The Committee on Taxation was called to order at 1:30 p.m., on Tuesday, May 4, 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

Mr. John Jay Lee

Mr. Mark Manendo

Mr. John Marvel

Mr. Harry Mortenson

Mr. Bob Price

COMMITTEE MEMBERS EXCUSED:

Ms. Sandra Tiffany

Ms. Dawn Gibbons

GUEST LEGISLATORS PRESENT:

Mike Schneider, Senate District 8

STAFF MEMBERS PRESENT:

OTHERS PRESENT:

Following roll call, Chairman Goldwater opened the hearing on S.B. 477.

A bill explanation, prepared by Ted Zuend, fiscal analyst for the Legislative Counsel Bureau has been included in the minutes and identified as Exhibit C.

Greg Ferraro, representative, Nevada Resort Association, introduced Harvey Whittemore, representing Nevada Resort Association, Tony Santo, president, Reno Hilton and Flamingo Hilton, Mayor Jeff Griffin, chairman, Reno-Sparks Convention and Visitors Authority, and Roger Trounday, executive vice-president, John Ascuaga’s Nugget.

Mr. Ferraro said S.B. 477 was the result of many months of negotiation, compromise, and consideration. Mr. Ferraro felt the bill would contribute a great deal to the future success of tourism in northern Nevada. He stressed the measure would help provide necessary relief for the Reno-Sparks Convention Center, which was badly in need of support. Many different parties came together to help make tourism more competitive and thereby help the economy in northern Nevada.

Harvey Whittemore, representative, Nevada Resort Association, testified in support of S.B. 477. Section 1 of the bill imposed an additional 3 percent tax countywide. Line 2 of page 2 referenced Nevada Revised Statute 268.780 to 268.785. An amendment would be presented to make clear that was a district where railroad grade separation projects were located. The tax was imposed in addition to all other taxes on transient lodging in Washoe County and was collected and enforced in the same manner as provided under Nevada Revised Statute 244.3352. It would be paid to the Reno-Sparks Convention and Visitors Authority. In the original version it was paid to the Washoe County Treasurer. That was a drafting error and was changed so that it could be collected in a manner consistent with existing room taxes. Page 2, lines 16 through 18, stated the tax was not imposed or collected on prior tax amounts. In other words, there was no tax on the tax.

Mr. Whittemore continued section 2 of S.B. 477 was the allocation and indicated that two-thirds of the tax was being generated for the reconstruction expansion of the existing Reno-Sparks Convention and Visitors Authority. Those proceeds could be used for bond purposes. Lines 31 through 43 of page 2 created a Truckee Meadows tourism facility. Section 6, page 5, lines 3 through 26, created a revitalization steering committee. The Truckee Meadows tourism facility and revitalization steering committee was the entity which should recommend capital improvement projects for downtown Reno. One and one half million dollars would be used from those proceeds to create additional tourism related facilities in downtown Reno. Following that expenditure and allocation, the Nevada Resort Association recommended that Sparks receive $100,000 and move up to $350,000 after year 2006, for specific tourist related projects and for rehabilitation and maintenance expenses associated with the downtown Sparks improvement district.

Further, said Mr. Whittemore, section 3 of the bill insured that the Lake Tahoe Incline Village and Crystal Bay Visitors Bureau retained existing grant funds given them by the Reno-Sparks Convention and Visitors Authority. Minor amendments would be proposed in later testimony. Mr. Whittemore did not know whether those had been accepted by the bond council but they had been reviewed by the Nevada Resort Association which had no objection to the amendments.

Mr. Whittemore explained section 4 of S.B. 477 allowed the city of Sparks to impose a 1 percent tax on the gross receipts. Under existing law, Sparks had a 1 percent advantage. Negotiations between the Nevada Resort Association and the city of Sparks created a process by which Sparks would retain that 1 percent advantage while still being increased 3 percent. The Nevada Resort Association felt it was not appropriate to try to create parody by bumping Sparks to 4 percent. They were hopeful that section 4 could be removed in light of other agreements the parties made. Section 5 created the Sparks Tourism and Marketing Committee. There would be two members of the Sparks city council on the committee and a third member from the Nevada Resort Association to determine how the allocated proceeds from section 2 of the bill was directed to the city.

Mr. Whittemore said again that section 6 created the Truckee Meadows tourism facility and revitalization steering committee. A board was composed of nine members, three appointed by the board of directors of the Reno-Sparks Convention and Visitors Authority, three from the Reno Redevelopment Agency appointed by the chairman of the agency and three persons appointed by the Nevada Resort Association from the downtown area. Any vacancy created in that body was to be filled in the same manner the original appointment was made to maintain the balance recommended in the bill. Section 7 dealt with the right of the Truckee Meadows Facilities Committee to recommend projects and to ensure those would be approved by a two-thirds vote of the members of the committee.

Finally, said Mr. Whittemore, section 8 of S.B. 477 provided a prohibition against officers or employees of the RSCVA from traveling first class, added because of difficulties which arose as a result of a travel policy which had since been rescinded. Sections 9 and 10 were transitory sections dealing with the effective date of passage and approval and a general savings clause.

Mr. Whittemore reminded the committee he had amendments he would present at the discretion of the committee. Mr. Whittemore thought in light of the heavy agenda it might be better to present those in the context of a work session inasmuch as they were not substantive. The proposed amendments were simply technical and cleanup amendments associated with bond council concerns.

Chairman Goldwater asked if the amendments addressed section 2, line 23, subparagraph 1, the incorporated area of Washoe County. He cautioned Mr. Whittemore to make certain the correct language was put in the amendment.

Assemblyman Marvel asked how many various committees in tourism were planned for Washoe County. Mr. Whittemore replied there would be a total of four in the Reno area. Incline Village had a separate marketing area for the Lake Tahoe area.

Assemblyman Marvel asked if the tax rate would be the same for Incline Village as it was for Reno. Mr. Whittemore replied that was the case. He added there would be three tourism-related committees; Incline, Reno-Sparks Convention and Visitors Authority, and the Sparks Tourism Committee. The downtown committee was not a "tourism committee" but was a "revitalization and capital improvements committee." Mr. Whittemore assured Assemblyman Marvel there would be no duplication of efforts.

Mr. Marvel wondered about the necessity of the Committee on Taxation having the bill before them and was advised by Mr. Whittemore there were people present to answer that question such as Mayor Griffin.

Assemblyman Marvel understood Mr. Ferraro said all parties were in agreement and wondered why the legislation was necessary. Mr. Whittemore replied it was because the local officials could not impose the 3 percent tax; that had to be done at the state level. Assemblyman Marvel suggested the adoption of a local ordinance and was advised that would not be possible since it would require legislative action. Assemblyman Marvel noted if there was no necessity for legislature intervention, he wondered why the legislature had the bill. Mr. Whittemore felt any disagreement had to do with a very small portion of the bill which addressed the funds remaining after the expansion program was completed. Assemblyman Marvel asked what the costs associated with the expansion were. Mr. Whittemore replied other witnesses would be better able to answer the question. In response to a question from Assemblyman Marvel as to how long did they anticipate it would take to pay the bond issue off, Mr. Whittemore stated the anticipation was for a 30-year bond. The new expansion was anticipated to be between $85,000 and $105,000.

Assemblyman Anderson commented he had requested the research department to do some background research for him relative to the development of S.B. 477. He noted the RSCVA board was not unlike Clark County, a body controlled by elected officials. He asked if that was the current composition of the RSCVA board and was advised by Mr. Whittemore that was correct. Assemblyman Anderson said he thought the committee was going to reduplicate that in the stakeholder group. Mr. Whittemore noted he was correct. In section 6, the present makeup would likely result in at least four of the members being private individuals, four being public with the fifth being rotated because it was not specific. The three members of the Reno Redevelopment Agency were public officials and the three members supported by the Nevada Resort Association in subsection (c), lines 15 through 16, were private. One of the members of the Nevada Resort Association on line 8 would be another private member. So, four out of the nine were definitely private, with three public and the other two coming from Sparks, Washoe County, the motel industry, or general business. If the Convention and Visitors Authority decided to appoint two public officials from their board, then the ratio would be 5 to 4, public versus private.

Assemblyman Anderson noted the RSCVA was supposed to take a regional point of view and not a particular point of view for any of the involved entities and was supposed to be concerned about the Truckee Meadows as a whole.

Mr. Whittemore concurred that one of the hallmarks of the efforts of the RSCVA was their ability to bring both Reno and Sparks together in furthering common goals. He suggested to the committee that the groups involved would be unanimous in their support of legislation to solve problems associated with expansion of the Reno-Sparks Convention and Visitors Authority and the utilization of funds for downtown projects. The question was what would happen with any additional dollars that may be raised.

Assemblyman Anderson responded those funds were public tax dollars; although the collection agency and the point of distribution was from hotel room taxes which would be available to Reno, Sparks, or Washoe County to be utilized for other purposes. Mr. Whittemore asserted Assemblyman Anderson’s statement would be correct if the state gave authority to local governments to adopt the tax without having generated a concomitant place of use. There had never been a room tax bill in his memory that had not utilized the room tax funds in ways identified by the legislature.

Assemblyman Anderson commented the committee should be concerned that the stakeholder groups would be predominantly elected officials who would have the strongest input. He pointed out there were already three people from the Reno redevelopment project. Perhaps one person should be from the county and one from the city of Sparks. Mr. Whittemore said he believed the stakeholder group as identified earlier was an appropriate way to proceed. He indicated he supported section 6 as presently written but understood the concerns of the committee.

Assemblyman Anderson asked Mr. Whittemore if the Nevada Resort Association intended to remove section 4 from the bill and was advised that was the case. Mr. Whittemore explained the amendment was not prepared at the present time, but those items which had been discussed would be provided in one package and would include the removal of section 4.

Assemblyman Anderson indicated it seemed to him that section 4 of S.B. 477 presented a position that had been rejected in the past by the city of Sparks and probably did not need to be in the bill. He said he would feel comfortable with the bill without that section and pointed out he would like the committee to take some time with the issue of section 6 and the makeup of the stakeholder board.

Assemblywoman Freeman asked why Sparks would choose to approve section 4 rather than the 1 percent increase in the room tax. Chairman Goldwater explained staff prepared the bill description using the first reprint rather than the second reprint, so it was incomplete. He suggested the members refer right to the bill.

Mr. Whittemore observed Ms. Freeman's question went directly to the heart of the dispute. Lines 14 through 21 represented a process by which the city of Sparks would receive some benefit from the imposition of those taxes. The legislature could decide whether Sparks would retain the amount listed in subsection 3 of section 2 or whether Sparks would have the ability to impose an additional 1 percent.

Assemblyman Marvel asked Mr. Whittemore if section 4 was added in the committee meeting or from the floor of the Senate. Mr. Whittemore responded it was added in the Senate and was adopted as the last amendment. He believed that what people wanted was to basically allow Sparks to get some additional money.

Mr. Ferraro noted during Senate deliberations on the amendment section 4 was not removed due to a drafting error and the view of the Senate, as Mr. Ferraro recalled, was to defer to the Assembly and ask them to help figure it out. He felt it was important to hear from the stakeholders to explain why it was important.

Mayor Jeff Griffin, chairman, Reno-Sparks Convention and Visitors Authority (RSCVA), said one of the major investments that the Reno-Sparks Convention and Visitors Authority held was that of hosting conventions. In the last 5 years that had been in decline and a number of conventions that were regular visitors to Reno and Sparks had gone elsewhere. The RSCVA had not only lost business due to the size and the layout of the convention center, they had been forewarned by existing convention business that those conventions would leave the community in the next several years unless steps were taken toward rehabilitation and expansion of the Convention Center. Mayor Griffin described the need for rehabilitation. He stated the Convention Center had about 400,000 square feet of exhibit space as well as meeting room space. Over the 35 years of its existence, it has been added to in an unusual manner and it was not possible to hold two 200,000 square foot conventions simultaneously due of the interior workings of that building. They recognized they were not getting full utilization out of that building nor were they competitive. They believed the estimated cost expected of the expansion and rehabilitation was somewhere around $100 million to $104 million. The expansion would allow that particular facility to compete for 95 percent of the conventions that were held in America today.

In addition to that, continued Mayor Griffin, there had been continuing concern throughout the community about the condition, the success, and viability of the downtown gaming enterprises in Washoe County. He estimated about 45 percent of the room tax in Washoe County was collected in downtown Reno. Reno had suffered some reverses and was in the process of trying to redevelop both in the private sector as well as through a fairly significant investment from the Reno Redevelopment Agency. Mayor Griffin continued with the plans for use of the facilities involved and the plans for future expansion. He thanked the committee for their consideration.

Tony Santo, president, Reno Hilton and Flamingo Hilton, gave a brief history of his employment with the Hilton Hotel chain during the past 18 years so the committee would understand his experience in the state and also his experience in both convention and leisure hotels. He recognized Reno currently lacked a diverse tourism base. Over the past 6 years, focus had been on the leisure market, especially in the northwest part of the country; Indian gaming had begun to spread, even without proposition 5 and would only get worse if proposition 5 passed in California. Card clubs in the northwest and Las Vegas, had been cutting into the area’s traditional leisure market. With the diminishing leisure market, it was very important for Reno to look at different areas to increase business. S.B. 477 would allow the Reno-Sparks areas to diversify their market. It would expand the convention center and allow them to attract conventions they could not ordinarily attract and to keep conventions they currently had. The bill also would provide marketing money for the National Bowling Stadium and seed money to attract more bowling tournaments, and to reposition the Reno-Tahoe area as a skiing/golf destination. By doing all of the above, it would help increase air traffic to the city, which could bring people and the leisure market from the east and it would provide the opportunity for future private and public development in downtown Reno. S.B. 477 would help bring in business and help Nevada's entire tourism base.

Roger Trounday, executive vice-president, John Ascuaga’s Nugget, stated the Nugget facility was the only member of the Nevada Resort Association in Sparks and supported the concept of expanding and upgrading the Convention and Visitors Bureau. He supported the bill as it was with the exception of section 4. He felt it was a good bill and would benefit the entire Truckee Meadows area. He felt community leaders should be able to pull all of the properties in Truckee Meadows together to resolve their differences and issues.

Assemblyman Marvel asked how many other hotels were equipped like the Nugget to host conventions and was advised the number varied at different levels. The Hilton probably had the largest facilities as far as conventions were concerned. John Asquaga's Nugget probably had the second largest in the total capacity of square footage that was available for pure convention facilities.

Assemblywoman Freeman again asked why the city of Sparks would prefer section 4 as opposed to a 1 percent room tax. She wondered whether the money would come out to be more or less and which would be the most beneficial.

Mr. Trounday explained using the 1 percent in the city of Sparks would equate to around $350,000 in revenue. The city had agreed to go up to the 3 percent, which everyone was going to go up to on the escalated schedule but they did not want to go up to the full 4 percent of additional room tax in Sparks.

Mrs. Freeman asked if the amounts that were listed in the bill would pull money that might be going to other entities. Mr. Whittemore agreed that was the case. The first 2 percent would go to expansion. The next $1.5 million would go to the downtown facility and any remaining revenue would go according to the agreed-upon schedule.

Terry Reynolds, city manager, city of Sparks, thanked the committee for the opportunity to address them in support of S.B. 477. He submitted written testimony, (Exhibit D.) Since its inception in 1976, the Sparks Redevelopment Agency had invested over $60,000,000 in downtown projects and surrounding residential areas within the redevelopment district. They had developed a series of premier special events for the Truckee Meadows, bringing in over a million people each year into their community. To date, the city of Sparks had seen very little room tax return. A majority of funds and facilities had gone to Reno. RSCVA built the Wildcreek Golf Course in Sparks which was currently up for sale. Sparks planned to bid on that course. The RSCVA also funded a portion of Sparks’ special event promotion and a portion of the operation of the downtown visitor’s center. However, the RSCVA no longer assisted in the promotion of special events in Sparks. The neighboring community of Reno had received over $100,000,000 in facilities and funding. For those reasons the city of Sparks felt that if the room tax was increased in their community, a portion of the tax should come back to their community.

The Sparks Redevelopment Agency will end in the fiscal year 2007-2008 so it is important for the city that they are able to fund the promotion, maintenance, and operation of their redevelopment facilities once that occurred. S.B. 477 would assist in that effort. Mr. Reynolds said the city fully supported the 2 percent that went to RSCVA for the reconstruction and remodeling of their convention facilities. That action would benefit the entire Truckee meadows. However, he felt a portion of the additional 1 percent should come back to Sparks as stipulated in S.B. 477. In addition, the bill provided the authorization for the city of Sparks to levy an additional 1 percent above the 3 percent tax increase. The Sparks council did not support that proposal. The Nevada Resort Association had provided the committee with a clarification as to the distribution of proceeds under section 2 of the bill. Mr. Reynolds assumed that once the convention center obligation was met and the additional sum of $1,500,000 was met, Sparks would receive a portion of the funds as outlined in subsection 3 on page 3 of the bill. That also coincided with the ending of their Redevelopment Agency in the years 2007-2008 and he assumed that was why the schedule was realized.

Mr. Reynolds said Sparks should be allowed to spend the proceeds for the operation and maintenance of capital facilities as did the provision to allow operational funds in section 3 for Incline Village. The bill stated Sparks could spend money on maintenance for the facilities within redevelopment districts but Mr. Reynolds wished to clarify that it would be for operation and maintenance. It was also very important that Sparks be allowed to use those monies for promotion of tourism facilities and their special events because they had a significant amount of time, money, and staff invested in that area. He thanked the committee for their time and patience and offered to answer any questions.

Tom Herndon, member, Reno City Council, indicated his support of S.B. 477.

Bill Newberg, vice-mayor, city of Reno, noted he appreciated the committee hearing S.B. 477.

Dave Aiazzi, member, Reno City Council, apprised the committee the city of Reno's concern with the bill was not the bill itself but with amendments or changes which might be made. He understood everyone in the hearing was in support of the bill and the primary purpose of the room tax amendment to expand the convention center and to revitalize it. The concern of the city of Reno was the manner in which the breakout was going to be made of the monies after that portion was assessed. Their feeling was that it would not be right for one entity to take general funds from another entity to use in their own general fund. If the city of Sparks wanted to have money from the RSCVA, it was felt they could do what the city of Reno and Washoe County had done, which was to impose the 1 percent room tax. Reno had always held they would like the authority to implement their own rules. That was what they had always come to request from the legislature and that was what they were requesting for the city of Sparks. The room tax in Sparks would go up 4 percent only if they actually voted to increase the room tax. There was nothing saying Sparks had to do so.

Mr. Aiazzi said he would like to remove section 2, paragraph 3, and retain section 4 which would allow Sparks to put in the 1 percent room tax and thereby remove favorable treatment by the legislature, thus enabling Sparks to receive money from the bill. He wanted to retain section 4 to allow the city of Sparks to enable the tax if their governing body so chose.

Bill Newberg representative, city of Reno, responded the city of Sparks did not receive enough return for the amount of money they contributed. However, the RSCVA had done a study which showed that the city of Sparks did receive, in return, what it put into the agency. Mr. Newberg stated the Reno City Council strongly supported the proposed room tax increase for the RSCVA facility improvements and construction of new facilities to increase convention and tourism activities in the region. Expansion and remodeling of the 35-year-old facility was absolutely essential to expand the tourism industry in the area. The construction of tourism-related capital improvements in downtown Reno was an investment in the future. Downtown Reno was the economic center of the region and investing in downtown was the right decision for the RSCVA. Both projects the RSCVA had proposed would enhance all aspects of the area’s tourism economy. Mr. Newberg wanted to focus on the fact it was a regional effort, which was why Reno had agreed to the bill and to lend its bonding ability to fund the downtown facility. The measure was never proposed to provide any money to the city of Reno. It was proposed to provide funding for RSCVA projects only. A separate allocation to another entity would undermine the fundamental purpose of RSCVA, which was to increase tourism for the region.

The Reno City Council had a serious concern with the amendment that funneled money earmarked for RSCVA projects to a local government as provided in section 2, paragraph 3, of the amended bill. Mr. Newberg did strongly support section 4, which allowed the city of Sparks to raise its locally collected room tax by 1 percent.

Mr. Newberg noted legislation passed in 1989 allowed local governments to raise or expand their revenue base, which included raising room taxes for local government use. The city of Reno as well as Washoe County raised their room tax by 1 percent for local use. Reno took that opportunity to ease the tax burden of local taxpayers by generating funds from tourists to fund maintenance and local infrastructure used by them and to promote local tourism activities, including parks, recreation, and arts. At that time, Sparks chose not to impose a room tax. The 1991 legislature subsequently repealed the provision allowing those increases. Section 4 of S.B. 477 gave the city of Sparks the opportunity to increase local use room tax by 1 percent. Action by the city of Sparks would also provide room-tax parity throughout the region. Sparks should be allowed to increase and keep the proceeds from its own room tax rather than diluting the pool of funding available for RSCVA projects.

Mr. Newberg continued 75 percent of the hotel rooms in the region were located in Reno and 75 percent of the room tax revenue was generated in Reno. Again, Reno received no revenue from the bill. The only provision that affected Reno was that requested by the sponsors of the measure to utilize its bonding ability to fund a capital facility in the future. Reno supported the bond council’s amendment that would allow the use of funds for the downtown facility and the Reno council strongly urged the committee to pass the measure, deleting section 2, paragraph 3, and retaining section 4. Mr. Newberg had provided a copy of his written testimony, (Exhibit E), and asked for favorable consideration.

Assemblyman Manendo asked Mr. Newberg to provide the committee with figures to indicate the amount of money Sparks contributed and received in return from the RSCVA so they would have them for the work session. Mr. Newberg responded he would refer that to the RSCVA as he understood they would have that available.

Assemblyman Marvel asked if the city of Sparks could raise the room tax by ordinance rather than by legislation and was advised by Mr. Aiazzi they needed to have section 4 of the bill approved and then they could do so if they chose.

Assemblywoman Tiffany understood the desire to draw bigger conventions but they were splitting up space. She asked for an explanation on the purpose of the proposed legislation. Mr. Aiazzi observed the purpose of the bill was to expand the convention facility downtown. The plans were for an art or sporting facility that would help the downtown area and would also bring in private monies. The money that would be going to the downtown area was certainly not enough to fund anything of a large scale.

David Howard, representative, Reno-Sparks Chamber of Commerce, disclosed on February 16 his board of directors had received a presentation from the RSCVA showing the need for expanding the current facilities. They passed a resolution on that date to support the legislation to raise the room tax to expand the facilities.

Robert Barengo, representative, Lake Tahoe, Incline Village, and Crystal Bay Visitors Bureau, focused on section 3 of the bill which dealt with money they were currently receiving and they would still expect to get in the future. Mr. Barengo noted that bond council had some changes and reviewed the proposed language which would change portions of the section found on page 4, line 5. There was a difference of opinion as to whether the language would work. The Incline Village, Crystal Bay Visitors Bureau would receive the same money they had been receiving over the life of those bonds and the new taxes imposed by section 1 would not be part of the proceeds. They wanted to make certain new language was added to page 4, line 9, to state they would not be required to pay any money expended or pledged for any purposes after March 1 of 1999. They wanted to make certain they were locked in as to a specific amount of money for specific times.

Vicki McGowen, representative, Incline Village, Crystal Bay Visitors Bureau, said the bureau supported S.B. 477 and had gone before the Senate Committee on Taxation. They were now before the Assembly Committee on Taxation with the hope they would be able to receive a return of 1 percent of the tax for a specific transportation project. She felt the bill needed to pass in current form.

Ms. McGowen expected she would be back in 2 or 4 years and hoped to see the ability of the RSCVA to generate money and what the expenses of the convention center would be. It was her hope that in the future the bureau was able to get a return of the percentage of the tax for projects that would specifically benefit the lake portion of Washoe County.

Bob Schriver, past president, Reno Performing Arts Center Association Board of Directors, indicated he had with him vice president Ron Smith and executive director John Shelton. He observed they supported S.B. 477, and as Assemblywoman Freeman mentioned earlier, they thought it was an opportunity to help revitalize the potential of the Pioneer Center as a cultural/tourism base for an area much broader than Washoe County. They felt there was great potential for that project.

Chairman Goldwater read into the record a letter from Assemblyman Dawn Gibbons asking that her support of the bill be noted (Exhibit F).

The Chair closed the hearing on S.B. 477 with no action taken and opened the hearing on S.B. 318.

Included in the minutes was a bill explanation prepared by Ted Zuend, fiscal analyst with the legislative counsel bureau identified as Exhibit G.

Alan Glover, Carson City clerk and recorder, stated the bill had the support of 15 of the recorders in the state. The officers from Washoe County, he believed, felt uncomfortable with it. The Clark County recorder also had some discomfort with it where it dealt with the lack of a collection mechanism in the bill. However, the Land Title Association and the other recorders would be coming back to the committee in 2 years to do additional work on the bill. The recorders thought that was an improvement, but it was not complete.

Chairman Goldwater asked if there was ever an instance where the escrow holder was liable for the tax. Mr. Glover stated that had happened. Chairman Goldwater said he understood the bill said the escrow holders were no longer liable for the tax but the buyer and seller would be. Mr. Glover agreed.

Assemblywoman Tiffany asked Ms. Lambert whom she represented on the bill and was advised she represented the Nevada Land Title Association at present, but also land title and escrow companies. Ms. Tiffany asked what had changed. Ms. Lambert apprised Ms. Tiffany that in 1989 the law was changed which removed the option of escrow companies to pay taxes 90 days later and other things. The regulation that matched the old law which had escrow companies responsible for paying their customers’ tax was never changed and the title companies and escrow companies felt it was not fair that they were responsible for paying somebody else’s tax. Now that the transactions were more complex and the rates had gone up in Clark County, they would not be talking about a $60 math error but about $15,000 transactions they were being asked to pay. Assemblywoman Tiffany asked if the realtors ever testified on that and was advised by Ms. Lambert the realtors did not testify; however, Ms. Lambert knew they had no problem as long as the bill did not dictate who must pay the transfer taxes. That was still left to negotiation.

Assemblyman Marvel stated in transactions in which he had been involved the title company usually withheld the money and it was usually in the "contact of sale" as to who would be liable for the real estate transfer. It was going to be the buyer or the seller. Usually the seller was the one responsible for the real estate tax.

Dino DiCianno, deputy director, Department of Taxation, stated he would like to echo the comments made by Mr. Glover. He added the chairman of the Senate Taxation Committee had directed his department and the two parties involved to discuss the particular situation. What the committee saw in front of them was the culmination of those discussions and that was only the beginning. The department was willing to work with all concerned parties and was going to open up workshops on regulations currently in existence inasmuch as some of them were definitely outdated and needed work. Mr. DiCianno also wanted to stress that the measure did not eliminate the subpoena powers of the recorders office nor did it eliminate the audit functions as those functions were still in place. They would still collect and they would also still perform the audit functions as they did.

Assemblyman Anderson asked Mr. DiCianno inasmuch as the particular topic was going to be a reoccurring event in the legislature in the future, what would happen if the committee did not process the bill but rather waited for the inevitable discovery and then put it off for 2 more years until they had reached some level of agreement.

Mr. DiCianno said he preferred not go that direction because he thought it would only acerbate the particular problems that were occurring between the title companies and the recorders offices. Mr. DiCianno believed what they were trying to do was establish the responsible party as far as the payment of real property transfer tax.

Assemblyman Mortenson asked if the escrow holder ever paid the fee and if he put it in the escrow fees so that either the buyer or the seller, whoever was now responsible, paid it before the escrow closed. Ms. Lambert explained after escrow was closed and deeds were recorded, if an audit showed an exemption was invalid, the recorders went to the escrow companies to collect their customer’s tax using an antiquated regulation that did not have any support in statute. Ms. Lambert pointed out there were 12 exemptions to the real property transfer tax. They were not explained very carefully in regulation. She had found it was fairly common to have a problem with an exemption. Ms. Lambert noted escrow holders, by law, followed escrow instructions and escrow companies and title companies followed escrow instructions from their customers. They were not supposed to practice law without a license and often they did not have all the information needed to deal with the exemption because it was not information they needed to do the transaction. Very complex transactions were generally where those problems arose.

Considerable dialogue followed between Mr. Mortenson and Ms. Lambert at which time Chairman Goldwater asked if Ms. Lambert would confer with Mr. Mortenson and perhaps explain her issues to his satisfaction, a request to which she agreed.

Kathy Burke, recorder, Washoe County, testified on behalf of Washoe County. Ms. Burke expressed her opposition to the bill for a lot of the reasons Assemblyman Mortenson had pointed out. The escrow holder had been responsible up until now and still was. Currently they did audit the title companies to see if they had complied with the property transfer tax, and if it was not, they sent a letter to the title company and they responded. They paid the additional money from the file or they went to the buyer and seller. It seemed to work pretty well in Washoe County. Unfortunately for Clark County, it was not working as well so there was an issue there. She conceded there was a problem, and they did need to get it resolved. She admitted she did not have the perfect answer but conceded she was uncomfortable with the way it sat. If they audited up front, by statute they were to collect the money up front. In the case of Washoe County, they would never get everyone on record. Homes bought would not close at the end of the month, and they were lined up as it was. Washoe County was recording over 1500 documents on the last day of the month. They were still hand-stamping documents at the present time.

Ms. Burke indicated there was a fiscal impact for the first year of $330,000. Those figures came from financial analysts of Washoe County.

Chairman Goldwater asked if Ms. Burke could suggest language to improve S.B. 318 or if she opposed the bill in general. Ms. Burke responded she wanted to process records as quickly as possible. She was concerned about holding up move-in dates for new owners.

Charles Cook, representative, Nevada Land Title Association, testified next. Mr. Cook commented in 1989, a statutory change removed the definition of escrow. He said S.B. 318 reinstated the definition. There was at one time a 90-day deferral. If a transaction went through escrow, escrow had 90 days in which to pay the tax. If it did not go through escrow, the tax must be paid immediately. Once references to escrow were removed from the statute completely, there was no longer a need for that particular provision. Right now, the statute simply said there was a tax on every deed. That was all it said; it did not say who should pay it. It was historically a seller’s tax because that was a pick-up tax from what used to be a federal transfer tax.

Currently the bill said the buyer and/or seller would pay the tax. The realtors were concerned. That language did not prevent the county from determining from whom they would be able to collect. There was a disagreement between the counties and the state as to who should collect the tax. It was a state tax, but the county was charged with collecting it.

Assemblyman Mortenson observed the situation seemed to question whether the committee should make things easy for the escrow company or for the citizen. The citizens had no representation. Assemblyman Mortenson was opposed to the bill because he thought it made it tougher on the citizens and easier on the escrow companies. Chairman Goldwater said the citizens had the best lobbyists in the entire building, adding, "It's you and me."

Mr. Stancato representative, Nevada Land Title, pointed out it was because of John Q. Public they were here. For example, if a man claimed marriage to a woman who was actually his mistress and was granted an exemption from transfer tax on the basis of his claim, any tax found to be due at a later time was paid by title companies. Mr. Stancato said S.B. 318 established the responsible party. In the last tax audit by Clark County, the 10 title companies in Clark County were faced with a tax bill in excess of $800,000. Not all title companies were profitable and the marginal ones would, in fact, go out of business.

Assemblyman Mortenson noted if John Q. Public misrepresented statements to escrow companies they would probably be able to institute legal action.

Recognizing there were several differing opinions on the subject, Chairman Goldwater noted those items should be addressed and suggested Mr. Stancato and Assemblyman Mortenson might address the issue collectively.

Chairman Goldwater asked for further questions or testimony. Seeing none he closed the hearing on S.B. 318 with no action taken. Chairman Goldwater opened the hearing on S.B. 428.

A bill explanation, prepared by Ted Zuend, Fiscal Analyst from LCB was included in the record and identified as Exhibit H.

Senator Mike Schneider, Senate District 8, Clark County, noted under current Nevada law bringing more than 1 gallon of wine across state lines constituted a class D felony. S.B. 428 established that an individual could bring wine in from California or other states in amounts of up to 12 cases a year. People could put their names on a list at a winery in California and if ones name was drawn, he or she could buy two or three cases. The wine could then be shipped to them or they could legally drive it back across state lines.

Senator Schneider proposed amendments that would be presented by other witnesses. He commented concern had been expressed the bill would cut in on the local distributors and their business. Senator Schneider assured the committee he thought it would actually increase their business. He explained Nevada would receive the revenue from the taxes on wine that was brought back where currently the state received no benefit from taxes collected on wine that was brought in.

Harvey Whittemore, representative, Southern Wine and Spirits of Nevada, said S.B. 428 would serve as a model for legislation in other jurisdictions. He believed it contained protections which would increase the business of the existing state license wholesalers.

Mr. Whittemore called attention to page 1,subsection 3, line 9, of S.B. 428 which stated the 100-case figure should be reduced to 25 cases. When a shipper exceeded the 25 case limit, that individual would designate an importer for purposes of retail consumption of those particular products, which would allow direct shipment to the consumer and further increase business of Nevada wholesalers.

Mr. Whittemore pointed out that for the first time Nevada would receive tax revenue associated with importation of wine. Page 2, lines 33 and 34, provided the Nevada Tax Department and Tax Commission would adopt regulations to enforce the provisions of S.B.428. Mr. Whittemore added he intended to prepare a further amendment to define what constituted a "case" of wine. He had discussed the matter with the Nevada Tax Department and there was concern that there be uniformity with respect to what a case of wine was.

Mr. Whittemore had worked with the Distilled Spirits Council on further amendments. Proposals numbered 1 and 3 in a handout (Exhibit I) would be discussed. He would not pursue the second proposal in that document.

Gary Milliken, representative, Distilled Spirits Council, called the committee’s attention to page 3, line 16, of Exhibit I. He wished to insert the phrase "other than the supplier, wholesaler, or retailer" between the word "person" and the colon. The second amendment on page 3, line 33, would be deleted. The last one on page 3 added a new section which referred to procedures when wine was sent through the mail for laboratory testing. Mr. Milliken observed Senator Schneider and Mr. Whittemore had agreed to those two amendments.

Sydney Abrams, representative, The Wine Institute, said the institute was the trade association of California wineries. He also spoke on behalf of Washington state, which encompassed approximately 125 wineries. Oregon had almost the same. The Wine Institute felt S.B. 428 might help solve some of the problems for thousands of wineries. There had been an explosion of wineries since the 1960’s and a tremendous decrease in the number of wholesalers because most of the wineries were small family-owned businesses. Those wineries had limited production and the bill provided the vehicle to make it possible for a consumer to acquire the desired product and pay the proper taxes.

Chairman Goldwater noted for the record the committee had lost their quorum and instructed the secretary to note the committee was now a subcommittee.

Peter Kruger, private citizen, spoke in support of S.B. 428. Mr. Kruger knew people who were illegally importing wine at the present time. There was great advantage in legalizing the process so Nevada could collect taxes due from the small wineries that were currently exporting products into the state. Mr. Kruger urged the committee’s support.

The Chair closed the hearing on S.B. 428 with no action taken and opened the hearing on S.B. 538.

Dave Purcell, executive director, Department of Taxation, explained S.B. 538 was the department’s request for technical changes which dealt with the distribution of revenues. He had asked Theresa Glazner, the supervisor of his distribution section to discuss sections of the bill to familiarize the committee with adjustments the department needed to be able to distribute taxes as promulgated in S.B. 253, which was the distribution of revenues bill.

Theresa Glazner, supervisor, Distribution Division, Department of Taxation, explained each section of the bill. She explained what actions were required and proposed language to accomplish those goals. When the legislation was written, paragraphs were removed that she needed for a subsequent distribution in another area of the statutes. The department had rewritten language which affected the Local Government Tax Act of 1991 distribution.

Chairman Goldwater asked if there was any opposition or points of contention discussed in the Senate or if the S.B. 253 committee had resolved those issues. Mr. Purcell replied there was no opposition to those technical requests.

Betsy Fretwell, representative, city of Henderson, Nevada, noted Henderson had concerns regarding the consolidated tax distribution formula approved in 1997. The city had worked with different local governments, standing committees, and technical committees that helped them work through those issues during recent weeks. Ms. Fretwell realized any change in the formula would have an impact throughout the state and appreciated that the S.B. 253 Legislative Standing Committee would evaluate the formula’s performance. That would take time, however, and Ms. Fretwell did not want to hurry something through that would be a temporary fix. Should that happen, the city would just be back in the next session fighting a different battle. She also realized fixing something that only concerned Henderson might not address any systemic problem in the formula.

Ms. Fretwell suggested the Assembly Committee on Taxation might send a letter of intent to the Legislative Standing Committee on S.B. 253 outlining two major areas of emphasis. The first might be that the performance of the formula be evaluated against the stated goals and principles of the consolidated distribution formula, tax distribution formula, from both the S.C.R. 40 Interim Committee from the 1995 session and the legislative record from the 1997 session. The second point, continued Ms. Fretwell, might be that the excess distribution portion of the formula be evaluated to determine whether the excess amount was reasonable, adequately linked to the base, and followed increases or decreases in growth and any other issues appropriate, considering the findings in the formula evaluation. Finally, she suggested that findings of both of those two provisions be a part of the formal record of the S. B. 253 Standing Committee and a part of the report to the Legislative Commission regarding the final disposition of the committee’s legislative duties prior to the 2001 legislature. At present, said Ms. Fretwell, there was no formal process regarding reporting from standing committees. She commented that both Las Vegas and Clark County agreed that the analysis review and reporting was the appropriate way to proceed.

Chairman Goldwater assured Ms. Fretwell the committee would draft the letter which would be the third coming from the committee remanding issues to the S.B. 253 Committee.

Michael Alastuey, assistant county manager, Clark County, Nevada Association of Counties appointee to the Technical Committee of the S.B. 253 Committee, noted Clark County was pleased to be an on-going participant in the process outlined under S.B. 253 and was willing to work within the established committee system to address issues brought by local governments including the city of Henderson.

Overall, said Mr. Alastuey, the county felt the consensus committee-based approach over the long-term would produce better results and would avoid unintended consequences of quick, ad hock changes. They felt it was best to take the time necessary to perform the appropriate studies and make certain the formula had time to run so the correct conclusions could be drawn as to long-term effects. Clark County stood ready to assist in the analysis and consideration in any alternatives in the future of both as a participant on the Technical Committee and otherwise as requested.

Marvin Leavitt, representative, city of Las Vegas, observed he was also a member of the Technical Committee. He said the committee had spent quite some time to be certain that the formula in place for the distribution of taxes was working properly. The formula, if it was to be effective in the long-term, should work for governments that were essentially declining in population and assessed value, for governments that were essentially standing still, and for governments that were growing very rapidly. He believed as a result of the specific request from Henderson there would be no objection to working on the formula during the next interim to test whether it was working the way it was intended.

There being no further business to come before the committee, the meeting was adjourned.

RESPECTFULLY SUBMITTED:

Lois McDonald

Transcription Secretary

RESPECTFULLY SUBMITTED:

Nykki Kinsley,

Committee Secretary

APPROVED BY:

Assemblyman David Goldwater, Chairman

DATE: