The Committee on Taxation was called to order at 1:30 p.m., on Tuesday, February 23, 1999. Chairman David Goldwater presided in Room 3142 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Guest List. All Exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

The measure provided for the dissolution of a hospital district by resolution of county commissioners after a hearing and upon a finding that such a dissolution was necessary. It additionally provided the taxes necessary to pay any remaining indebtedness of a dissolved hospital district must continue to be levied and collected as if the district had not been dissolved until all such indebtedness had been repaid.

In conclusion, the bill provided the property of a hospital district may be used by the county commissioners as a hospital or disposed of in any appropriate manner. Any proceeds from the sale or transfer of such property must be used to repay indebtedness of the district.

Chairman Goldwater announced his intention was to move the bill out of committee as quickly as possible upon completion of all testimony and requested co-sponsors Senator McGinness and Assemblyman Neighbors to proceed.

Speaking first was Senator McGinness explaining he and Mr. Neighbors both served on the committee created by S.B. 253 of the 69" session when the issue was first initiated. Nye County Commissioner Carver and the county manager were part of the study group and were able to draft the bill to the mutual satisfaction of all concerned. Senator McGinness suggested Mr. Neighbors would provide more information, but he wanted to indicate his full support.

Mr. Neighbors stated about 30 years ago the hospital in Tonopah was one of the hospitals receiving a Hill Burton Grant and the matching funds required at that time to build a 46-bed hospital had since been paid off. Recently due to the population shift in Tonopah and surrounding counties and some problems with management of the hospital, county commissioners had struggled to keep the facility open. They now had two new doctors on board and were looking at a new management team which might result in some downsizing, but it was very critical to the community the hospital remained in operation. Mr. Neighbors added the county commissioners also served as the board of directors of the hospital.

A recent article in a newspaper questioned why the legislature should be expected to help the hospital with funding if the commissioners would not. People had not been aware there had been millions of dollars involved with the issue, both in loans and grants by the county commission to keep the hospital open. He emphasized the hospital was located at the hub of central Nevada and proceeded to provide data on the distance in miles among the various parts of the state served by the hospital in Tonopah.

Continuing with his testimony, Mr. Neighbors explained the critical issue with that piece of legislation was the window of time the commissioners had. The county commission recently loaned the hospital another $320,000 with the understanding they would do whatever they needed to get the hospital back on its feet. The commissioners' concern was they had put so much money into the hospital, they wanted assurance when they loaned the hospital money, the hospital district tax rate would remain the same until the bills and vendors had been paid. The bill was assurance to the county commissioners the district tax rate would stay in place until the bills were paid. He informed the committee there had previously been a similar law passed in regard to irrigation districts so it would not be setting a precedent.

Mr. Neighbors gave a brief history of solutions that had been put in place and the resulting problems, with the thought of making the hospital self-sustaining. The county commissioners were willing to assist, once again, but they needed the assurance the measure would provide. He asked for favorable consideration and then asked Ms. Vilardo, President of the Nevada Taxpayers Association (NTA), for comments.

Ms. Carole Vilardo, representing the NTA, stated, for the record, her association did support the bill. She advised the committee members the bill was not solely for Nye County or the Nye County Hospital but a bill that would serve any hospital district. Many hospitals, whether they were county hospitals outside of Clark or Washoe, were district hospitals. They did not encompass the property tax rate that supported them, the entire county. In Nye County the hospital district boundaries, in essence, went from the northern part of the county, both easterly, westerly and down close to Beatty. There would be another district for the Pahrump clinic.

Ms. Vilardo explained there had been a series of unfortunate circumstances, which put the survival of the Tonopah hospital in jeopardy, and the hospital had been in a severe financial emergency. During the 1993 and 1995 sessions of the legislature, a provision had been set up by statute to deal with the White Pine School District which also included the hospital district. Fortuitously what had been done was provide that, "in severe financial emergency" the hospital would be under the charge of the Nevada Department of Taxation and the Nevada Tax Commission. It was a very real possibility, without the additional infusion of money by the county commissioners, the Tonopah hospital would close immediately.

Ms. Vilardo assured the committee the county commissioners were well aware of the importance of the hospital, not only to Nye County, but also to the state inasmuch as it was located on Highway 95 and provided medical emergency facilities for travelers through Nevada. For that reason, the county commissioners were willing to loan money to the hospital but the problem was the way the law was written. Under the law if the hospital district was dissolved, either by recommendation of the tax commission or went into bankruptcy, any money for the debt would become an obligation of the county. Meaning, county residents would be paying off the debt and would not receive money to which they were entitled from their area.

Explaining the importance of the bill, Ms. Vilardo stated if for any reason the hospital district had to go through dissolution, any obligation, whether it was a loan, cash outright, or a debt voters approved for bonds to build a hospital, the hospital would be dissolved. In effect the district, for operating purposes, would be dissolved. For purposes of paying the outstanding loans the district would stay in place so the tax rate could be assessed. The precedents for that came through a fire protection district in a change made in 1939. With passage of the bill the legislature would be giving a certain amount of comfort level to the county commissioners that, if they loaned the money to the hospital, there would be a way of putting the money back into the county's general fund. In addition, it gave the vendors, who were providing supplies and medical equipment to the hospital, a comfort level as well inasmuch as there were contractual obligations in effect. If anything happened, there would be a mechanism in place to keep the district alive only as long as necessary to pay off any obligations.

Ms. Vilardo, urged the committee to support the measure as a matter of sound policy in helping the local jurisdictions. In that instance, the hospital districts.

Joining the discussion at that time was Mr. Neighbors who pointed out Ms. Vilardo brought up an important issue, that being, the vendors' concerns. If the legislature did not do something to keep the hospital from being shut down the vendors might decide not to provide supplies or equipment. That action would completely destroy the ability of the hospital to provide service to the communities. He indicated that was one of the main thrusts of the bill and he offered to respond to questions from the committee.

Mr. Marvel asked about the amount of the combined tax rate of Nye County and was advised by Ms. Vilardo, the Tonopah area tax rate was $3.64. Additionally there had been a "buy down" done by the county in Gabbs and she believed Round Mountain. Mr. Marvel, pursuing his line of questioning, asked if Nye county was going to loan money to the hospital district, how would the commissioners be in a position to override the "cap." Ms. Vilardo replied when the provisions for the "severe financial emergency" were set up 'in Nevada Revised Statutes (NRS) 354 one of the steps allowed was for the Tax Commission to go into the area, hold public hearings and at that time they could exceed the "cap." The county could override the $3.64 property tax and raise the cap to $4.50 over a maximum 5-year period.

Continuing, Ms. Vilardo advised exceeding the cap was not the only revenue source; governmental agencies could use the property tax, a 1 percent motor vehicle privilege tax, or up to a quarter or a half percent that could be levied for sales tax. She cautioned the sales tax would not work well in the Tonopah area but it would work great in Pahrump due to the large amount of sales tax that was generated there.

Ms. Vilardo pointed out one additional thing that was done on a report to the tax commission was that the tax commission was prepared to go into Tonopah, hold a hearing which she recalled was in February, and recommend an increase in the tax rate. The tax commission had recommended a property tax rate of 20 cents specifically to help the hospital return some of the money to the commissioners and gave them enough cash flow to go forward. While the tax commission was prepared to have the hearings and hear the public response to increasing the property tax by 20 cents, state law was such that tax rates were certified once a year on June 25 by statute, then the new rates went out with the bill. Going in at that time for a 20 cent increase would not help inasmuch as it would be July before those first payments became due.

She believed that might have been a secondary option to putting it in statute. If the tax officials saw the public would absolutely not accept that type of increase, the tax commission had the ability to deny it. If there had been no approval for the increase and no other mechanism to provide the revenue, the district would be dissolved. It was very important that those pieces fed into one another and was the step the bill provided.

Mr. Marvel asked if, by dissolving the hospital district itself, would Nye County be in a position to operate the hospital so the citizens would have some type of health care. Mr. Neighbors responded the district did not include the largest tax base in the county, which was Pahrump, nor did it include Armagosa but it did include Beatty. The net proceeds, because of what happened around Round Mountain were very low which had hurt the county's balance sheet as well. Mr. Marvel asked how many other districts were facing the same problem and was advised by Mr. Neighbors two additional rural hospitals in the state were doing well; one in Elko which was recently purchased and privatized and one in Fallon. Most of the rural hospitals were having difficulties which was the reason the measure was so critical. He pointed out, if the hospital was ever closed, the county was not "grandfathered" in to reopen the hospital and the county would have to build another hospital.

In response to a question from Ms. Freeman, Mr. Neighbors explained the issue in the bill did not mention a dollar amount; county commissioners just recently gave the hospital a loan of $300,000. The bill under consideration would provide that some time in the future if a short term loan was taken out there would be some security as far as the commissioners and vendors were concerned where they would be repaid. He pointed out Ms. Vilardo had brought out an excellent idea that perhaps when the commissioners made loans to the hospital the county would pay the bills to the vendors until the hospital got under good management.

Ms. Tiffany posed a question to Ms. Vilardo asking if the county would be assumed to be the owner of the hospital and property. Ms. Vilardo advised the hospital district and the people who lived in that district owned the property. Under normal circumstances when a district was created, such as the library district that had been created in some counties, the commissioners went to the voters to establish a tax rate, both for the facilities and for operating the facility. The Nye county hospital district was created, she believed, 30 years ago with the commissioner's approval. The commissioners created boundaries and within the boundaries there had been a provision allowing them to establish a property tax rate for the people within the district to support the facilities.

Ms. Tiffany asked Ms. Vilardo if she had any idea for what the previously loaned $320,000 had been used. Ms. Vilardo said generally speaking, the hospital had been in severe financial emergency for over a year. Among the department of taxation, local government advisory committee, and the tax commission there had been constant reports made as to their situation. At one point there had been a benchmark level of what the hospital had to have in cash and Ms. Vilardo believed it was $700,000 before the Department of Taxation and the director were going to recommend the next step forward. The hospital kept slipping down from that balance and the county helped them recoup, but they eventually fell below the level again.

Ms. Vilardo stressed the bill did, in a very systematic and logical way, do what it was designed to do and that was to insure the legislature could maintain the financial integrity for those entities that had lent money.

Ms Tiffany, pursuing her line of questioning, asked about the trigger point to begin the process and who would decide whether the entity needed to be dissolved; would it be the tax commission, the county commissioners, or the vendors calling the debts due. What was the trigger point for that decision. Responding to her question Mr. Neighbors pointed out the answer would be on page 2 section 3, of the bill wherein it stated, "The property of the dissolved hospital district may be retained by the board of county commissioners for use as a hospital or disposed of in any manner the board deems appropriate . . ." He stated the hospital would be under new ownership but explained the most critical issue was, of the five commissioners in Nye County three were very supportive. If they were able to get the bill passed, the remaining commissioners would be more comfortable about making future loans to management to keep the hospital open. The commissioners did want to keep the hospital open, but if it got to the point where the county could not pay the bills something would have to be done; however, the county would be responsible for the loan.

Ms. Tiffany repeated her question about what would be the trigger point of deciding whether the hospital was insolvent or not. Mr. Neighbors answered it would depend upon whether or not the legislature passed the bill. If it was not passed, the commissioners would not be comfortable, resulting in them not providing any further loans. The county commissioners had previously said part of the $350,000 they recently loaned the hospital district would be "shut down" money. Ms. Tiffany again asked if the county commission, the tax commission, or who would make the decision to shut it down. Ms. Vilardo responded by indicating all of the above could make that decision which was why it was so important to move the bill through the process as quickly as possible. Ms. Tiffany, reiterating her questions, asked if the legislation gave commissioners authority to provide assistance, would the commissioners do the contract negotiations in the event the hospital was to be privatized. Mr. Neighbors replied he understood there had been several doctors looking at the hospital if it was privatized, but at that point the commissioners would be the negotiators.

Following that line of questioning, Mr. Anderson asked Mr. Neighbors if, since that would all evolve to a hearing of the county commissioners might the commissioners decide they no longer wanted to take the hospital on as a responsibility. Would they be allowed to back out of a hospital program that may be operating marginally even though not currently in the red. He pointed out the legislature was being asked to expand the policy of health care providing. Mr. Neighbors suggested the chairman of the county commissioners would be in a better position to answer that.

Chairman Goldwater requested the representatives from Nye County present their testimony.

Speaking next was Dick Carver, Chairman of the Nye County Commission who introduced himself and Geneva Neuhauser, representing the Nye County budget office. Mr. Carver suggested Ms. Neuhauser begin first.

Ms. Neuhauser stated since June of 1984 county commissioners had given the regional medical center over $4,600,000 dollars in loans and grants. Most of those funds had started out as loans but since the hospital was in such dire financial shape, they had converted most of the loans to grants. Since November of 1996, they had given about $3 million. In answer to Ms. Tiffany's previous question about the $350,000 they gave the hospital February 2, 1999, the $350,000 was to pay "payables." The Department of Taxation said the $350,000 the commissioners had given to the hospital at that point, would only bring the accounts current through November. The accounts then were still 90 days late which meant the vendors, at any time, could close the hospital. The Department of Taxation had reported to Ms. Neuhauser they were out approximately $1.2 million at that time.

Mr. Carver explained his understanding of the bill was to assure Nye County commissioners they would get their money back if they loaned money to the hospital and to assure the vendors they would get paid if the hospital did close. He felt the problem was utilization at the hospital but as long there remained a split vote of the commission a message was being sent to the public there would be a possibility the hospital could close. He felt the bill would assure the commissioners the county would get its money back which would mean the hospital would get the support of five commissioners and keep the hospital open. That would help eliminate the utilization problem.

Commissioner Carver stressed the hospital's needs involved two focuses; one was short-term for a period of about 9 months before the hospital could get something going on a long-term basis, which would be after the tax increase. Since the commissioners voted on January 19, 1999, not to fund the hospital anymore there had been some new options that looked very promising. Cameron McRae, a member of the Nye County Board of Commissioners from Pahrump had told the commissioners he did not mind providing money for the hospital if they could budget it, but proper management had to be put in place. The commissioners would need to know how much money it would cost each year. The commissioners also had been looking at Bridgeport, California, where they had a situation similar to Nye County. They had changed to a county-private partnership where the county put in $425,000 per year and the private party ran the hospital. So far it had been very successful, so Nye County had been looking at that possibility.

Continuing with his testimony, Commissioner Carver pointed out if the medical services were removed from a community, the economy would be dead. It would kill the central part of the state. He gave statistics on Nye County, including the fact it had 18,000 square miles with a population in excess of 40,000 people and probably in excess of 80 percent of those are in Pahrump. The assessed valuation for the entire county was $665 million which was a $65 million dollar increase over the previous year. of that, $55 million was in Pahrump alone. Round Mountain Gold Mining Corporation put in a $100 million dollar expansion but Nye County did not see that much reflected countywide because there had been so many decreases in other areas of the county.

Mr. Carver felt Nye County was the most unique county in the state inasmuch as it was now in the process of building its second courthouse. Nye County would soon have two complete courthouses; one in Pahrump and one in Tonopah. The one in Tonopah was completed 5 years ago and was built with money the county had in the bank. Something that occurred during construction was the county suffered a $1 million dollar shortfall in revenues and had to make some cuts from county government, but they did not lay off one person. The next year the county experienced a $1 million overpayment of net proceeds by one of the mines and the county had to again cut back. There could be no more cut backs without suffering any layoffs.

The commissioners had voted to start the process to increase the tax rate and the Department of Taxation had been taking care of that. As chairman of the board of county commissioners, Mr. Carver strongly urged the committee to recommend passage of the bill, which would allow the hospital to remain open. He assured members the county would find a solution, but the solution would be to increase the utilization and that could not be done until Nye County got the full board of the county commissioners pulling together.

Joining the discussion at that time was Mr. Lee who pointed out as a business the hospital district would naturally have receivables and payables as part of operation but asked why the hospital was having continuing problems. For example, had they carried forward a heavy burden of debt and interest, was their interest too high, the labor burden too high, or indigent care high. Why did the hospital continue to have problems and why did it continue to be a problem given the fact they had received so many loans and grants from the county over the years.

Mr. Carver, prior to responding announced he may have a possible conflict of interest inasmuch as his mother was on the hospital board when the hospital was built and was now a patient in the elderly care facility. His family had paid taxes since 1938 and he felt they had a vested interest in the hospital, but it did not matter and he would continue the course, as he understood the importance of that hospital. As he saw the situation, the hospital had not been run as a business and, as a county commissioner for 10 years and involved with the hospital for 6 years, he was frustrated. As a county official, he could not go into the hospital's business and do what had to be done which was run it as a business.

Elaborating on that statement, Mr. Carver explained when the hospital first fell into financial trouble the hospital board had some good contracts with doctors who were getting paid 65 percent of billing, plus $206,000. They were guaranteed 65 percent of the billing, but if the hospital only collected 40 percent of billing, they would be failing behind. One doctor had told Mr. Carver he was there for the community; however, he was going through the streets of Tonopah bragging about making over $400,000. The doctor became angry at Mr. Carver when he suggested the commissioners renegotiate the contract. The other issue that had been very critical had been the turnover of hospital administrators. He estimated they had worked with over 17 administrators over that many years and had a great deal of difficulty in billing and in keeping doctors in Tonopah. At one time the hospital had no doctors and residents had to go outside the community for medical treatment.

Commissioner Carver added, with the split vote issued by the commissioners on the hospital board, he doubted anyone would be interested in coming back into the area for medical care when they were aware the hospital could be shut down at any time. He stated he could provide additional reasons for their failure but the bottom line was the hospital had not been run like a business. In response to a question from Mr. Lee on the possibility of the problems continuing even if the measure was passed, Mr. Carver stated, with the appointment of a new director of the Department of Taxation and as chairman of the Nye County commissioners they would not let that happen. He felt the money Nye County had spent at that point had been no more than taxes. Mr. Carver admitted he was not a hospital administrator and did not know the workings of running the facility; however, they hired a professional group to come in and it failed. The Department of Taxation had been trying to work out a solution, but to date had not been able to put a package together to make it successful. The commissioners were at the point where they had a plan to get things together, but they had just a short window of time to make it work.

In his personal opinion, Mr. Carver emphasized if the Nye County commissioners were able to get themselves out of the operation of the hospital, privatize it and let it be run like a business it would work. As an example, he pointed out the Elko hospital was privatized and at that time the commissioners had built in a safety valve which provided if the hospital shut down, the facility would revert back to the county. The county had provided a special account in its budget to support the hospital and went forward; he felt that would be something Nye county commissioners would be willing to do. He added Fallon had done the same thing and had built a new addition to the hospital, which had been a success. Mr. Carver opined he did not feel the county commissioners would object to putting money into the hospital if they felt it would be run like a business.

Ms. Freeman interjected she agreed the hospital needed to be run like a business; but if they treated a large number of indigent patients you had to have some type of revenue coming in from "private pays." She added, in reference to the statement about the Elko hospital being successful, Elko county had a much larger tax base than Nye county and with mining doing well she did not think Nye county could anticipate being as successful as Elko county. She explained when you put a hospital in a remote area you must have some deep pockets from another area to provide some subsidy. Rural legislators needed to get together and work out some type of state policy in regard to rural health care facilities. Mrs. Freeman wondered how much longer the rural health facilities would be able to survive without the state becoming involved in some way but she wished the Nye county commissioners good luck with their efforts.

Chairman Goldwater advised there had been a bill in Ms. Freeman's Committee on Health and Human Services that, hopefully, if any county did have a disproportionate share of indigent care there would be a method to provide some additional money.

Speaking next Mr. Anderson addressed his question to Mr. Carver stating he understood Nye County's concern was in keeping the county hospital open. He could envision the situation whereby a county hospital might shut down after a hearing just because they saw their accounts receivable not quite at the level they wanted. They could then use that as a threat to the community for other purposes and, without standards as Ms. Tiffany had pointed out, after holding a mere hearing without further proof or recommendation from outside source, closing the hospital might be a necessity. He asked if it was Mr. Carver's intention to empower the county commission and no one else, to which Mr. Carver replied in the affirmative.

Interjecting at that time was Ms. Neuhauser, Budget Officer for Nye County who stated in response to Ms. Tiffany's previous question, she understood the triggering of the "severe financial emergency" provision would prevail when the Department of Taxation had actually taken over running the district.

Mr. Carver wanted to follow up on his previous comment and explained when the Department of Taxation stepped in there was no decision made without all the entities working together, i.e., the Department of Taxation and the county commissioners. He did not see where the commissioners could make the decision to close the hospital.

Mr. Anderson suggested perhaps there needed to be some clarity written into the section of the law defining the process in the language. He had several questions in his reading of the bill he would like to see covered prior to voting for passage of the bill.

Chairman Goldwater asked Mr. Carver what entity had the responsibility of creating a hospital district and was informed it was the county commission. Mr. Carver stated, as he understood it, the issue would be to give commissioners the power to carry on the tax rate after the district was dissolved. Once the Department of Taxation became involved, it was a mutual arrangement between the county commissioners and the Department of Taxation.

Speaking next was Ms. Tiffany who concurred there was no other way the hospital could survive unless the county subsidized it, whether they brought in new physicians or not. She asked what amount would be generated with a 20 cent increase on the taxpayers per year. Ms. Neuhauser admitted she did not bring a budget with her but she said she believed the amount they had used was 20 cents, which was their operating and debt rate.

Entering into the discussion at that time was Dave Pursell, Executive Director of the Department of Taxation, who provided figures relative to the tax rate and assessed value. Records of the Department of Taxation indicated assessed valuation in the hospital district was $168.5 million. Ad valorem tax rate for that district for the next fiscal year was approximately 38 cents, which would generate ad valorem tax revenue of $643,000 per year. The department extrapolated sales tax revenue for the current year (FY 99) to be approximately $143,000 and for the coming fiscal year at around $152,000. Those numbers would change as the department received additional information from the counties, which would be updated by next month.

Pursuing his line of testimony, Mr. Pursell added for clarification of the record, NRS 354.705 was the "severe financial emergency" statute with which his department would be dealing which contained the $4.50 tax rate that could be imposed. He volunteered he did not establish that in 20 cent increments but if an additional 80 cents were allowed to be applied in Nye county and it was applied against the $168.5 million value in the hospital district it would generate approximately $1.3 million.

Responding to Mr. Pursell's information, Ms. Tiffany thanked him for his information and asked if he knew what would be required as far as the total annual budget to keep the hospital alive because it was without any negotiations or contracts. Additionally, what the current tax base brought in so legislators would know to what level the county would have to raise taxes to make the hospital whole, assuming the county was to take over the hospital district and subsidize the hospital by a tax increase. Mr. Pursell agreed to provide additional information, which may assist the committee in making some decisions. At that time the Department of Taxation estimated there was a cash shortfall between $130,000 and $150,000 per month. If that was to be carried through the rest of the fiscal year, the commissioners would be looking at approximately $700,000 to $750,000. Accounts payable were at a point of $1.2 million which meant the county was looking at $2 million to run the hospital through fiscal year 1999.

Chairman Goldwater interjected by asking if Mr. Pursell knew the age of the accounts payable and to whom the bulk would be owed. Mr. Pursell admitted he did not have that information but believed it was for medical supplies for the acute part of the hospital. The Chairman asked Ms. Tiffany to continue her questions.

Ms. Tiffany asked Mr. Pursell if he knew the annual budget for the hospital using the projected figures of $750,000 plus $2 million. Her next question was if the tax rate was raised to subsidize the budget what would the budget be for 1999. And if you took out the $1.2 million for the year 2000, what would be needed in the way of tax increase. She explained she was interested in learning what the hospital would have to take out of its pocket through a tax increase to keep solvent. She asked that his response be relayed in different increments such as 10 cents or 20 cents more added to the existing rate.

Mr. Pursell stated something else needed to be taken into consideration which was that the tax rate would not be certified by the tax commission for the next tax year until the end of June. The county would not see any increase in taxes until after August of 1999 which was why it was so critical that action be taken immediately. The funds to run the hospital would have to come from individuals in the community using the hospital plus whatever Nye County could afford. Mr. Pursell added the local community must support the hospital because without the residents use the county would not be able to keep it afloat. He felt a number of individuals had tried to help correct the problem but in looking at fiscal year 1997-98 the average use per patient per day had dropped by half. Usage had been about four patients in 1997 and had dropped to two patients. That had caused a lot of the problem, as there was no cash flow into the hospital.

Mr. Pursell added the Department of Taxation was in the process of contracting with an administrator and financial officer to run the hospital. From his experience at the White Pine High School the Department of Taxation could help with the financial aspects of running the district but his staff were not hospital administrators or school superintendents and for that reason the contract was extremely important. His staff was hoping to have a contract signed within the next few days because the current hospital administrator who had been handling the financial angle of the hospital was leaving the end of the month. Someone needed to get out in the community and convince local residents the hospital needed to be the primary care facility for the community.

Mr. Price indicated he had a question relative to some information he had located in an older tax book from last year. He pointed out Mr. Pursell had indicated the assessed valuation was $168 million and he noticed in the old book it had been listed as $197 million. He asked if the assessed valuation of the hospital was going down. Mr. Pursell explained the difference could be a combination of additional depreciation or a multitude of things that had caused that decrease.

Chairman Goldwater asked, assuming a hospital district was dissolved, did the taxation department have the authority to tax that district, and would it be administratively difficult. Would the district remain for an indefinite period of time or how would the taxes be levied and was the department equipped to impose the legislation if it were passed. Mr. Pursell, in responding, indicated it would not be difficult for his department. They still had the delineation of the district and the information built into the formula that drove the sales tax distribution and what the property tax revenue was. As someone had mentioned earlier if 80 cents was imposed that would be over a 5-year time period so to administer the bill would not be a hardship on the department.

Additionally, Mr. Pursell pointed out, one thing that had been clarified for him from the discussion the committee and Nye County officials would be talking about all taxes whether it was sales tax, ad valorem, et cetera.

Chairman Goldwater, pursuing his line of questioning, asked when all taxes that would be increased for the hospital would sunset and by whom. Responding Mr. Pursell stated the Department of Taxation would need to schedule the amount of loans outstanding, use the generated revenue and amortize it to see how long it would take to pay the loans. Chairman Goldwater assumed the executive director would essentially make that decision after an analysis.

Mr. Anderson asked, after considering the facts of the NRS citation would the legislature be diminishing the capacity of the county commissioners to settle other tax problems. Particularly in the management of governmental functions as a result of language in NRS 354.705, would the commissions be precluded from building another courthouse, furnishing it, or any other projects they wanted to do. Mr. Pursell explained he did not know where Nye county was on the $3.64 cap or how close each district was but he felt they were pretty close to the tax cap county-wide. As he recalled, the reasoning for putting in the $4.50 contingency was because other local entities needed to compete within the $3.64. The 80 cents just became a tool to use when a local entity was in trouble and would become an additional tax on the taxpayers.

Responding to Mr. Anderson's question Mr. Pursell pointed out the 80 cents would not make a difference in how the tax rate was calculated for any other entity. It would be two separate issues, but the bottom line was the tax district was going to be left in place to take care of debts created within the district and would not be taking dollars away from another entity. Mr. Anderson interjected his supposition was the debt would be on a higher level and a debt that had to be satisfied. It was apparent the legislature was trying to help Nye county but having done that the legislature would be restricting the county commission because they would not have access to further dollars until that tax rate had already been satisfied to that particular level of indebtedness. In effect, Mr. Pursell and the taxation department would become a steward to the management of that particular county's assets and taxes. He asked if that was a correct assumption and was assured by Mr. Pursell it was.

Ms. Freeman posed a question to Mr. Carver asking if the utilization of the facility was down, how were the voters in that area and the taxpayers going to feel about having their taxes raised. If the taxes were raised would it go to a vote of the people. Responding to her question, Mr. Carver stated emphatically he would not support the process unless it did go to the vote of the people but he felt people were concerned about having a facility on which they could depend in the future and not short-term. He added he felt taxpayers were going to be supportive. He had received word the governor's office had received over 1,500 phone calls on the hospital in Tonopah.

Chairman Goldwater called upon Mr. Pursell who wanted to clarify the financial emergency statutes on who was going to make the decision to invoke that 60 cents or 80 cents, whichever it was determined to be. The Department of Taxation through its fiscal review, once they got the new financial officer on board and up to speed, would make that determination on whether an additional rate needed to be imposed. That was assuming there would be enough money coming forward to keep the hospital open until the end of this fiscal year. Those statutes directed the Department of Taxation to submit that information to the local government advisory committee and, with the department's report, go for the Nevada Tax Commission's determination on whether or not to invoke the tax rate. That formula started with the White Pine School District and was a litany of legislation that had been put together to deal with the problem of not having enough revenue within a local governmental agency. The hospital needed an infusion to get back on track.

Ms. Tiffany posed what she considered a tough but fair question in that she stated what Tonopah may need was a clinic rather than a hospital. At the time the Tonopah hospital was built, the population of Tonopah was much larger than it was at the current time and it was a distribution center for medical services which were passe'. She knew that people in Tonopah went to Las Vegas or Bishop, California, on a regular basis for their health care as opposed to the hospital. She asked if anyone had ever considered closing the hospital, letting it go the way of the bank. The bank came in on a bankruptcy situation and put a trustee in charge of it and had to liquidate or renegotiate the contract. She felt the county would be throwing good money after bad inasmuch as she did not think they had the right facility for their needs. The commissioners could then look at a medical clinic and a separate long-term care facility. She asked if anyone had ever looked at that. She felt that was the correct answer but did not know if the county could get to that point.

Mr. Pursell concurred that was a very good question and was something the Department of Taxation needed to examine. He sat in on his first meeting with county officials and representatives from various groups handling different aspects of the hospitals and came away with some questions as well. When one makes the decision to close the hospital, the regulatory authority must have a lot of things in order to do that. For example, there was a long term care facility which was licensed as a hospital. Responding to Ms. Tiffany, he did not know if that was something that had been examined in the past but was something that should be considered. The taxation department had been requested to have a plan for closure or downsizing due to the financial picture for the fiscal year and that may be a solution..

Ms. Tiffany pointed out if the legislature passed the bill, but it was determined the hospital would be closed, retaining the long-term care and medical clinic, would the department still collect taxes out of the hospital district. Would the taxation department still do that. Mr. Pursell responded in the affirmative.

At that point, Mr. Marvin Leavitt, Chairman of Committee on Local Government Finance entered the discussion in his position of chairman of the local government study committee, which would have a definite role in the operation of hospitals. His concern with the bill was he did not feel it had the detail he felt needed to adequately cover that particular situation. For instance, the bill did not address whether the hospital would indeed meet the financially difficult situation required under statutes. There would be different types of rules if they were in that difficult situation, or if they were not. In other words, the legislature could have had a whole group of taxes levied for the hospital over the past 3 years even though the governmental entity for which they were levied was no longer in existence. If they had a district set up to fund it, would that original time period be followed. The language in the bill was not very clear as to exactly what taxes would be involved where the bill said, "taxes would be levied." He emphasized he was not opposing the bill but felt it would be difficult to know what the full intent was and how they should operate under individual circumstances. The proposed legislation should provide what was in the current bill. He knew from past experience when administrators tried to implement one of those measures they normally got in trouble as to what taxes were being considered.

Chairman Goldwater interrupted at that time by asking Mr. Leavitt if he would work with him and the Senate committee to come up with some of the detail to which he referred. The committee had been informed the bill was of extreme necessity and the Chair felt he and Mr. Leavitt could get the process moving by meeting with members in the Senate and hopefully meet the concerns pointed out by Mr. Anderson earlier. Mr. Leavitt agreed to work with the Chairman for that purpose.

Chairman Goldwater indicated he would accept a motion to proceed and asked for the will of the committee.

It was noted for the record, Mr. Anderson's vote was based on the understanding that an arrangement would be made whereby the committee would see some "clean up" language from the Senate side. Chairman Goldwater pledged that would be done which was concurred by Mr. Leavitt. The Chair assigned Mr. Neighbors to carry the bill on the Assembly floor.

There being no further business the meeting was adjourned at 3:00 p.m.

RESPECTFULLY SUBMITTED:

Nykki Kinsley,

Committee Secretary

APPROVED BY:

Assemblyman David Goldwater, Chairman

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