The joint meeting of the Senate Committee on Taxation and the Assembly Committee on Taxation was called to order by Senate Chairman Mike McGinness, at 2:10 p.m., on Tuesday, February 9, 1999, in Room 1214 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

SENATE COMMITTEE MEMBERS PRESENT:

Senator Mike McGinness, Chairman

Senator Dean A. Rhoads, Vice Chairman

Senator Randolph J. Townsend

Senator Ann O’Connell

Senator Joseph M. Neal Jr.

Senator Bob Coffin

Senator Michael Schneider

Mr. David E. Goldwater, Chairman

Mr. P.M. (Roy) Neighbors, Vice Chairman

Mr. Bernard (Bernie) Anderson

Mr. Morse Arberry Jr.

Ms. Vivian L. Freeman

Mr. John J. Lee

Mr. Mark A. Manendo

Mr. Harry Mortenson

Mr. Robert E. (Bob) Price

Mr. Greg Brower

Ms. Sandra J. Tiffany

Mrs. Dawn Gibbons (Excused)

Mr. John W. Marvel (Excused)

STAFF MEMBERS PRESENT:

Ted Zuend, Deputy Fiscal Analyst

Alice Nevin, Senate Committee Secretary

OTHERS PRESENT:

Senate Chairman McGinness introduced Bill Draft Request (BDR) 32-116.

SENATOR RHOADS MOVED TO INTRODUCE BDR 32-116.

THE MOTION FAILED FOR LACK OF A SECOND.

*****

Assembly Chairman Goldwater had submitted a memorandum to all members of the Assembly Committee on Taxation asking for consideration and motion for a BDR. Attached was a letter from Mr. Timothy R. Morse, Chairman, Clark County Board of Equalization, explaining the need for this legislation. According to Mr. Morse, the appraisers in Nevada had experienced several instances wherein an appraiser’s ability to estimate the full cash value of a property had been limited. This had been set forth in Nevada Revised Statutes (NRS) 361.227 and would require legislative action to correct their problem. Pursuant to Mr. Goldwater’s request, a motion was introduced as follows:

Senate Chairman McGinness announced the purpose of the joint meeting was to hear from the Nevada Tax Commission, Department of Taxation, and Commission on Economic Development. He commented this meeting would provide updated information for members of the committees.

Barbara Smith Campbell, Chairman, Nevada Tax Commission, introduced the members of the commission (Exhibit C). Ms. Smith Campbell said Michael A. Pitlock, Executive Director, Department of Taxation, had accepted an appointment to the Public Utilities Commission of Nevada. She congratulated him and wished him much success. She commented the commission is anxious to meet with the new director and assist him in any way possible for a smooth transition.

Ms. Smith Campbell said since the last legislative session the commission had dealt with special areas of concern. One area was the centrally assessed utility. She continued the commission entered into the regulatory process to address some potential areas of change because of the change in deregulation in the utilities industry. She said a subcommittee (of the tax commission) and staff worked with industry representatives to try to work out changes in the regulation that were consistent with the statute. Ms. Smith Campbell noted the areas with the most difficulty were the assessment of intangibles, equal assessment (when you have the state assessing a utility versus the county assessing a utility), and discrepancies between statutes, regulations and old attorney general opinions.

Ms. Smith Campbell discussed the fine arts regulation. She said it was the commission’s jurisdiction to promulgate the regulation to fit the statute passed in the last legislative session. She said they tried to honor the intent of the legislation as it was passed. She stated the commission listened to recommendations from the deputy attorney general as well as testimony from representatives from the arts industry. Ms. Smith Campbell noted the commission decided to sunset the regulation for 1 year because it was felt there were areas where the legislative intent was not easily interpreted.  Ms. Smith Campbell said commission members also wanted to have an opportunity to see if more than one or two taxpayers would ask for the exemption. The regulation was to be reheard in about 9 to 10 months. She noted testifiers were asked if they were planning to apply for the exemption and of the people that testified, only one person was interested in applying. The commission also asked the people that testified if they owned museums or art galleries. She explained the hot issue was the cost of admission. Those that testified said they had interest in either ownership or involvement on boards of some galleries and museums. She stated they were supportive of the exemption.

Ms. Smith Campbell said another question asked was the admission charge of galleries or museums and those that answered said the admission was free. She noted nationally there were several museums with free admission, but other museums were not free. Some had free admission on certain days, some had free admission for people of a certain age, and most of them had staggered or varied admissions. She said it was the decision of the majority of the commission to strictly construe to the language of the statute as it could be interpreted. The group found that the statute gave minimum restrictions for a taxpayer to apply for the exemption. The commission felt that for 700 hours per year, the taxpayer should offer the artwork free of charge for educational purposes. Ms. Smith Campbell explained the commission felt the entire gallery did not need to be free of charge, only those rooms containing the exempt art. The commission felt it no longer had the ability or authority to regulate what the admission charge should be once the minimum requirement of 700 hours had been met. She noted one taxpayer had appealed the decision and it is now in litigation.

Ms. Smith Campbell stated another area of concern was the increasing number of issues that dealt with estoppel. She said this was a situation where the taxpayer had relied on past audits with the Department of Taxation and tried to establish a pattern of tax policies for their business. Then, in later audits, some of those tax policies were incorrect. She stated both the commission and the staff agreed this was something to put into a regulatory process. She said guidelines need to be established for taxpayers. She concluded any input from the Legislature on this subject would be appreciated.

Mr. Mortenson asked for clarification of Ms. Smith Campbell’s statement that only galleries with exempt art would be exempt from costs.

Ms. Smith Campbell said the commission was not telling a business person how to run their entire gallery. She stated when you visit most museums in areas that have fine works of art there are usually several venues that run through the building. She said the regulation could not be geared to one taxpayer. The commission felt if an owner or gallery had artwork that was on loan, the art would be in one area of the museum and only that part of the gallery or museum would be free of charge for the minimum 700 hours per year. She clarified the rest of the gallery could not be regulated. She explained the commission did not have the authority to tell the owner how to charge admission. Ms. Smith Campbell explained the 700 hours is 35 weeks at 20 hours per week.

Assembly Chairman Goldwater inquired about input from the Legislature on the equitable estoppel issue.

Ms. Smith Campbell said this issue comes up frequently. With the change in technology and businesses, there would be changes in taxation as well. She noted the commission is currently working with staff at the Department of Taxation and when the new Director of the Department of Taxation is appointed he may feel that legislative authority or direction is needed for this issue.

Senator Neal said he had followed this particular issue. He asked if a gallery had secondhand art dealers licensing and selling pieces of art, would sales tax be collected for those pieces of art. Ms. Smith Campbell said galleries, like every other business in the state of Nevada, would be subject to compliance audits from the Department of Taxation and compliance issues would be addressed at that time. Senator Neal commented he hoped Mr. Pitlock would appear before the committees at a future time to discuss this issue.

Senate Chairman McGinness extended congratulations to Michael A. Pitlock, Executive Director, Department of Taxation, who was recently appointed to the Public Utilities Commission of Nevada.

Michael A. Pitlock, Executive Director, Department of Taxation, said there were two issues to discuss. He stated he wanted to set the stage for discussions the committees would have during this session. Mr. Pitlock called attention to the Report to the 70^th Session of the Nevada Legislature on the Effect of Nevada’s Tax Policies on the Potential for Effective Competition in Providing Electric Service to Customers in Nevada (Exhibit D). He stated he was required to provide this report in accordance with Assembly Bill (A.B.) 366 of the Sixty-ninth Session.

Mr. Pitlock stated the report deals with the potential impacts of utility deregulation on Nevada’s tax structure and whether the tax structure had any barriers to the development of a competitive market. Mr. Pitlock said one of the main issues in this report was centrally assessed properties which have the potential to impact utility deregulation on how to determine assessed value for centrally assessed utilities in a competitive market. This is because many of their competitors are locally assessed. He explained there are two very distinct schemes of assessment set forth in NRS. He said the report was presented to the Senate Committee on Commerce and Labor and there is a bill draft request that attempts to eliminate or minimize the differences. He stated currently discussion focuses on how to assess and tax intangibles. He noted the rest of the tax policy has very little impact on the utility industry because unlike other states, Nevada has not taken advantage of the utility industry and has not placed an unnecessary or unequal burden upon that one industry.

Mr. Pitlock distributed the Executive Director’s Exemption and Refund Report (Exhibit E). He said this report is an update of a document written during the 1997 Legislative Session. He stated the document attempts to quantify the fiscal impact of all the constitutional or statutory exemptions currently in law. He commented you have heard discussions centered on the sales and use tax and the narrowness of the tax base. He explained based on the latest estimate of the sales and use tax, exemptions add up to about $677 million annually. He noted the total sales and use tax collected last fiscal year, including both the state and local government portions was about $1.8 billion.

Mr. Pitlock pointed out Nevada currently has exemptions in excess of 30 percent of the remaining tax burden. One exemption highlighted in this report was the fine art exemption. He said presently the department is undertaking an investigation of the purchases of fine art that have been made by one taxpayer who has claimed an interest with this particular exemption. He noted because the resale issue is tied to this, and the question of whether the taxpayer is an art dealer as opposed to an art collector, the department is having difficulty in actually quantifying this exemption. He said you will note in the report that it could range anywhere from $150,000 to $7 million. Mr. Pitlock said it is tied with the issue of whether or not this art is being purchased for resale. He stressed this is a totally separate issue from the fine art exemption that was passed last legislative session. The investigation will be concluded in the coming weeks and the department will be in a better position to narrow the range of these numbers and report back on the impact of the particular legislation.

Mr. Pitlock said another document provided today is the department’s red book entitled the Nevada Department of Taxation, Fiscal Year 1998-99, Ad Valorem Tax Rates for Nevada Local Governments (Exhibit F. Original is on file in the Research Library.). It sets forth the overlapping property tax rates for all local governmental entities and is a handy reference guide. Mr. Pitlock noted joint committee members should have received a copy of the department’s annual report for the last fiscal year in the mail. It summarizes the 19 tax programs the department administers and redistributes to 137 different governmental entities. He noted additional copies are available upon request.

Mr. Pitlock said he had been working with Carole A. Vilardo, Lobbyist, Nevada Taxpayers Association, on estoppel issues. Ms. Vilardo plans to propose some amendments to the taxpayer’s bill of rights. He clarified estoppel centers around what happens after a taxpayer audit and a subsequent audit several years later. Mr. Pitlock said in discussing this with Ms. Vilardo, it appears that one of the problem areas has to do with the department itself. He believes a taxpayer has a right to a clear and concise written report from their auditor explaining the issues that have been reviewed and the results of the review. He stated taxpayers have not always received this information. Taxpayers may have an exit conference where they sit down and discuss issues with the auditors but a written report is never issued. He pointed out changing the procedures internally and adopting a procedure where the auditors will provide to the taxpayer a written audit report has been discussed. He said the taxpayer would then be able to rely on that written communciation from the department as the basis for doing business in the future. He concluded if this process is implemented internally it would allow more precise and clear evidence to be offered when an estoppel argument is presented to the commission.

Mr. Pitlock said he recently presented an overview of the department budget to the Interim Finance Committee. One of the issues discussed was the Business Process Reengineering study (BPR) the department is currently conducting. He stated the study is the first step in a three-step process that will hopefully lead to the development of a replacement system for the Automated Collection Enforcement System (ACES). He stressed step two of the process needs to be funded during this biennium to avoid lagging behind by at least 2 years.  Mr. Pitlock expressed the opinion that he doubts ACES will be able to function for 2 years. He said at the time of the budget presentation, the cost of step two was inaccurately stated. It was reported to be $1.2 million to $1.6 million. He explained based on information received from their consultants, it appears the correct number will be about $800,000. He noted one of the concerns expressed by the Senate Committee on Finance and Assembly Committee on Ways and Means was the $800,000 was not included in the department’s proposed budget. He said if step two is not completed, the department would be in grave danger of not being able to administer the sales and use tax beyond the next 5 years. He pointed out the Department of Taxation provides 70 to 75 percent of funds for local governments, cities, counties and special districts, particularly in the area of sales and use tax. He said because one of the main beneficiaries of a new system would be local government, one idea is to allocate 70 percent of the cost of step two to local government. He stated there is a mechanism through the consolidated tax-distribution formula where a one-time appropriation could be made out of that fund to the Department of Taxation to at least defer a portion of the cost of step two of the BPR.

Mr. Pitlock said another item to be examined is the Department of Information Technology (DoIT) budget. For the current fiscal year, the DoIT budget is about $1.6 million. He stated in the proposed budget, $2.3 million was requested in the budget. Mr. Pitlock said it was hard to explain why there was a difference because this was a flow-through item for the department’s budget. He noted the information is received from DoIT and passed along to the Department of Administration. When examining the department budget and the DoIT budget, it might be possible to come up with a portion of the budget to fund the state’s share of the $800,000 for the remaining portion of step two of the BPR. He stressed this is the important aspect of the department budget. Getting procedures in line and getting the system replaced is critical. He pointed out over $2.5 billion is collected annually for state and local government. The state needs a solid system to administer those taxes.

Mr. Pitlock explained he reported to the Senate Committee on Finance and Assembly Committee on Ways and Means that there is approximately $60 million of sales and use tax currently not collected. He noted improving our system would improve this collection ratio. He said if the collection ratio is improved by only 10 percent that would mean an additional $6 million to fund state and local government. Mr. Pitlock pointed out the Department of Taxation is a good investment for state and local government and an $800,000 investment at this point of time is not unreasonable to assure the ongoing collection of the $2.5 billion.

Mr. Pitlock thanked Senator O’Connell for her work on the Senate Concurrent Resolution (S.C.R) 40 of the Sixty-eighth Session and Senate Bill (S.B.) 253 of the Sixty-ninth Session committees.

Mr. Pitlock noted the privilege of serving as a technical advisor for both of those studies was one of the greatest experiences he had in public service. He said part of the reason it was such a great experience was Senator O’Connell’s leadership on those committees.

Senator Rhoads asked if the 10-percent figure was realistic to collect increased revenues. Mr. Pitlock replied a 10-percent improvement over the current level of collection is not an unreasonable estimate.

Senator O’Connell said the purpose of Assembly Bill (A.B.) 230 of the Sixty-sixth Session (A.B. 320 of the Sixty-sixth Session) was the collection of the tire tax which was to be distributed to the smaller counties (under 40,000 in population).

Senator O’Connell said it was her understanding that the purpose of that tax was to help with solid waste disposal, but after an amendment to the bill in 1993, the funds were no longer distributed to the small counties to fulfill the original purpose. Senator O’Connell asked Mr. Pitlock to comment.

Mr. Pitlock replied collections for the last fiscal year were just under $1.2 million. He said at the present time, the distribution is split between the State Department of Conservation and Natural Resources, the Clark County District Board of Health and the Washoe County District Board of Health. He stated it appears that none of the funds go to the small counties.

Senator O’Connell asked if this issue could be examined during the session. She said this is one of the major problems of the smaller counties. The mandate on the landfill is just breaking the backs of the small counties. She continued when the tax was orginally passed, the purpose was to give the small counties some relief in that area.

Ms. Freeman said the original intent of the 1991 recycling bill was collection of funds for the State Department of Conservation and Natural Resources to administer the program. She continued there was to be a large educational component but she did not remember funds being allocated to the smaller counties. Ms. Freeman stressed she did not believe that was the purpose of the tax fee for the tires. She said there were changes in the next legislative session.

Senate Chairman McGinness said he recalled serving on Ms. Freeman’s natural resources committee and he believed that was exactly where it was supposed to go.

Mr. Neighbors thanked Mr. Pitlock for his help with the Nye Regional Medical Center problem. He said the state receives two cents from the sales tax. He asked what a penny generates. Mr. Pitlock replied in the last fiscal year, two cents raised over $512 million so one cent would raise approximately $250 million.

Mr. Price said regarding the tax on fine art, he had researched the minutes of the Assembly Committee on Taxation. He stated he could find no mention of a charge for viewing the art and no one testified in opposition to the bill. He said he remembered, in other states, art would be moved from one state to another where the sales tax was lower or they did in fact have an exemption. He pointed out there would then be a potential loss to the state where the art would normally reside. He asked if Mr. Pitlock had any knowledge of this issue.

Mr. Pitlock said that issue was raised during discussion of the exemption. He said the state would be creating a safe harbor where art collectors would bring their art after they purchased it, leave it on display long enough to qualify for the exemption and move the art to a permanent location. He noted this would mean the State of Nevada would attract these works of art at least for a short period of time.

Mr. Anderson said the bill originated in the Assembly Committee on Judiciary and there was discussion at that time relative to what was going to happen. He suggested checking the minutes from the discussion. He emphasized the committee heard that every piece of art is really for sale, regardless of where it is located. He said if you have the right dollar amount you will probably be able to buy it from somebody.

Mr. Pitlock said this issue is a very real problem. He stated if the individual is going to claim a resale exemption for art, they have to be able to justify to the department that they are truly in the business of buying and selling fine art. He clarified they have to be able to demonstrate to us that they are actively marketing the art, that they have a business plan for marketing the art and it is more than just saying everything is for sale. He stated there are two separate issues. He said if you are truly in the business of buying and selling art and all the art you buy is in your inventory, marketed for resale, then it is already exempt because inventory has always been exempt from sales tax. He continued the fine art exemption does not really enter into whether it is sales tax or property tax. There is no property tax on inventory. He explained when you say "I am no longer a dealer, I am a collector of art," then the fine art exemption passed last session becomes an issue. If an individual is not able to demonstrate to the department that they are in fact a dealer, then the art would be taxable unless they comply with the regulations that were adopted by the Nevada Tax Commission for the fine art exemption.

Assembly Chairman Goldwater thanked Mr. Pitlock for his professional leadership in the Department of Taxation. He said, first, the equitable estoppel work Mr. Pitlock had done, with Ms. Vilardo, is of utmost importance to the Legislature because it is an issue where taxpayers are assessed penalties and interest when they are trying to act in good faith. He asked Mr. Pitlock to please let legislators know how to clarify this issue. Mr. Goldwater said, second, what is your methodology for collecting the amount of money you would need to fund step two from local governments.

Mr. Pitlock answered the Department of Taxation currently administers the consolidated tax-distribution fund. He said it was created as part of S.B. 254 of the Sixty-ninth Session where all of the funds collected on behalf of local government are pooled together and distributed monthly.

Mr. Pitlock pointed out this was done in the past. He said there was a one-time appropriation of the fund to pay for a study by University of Nevada, Las Vegas (UNLV), on fuel tax and road maintenance. He explained money is taken off the top of the fund before it is distributed. He said each local government would be assessed a proportional share based on the ratio of their distribution from the consolidated distribution fund.

Assembly Chairman Goldwater asked if it would require legislation. Mr. Pitlock answered yes, the funding for the UNLV study was part of S.B. 254 of the Sixty-ninth Session and legislation would be required for a one-time appropriation from the fund.

Assembly Chairman Goldwater said that he had heard complaints and would like to give Mr. Pitlock an opportunity to clarify something. Your auditors budget and the department budgets collections of penalties and interest of a certain threshold to the Department of Taxation. Mr. Goldwater stated that he knew that was not the case and he wanted to make sure Mr. Pitlock would be on the record that it has never been the case. Mr. Pitlock stated:

Senator Rhoads said when passing down more cost to local governments is considered, we should remember some of the rural counties are having financial difficulty.

Mr. Pitlock said his department is very aware of the problems of the smaller local governments since they contact the Department of Taxation when they have serious financial trouble, like the Nye Regional Medical Center. He continued this was suggested because the potential is there for these governments to benefit from the improvements in our system. He stated, of the 10-percent improvement in collection ratio discussed earlier, 70 percent would flow down to the local governments.

Senator O’Connell said Mr. Pitlock’s work with S.C.R 40 of the Sixty-eighth Session and the S.B. 253 of the Sixty-ninth Session committees were very much appreciated.

Ms. Freeman asked the meaning of the term ACES. Mr. Pitlock answered it is the name of our computer system that handles all the sales and use tax and business tax functions.

Senate Chairman McGinness asked for clarification on the number of programs administered to and distributed by the department. Mr. Pitlock said there are currently 19 different tax programs administered and money is redistributed to approximately 137 different governmental entities.

Senate Chairman McGinness introduced Robert E. Shriver, Executive Director, Division on Economic Development. Mr. Shriver thanked the committee for the opportunity to appear and bring them up to date on how effectively Nevada uses the sales and use tax abatements. Mr. Shriver presented the Nevada Commission on Economic Development (Exhibit G. Original is on file in the Research Library.), and the Partial Real & Personal Property Tax Abatement for Recycling/Retail Wheeling (Exhibit H). He commented Exhibit H corresponds with the graphs in Exhibit G. He noted one of the most important things the commission did last legislative session was to establish the personal property tax abatement and ongoing abatement. He continued so far only one company has utilized the abatement but the criteria are extremely high. He said when the commission introduced the sales and use tax abatement, the issue was to get higher-wage jobs for Nevada companies who were making significant capital investment in this state and could spread the wealth throughout the community. Mr. Shriver said the types of companies show how this helps to diversify Nevada’s economy. The tax abatement program brings significant employers and marque companies to this state. The Partial Real and Personal Property Tax Abatement for Recycling/Retail Wheeling Act has been used with Kaiser Aluminum in Story County and Trex Company LLC, in Lyon County. Both companies qualified under the standard set forth in the bill.

Mr. Shriver explained it was necessary to write regulations, as it had never been done. He commented there were shortcomings and the legislative package addressed some of the shortcomings. He pointed out there is little or no flexibility for the commission to act and it hamstrings the local government to the effect that they have no input into what occurs. Mr. Shriver continued most of the tax collected affects local government. The commission wanted to make sure when the personal property tax exemption was written that local government was involved by having them sign off on what was being done. He said in other words, they must give approval before the commissioners would go forward because they were giving up the tax for a period of time.

Mr. Shriver stated Michelin North America, based in Reno, a company that did utilize the personal property tax abatement, proved the impacts were significant on the number of jobs, the wage and the payback period. Mr. Shriver stated the same standard needed to be applied to the recycling and retail wheeling. This will give the commission some flexibility and give local government input in how, when or if they want to go forward with the exemptions. Mr. Shriver said issues are how our competitors do and how Nevada competes.

Senator Rhoads asked for an explanation of the Sales and Use Tax Deferral Certifications on page 2 of Exhibit H.

Mr. Shriver said all of the lists of tax issues were included. The deferral was the first attempt the State of Nevada had to address the fact that sales and use tax is charged on manufactured goods. This process was started in 1989. He explained the company puts up a security bond in the amount of the tax due and if they meet the criteria, are a diversified industry in the State of Nevada, pay 80 percent of the statewide wage and put up the bond, it is in essence a deferral, interest free. It is used in conjunction with the abatement because the abatement applies only to that which is not constitutional or 2 percent. He pointed out most companies will get the abatement on the nonconstitutional amount and then defer the 2 percent over time. He said sometimes it is a question of the cost of money. He commented at one time it was cheaper to pay the tax than to go out and buy a security bond so there was not a lot of use by companies. He said now it is applied more to the abatement side.

Ms. Freeman said she was glad to see recycling finally happening in this state.

Mr. Shriver introduced Berlyn Miller, Vice Chairman, Commission on Economic Development. Mr. Shriver explained Mr. Miller was responsible for the decision process and the presentation of facts provided to the commission. He noted Mr. Miller is a private citizen and a business leader in the state, appointed by the Governor, and there is a lot of judgement and responsibility with his appointment. He commented there is a perception that every company with a request gets approval, but that is not the case. He said the criteria are rigorous and Mr. Miller and the commission are responsible for investigating and making sure each company qualifies.

Mr. Miller said thank you for giving the commission a tool which can be used to help attract companies. He remarked without this tool a number of companies would not have located in Nevada. He noted Arizona, California, Utah and Texas are the immediate competitors. Companies are automatically exempt in those states and do not have to meet the qualifications required of companies who come to this state. Mr. Miller continued as a commission, our objective is to bring higher paying jobs to this state. He pointed out that Exhibit F, page 3, gives a comparison of sales/use tax exemptions and abatements for manufacturers. Many states, 38 in this case, provide sales/use tax exemptions. He noted staff receives many inquiries that never reach the commission because companies cannot meet Nevada’s qualifications or are not in the best interest of the state.

Senator O’Connell asked how Nevada compares with other states as far as general tax structure, cost of living, workforce and workers’ compensation.

Mr. Miller said Nevada has a favorable tax structure as far as corporate and personal income tax. He said the largest single complaint from companies interested in Nevada is the lack of a highly trained qualified workforce. He felt this is one of the reasons the commission has appealed to the Legislature. Additional training dollars are needed to help train the workforce and to improve the educational system for training of workers. He continued Nevada is not competitive in insurance rates for workmans’ compensation. Other states have been much more aggressive than Nevada. He said Texas, for example, will pay a company several thousand dollars per employee for just moving into the area, even though these are low-paying jobs. He stressed Nevada does not want to do that.

Senator O’Connell asked if the business tax had been a barrier to anyone looking at Nevada. Mr. Miller said he was not aware of any situations. He added there are not many requests for abatement of the business tax. Mr. Shriver said Nevada is one of few states to have a head tax. He said larger companies with good wage rates do not find this a significant factor. He noted it would impact the smaller mom-and-pop shops. Mr. Shriver remarked he would be glad to meet with any legislator to hear their input. He said the work with Senator O’Connell’s interim committee made these incentives more useful for the state, the applicant and the counties and cities affected by it.

Ms. Freeman referred to Exhibit F, pages 4 and 5, asking for an explanation of the rural counties status.

Mr. Shriver said this is a reflection of Kaiser Aluminum Company, Kal Kan Food Inc., and Quebecor Printing Company in Fernley. Mr. Shriver noted the Trex Company LLC, in Fernley, had also qualified for an incentive. Much of the indirect job spin off will affect the Reno Sparks area and also the rural counties but there is no way to decide which percentage goes to Reno, Fallon or Fernley.

Ms. Freeman asked why just two to three counties are benefiting and not the others. Mr. Shriver said it depends on location. He stated Fernley is in a good location. They are 30 miles east of a metropolitan area; they have rail service and the interstate highway. He continued Fernley also had private land developers who helped assemble a package using the community-development block-grant programs on infrastructure. He stressed it should be taken to other rural areas as well. He said start-up business and homegrown industries in the other rural counties will really make the difference.

Ms. Freeman asked about access to the university. Mr. Shriver stated workforce development is Nevada’s biggest issue. He said skills training is needed at all levels, even the Ph.D. level. He noted the University and Community College System of Nevada has distance learning programs available in the rural areas and Nevada’s companies have the ability to use these programs for further training. He said a grant had been received from the federal Economic Development Administration to study how to interconnect rural Nevada with the rest of the world. The costs involved are still fairly prohibitive but he believes there is great potential for rural Nevada. He remarked the lone eagle concept of letting someone who enjoys the rural Nevada lifestyle still participate in the global economy is one way to tie them together.

Senator O’Connell asked Mr. Shriver to explain what happened to the manufacturer in Fernley who recently closed down. Mr. Shriver responded the Stanley Tool Company opened a facility distribution center in Fernley and closed it down within 9 months. He said because of the location, a company called Amazon.com, which worked with the local development authority and a local real estate company, located to the same facility. He remarked it was just what they wanted and was a great win.

Senate Chairman McGinness reminded the joint committees to meet again in Room 1214 on February 11 at 2:00 p.m. for a presentation and discussion of the Performance Audit Report on the Southern Nevada Water Authority as provided by section 25 of A.B. 291 of the Sixth-ninth Session.

Senate Chairman McGinness adjourned the meeting at 3:25 p.m.

RESPECTFULLY SUBMITTED:

Alice Nevin,

Committee Secretary

APPROVED BY:

Senator Mike McGinness, Chairman

DATE:

Assemblyman David E. Goldwater, Chairman

DATE: