The Committee on Transportation was called to order at 1:40 p.m., on Thursday, February 25, 1999. Chairwoman Vonne Chowning presided in Room 3143 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:

Mrs. Vonne Chowning, Chairwoman

Ms. Genie Ohrenschall, Vice Chairwoman

Mr. Douglas Bache

Mr. John Carpenter

Mrs. Barbara Cegavske

Mr. Jerry Claborn

Mr. Tom Collins

Mr. Don Gustavson

Mrs. Kathy McClain

Mr. Dennis Nolan

Mr. David Parks

Ms. Bonnie Parnell

Mr. Kelly Thomas

GUEST LEGISLATORS PRESENT:

Assemblywoman Kathy Von Tobel, District 20

Assemblyman Roy Neighbors, District 36

STAFF MEMBERS PRESENT:

OTHERS PRESENT:

Mrs. Chowning stated no action would be taken on A.B. 31 and a subcommittee would be appointed which would meet on March 2, 1999. The subcommittee would consist of Assemblyman Claborn as Chairman, Assemblyman Collins, and Assemblyman Carpenter.

Mrs. Chowning opened the hearing on A.B. 27

Assemblywoman Von Tobel, District 20, testified the Advisory Board for Mount Charleston Wilderness requested she sponsor a bill for the production of a special license plate to assist in preserving the area. The revenue would go towards the preservation and restoration of the area. She presented a proposed amendment (Exhibit C) to allow all areas of Mount Charleston to be serviced by the funds from the license plate instead of just the Mount Charleston Wilderness area, as well as allowing for other activities which supported the natural environment, such as education and fire preservation.

Mrs. Chowning asked for an explanation of the entire funding method, such as who would be the central collector and administrator of the funds and the grant process for the fund.

Pam Wilcox, administrator, State Division of State Lands, testified she would not take a position on the bill, only offer information. The Division of State Lands would be responsible for the administration of the funds. The Department of Motor Vehicles and Public Safety (DMV & PS) in conjunction with the local residents would design the license plate. The revenue generated would be placed in an interest-bearing fund within the state general fund for purposes of issuing grants. She informed the committee the process would be similar to the fund for the Lake Tahoe license plate. Local groups would be involved in the grant approval process. She was unclear how much money would be generated from the license plate; however, she would be able to issue a report to the 2001 legislature explaining the administrative costs.

Mrs. Chowning inquired if the distribution of the funds raised to be similar to the Lake Tahoe license plate and how much money the Lake Tahoe plate had raised. Ms. Wilcox explained the Lake Tahoe plate had generated over $200,000 in the first year of production. The fee was $25 for the first year and $20 for each continuing year. If the number of plates was consistent the revenue generated would remain constant. Currently the money was in an interest bearing account. The revenue was available for grants for the preservation of Lake Tahoe which would be issued beginning in 2000.

Mrs. Chowning observed the Lake Tahoe plate had raised $200,000 plus interest at minimal cost to the taxpayers. Ms. Wilcox indicated the cost to the taxpayer was for the generation of the plate and administration of the funds.

Mrs. Chowning expressed the Lake Tahoe plate was a success and helped to make Nevada unique. She wondered if there were any other states which had special license plates to raise funds for environmental programs. Ms. Wilcox stated she was unaware of any other state which issued environmental plates; however, she had not dealt with license plates until the Lake Tahoe plate was issued.

Mrs. Chowning noted the fiscal impact was approximately $23,500. She asked if the fiscal note came from the Division of State Lands. Ms. Wilcox remarked the fiscal note came from DMV & PS and was for the production of the license plates. The Division of State Lands would not be impacted for the first 2 years of the plate. She felt the fiscal note for her department would be approximately $25,000 a year depending on the amount of money generated. The administration of the program could be funded through the interest of the account.

Pete English, chief, Registration Division, DMV & PS, testified the department was not opposed to the production of the plates; however, they would require funding to produce the plates. Special plates tended to cost a considerable amount of money to produce because they were short-run plates. He revealed the Senate Committee on Transportation had addressed the issue of production of special plates in S.B. 67. The bill would create a special fund for the production of special license plates.

Mrs. Chowning inquired if currently there was any revenue available for the production of special license plates, even those plates with the required 250 orders. Mr. English stated the production of all license plates had been provided for in the operating funds which were contained in the biannual budget. There was currently no special fund for the production of special license plates.

Mrs. Chowning asked if DMV & PS was working on addressing the problem of special license plates. Mr. English indicated they were.

Assemblyman Bache inquired if motorcycles would be able to obtain the special license plates. Mr. English stated the special plates would only be available for passenger vehicles.

Mr. Bache asked if a certain number of plates could be produced to bring the cost down be similar to the cost of the general issue plate design. Mr. English indicated it was difficult to determine the exact cost of the special license plates since there were generally more detailed designs with more color in the special license plates, all of which had to be factored into the cost of production.

Mrs. Chowning noted the estimated cost of the proposed plate would be $23,500. Mr. English stated the fiscal note of $23,580 was based upon a four-color design.

Assemblyman Carpenter inquired about the production cost of the special license plates from previous sessions. He wondered how many orders were required before a plate could be produced. Mrs. Chowning stated a uniformity mechanism was placed into all special license plate bills in the 1997 session. It required those requesting a special license plate to obtain 250 orders before being considered for production by DMV & PS. It also allowed for 4 years to obtain the required signatures.

Mr. Carpenter asked if $23,000 would be the same estimated cost to produce the special plates or had the cost increased. Mr. English stated the cost of production of the license plates varied due to cost of aluminum. The figures stated in the fiscal note were based upon current figures.

Mr. Carpenter wondered if the required 250 orders would be enough to cover the cost of producing the license plate. Mr. English responded question was difficult to answer since the actual cost determined on a variety of factors, such as aluminum, design, and color.

Mr. Carpenter noted the bill was drafted in the same format as those in 1997 and he stated there had to be 250 applications for production to begin. He asked if it would cost $23,000 then that would be close to $25,000 and would that mean 1,000 applications would be required before production of the plate would be begin.

Mrs. Chowning indicated the breakdown of the fiscal note provided $20,000 would be for artwork design and a set up fee. She wondered if the cost of producing the plates could be reduced if a design was submitted to DMV & PS. Mr. English revealed if a design was brought to the department, they would not have to use their vendor to design the plate which would cut the cost of production. The fiscal note reflected the maximum cost of producing the plate.

Mrs. Chowning mentioned DMV & PS had not designed any of the current special license plates. Mrs. Von Tobel relayed the artwork and design for the Mount Charleston plate would be provided to the department. There was a mural located in the lodge at Mount Charleston which would probably be used for the design of the plate.

Mr. Gustavson commented the 250 plates would collect $8,750. If 700 plates were produced $24,500 would be generated which would cover the cost of production. Mrs. Von Tobel responded the people in Mount Charleston would have enough applications and there would be no reason to generate funds. She also stated that any help in working with DMV & PS would be appreciated.

Assemblyman Collins commented aluminum was down about 30 percent and the artwork would be estimated at $20,000. He asked how aluminum could make a difference in the consideration of cost. Mrs. Chowning stated the cost was a maximum figure and included the cost of artwork and design.

Mrs. Chowning stated there was a proposal that stated trailers and other types of vehicles would like to be included in the special license plates. She explained that would be an issue for an another meeting.

ASSEMBLYWOMAN CEGAVSKE MOVED TO AMEND AND DO PASS A.B. 27 WITH THE PROPOSED AMENDMENTS SUBMITTED BY ASSEMBLYWOMAN VON TOBEL.

SECONDED BY ASSEMBLYWOMAN OHRENSCHALL.

Mr. Bache remarked he would like to see the motion amended to increase the number of orders from 250 to 1,000 and only allow 2 years instead of 4 years to obtain the orders. He did not want Nevada to end up with too many special plates.

MOTION PASSED UNANIMOUSLY WITH ASSEMBLYMAN BACHE VOTING NO. ASSEMBLYMAN CLABORN WAS NOT PRESENT FOR THE VOTE.

Mrs. Chowning closed the hearing on A.B. 27 and opened the hearing on A.B. 35.

Assemblyman Neighbors, District 36, read from the prepared text of Exhibit D. He indicated the bill would eliminate a loophole in the special fuel tax law by amending Nevada Revised Statutes (NRS) 366.197. The bill would remove liquid petroleum gas (LPG) from the conversion formula used for alternative fuels, such as compressed natural gas (CNG). An inequity was created regarding LPG when it was taxed according to the statutory formula. The original formula came from A.B. 105 from the 1987 session. He presented the committee with the minutes from all committee meetings which dealt with the special fuel tax issue (Exhibit E). The intent of the legislation was to create a more equitable tax for all special fuel users and generate more revenue for the highway fund which was in desperate need of more revenue.

Assemblywoman Cegavske asked how many people and businesses would be affected by the bill. Mr. Neighbors knew of only a few taxicab companies which would be affected, but did not know an exact number.

Mrs. Cegavske inquired if the fuel was used because it was a more efficient way to burn gas and would it help with pollution. Mr. Neighbors stated that was correct.

Mrs. Cegavske wondered how much money would be generated in taxes. Mr. Neighbors replied approximately $600,000 a year would be generated.

Mr. Gustavson asked if the tax increase would require a two-thirds majority vote. Mr. Neighbors replied there would not be a tax increase. Mrs. Chowning indicated the two-thirds requirement was not noted on the bill.

Mrs. Cegavske inquired who decided a change in the formula would be the best way to raise revenue. Mr. Neighbors stated the bill came from the interim subcommittee on highways and roads.

Mrs. Cegavske wondered if a private firm was hired to conduct the study. Mr. Neighbors stated the interim subcommittee conducted the study.

Ray Sparks, deputy director, Division of Public Safety, DMV & PS, read from prepared testimony (Exhibit F). He offered a brief history of the legislation. The department was in support of the legislation because they felt the present formula was poor tax policy due to the inequity.

Mrs. Chowning questioned if a customer went to a distributor of LPG would they be charged a higher fee rather than the lower fee. Mr. Sparks answered the tax rate is $0.22 per gallon and most retailers which sold LPG did not use the conversion formula.

Mrs. Chowning inquired about regular customers using private distributors and asked if they are able to purchase LPG from private distributors. Mr. Sparks stated there were two taxpaying customers which used the formula. One was a taxicab company in Las Vegas which dispensed their own fuel. A private citizen would not be able to use their fuel since it was a private company. He was unsure if the second customer dispensed the fuel for the public or their own vehicles.

Mrs. Chowning asked if LPG was a cleaner burning fuel then CNG. Mr. Sparks stated he was uncertain but believed that CNG and LPG were both cleaner burning fuels compared to gasoline.

Mr. Nolan asked how many vehicles were involved in the two companies taking advantage of the formula for the fuel. Mr. Sparks stated he was unsure.

Mr. Nolan wondered if both companies were in Clark County. Mr. Sparks responded one company was located in Clark County but was uncertain about the other.

Mr. Nolan inquired if the state offered any type of credit to users of alternative fuels. Mr. Sparks responded no rebate or reduction was given to users of alternative fuels.

Mr. Nolan mentioned he had been involved in discussions with the Clark County Regional Transportation Commission and Tom Stephens, director of the Nevada Department of Transportation (NDOT) concerning the air quality in the Las Vegas valley. There was a concern the state could lose several million dollars from the Federal Highway Fund due to the poor air quality. If only a few hundred vehicles were using the alternative fuels the state should focus on getting more companies to convert their tanks to the alternative fuels to continue to work on the air quality in southern Nevada. Mr. Sparks suggested the state could encourage the use of cleaner burning fuels with tax incentives; however, currently the only companies which would be able to benefit from the tax advantage were large companies who dispensed their own fuel.

Mrs. Chowning asked if the discussion of the conversion of alternative fuels began at the end of the session in 1987 and asked if there was time given to discuss the issue or was it brought in the waning moments of the legislative session. Mr. Sparks stated he did not know and had researched the legislative history of the statute and stated he was not involved with the issue in 1987. His recollection of the legislative history showed there was little debate on the legislation.

Assemblywoman McClain inquired as to why the Assembly Committee on Transportation was hearing the issue when it is a tax policy issue. Mrs. Chowning indicated the section of NRS the bill dealt with was the section the committee was expected to deal with. The committee would only deal with the policy aspect of the legislation and could re-refer the bill if they felt it was necessary.

Assemblyman Claborn recalled when the taxi authority had transferred from gasoline to propane because it was cheaper, cleaner burning, and the amount of vehicles they had on the roads. Mr. Sparks stated the fuel did burn cleaner. There were a number of benefits to using LPG as a motor vehicle fuel, such as the cost of the fuel and maintenance of vehicles. The concern of the department was the current conversion formula.

Assemblywoman Ohrenschall asked how close was southern Nevada to a non-attainment area as far as air quality was concerned and how much money was at risk if the air was not cleaned up. Mr. Sparks stated Clark County was currently a non-attainment area for carbon monoxide.

Ms. Ohrenschall wondered if there was a deadline for attainment. Mr. Sparks replied a deadline was possible and there were some sanctions the county could be facing but he was not familiar with the current state of affairs.

Ms. Ohrenschall asked if that could be researched and provided to the committee. Mr. Sparks stated he would.

Ms. Ohrenschall inquired for an explanation of the formula and why there was an inequity. Mr. Sparks stated LPG was stored and sold in a liquid form. It had to be converted back to a liquid form for special fuel tax to be applied. LPG was in a liquid gallon form and it was simple to directly apply the tax rate to the liquid measurement without the process of converting a gas to a liquid back to a gas. The problem with the current conversion formula was that it did not make sense scientifically.

Mrs. Cegavske asked if only a small number of businesses would be affected was it reasonable to place them in a situation where they would be paying more and possibly put them out of business. Mr. Sparks indicated there were only two companies which would be affected by the change and they would be paying more in taxes if the bill were passed. However, if all other businesses were required to pay the higher tax an inequity was created. If the legislature wanted to offer tax incentives for using cleaner fuels the incentive should be given for all alternative fuels and not just LPG.

Mrs. Cegavske asked if any other company had offered to convert their vehicles to using alternative fuels. Mr. Sparks responded he was not aware of any other company taking advantage of the fuel.

Mr. Bache inquired after the conversions what was the actual tax per 1 gallon of LPG after the conversions had been made. Mr. Sparks stated after conversion the tax was 6.4 cents per gallon. The statutory rate was $0.22 per gallon.

Bill Gregory, representing Yellow Checker Star Transportation, presented a letter to the committee from Michael Naylor, director of the Air Pollution Control Division of Clark County (Exhibit G). The letter explained the impact the bill would have on the air quality in Clark County.

Patrick Fagan, counsel, Yellow Checker Star Cab Company, presented the committee with a history of A.B. 35 and NRS 366.197 (Exhibit H). He explained that in 1987 the legislature included a formula that converted both CNG and LPG to a liquid form for tax purposes. The reason for the legislation was in 1984, Carson City District Court issued a judgement requiring DMV & PS to refund taxicab companies for illegally collected special fuel taxes. The basis for the order was there was no conversion formula so the tax for special fuel was based on gallons, since LPG was a gaseous vapor not sold in gallons so there was no way to determine the tax. The court’s decision was included in the history presented (page 11, Exhibit H). In 1987, DMV & PS submitted a request to the legislature to change the law to allow the department to tax alternative fuels. The intent of the original legislation was to allow the state to tax gaseous fuels the way they taxed liquid fuels. The cab companies took the state to court for another refund in 1992 because DMV & PS refused to apply the statutory formula to LPG for reasons previously stated. Carson City District Court determined the formula was appropriate for the taxation of LPG. The remaining history of the legislation had been offered by others so he would not repeat it.

Mrs. Chowning mentioned the law stated a taxpayer would have to pay a certain amount if they purchased liquid fuel; however, someone else was able to pay a different amount because they purchased LPG. The statute was unclear and should define LPG as a vapor. Mr. Fagan suggested the terminology was confusing. He felt a better way to refer to LPG was petroleum. He understood that any taxpayer who used LPG was entitled to be taxed under the formula. The problem was with public knowledge. Other taxpayers did not receive the benefits of the tax because they were unaware of the formula. In 1998, $430,506 was attributed to LPG taxes, of which the Yellow Checkered Star Cab Company contributed approximately $250,000.

Mr. Collins mentioned similar legislation had been debated in previous sessions. The argument in past sessions was about the inequity in the method of taxation. If the committee would focus on that inequity there would be less confusion on the bill. There should be a fair formula dealing with alternative fuels. Mr. Fagan felt removing LPG from the formula would not create the equity the committee was looking for. The current tax provide the appropriate incentives to use a cleaner burning fuel.

Mr. Collins remarked the formula needed to be corrected. Fuel taxes were for highway maintenance and not environmental clean up. Mr. Fagan communicated the total alternative fuel taxes paid in Nevada was $61 million and LGP users only contributed approximately $500,000. If the formula was removed there would no longer be any incentives to using LPG and the companies would convert their tanks back.

Mrs. Chowning inquired if the companies would actually change their tanks back to using regular gasoline instead of LPG. Mr. Fagan suggested the companies which currently used LPG would be required to evaluate the impact it would have on their companies.

Mr. Nolan informed the committee the formula made sense if looked at in terms of converting a gas to a liquid. The difference in the figures in statute was due to the difference in pressure between LPG as a gas and LPG as a liquid.

Milton Schwartz, vice president, Yellow Checker Star Cab Company, testified his company had changed their vehicles to LPG because of environmental issues in southern Nevada during the early 1980s. Their original incentive to convert their tanks was because the fuel tax was cheaper even though it was expensive to convert their tanks. Their investment over the years to convert their tanks had been $4 million. They probably would not change their tanks back to regular gasoline if the bill were passed; however, they would not be able to use LPG with the higher tax rate and remain competitive. The formula was created to repay the investment companies made if they chose to use LPG. He knew of nine companies throughout Nevada which used LPG. The issue was not about tax inequity, but about environmental impact. The 9 companies which used LPG reduced air particulates by 800 tons a year in Clark County. There were 42 states which recognized the need to become environmentally conscious and used cleaner burning, alternative fuels. For example, Arizona charged a 1 percent tax, California had a $35 annual sticker, and Utah charged $0.03 per formulate gallon. He knew other companies would not convert their tanks to use LPG because it tax issue came before the legislature every session and the threat of paying a higher tax.

Mrs. Chowning inquired why the companies which currently used LPG would not be able to remain competitive. Mr. Schwartz suggested if the tax were increased they would not be able to continue to convert their tanks to LPG because of the cost.

Mrs. Chowning wondered how long it would take for the companies to repay their initial investments. Mr. Schwartz indicated the investment was ongoing since all new vehicles had to be converted.

Mrs. Chowning commented the legislature regularly offered incentives for businesses in Nevada. She felt the current formula was an incentive to businesses which chose to assist with the quality of air in the state. Mr. Schwartz felt the companies did not receive any incentive because the vehicles lost 22 to 27 percent in vehicle efficiency.

Mr. Collins claimed the current formula worked; however, there was the efficiency issue raised by Mr. Schwartz. He understood the engines and motors ran longer and better if natural gas fuels were used.

Mr. Nolan asked what the value of the converted vehicles was when they were retired from service. Mr. Schwartz remarked the vehicles would be worthless to anyone who did not use LPG because it cost too much to convert the vehicles back to regular gasoline.

Mr. Gregory informed the committee the investment to convert vehicles to LPG required the company to build facilities to store the fuel if they dispensed it themselves. There was also an ongoing investment if new vehicles were purchased and needed to be converted.

Daryl Capurro, representing Nevada Motor Transportation Association, commented LPG was a liquid gas and sold and metered as a liquid. He explained LPG and gasoline were burned through automobiles the same way. The same formula could be used to convert gasoline and the inequality was in the formula. It was unfair to give one alternative fuel a break on taxes while other alternative fuel users had to pay their taxes in full.

Peter Krueger, representing Nevada Petroleum Marketers Association, stated he supported clean air and would ask to pass A.B. 35. All alternative fuels should be given incentives for burning cleaner fuels and not just one. LPG was metered and sold as a liquid and should be taxed the same as other fuels.

Mr. Nolan inquired if it was possible to turn oxygen into a liquid and to sell, meter and transport it as a liquid. Mr. Krueger replied it was possible to sell oxygen as a liquid but oxygen was not transported.

Russ Law, representing NDOT, stated LPG was a liquid, as could be seen in butane lighters. Regular gasoline and LPG both evaporated when they were placed at room temperatures. He stated 80 percent of people in Nevada paid 33 cents per gallon for regular gasoline while LPG was taxed at 22 cents per gallon, which created an $0.11 per gallon advantage for using LPG. Special fuel was weighed for energy content and taxed accordingly, as established during the 1997 session. Vehicles which used alternative fuels also polluted the air even though they were cleaner burning than gasoline.

Mr. Claborn asked how much would it cost to produce a gallon of gasoline to a gallon of LPG. Mr. Law responded gasoline and propane cost approximately the same per gallon. Mr. Capurro stated regular gasoline was the most expensive fuel to produce because of the process involved.

Mrs. Chowning adjourned the meeting at 3:40 p.m.

RESPECTFULLY SUBMITTED:

Christine Cole,

Committee Secretary

APPROVED BY:

Assemblywoman Vonne Chowning, Chairwoman

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