The Committee on Taxation was called to order at 1:30 p.m., on Tuesday, March 16, 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.

COMMITTEE MEMBERS PRESENT:

Mr. David Goldwater, Chairman

Mr. Roy Neighbors, Vice Chairman

Mr. Bernie Anderson

Mr. Morse Arberry, Jr.

Mr. Greg Brower

Mrs. Vivian Freeman

Ms. Dawn Gibbons

Mr. John Jay Lee

Mr. Mark Manendo

Mr. John Marvel

Mr. Harry Mortenson

Ms. Sandra Tiffany

COMMITTEE MEMBERS EXCUSED:

Mr. Bob Price

GUEST LEGISLATORS PRESENT:

Mr. Richard Perkins, Assembly District 23

Mr. David Humke, Assembly District 26

STAFF MEMBERS PRESENT:

OTHERS PRESENT:

Assemblyman Perkins advised the committee he had been approached by a constituent asking why citizens of Clark County had 2 privilege taxes. In Nevada of the 2 privilege taxes one was a 4 percent tax going to the state and redistributed to schools and a number of other sources. The additional 1 percent tax passed in 1990 was for transportation benefits in Clark County. His constituent, being a senior citizen, gave rise to his concern that, as the price of vehicles went up, senior citizens on fixed incomes could not afford to register their cars. Basically the privilege tax was based on a fairly complicated formula which started with the base price of the car.

The bill, according to Mr. Perkins, was an attempt to create an exemption for the first $5,000 worth of value for a seniors car and plug that number into the rest of the formula. The formula basically took the price of the car and carried a 35 percent tax ratio and had a depreciation factor if the car was not new. Mr. Perkins provided examples of the amount of exemptions and tax rates showing the bill would lower the privilege tax burden to senior citizens. The bill was written, as indicted in subsection 7 of section 1 stating an elderly person means a person who was 55 years of age or older. He had received some suggestions that the committee raise the threshold to 62 making it more consistent with other definitions of elderly citizens in the state.

According to Mr. Perkins there had been some concerns expressed in regard to subsection 3 of section 1 providing for the filing of affidavits and the need to continue showing proof of age. He felt those provisions could be changed to make it a much more friendly system. If someone filed an affidavit and the applicant had lied on the affidavits there would be penalties in the form of a misdemeanor so he was undecided as to whether showing proof of age every year would be of much use to the state. There had been some discussion from the assessor’s office as well as DMV with suggestions for amendments but he pointed out he had no problem with amending or changing anything in the draft. His thinking was to find some relief for seniors inasmuch as Nevada did not have the mass transit systems found in other states for seniors who were unable to drive. People were dependent upon their vehicles for a number of reasons; whether it was employment, medical care or daily functions so going without an auto was not an option. He felt the bill would help senior citizens facilitate their needs.

Mr. Perkins emphasized it was his intention to exempt only one vehicle per household although the bill did not state that. He wanted to allow a family the opportunity of one reduced registration on the primary vehicle. He offered to answer any questions.

Ms. Freeman, speaking first, suggested raising the age limit to at least 62 but questioned why there were no income qualifications in the bill however, Mr. Perkins indicated it would appear to be a complicated formula to get into. Ms. Freeman suggested he may want to speak to the assessors from Clark County as she had a bill on property tax which contained a formula that could be used in the bill. She added she did not want to discriminate against people with money but if an exemption were included the members may be more willing to consider the bill if there were an income factor within it.

Mr. Neighbors indicated his only question was on page 1, line 4 relative to "bona fide resident". He asked if the committee needed to define that inasmuch as a person could be a resident to vote on about 7 or 8 different resident requirements. He suggested the bill could specify the length of time or define what determined when a person was a resident. In response, Mr. Perkins indicated in the Nevada Revised Statutes (NRS) the term "resident" was spelled out and after a specified period of time when someone moved into the state they must register for Nevada license plates and so forth. His understanding was the residency requirement was already spelled out in the registration statute.

Addressing his concerns relative to 2 areas, Mr. Lee complimented Mr. Perkins on his idea for the bill adding he was extremely pleased to see the proposed exemptions come forth. He asked if the bill addressed a vehicle such as motor home and was advised by Mr. Perkins his question was addressed in subsection 5, of section 1, page 2, line 4. The exemption did not apply to a bus, truck, or truck trailer having a declared gross weight of 10,000 pounds or more so it would be based upon the gross weight of the vehicle.

Mr. Mortenson suggested it may be easier to regulate this exemption if the regulation language provided for a blanket deduction. Mr. Perkins concurred adding the comments from the committee had given him something to consider. He would investigate through the county assessor's office in Clark County to determine what would be the best method for him to monitor the exemptions. Mr. Perkins pointed out he had discussed this with Chairman Goldwater relative to the Department of Motor Vehicles (DMV) Project Genesis computer system. If the bill was looked upon favorably, it might be better for the effective date to be extended out a little further so this exemption occurred after Project Genesis was rolled out. In that way it would not be necessary to convert from one system to the next as undoubtedly there would be an initial influx of requests for exemptions.

Acknowledging the necessity of having a fiscal note prepared on the bill, Mr. Marvel suggested if one had not been requested it should be. Mr. Perkins informed the committee a fiscal note had been requested which had gone from the Department of Administration to DMV but had not been returned as yet. He acknowledged with some of the changes the committee had suggested the fiscal note would change significantly and a new one would need to be obtained. He volunteered to track the fiscal note and advise the Chairman when it was available.

Several members made suggestions such as including "one exemption per family" made by Mr. Neighbors who pointed out that would have an effect on the fiscal note as well. Additionally Mr. Anderson suggested amending language on line 5, section 1 which he felt would help the committee in its deliberations and might possibly move the bill along as well.

Mr. Manendo stated he favored the 55 age range rather than 62 as he was always concerned about people's high ticket items as they aged which usually affected their vehicles. People in that age category generally needed the help. Mr. Perkins concurred, adding one reason the committee may want to settle on the higher age was at some point in time most everyone would be living on a fixed income and that could happen at any age and 62 was probably more realistic than 55 in that regard.

Chairman Goldwater asked Mr. Perkins if he had considered rather than claiming an exemption on the front end perhaps paying the tax and applying for relief on the back end from some appropriation to some type of relief fund. He asked if that might be feasible. In reply, Mr. Perkins stated he had looked at several different options but one of the difficulties for someone on a fixed income was the initial outlay. Applying for the rebate would be a much more difficult circumstance for them but it was something that could be looked at. Additionally, there were many difficulties when attempting to provide exemptions and you had to look at the constitutionality. In his opinion the bill as introduced was the cleanest approach.

Chairman Goldwater asked for further testimony from anyone in favor of the bill or opposed. Coming forward was Pete English, Chief of the Registration Division, DMV who stated his department was taking no position on the bill. However, in light of a question from Mr. Marvel concerning a fiscal note, the department was in the process of preparing one based on the 55 age limit and all vehicles in a family rather than a primary vehicle. Utilizing that factor, they had identified an approximately $42 million fiscal impact to the state. There were no questions from the committee for Mr. English.

Chairman Goldwater called for further questions or comments. Speaking next was Ms. Carole Vilardo, President, Nevada Taxpayers Association who wished to speak to an amendment on the bill if it was processed. She stated the Committee on Taxation had a major policy decision to make, one the S.B. 253 committee had been studying. The study committee had been looking at the entire issue of exemptions and felt if the Committee on Taxation was going to go forward an exemption such as the one being considered in the bill, there were several points to be considered. For example Assemblyman Perkins had already trusted the committee was trying to be consistent with age when dealing with the issues for exemptions. And in that regard 62 seemed to be the prevalent age. Six months was the residency requirement for the current widow exemptions, veterans exemptions and so forth and she believed that was different from the residency requirement that existed in the DMV statutes for registering.

Stating she agreed with Ms. Freeman, Ms. Vilardo concurred that the bill should provide for "means testing." If the committee were going to do something like this and not have it means tested she felt the policy question would be why should the exemption be just for seniors. Why should it not be for everyone no matter what age which would have a considerable fiscal impact. She compared that to the policy of adding "widowers" to the statutes as the state only provided the exemption for widows. She pointed out if the state was not agreeable to getting rid of all the exemptions, then they should make them uniform and across the board.

One other issue the committee would be dealing with was the vehicle privilege tax which could wind up being in lieu of the personal property tax we had. The state currently had on the books an exemption 62 years of age for a senior citizen widow and it was anticipated "widowers" would be included to make it an equal exemption. Based on that age the committee might want to look at expanding the exemption and changing some of the conditions within the refund. In reality what happened was the rebate was allowed to be used on property taxes or motor vehicle registration and was used in whatever county possible because it was considered as property tax or "in lieu of" property tax. The rate for the exemption was set at fifty dollars currently in Washoe, Clark, and Churchill counties and forty dollars in the rest of the counties. Obviously if a person did not have a car they would not get the benefit.

She concluded the committee had a number of policy issues to decide and she urged them to be consistent with what was in statute; to do otherwise would give the political entities major problems in revenue and estimating revenues.

Ms. Vilardo raised another point that being, if the committee processed the bill the exemption became an entitlement. Matters such as these did not belong with the Department of Taxation or the assessors. They belonged in the Human Resources Department or in one of their divisions, perhaps the aging services or senior division as they had more contact with elderly people. That placement would make a great deal more sense because, in effect, the committee would be creating an appropriation that had to be accounted for somehow. She apologized if she had not been as concise as she should have been but she was trying to provide some parallels for the committee's consideration.

Chairman Goldwater asked Ms. Vilardo how the exemption would work if it was put in another agency and, rather than provide an exemption, perhaps create a program requiring the issuance of a voucher. He pointed out the initial outlay was what concerned the sponsor of the bill so a person could apply for a voucher to aging services they could give them the assistance and fund the program that way. Ms. Vilardo concurred with the suggestion and stated that made much more sense.

Chairman Goldwater announced the hearing was closed on A.B. 455 but further work would be done in a work session.

The Chair then opened the hearing on A.B. 471.

Prior to taking testimony, the committee received a written bill explanation prepared by Fiscal Analyst Ted Zuend. He wrote the following analysis of the bill:

"The bill would reduce the 1 percent special vehicle privilege tax in Washoe County to 0.5 percent in FY 2001-02 and then eliminate it in FY 2002-03. The special tax was authorized by the Legislature and subsequently enacted by the Washoe County Commission to replace a portion of the supplemental city-county relief tax revenues lost by local governments in Washoe County because of the passage of the 1991 "fair-share" legislation (AB 104).

Washoe County estimated the revenue loss for all local governments that currently received the revenue at $3.3 million in FY 2001-02 and $6.9 million in FY 2002-03.

The proponents of the bill included most of the Washoe County delegation, who had received steady complaints about the tax since its enactment. Some residents apparently felt that the tax should have expired after a fixed period of time because of some confusion over provisions in AB 104 that also authorized the additional tax in certain other counties for only a few years. Governments in Washoe County, though not opposing the elimination of the tax, did not support the bill because it did not provide an alternative revenue source for those governments. They noted that the tax generates more than 2 percent of the revenues for the county and other local governments and that it would be a hardship for those governments to absorb the revenue loss."

Chairman Goldwater turned the floor over to the prime sponsor of the bill, Assemblyman David Humke who gave a background on how and why the legislation was requested. He explained the bill went back to 1991 which was known as the "fair share" session as there had been a redistribution of tax revenue affecting Washoe and other counties. Washoe County found itself short in revenue and was forced into a position of providing methods to obtain make up revenue. One method was a portion of the motor vehicle privilege tax. Many residents in Washoe county were surprised on or about July 1, 1996 with the motor vehicle privilege tax when it did not end in Washoe County as it had in most every other county of the state. The citizens of the county were quite angry and had trouble getting answers from DMV, Washoe County, or even the Legislative Counsel Bureau (LCB).

Mr. Humke admitted he heard a great deal about the tax during the campaign season that year and therefore, in 1997 he put forward A.B. 340 which was introduced on April 8, 1997. That was a similar bill eliminating the Washoe County portion of the motor vehicle privilege tax but it did not become law and he did not pursue it.

Mr. Humke pointed out A.B. 471 was a similar bill but had some differences. First there would be a delay in the beginning of the repeal of the Washoe County portion and then it would be split between 2 budget years. He admitted he had been persuaded that a delay in the enforcement of the bill was needed should it become law. The counties and the various entities receiving the revenue were currently in their budget process for the coming year and it would be detrimental for them to have it become effective on October 1, 1999. Therefore, there would need to be a delay in the effective date.

Mr. Humke explained he had requested a fiscal note and when he received it he had returned it with a "yes" indication but it had not been returned at that time. He warned the committee some public entities in Washoe County would provide opposing information regarding the fiscal impact of this bill and would probably testify in opposition offering some amendments. He concluded by stating he felt he had to do what he felt was the right thing as there were a number of constituents complaining about the tax and the fact that it did not end similar to other counties. He admitted he complained bitterly about the policy Washoe County chose to follow in leaving the tax revenue on and not using other taxes to make up for the lost "fair share" revenue. He volunteered to answer any questions.

Mr. Anderson spoke in favor of the bill and complemented Mr. Humke for his attempts in trying to find a more neutral position in solving the problem. He recalled when the tax was first initiated the staff at DMV took a news story relative to the bill and put it on their counter and when people came to complain about the tax they would say please write your legislator as that was the only solution available at that time. It was the opinion of the legislators the tax would go away an issue the county and state had disagreed about. He trusted everyone involved would remember a major commitment made to look for additional revenue to make up for the 1991 and 1992 tax shift.

The Chair called next on Ms. Freeman who asked Mr. Humke if he had any idea what kind of revenue this brought to Washoe County and what percentage that would be to the total budget if this tax were repealed. Mr. Humke admitted he could provide testimony given during the 1997 hearings and adjust the figures up from there based on a certain percentage but he did not know the percentage of their budget.

Testifying in opposition to A.B. 471 was Ms. Joan Lambert representing Washoe County. She acknowledged Mr. Humke had covered quite a bit of history of the tax so she preferred not to go back to 1981 when the property tax was rolled back and the Supplemental City-County Relief Tax (SCCRT) was implemented in the original state distribution. In 1991 that distribution was changed and had approximately a $16 million impact to all of the entities in Washoe County. At the time the legislature, in A. B. 104, allowed several make up revenues, the same revenues that at that session had gone to fund various transportation projects in Clark County. Those revenues went not just to Washoe County but to other entities in the county that received revenue such as City of Reno, City of Sparks, Incline Village General Improvement District, North Lake Tahoe Fire District, Truckee Meadows Fire District, Sierra Forrest Fire District and Verdi TV District. In order to give the members an idea of the magnitude of what the motor vehicle privilege tax was as part of the make up revenues the last actual numbers which were for 1997-1998, the sales tax brought in just short of $11 million or $10,732,000. The property tax brought in a little under $2 million; motor vehicle privilege tax brought in $5.5 million. Gaming tax brought in just under $900,000, real property transfer tax increase brought in just under $500,000 for a total of $19,561,000 and change. That was the order of magnitude and was the second largest replacement revenue to the quarter cent sales tax that was in place.

Continuing, Ms. Lambert pointed out there had been a great deal of confusion over the tax and much false information was being put out which had Churchill County confused with Washoe County and so forth. Basically, in 1991 the Board of County Commissioners was allowed to impose those make up revenues if they chose and they did choose. In 1993 there was some clean up in A.B. 104 and part of that was Washoe County entities working with some of the legislative delegation who brought forward S. B. 506. In that bill some revenues were allowed to roll back because the payback to Clark County went away. The decision was made then, because of concerns about the property tax rate approaching the $3.64 cap, that the property tax rate be rolled back from a little over 8 cents to a about 2.7 cents and the motor vehicle privilege tax would be left in place. That was the decision of the 1993 legislature and was where the tax rate was currently. She turned the floor over to John Sherman, Acting Budget Director in Washoe County who could provide details about the complexities of the rollback, payback and so forth.

Mr. Sherman introduced himself as the Interim Finance Director for Washoe County. Proceeding from Ms. Lambert's testimony, A.B. 104 of the 1991 session had several features he wanted to share with the committee. First, Washoe County had implemented the switchover for the distribution of SCCRT and phased that out over two years. The second part of the issue included a payback to Clark County of about $6.7 million over 3 years. The first year of 1991-92 the county imposed $8.7 million worth of make up revenue taxes and the next year they layered on the additional tax which included the motor vehicle privilege tax bringing the total to $16 million. In S.B.506 Washoe County officials had discussed with the legislative delegation the issue of those taxes and which would come off when the $6.7 million payback ended. He admitted the motor vehicle privilege tax was one of those taxes on the table. When the decision was made to roll back the property tax component of the make up revenues after the $6.7 million payback went away he believed the tax went from about 8 cents to 2 cents where it laid at that time. The total county-wide was about $5 or 6 million; the county itself got about three-quarters of the amount which was in the $3.5 million range. That equated to about 2 percent of the general fund budget and was a very significant revenue resource to the county. He asked to turn the floor over to Pat Coward for his comments.

Pat Coward introduced himself as representing Washoe County and advised the members of a meeting with the Washoe County Commissioners where they spent considerable time discussing the issue. He understood many of the members of the legislative committee and Washoe County had received calls on the issue from people who were working with this on a day-to-day basis. The residents of the area knew it was not a popular tax and supported the position that this should be rolled back over a 5 year period of time while the county commissioners looked for some help from the state in the way of make up revenue in another area. As Mr. Sherman had indicated earlier, it was a substantial amount of money that the county and other municipalities would be losing. Mr. Coward felt if the state could come up with some way to make up the revenue the county commissioners would support the roll back.

There were questions from the committee members beginning with Mr. Anderson who asked, in terms of revenue that had been generated for Washoe County over the history of this had the county exceeded, remained equal with or behind the offset which the bill was intended to solve. Had it become an additional generator for dollars greater than merely the loss that came about as a result of the tax shift. Responding was Mr. Sherman who explained one of the dilemmas Washoe County faced early on in the fiscal issue was the estimate of the loss. The formula that distributed the SCCRT was a complicated 43 plus column spread sheet. A.B. 104 removed the calculation and the information used to drive the formula was no longer being used so between Washoe County and the Department of Taxation the county had entered into a process of doing estimates of loss based on estimates that would go into the formula. That dilemma became exceedingly apparent in trying to generate some reliable information.

Mr. Sherman continued as part of S.B. 506 in the 1993 session the estimate process was done away with. Those revenues had different growth patterns in determining the difference between the old SCCRT distribution formula and what would have gone to Washoe County. The revenues generated from the make up was very difficult to figure so the county officers did away with it. Now the growth patterns still fit into a pattern, for example the real property transfer tax went down but the motor vehicle privilege revenue went up on a percentage basis from year to year. The growth pattern of Washoe County, when the make up revenues were added together with the SCCRT, was following a pattern of the sales tax in total. He could not provide an educated guess without the figures used to make those calculations.

Mr. Anderson suggested the question would be, "we know how much was generated under the old formula in 1989, we know what was generated under the new formula for 1997, and we know the increased number of vehicles." Could the tax officials not hypothesize that the tax had become a greater generator than if the state had stuck to the existing formula. In response, Mr. Sherman pointed out the motor vehicle privilege tax was a fairly robust tax in comparison to the pool of taxes including property, sales, motor vehicle privilege, and gaming taxes which in Washoe County were fairly low. Giving the committee some perspective Mr. Sherman pointed out last year prior to the change in the distribution formula in 1990-91 the total combined distribution of the SCCRT to Washoe County was about $68.6 million. Over the next several years when all those phasing mechanisms were put into place Washoe County's total governments in 1992-1993 ended up receiving $54 million in SCCRT. The net difference was $16 million which was what the county made up. The combined total was $70 million as opposed to $68 million but over the subsequent years those amounts have grown. In 1993-1994 the SCCRT was $64 million and make up revenues were $15 million because the payback went away. In 1995-1996 the SCCRT was $70 million and the make up total combined was $17 million.

According to Mr. Sherman, another thing driving the old distribution formula was "assessed valuation" as it was a make up for the lost property tax. If Washoe County's assessed valuation was accelerating, which it historically had, for example, the next fiscal year they would be looking at roughly 8 percent. The problem was if the assessed valuation growth rate was robust Wash County, in essence, would be receiving more SCCRT than they were generating. Someone could hypothesize that because of those tremendous growth rates and assessed valuation the county would have been receiving a disproportionate amount of SCCRT. Mr. Sherman felt the make up revenues were at or near what the county's hypothetical loss would be. In terms of a definitive answer he could not know that inasmuch as the formula was not being kept alive with current data.

Chairman Goldwater asked when the real estate transfer tax was last increased and was advised by Mr. Sherman in Washoe County it was when a 10 cent levy was increased for A.B.104 in 1991. The total was 65 cents. The Chair next asked if there was an analysis that could be done to juxtapose the revenue sources they had available, what they would bring in, and what they would need in the way of statutory authority. For example figuring real estate property, transfer tax and so forth if those sources were raised what would that accumulate in the way of revenue. He asked if that would be a doable thing and was advised by Mr. Sherman the county could analyze those revenue streams as that was a normal course of their forecasting.

Ms. Tiffany asked at the time the county was talking about a 5 year roll back were they talking about doing nothing for 5 years and then cutting the tax off or talking about putting some of the money away for 5 years to accommodate for when the tax was cut off. Responding to Ms. Tiffany's question, Ms. Lambert advised the Washoe County Commissioners wanted 5 years in phasing in the decrease. Considerable dialogue continued between Ms. Tiffany and Ms. Lambert relative to the process involved.

Ms. Tiffany's next question was relative to a possible additional increase in revenue from another source that would offset the tax if the county was not building it into their base. She asked if it were possible to depend on the revenue from the surplus and was advised by Mr. Sherman that Washoe County was going through a tremendous growth and, much like the rest of the state, they could project their growth rate in the revenue streams coming in at a 4,5 or 6 percent growth rate. He conceded that looked like large numbers but on the other side of the equation they had growth rates and demands on their services. The county's jail population went up in a pattern similar to the state's prison population; the caseload for child protective services went up and so forth. Washoe County had requests from the department heads and the commissioners constituents that exceeded the available resource pool.

Ms. Lambert indicted she had seen graphs looking at the per capita increase and the assessed valuation where it was not showing an increase but a decrease. Many of the per capita taxes were decreasing which seemed strange when you had a growing robust economy but that was the situation.

Mr. Mortenson put forth a hypothetical question wondering if anyone could tell him what a 1 percent increase in the transient or room tax would bring. There was no one available to provide that information.

Ms. Gibbons spoke next explaining she was happy to put her name on this bill inasmuch as the public really found the tax distasteful but, on the other hand, she understood revenues were down in Washoe County particularly in gaming and tourism. She had been concerned about what effect ending the tax would have as far as services for children, juvenile facilities, and senior citizens. She indicated that concerned her most and asked for some feedback from the Washoe County officials.

Mr. Coward pointed out he had spent some time talking with the County Manager from Washoe County and understood the commissioners were very sympathetic to the issue however it was not a popular tax. What the committee was looking at in Washoe county was the same situation the state was facing. That was, "Yes, we have revenues growing but they were not growing at the rate the requirements were for the services in the area." He projected the county was, "under the gun" as had been indicated for a revenue source and would probably require realigning some priorities and juvenile problems could be one of them. He emphasized he was not saying that would definitely happen but when county officials began looking at the money going out and when they start building the budgets it would mean realigning the priorities.

Chairman Goldwater recognized Ms. Gibbons who asked Mr. Coward if he was aware the county commissioners had a bill in to raise their salaries; there was no response. Chairman Goldwater then asked if the proposed bill had been brought to the attention of the county commissioners and whether they had expressed their thoughts whether they concurred or not; he was advised they had been told of the bill prior to the hearing. Ms. Lambert added, for the committee's information, in the 1997 session A.B. 340 was referred to the Committee on Taxation and hearings were held in Washoe County and if one of the participants was present they could testify as to what action was discussed or taken.

An observation was submitted at that time by Mr. Anderson that Ms. Lambert made reference to fees, fines and forfeitures which he said was one of his favorite topics, but that would be an additional revenue stream that many of the smaller counties and Clark and Washoe had found to be advantageous. It did not appear to be the will of the legislature to move against the added revenue so the bills dealing with the issues were not moving swiftly through the program. He did not see where they represented a threat but there were several additional enhancements the courts had asked for so it appeared there was a possibility of seeing increased revenue in that area. He was a little puzzled by the concern even though he was aware several of the counties raised it.

Mr. Anderson addressed his other concern which was in reference to the statement earlier about the cost of incarceration in the department of prisons. He pointed out legislation had been passed that would make it a "pay as you go" system which would increase the county's ability to meet the financial obligations of operating the jail facility. He was a little puzzled inasmuch as the state was trying to help out with that type of legislation. He questioned the puzzlement of the economics of decreased valuation, as the population number increases the spread of the burden of taxation became lesser to the individual, at least according to the economic school he paid attention to. He did not find that to be so surprising as the more people in the pool, the less the rate of payment would have to become and the state did have a bulging population. If Washoe County were in any other state other than Nevada where Las Vegas and Clark County take the limelight in terms of great population growth, the county would be the phenomenon that Las Vegas and Clark County are, He realized the county had some problems but he did not believe the bill was the proper way to solve it. He admitted he was a little surprised at some of the previously made statements especially with fees, fine and forfeitures being such a large part of the state.

Chairman Goldwater thanked Mr. Anderson for his comments and called upon Mrs. Henderson advising her the committee members had a good understanding on the issue due to the very capable testimony. He asked that she provide an update from the SB 253 technical committee.

Ms. Henderson introduced herself as being a technical advisory committee member on S. B. 253 which was a standing committee of the legislature. She served in that capacity for over 3 years and had been involved in many of those issues. For the record she wished to state she was a representative of the City of Reno and for 4 sessions she represented Washoe County as either a member of its lobby team or the lead lobbyist. She had received Senator O'Connell's permission to appear before the committee to present the findings of the S.B. 253 committee to the members.

Ms. Henderson submitted a copy of the minutes of the meeting of the Legislative Committee to Study the Distribution among Local Governments of Revenue From State and Local Taxes included as Exhibit C. She proceeded by briefing the members on the history of this matter and how it had come to this point. She enumerated several of the problems involved and concluded this was a very complicated issue to explain the bottom line was that most of the time people did not want to hear what the real answer was.

According to Ms. Henderson the reason this went into the S.B. 253 committee was so the members could have the time not at the end crunch of the session to do the full legislative review that she felt the issue really required because of the misinformation being circulated. She added the technical committee members did not have a vote on the committee only the elected officials. They had formed a sub-committee to review the proposed legislation in July or August of 1998 and she had been asked to chair that committee but had declined as she did not want to have the appearance of a conflict. She called attention to the handout (Exhibit C) as that went to the center of the matter when Chairman O'Connell suggested a motion on a report made by Terry Thomas, the Finance Director for the City of Sparks who did actually chair the sub-committee. That motion was read into the record and was contained in the exhibit as well. The committee met several times and had a full discussion and review of the matter assigned to that committee. She volunteered to answer any questions.

Chairman Goldwater shared with the committee the fact the sponsor of the bill before the committee, as well as several legislators, found no solace with the recommendations and disagreed with some of the suggestions based on general principle. He then asked if the technical committee evaluated any other source of revenue that could make up some of the lost revenue or was there anything that was less or more unfair this committee should look at. In response to the Chairman's question, Mr. Henderson freely admitted the issues raised by the study committee had been a vexatious issue. She stated for the record she was going to speak only for herself. She thought the problem the committee ran into, particularly with the make up revenue as opposed to the other sources they had used was that it showed up on someone's registration. No one saw the quarter cent line item broken out when they purchased groceries and so forth, but when the buyer went to the counter at DMV and saw the special privilege tax and the question became, "what is this and what is it for." The county commission did that for all the local governments in northern Nevada but the complaints went to the legislators and the board of county commissioners as to why they were allowing the tax. Ms. Henderson stated she felt the technical committee had looked at everything over the past 3 years in terms of revenues that would be available to local governments in the state, asking themselves if there were better ways of handling it; were there better taxes, were there ways in which taxes could be reduced. Perhaps such as broadening the base of sales taxes. The members looked at all the issues the legislators would be facing. When the decision was made in 1993 to roll the property tax back and freeze it, and it still remained frozen at the 2 cent level, the legislators really cut off the ability of Washoe County to make that decision on behalf of 11 governments. The decision had to come from the legislature and with the northern part of the state so much different from the southern Nevada in the sense of how the county received revenues from gaming and it was very problematic when the county tried to decide how they could make up $6.6 million. The question was, would property tax be raised 8 cents or what other accommodation could be proposed to make up the difference. She felt what the committee was hearing from some of the local governments was they would be willing to do a phase out but there still needed to be some type of make up mechanism and she did feel the committee had dealt with that issue.

Entering the discussion at that time was Ms. Freeman who stated she had been a member of the S.B. 253 committee and after hearing the testimony she would like to see the analytical report before she made any decision. She felt that would aid the committee in making an honest and informed choice on this regarding Washoe County in which she resided as well. It seemed to her in the study committee the members spoke more in terms of what was needed to be done for the state as a whole rather than one individual county or locality. In regards to taxation she and Carole Vilardo had discussed this issue and recalled the Governor had promised to do a tax study. Ms. Freeman indicated she wanted to see the results of that study prior to making any decision and she was willing to work with the county to do it on the basis they had suggested until we have a chance to look at a statewide study. She was not proud of the tax system we had in Nevada as it was very difficult for anybody to survive in a responsible manner and pledged her willingness to work with Washoe County on this.

Ms. Henderson wanted to respond to a previous question from Mr. Anderson. Going back to when A.B. 104 was being studied in 1991, one of the estimates made at that time was that by the 5^th year out of the distribution formula, based on where the state was at that time and where we were projected to be, the loss to northern Nevada governments would be approximately $25 million. The committee went through extensive hearings in 1993 as well to prove that the county was not making more money off the make up revenues than they were distributing. There had been weeks of analysis and testimony going on in 1993 which was when the decision was made not to keep track of that. It was an exaggeration to say they were exploiting the amount but that was the estimate provided by both Washoe County officials and southern Nevada proponents of the bill that it would be in excess of $25 million at 5 years out. The committee was now sitting over 9 years with make up revenues around $20 million so she felt comfortable saying not much more money was being generated than anticipated.

Mr. Mortenson asked Ms. Henderson if the county had ever considered an increase in room tax as a source of income. She responded the committee itself did not talk about room tax as a source of make up revenue, however, at the same time the county had the infrastructure bill going forward. The bill included an increased room tax in the city of Reno as an alternative. She felt the legislators would see a proposal coming forward, not from the city itself, but from the proponents to increase the room tax by 3 percent in northern Nevada to accommodate the regional convention facility in downtown Reno.

Additionally wishing to testify from the City of Sparks was Neena Laxalt who stated she would not repeat the history of the proposal as it had been gone over extensively by prior witnesses. She wished the members to be aware the fiscal impact on the City of Sparks for this tax would be $450 thousand per year which amounted to 2 percent of the total budget. The City of Sparks was opposed to the tax but they would like to work on getting the revenue supplemented another way.

Chairman Goldwater acknowledged he had gotten a sense of the way the committee wished to proceed. He requested the representatives of the municipalities who would benefit from this revenue to work with the sponsors of the bill to find a way to phase out what he considered the violation and what was "right" and replace it with something that was more correct. He added if that was acceptable to the sponsor that may be a way to work out a compromise whether it was a real estate transfer tax, room tax or whatever the legislature needed to look at. He asked if there were further comments or questions prior to moving on with testimony.

Speaking next was Barbara McKenzie representing the City of Reno acknowledging the income loss to Reno if the bill passed over the next 2 years would be about $1 million. The amount was what they were enjoying at that point in time and as a result of the loss, some of the areas would likely suffer putting the city further behind in what they were able to do. Their stabilization fund, capitol projects fund and street maintenance funds all of which would be in extreme deferred maintenance situations. The city would be left $128 million behind in their street funds and between $500 million and $100 million behind in capital projects and deferred maintenance of their buildings and facilities. Those were the areas that would suffer from continued loss of revenue.

Chairman Goldwater asked Ms. McKenzie what the stabilization fund was running and was advised the city had about a $1 million in the account.

There were no questions or comments on the bill therefore the Chair turned the floor over to the sponsor of the bill, David Humke.

Mr. Humke pointed out he had a couple of points he wanted to make as to the S.B. 253 committee and quoted Ms. Freeman's words which were given in an earlier report. On page 11 of that report, Ms. Freeman commented that, "a number of her constituents were upset about the increase in motor vehicle privilege tax and she said she supported the tax because the county needed it but it does cause a lot of unhappiness among her constituency. She suggested possibly in the future another way can be found to provide this additional revenue for the county." Despite the fact that the motion passed unanimously on the date of the meeting, and with all due respect to the S.B. 253 committee, it was a committee that did not have the power to pass legislation and he was not certain if they had the power to request bill drafts. In essence he contrasted that situation with the following, he stated " this was a committee that did not have the power to change the law." Mr. Humke conceded he was not surprised citizens did not show up. He as well as Mr. Anderson, Ms. Freeman, and Ms. Lambert had all gone to people's doors in 1996 when they were running and all of the members had heard complaints and had citizens thump their finger into their shoulders saying, "you had better do something about that motor vehicle privilege tax; it is not fair." That was the essence of the proposal and, finally, the suggestion by motion of the Washoe County commissioners that they did support this bill and would agree to a phase out within 5 years. He admitted he could live with that number as long as the county started seeing some action. Additionally, the county wanted help with make up revenues and he felt they would be looking at the legislature for that. He suggested that it would be a mistake and he would not ask other legislators when they thought they were voting for a tax repeal to, in essence authorize another tax increase. He suggested the committee only authorize the Washoe County Commissioners to hold a vote if they find a need to raise some other tax revenue.

Chairman Goldwater pointed out Nevada was not a home rule state and some of the members did not subscribe to that theory however, the legislature had a responsibility to those municipalities empowering them to take care of themselves. He asked if there were any questions from any member of the committee for the sponsor. There being none he asked Mr. Humke to work with the municipalities not only for scheduled phase-in but perhaps some enabling legislation this committee could act on to feel confident the citizens of the community would not be denied services because there were not enough resources to provide for them. Mr. Humke agreed to work with the municipalities as the Chair asked. The Chair advised Mr. Humke as soon as he heard from him on any suggestions the sooner the committee could work on getting the bill passed out prior to the deadline date.

Chairman Goldwater asked for further testimony or comments; there being none, he declared the hearing on A. B. 471 closed.

The Chair asked for a committee introduction for a bill which would postpone the date and eliminate extensions for reporting net proceeds of minerals.

ASSEMBLYMAN NEIGHBORS MOVED TO REQUEST A BILL

There being no further business to come before the committee, the meeting was adjourned at 3:00pm.

RESPECTFULLY SUBMITTED:

Nykki Kinsley,

Committee Secretary

APPROVED BY:

Assemblyman David Goldwater, Chairman

DATE: