole by adding a new section designated sec. 37.5, following sec. 37, to read as follows:
"Sec. 37.5. 1. There is hereby appropriated from the state general fund to the department of taxation for the personnel, equipment and costs of operation necessary to administer the provisions of this act:
For the fiscal year 1997-98 $137,814
For the fiscal year 1998-99 $127,200
2. Any balance of the sums appropriated by subsection 1 remaining at the end of the respective fiscal years must not be committed for expenditure after June 30 of the respective fiscal years and reverts to the state general fund as soon as all payments of money committed have been made.".
Amend sec. 38, page 28, line 31, by deleting:
"13 and 37" and inserting:
"12.5, 13, 37 and 37.5".
Amend the preamble of the bill, page 1, by deleting lines 1 through 6.
Amend the title of the bill, eighth line, after "circumstances;" by inserting:
"making an appropriation;".
Senator O'Connell moved the adoption of the amendment.
Remarks by Senators O'Connell and Coffin.
Amendment adopted.
Bill ordered reprinted, engrossed and to third reading.

Senator Raggio moved that Senate Bills Nos. 156, 351, 353, 364, 369, 370; Assembly Bills Nos. 110, 113, 249, 284, 297, 324, 408, be taken from the General File and placed on the General File for the next legislative day.
Motion carried.

On request of Senator McGinness , the privilege of the floor of the Senate Chamber for this day was extended to Susi Wilkin, Tessa Wilkin, Launa Wilkin, Jenna Wilkin, Steven Sonnenberg, Devin Sonnenberg, Camille Sonnenberg, Jamie McCrosky, Margaret Wilkin, Glen Van Roekel and Stephanie Haluzak and the following students from the Numa Elementary School: Curtis Conklin, Amber Baker, Katie Bowman, Alex Borowy, Amber Brown, Roger Burwell, Jacob Cann, Jared Cunnington, Dan Evans, Heather DeMars, Naron Federizo, Jared Federizo, Lentry Hammond, Jake Marshall, Kacee MacKenzie, Ryan Krastins, Sarah McCallum, Mauricio Muniz, Mike Pruitt, Michael Restrip, Ashley Steers, Mary Toms, Iris Ugalde, Tena Macaldad, Brody Hammon, Victoria Morrison, Nicole Lister, Stacie Amick, Allisia Carpenter, Serloyd Carter, Shaina Crawford, Joey Flatley, Kyle Frank, Jennifer Gaston, Kody Grant, Jeff Graves, Chris Guierrez, Ciera Hammond, Jaime Homstad, Preston Jeanjacques, Jennifer Kettle, Sara King, Lilia Marquez, Daniel Marro, Thomas Miller, Ashlee Nelson, Tyrel Noneo, Rudy Ortiz, Amber Pettit, Celia Quinonez, James Taylor Daniel Tomb and Megan Zamarripa; teachers: Mrs. Amy Piazzola, Mrs. Bridget Rigg-Anderson and Mr. James Anderson.

On request of Senator Raggio, the privilege of the floor of the Senate Chamber for this day was extended to Senator John Andreason, Idaho and the following representatives from the Nevada State Branch of the MS Senior America Pageant: Patti Ogren, Helen Holtz, Reggie Dunbar, Josie Vlaun, Kayla Callas, Lori Hardgrave Sanchez, Kitty Duarte, Loretta Jones, B. J. Hetrick, Blanche Frances, Maggie Latimer, Edna Herrea and Evelyn Phillips.

On request of Senator O'Donnell, the privilege of the floor of the Senate Chamber for this day was extended to Senator Bob Geddes, Idaho.

On request of Senator Regan, the privilege of the floor of the Senate Chamber for this day was extended to Betina McCrosky and Amy Sonnenberg.

On request of Senator Shaffer, the privilege of the floor of the Senate Chamber for this day was extended to Andy Peressin.

On request of Senator Titus, the privilege of the floor of the Senate Chamber for this day was extended to Clayton Wright.

On request of Secretary of the Senate Jan Thomas, the privilege of the floor of the Senate Chamber for this day was extended to Jeannine Wood, Secretary of the Senate, Idaho.

Senator Raggio moved that the Senate adjourn until Friday, May 23, 1997 at 9:30 a.m.
Motion carried.

Senate adjourned at 12:38 p.m.

Approved:

Lawrence E. Jacobsen

President pro Tempore of the Senate

Attest: Janice L. Thomas
Secretary of the Senate