The Senate Committee on Taxation was called to order by Chairman Mike McGinness, at 4:33 p.m. on Tuesday, April 6, 1999, in Room 2135 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.

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

STAFF MEMBERS PRESENT:

Alice Nevin, Committee Secretary

OTHERS PRESENT:

Marvin A. Leavitt, Lobbyist, City of Las Vegas, said Senate Bill (S.B.) 253 of the Sixty-ninth Session changed the way revenues were received by local government. He noted this resulted in the formulation of S.B. 502.

Guy S. Hobbs, Lobbyist, Nevada Association of Counties, said the process resulting in formulation of this bill actually began under the Senate Concurrent Resolution (S.C.R.) 40 of the Sixty-eighth Session.

Mr. Hobbs said legislation was promulgated which made substantial changes to the distribution of local government revenue. He commented it had been a good process, reliant upon consensus and group decision-making to arrive at solutions that would be workable well into the future.

Mr. Hobbs noted there were additional issues to be dealt with and the committee would continue to work, as a standing committee, over the next 2 years. He said:

Carole A. Vilardo, Lobbyist, Nevada Taxpayers Association, said the association supported the bill. She said the subcommittee of the S.B. 253 of the Sixty-ninth Session committee looked at the issue of the net proceeds of mine tax and discussed the problems experienced by local governments, particularly in the rural counties. She stated one of the obvious problems was the fluctuation in the net proceeds of gold and what the local governments received as revenue. She noted it was felt that a return to actual reporting was needed, as was done prior to 1989.

Ms. Vilardo pointed out estimates were still being provided, even after changes were made in 1995. She noted when the reconciliation was done and final payments calculated, if the price of gold had gone down dramatically, based on the schedule of payments and the way they were made, mining companies were owed a refund from their local government. She stated in many cases, an agreement was worked out whereby they received a credit. However, she continued, if interest were accrued and if gold continued to go down, local governments were impacted when mining companies requested refunds.

Ms. Vilardo said the bill made changes in the dates on which information would be submitted to the Department of Taxation. She explained the bill amended a number of items. She went through the changes, pointing out the bill had a mitigation fund for the opening and closing of mines. She said the county established the funds and set aside the funds for school districts and it was felt that the mitigation fund should be expanded to include the opening and closing of mines. She concluded, if passed, the bill would become effective July 1, 1999.

David Pursell, Executive Director, Department of Taxation, said the department requested two changes to the bill. He noted on page 1, line 10, the time would be changed from "45" to "30" days; page 4, line 17, "before March 15" would change to "before April 15." He stated it would give the department more time to do desk audits of net proceeds returns and still be able to notify the operators and royalty recipients of payments to be made in August and February.

Tim Crowley, Lobbyist, Nevada Mining Association, said this issue came up when the S.B. 253 of the Sixty-ninth Session committee was working with local communities to address the budgeting problems on projections made from net proceeds. He noted technical support was offered through the association’s taxation committee. He clarified this bill would achieve three things, provide an earlier calculation of full-year proceeds from the industry, which allowed local governments to receive more accurate budgetary information; modify the reporting and payment schedule in a way that reduced the occurrence of overpayment and resulting refunds; extend the provisions regarding mitigation funds to school districts. Mr. Crowley said the association supported the Department of Taxation’s amendments and the bill.

Senator Rhoads asked if there were counties that still owed mines. Mr. Crowley said he did not know and would get that information for him.

Henry Etchemendy, Lobbyist, Nevada Association of School Boards, said the association realized estimated net proceeds were a problem for counties and school districts. He presented Possible Solutions for Net Proceeds Problem (Exhibit C). He explained the exhibit to the committee, noting this document would set up a prepayment to the school districts and would accomplish the needs of the school districts. He clarified although this solution would not help the counties, it would help the school districts and he wanted the committee to have the opportunity to review it. Mr. Etchemendy commented this issue would be discussed before the Assembly Committee on Ways and Means and Senate Committee on Finance in the near future.

Senator O’Connell asked why this information was not provided during the interim meetings of the committee. Mr. Etchemendy said he had no information on the school districts, but the association did not attend the hearings. He added they should have attended the interim committee discussions.

Robert S. Hadfield, Lobbyist, Nevada Association of Counties (NACO), testified he understood the schools’ position, but the counties were in the same position. He noted discussions were held on eliminating the advanced payment altogether but it was felt it was not a workable solution at this time. He said NACO supported the bill because it was important to take care of the problem procedurally now.

In response to a question from Senator Neal, Mr. Hadfield explained the arrangement changed the ad valorem tax rate applied for net proceeds of mines and brought it up to the constitutional limit of $5. He clarified it created a procedural problem in estimating revenue and the only way to avoid it was to eliminate the prepayment. He noted this would require the state to provide the amount of money necessary to eliminate it, since they were the benefactors of the advance payment.

Chairman McGinness closed the hearing on S.B. 502 and opened the work session on S.B. 259.

Chairman McGinness called attention to three documents, Possible Project for Legislation (Exhibit D); Proposed Amendments to S.B. 259 (Exhibit E); letter from the Office of the Secretary of State dated March 15, 1999 (Exhibit F).

Robert E. Shriver, Executive Director, Division of Economic Development, Commission on Economic Development, said the Office of the Secretary of State had requested deletion of section 5 of the bill (Exhibit F). He noted all other issues were addressed in previous testimony. Chairman McGinness clarified all parties were in agreement to the deletion of section 5, and the answer was yes.

Andrea L. Reitan, Deputy Chief of Staff, Office of the Lieutenant Governor, said the only change requested was to amend one portion of Nevada Revised Statutes (NRS) 231.170. She referred to Exhibit E.

Ivan R. Ashleman II, Lobbyist, International Alliance of Theatrical and Stage Employees, Local 720, said Exhibit D added the people who worked technically in trade shows. He noted currently actors, dancers, athletes and people in stage productions were covered, as well as the technical workers in motion pictures, but technical workers who worked in trade shows were excluded.

SENATOR O’CONNELL SECONDED THE MOTION.

Guy S. Hobbs, Lobbyist, Nevada Association of Counties, testified this bill was also a part of the work done to establish a formula for distribution of local government revenues. He stated bases were established for local governments that would increase each subsequent year by the Consumer Price Index (CPI). He said additional revenue would be added if there were sufficient revenues to cover the base, which would be distributed on statistics, related to growth.

Mr. Hobbs said one of the issues discussed in the past was positive growth and negative growth. He continued circumstances might exist where there were declines in population and assessed values for a sustained period of time, whereby bases otherwise guaranteed as positive values growing might be overstated in time. Mr. Hobbs noted S.B. 534 represented a suggestion of how such conditions might be recognized and those bases adjusted so they could be allocated to other areas within a county for better use.

Mr. Hobbs stated this bill suggested if population and assessed valuation figures each declined over the course of 3 fiscal years, then for the subsequent budget year, the Department of Taxation would undertake a review of the circumstances to determine whether an adjustment in the base was warranted. He explained if the Department of Taxation believed this to be the case, a recommendation would be submitted for additional review to the Committee on Local Government Finance (a Department of Taxation committee). He continued if the committee believed it to be warranted, a recommendation for an adjustment or modification to the base would be submitted to the Nevada Tax Commission. He said public hearings would be held and if an adjustment was indicated, it would be directed for subsequent fiscal years. Mr. Hobbs noted this was the essence of the bill.

Senator Rhoads asked about the possibility of adjustments. Mr. Hobbs clarified it would be for a particular local government. He explained an example would be a decline in the population and assessed valuation of a city located within a county, where there appeared to be an out-migration, causing a reduction in the population base requiring services. He summarized the Executive Director of the Department of Taxation, with the concurrence of the Committee on Local Government Finance, might determine an adjustment be made on a per capita basis, or on some other kind of proportionate basis, to reflect the decrease in population. He noted a fixed formula was not prescribed because conditions might vary as to severity or longevity.

Senator Rhoads asked if this would shift money from one government entity to another within a county. Mr. Hobbs said yes, the revenue would remain within the county and would be distributed to the other local governments on a proportionate basis.

Chairman McGinness closed the hearing on S.B. 534 and opened the hearing on S.B. 535.

Mr. Hobbs testified when the formula was promulgated, gross statistics were used for amounts in excess of revenue generated within a county. He noted distribution was above and beyond the revenue required to cover the base. He stated the statistics included a change in population and a 5-year moving average on assessed valuation. He clarified the Department of Taxation said the assessed valuation statistics being used did not necessarily prescribe inclusion of the value of redevelopment. Mr. Hobbs continued redevelopment agencies must sunset after 20 years and at that time, the valuation, if it were not part of the valuation used for computation, would suddenly appear in the computation. He noted this would represent a bump in the statistics that could artificially disrupt them. He stated it was felt that redevelopment should be included in the calculation of the assessed valuation moving average within the formula, for long-term stability.

Chairman McGinness closed the hearing on S.B. 535 and opened the hearing on S.B. 536.

Marvin A. Leavitt, Lobbyist, City of Las Vegas, said this bill dealt with a property tax situation. He said one of the foundations of the property tax system was that individual property taxpayers paid for services they received by being residents of a particular area, county, city, or special district. He noted all of these things were important, as they related to the property tax system of the state, but it was possible to have an overlapping property tax rate. He continued that would be where one individual property might pay a levy by the state, school district, county, city and perhaps a special district.

Mr. Leavitt continued there were situations where the overlapping rate went to $3.64 (per $100 assessed valuation), and property taxes to be levied would exceed $3.64, the maximum rate. Mr. Leavitt said a possible solution to this problem created another problem. For example, Mr. Leavitt said, a relatively small local government, that was part of the overlapping rate, had the right to levy 40 cents; but the levy of 40 cents, when combined with all other levies, pushed the taxpayer over the $3.64 maximum. He explained this could lead to "buy downs" which had happened many times in the past. He said there might be situations where people had paid for services they did not receive and this bill would outlaw that practice.

Chairman McGinness clarified this issue would be required to go to a vote of the people. Mr. Leavitt said no, there was another bill which addressed the maximum limit. He said in this case governments could enter into local agreements. He noted in some cases the rate would have to be tolerated, with the governments negotiating with each other. He continued if they could not reach a solution, it would go to the Nevada Tax Commission for a determination.

Senator O’Connell said this was one of the purposes of the debt management commission in each county, an umbrella organization created for this purpose.

Chairman McGinness closed the hearing on S.B. 536 and opened the hearing on S.B. 537.

Carole A. Vilardo, Lobbyist, Nevada Taxpayers Association, spoke in support of S.B. 537, saying even with the new language in the NRS chapter 360, additional clarification was needed. She said the intent of the legislation was that abatements were not 100-percent forgiveness of a tax; they had conditions set to them; they were limited and generally they were for a specific period of time during which the tax was exempted or abated. She testified the Commission on Economic Development and all of the development authorities discussed this issue and determined greater consistency was needed in the statute before going out to attract business. She stated abatements had been adopted for economic development, on a case-by-case situation, but the whole issue had not been examined.

Ms. Vilardo noted a consistent set of general criteria would be developed which would do away with the majority of the differences. She said the criteria would require the Commission on Economic Development to approve any abatements, but there was a provision that local governments must receive notice of the hearing where the abatements would be discussed. Ms. Vilardo said the commission was asked to report back on all of the abatements being granted to see if there were any abatements not being used that could be eliminated or that needed modification.

Ms. Vilardo told the committee the language for the amendments, and the suggested inclusions, had been presented to the S.B. 253 of the Sixty-ninth Session committee and adopted, with revisions, and an amendment offered by the Department of Taxation. Ms. Vilardo asked for approval of this bill, with the intent to add additional language as soon as possible. Chairman McGinness asked Ms. Vilardo to bring the amended language back to the next meeting.

Karen G. Baggett, Deputy Director, Division of Economic Development, Commission on Economic Development, testified Mr. Shriver would work with authorities throughout the state to make sure local governments would be notified. She emphasized this was an important bill.

Ray E. Bacon, Lobbyist, Nevada Manufacturers Association, testified the consistency provided by this bill would be beneficial for long-term economic development in this state.

Chairman McGinness closed the hearing on S.B. 537 and opened the hearing on S.B. 538.

Mr. Hobbs said this bill contained suggestions made by the Department of Taxation. Teresa Glazner, Supervisor, Distribution/Statistics, Administrative Services Division, Department of Taxation, said she supervised the distribution of statistics. She noted one of their tasks, with the new consolidated tax legislation from the last session, was to implement the formulas and get the distribution rolling. Continuing, she said as they worked through the formula, they came across technical areas that needed corrections to clarify the language. Ms. Glazner went through the bill, noting proposed changes.

Senator Neal asked for clarification of the role of the Bureau of the Census as shown on page 4, line 18. Ms. Glazner said the Governor certified the population for the Department of Taxation. She noted the Governor’s certification was used until the Census Bureau released their statistics and then the formula would be reestablished, based on the new statistics.

Senator O’Connell said some sections were part of a special act which discussed "fair share issues." She noted when the bill was put together, all of the old formula language was taken out, but this bill would clarify and allow the staff to apply the formulas.

Mr. Hobbs thanked Ms. Glazner for her support and assistance. He noted she had been quite diligent about bringing forward things that needed attention. He said as mentioned earlier, the S.B. 253 of the Sixty-ninth Session committee would continue its work. He added there was one issue that occurred recently, which pointed out the fact that the language did not always reflect the intent of what was discussed.

Mr. Hobbs continued there was an issue currently which involved how the base should be rolled forward. He said original discussions suggested the base would roll forward and increase by the CPI each year, but only the base would be increase by the CPI. He said it could be very important in future years that there be enough revenue in the excess column to have that column be meaningful. He noted that was part of the revenue that was distributed according to relative growth and the assessed valuation of population, and if none was available in that column for distribution, the statistics would not apply to the formula. He commented there were six or seven counties where the amount of revenue in the fund did not equal the amount of the combined bases, so zero revenue would be distributed, according to those statistics.

Elizabeth N. Fretwell, Lobbyist, City of Henderson, testified in support of the bill. She said the City of Henderson intended to present an amendment because, in following the performance of this formula since its implementation, there were some concerns with the formula. She noted it was felt that Mr. Hobbs had addressed the concerns. She said city representatives hoped to work with Mr. Hobbs and the technical committee in the future.

Ms. Fretwell added an inverse relationship between growth and the distribution had been noticed. She referred to graphs entitled Comparison of Applied Growth Factor to Distribution Percentage, Comparison of Growth Factor Increase to Distribution for FY 98/99, and Consolidated Tax Distribution for FY 98/99 (Exhibit G).

Steven M. Hanson, Finance Director, City of Henderson, referred to page 3 of Exhibit G. He said the first 6 months distribution of taxes, under the new formula, indicated that Mesquite was getting 13 percent less than they received in the same 6-month period last year. He added Mesquite’s growth factor was the highest that existed in the formula. He noted there was a slight increasing trend to the other extreme in Boulder City. He stated it had the slowest growth factor in the consolidated tax formula, but received 18 percent more in the first 6 months of the current fiscal year, with the new formula, than was received last year.

Mr. Hanson pointed out one of the problems may be how the base allocation was calculated. He said in calculating the base allocation for all the entities, the revenues in Fiscal Years 1996 and 1997 were averaged together and increased by a 6.5-percent factor to make them equate to Fiscal Year (FY) 97. He continued the FY97 estimate was used to create the FY99 base, skipping over FY98. He said Henderson and Mesquite experienced rapid growth in FY98, and by not incorporating or acknowledging the growth that occurred in FY98, it caused a certain fiscal detriment as a result. He stated that was one of the main problems with the calculation. He said as far as the methodology in the base calculation, it was a fair and equitable distribution, but the first-year calculation created a certain anomaly that affected the faster growing cities.

Mr. Leavitt said when the committee was deliberating the formula that would be put in Senate Bill 254 of the Sixty-ninth Session, there were questions as to what base year should be used.

SENATE BILL 254 OF THE SIXTY-NINTH SESSION: Makes various changes to formulas for distribution of certain taxes. (BDR 32-314)

He stated when looking at the base years, no year was fair to everyone. The committee decided that, to be fair to every local government, a combination of the two most recent years would be used to give every government a fair distribution. He pointed out when this issue was deliberated, every local government in the state had an opportunity for participation. This process was done over a 2-year period and, he remarked, no local government objected to what had been done.

Chairman McGinness closed the hearing on S.B. 538 and opened the hearing on S.B. 539.

Mr. Hobbs said in discussing exemptions, the work was oriented towards containing exemptions and protecting the tax base in the future. He noted one exemption from ad valorem taxes, the property and motor vehicle privilege tax, seemed to be unequal in its application. He stated it was an exemption extended to widows but not to widowers, and this bill would change the wording to "surviving spouse."

Ms. Vilardo testified the association urged passage of the bill.

Eric E. Scheetz, Fiscal Analyst, Registration Division, Department of Motor Vehicles and Public Safety, said the department had no position on the bill, but a fiscal note was forthcoming. He explained there were about 1,789 individuals affected by this bill and the fiscal impact (in loss of revenue to the state) would be about $57,441 for FY 1999-2000.

Chairman McGinness closed the hearing on S.B. 539 and opened the hearing on S.B. 476.

Mr. Leavitt said this bill came from the Senate Bill 253 of the Sixty-ninth Session committee and related to a property tax rate problem. He stated property tax rates, particularly in the rural counties, had increased until a number of counties were at the $3.64 limitation. He added it was believed to be caused by new debt, depreciation on old property and other situations. He noted whatever the reason, the problem caused fairly severe cutbacks in services for those counties. He commented this request was mostly for the rural counties, and certain local governments within those counties. He asked that the rates be included in the $3.64, to provide a constant level of operating funds available to local governments now and in the future.

Mr. Leavitt pointed out the only governments that could take advantage of this would be those that had rates certified at $3.50 or above as of June 1998. Mr. Leavitt referred to Total Tax Rate (Exhibit H). He commented it showed the counties that were in excess of $3.50. He noted this bill would allow the property tax rate to increase from $3.64 to $4.04 in those counties. He stated it also contained a special modification on page 3, line 4 that allowed local governments to go above the limitation. He clarified there was a separate provision in the bill that related to other counties, and if the state decided at some time to raise the rates above the current levy, this same type of provision would apply to everyone else.

Senator Neal asked what would happen if the bill did not pass. Mr. Leavitt answered the rate would remain at $3.64. He said there had been increasingly severe financial problems in some local governments and there were specific provisions for emergency situations. He noted, if needed, the Nevada Department of Taxation would literally take over the local government. He commented local governments could avoid severe financial problems because they could cut expenditures to agree with their income. He called attention to Mineral County, facing a substantial decrease in employees of the county, because of declining revenues.

Senator O’Connell said long-term care was a major issue for the smaller counties, as well as unfunded federal mandates. She added counties with small populations had no options, so this would give them some relief.

Mr. Hadfield presented two letters from David M. Ebner, Auditor, Kafoury, Armstrong and Company (Exhibit I), regarding the situation in Mineral County. He explained the Mineral County budget and noted Mr. Ebner pointed out the county might not be able to make all of the necessary payments to the state. Mr. Hadfield said the only tax rate that could be reduced was the county tax rate. He stated this was a classic example of a county with a declining economy and an assessed valuation; mandated state tax rates; climbing long-term care needs; a tax rate being driven down.

Senator Neal stated for the record, he voted against the action that was taken that led to this point, where draconian cuts are needed. (This "action" refers to the "Tax Shift." The "Tax Shift," as a result of Question 6 on the ballot in 1978, prompted the Legislature to pass a combination of seven bills in 1979 and 1981 to give property tax relief.)

Mary C. Walker, Lobbyist, Carson City, Douglas and Lyon counties, spoke in support of the bill even though Carson City, Douglas and Lyon counties were not in the group of the seven counties at the top of the tax cap.

Janine Hansen, Lobbyist, Nevada Eagle Forum, said there was an alternative that had not been explored. She stated none of the federally administered lands in Nevada were taxable, and federal holdings constituted 86.7 percent of the state. She commented federal government activities were extensive and created a tax burden for the private property owners of Nevada, who must meet the needs of the children of federal employees, as well as provide other services. Ms. Hansen said the problem was the counties did not control the land or collect the property taxes in their own counties. She remarked the land needed to be taken back from the federal government. She said some counties were forced to exist on 1 percent of the land in the county.

Ms. Hansen read from an article entitled, The Bryan-Miller Legacy They’d Prefer You Forget, by Ralph Heller (Exhibit J). She said, "Until we break out of the mind-set that we have to go begging to the federal government, and start standing up as a sovereign state and take our land back, this problem of these small counties cannot be resolved."

Senator Neal asked Ms. Hansen if her idea could be put into place, with results within 2 years. He said the Nevada tax policy was not in the abstract; there were people and services needed. She responded an interim measure might be needed to address the tax policy.

Chairman McGinness said he agreed with Ms. Hansen’s remarks as far as the lands, but the problem was the situations were immediate.

Ms. Vilardo spoke in support of this bill. She said a number of valid points were made but one important issue was the number of state mandates, which had taken control away from the local government. She maintained raising taxes was very undesirable. She noted distinguishing between counties with rates above and below $3.50 provided a tool to have available. She suggested adding a sunset clause and monitoring it to see if it was being used.

Mr. Hobbs said if the smaller counties were contrasted with Clark County or Washoe County, the same revenues would either be unavailable or unworkable. He noted the committee discussed this and the problem was there were not a lot of revenue options in some of the rural counties.

Mr. Leavitt thanked Senator O’Connell for her efforts in this regard.

Chairman McGinness closed the hearing on S.B. 476 and opened the hearing on S.B. 411.

Paul D. Bancroft, Attorney, representing AT&T, Nevada Bell, Sprint, Southwest Gas Corporation, Union Pacific Railroad Company, Sierra Pacific Power Company, Idaho Power Company and Nevada Power Company, said these companies had a common concern regarding the property tax system and a disparity between values arrived at locally and values arrived at centrally. He said this bill brought parity to this issue.

Mr. Bancroft provided background information for the committee, saying central assessment was initially designed to address the valuation of quasi-monopolistic companies. He noted these industries were entering deregulation or had been deregulated and most were now subject to competition. For example, he stated, there were 482 companies in the telecommunication industry authorized to provide telecommunication services in Nevada. He said 25 of these companies were subject to central assessment.

Mr. Bancroft continued the remaining companies were assessed at the local assessment level. He emphasized differences in the assessment methodology had resulted in an unlevel playing field and this disparity was apparent at the end of the 1997 Legislative Session. At that time, he said, industry representatives met with the Department of Taxation and initiated a project, with the Nevada Tax Commission, sponsoring a series of workshops to reevaluate methods for valuing centrally assessed companies. Mr. Bancroft said as the industry changed to adapt to a new competitive environment, changes in appraisal methodology were necessary to ensure fair property values were being assigned. He declared as a result of the workshops, a capitalization rate was adopted, based on the yield methodology. He said for appraisal purposes, it pulled the income indicator down and moved to methodologies similar to what was being done on the local level.

Mr. Bancroft continued the workshops led to regulatory workshops and in August 1998, the Nevada Tax Commission adopted amended regulations to address the valuation of centrally assessed properties. He said those regulations were more appropriate to companies that were entering or in a competitive environment. He stated the changes were implemented for the 1999-2000-valuation year. Through working with the tax commission and the department, he said, great strides had been taken in addressing the disparity between local-assessment methodology and central-assessment methodology. He noted, in the process, the amount of intangible property being valued was reduced in a central-assessment process. He concluded the next step was passage of this bill because it was a continuation of the process and would bring a level of parity. Mr. Bancroft gave an explanation of the sections of the bill.

Senator Neal asked which taxes would be paid in this category, if this bill passed. Mr. Bancroft said companies currently pay property taxes and would continue to pay property taxes on their properties. He noted there would not be a tax on intangible personal property. Currently, he said, there was no tax on it at the local level but centrally assessed companies, such as telecommunication companies, were competing with locally assessed companies who operated within one county.

Senator Neal asked for a definition of "intangible personal property." Mr. Bancroft noted section 1 contained a list of items taken from the Nevada Constitution. He stated the Nevada Constitution required all taxpayers be treated in a uniform and equal manner. He said by the systematic exclusion of intangibles at the local level and the systematic inclusion of them at the central level, taxpayers were being treated in a different manner.

David Pursell, Executive Director, Department of Taxation, said the fiscal note for the bill estimated $1.367 million as the total tax dollar loss, with the state portion of this amount at about $67,000. Chairman McGinness asked if the information could be broken down by county. Mr. Bancroft presented Estimated Impact of S.B. 411 (Exhibit K), which contained a breakdown by county. Mr. Bancroft commented a considerable amount of time had been spent studying the numbers which industry and the department had generated. He said they were currently both within a range of value which was reasonable. Senator Rhoads said his counties could not withstand this kind of impact.

Mr. Bancroft recommended amending S.B. 411 to include a special license fee which would be outside the property tax. He noted this would be collected from the centrally assessed companies and would be sufficient funds to phase in the impact of the bill for school districts and taxing authorities which were at the $3.64 cap. He said it could be implemented for tax years 2000 and 2001, to provide 100 percent of the funds. He continued these funds would have been otherwise associated with intangible property. In the subsequent tax year, he noted, the special license fee would provide 66 percent of the funds and 33 percent of the funds in tax years 2002 and 2003. He noted following that, the special license fee would terminate.

Senator O’Connell said, for the record, she had property in Pahrump that had a transmitter on it.

Robert Gastonguay, Lobbyist, Nevada State Cable Telecommunications Association, spoke in support of S.B. 411.

Mr. Hadfield testified the association recognized the telecommunications industry was a changing environment. He said in response to statements that counties could not withstand this legislation, a special licensing tax was proposed. He noted his concern was not for today, but for the future. He said Nevada’s tax system is currently not well suited to meet the needs of business in the future. He concluded, "Time must to be taken to examine all of Nevada’s taxes and what the population and business needs of Nevada will be in the future."

Stephanie D. Licht, Lobbyist, Elko County Commissioners, submitted a letter from Cash A. Minor, Chief Financial Officer, Elko County (Exhibit L), which addressed the significant financial impact to Elko County.

Robert A. Ostrovsky, Lobbyist, Cox Communications, and Nextlink, testified he participated in the Nevada Tax Commission hearings and meetings of the Senate Bill 253 of the Sixty-ninth Session committee. He said he supported the bill and commented the deregulation process was forcing the issue. He noted perhaps a compromise was necessary to aid the small counties.

Senator Neal asked if Mr. Ostrovsky’s client would leave the state if this bill failed to pass. Mr. Ostrovsky answered no; his clients want to be in this state, but in the larger population areas.

Mr. Leavitt clarified local governments would be protected by the amendment. He continued school districts, guaranteed the rate, would be protected; local governments, not at the maximum rate, through the operation of the 6-percent formula, would make up whatever amount of money was lost by a slight increase in the rate they levied for operating purposes. He emphasized that was the way the formula would work. As far as the debt side was concerned, he said, whatever was necessary to repay the debt would remain unchanged. Mr. Leavitt stated for the period indicated, local governments would be able to offset the costs associated with the bill.

Ms. Walker expressed a concern about the accuracy of the department’s fiscal note. She suggested a mechanism to "hold harmless" not just a few the counties, but the entire state, if necessary. She stated this could be done for at least the first year or two of the impact, so the actual impact could be examined. She said valuation would level the playing field but it did not resolve the equity issue. She remarked, "We are really not there yet with this legislation."

Chairman McGinness closed the hearing on S.B. 411 and opened the work session.

Senator Schneider presented an amendment entitled Proposed Amendment to Senate Bill 428 (Exhibit M). He noted he had worked with Mr. Whittemore to prepare this amendment.

SENATOR SCHNEIDER MOVED TO AMEND AND DO PASS S.B. 428.

SENATOR O’CONNELL SECONDED THE MOTION.

THE MOTION CARRIED UNANIMOUSLY.

*****

SENATOR NEAL MOVED TO DO PASS S.B. 90.

SENATOR O’CONNELL SECONDED THE MOTION.

THE MOTION FAILED. (SENATORS TOWNSEND, SCHNEIDER, MCGINNESS AND RHOADS VOTED NO.)

*****

Harvey Whittemore, Lobbyist, Nevada Report Association, presented an amendment entitled Proposed Amendments to S.B. 521 (Exhibit N).

SENATOR TOWNSEND MOVED TO AMEND AND DO PASS S.B. 521, TO INCLUDE EXHIBIT N AND INCLUDING REMOVAL OF THE WORDS "AND INDIRECT COST" IN LINE 11 OF THE BILL.

Senator Neal asked for clarification of the bill. Mr. Whittemore said the act was intended to clarify existing sales and property tax provisions. He stressed it was not adding a tax at all. Senator Neal said he would like clarification on the specific taxes such as exemptions for the sales tax, the use tax, the personal property tax and the inventory tax. Mr. Whittemore said that information was already in the existing law and was not amended. Senator Neal emphasized this allowed Mr. Whittemore’s client to take advantage of certain tax provisions. Mr. Whittemore said the inventory tax was exempt under the constitution. Senator Neal said there would be no exemption if a business license were not obtained.

Senator Neal clarified all of the exemptions remained; the portion dealing with indirect cost was removed; the 50-percent discount for Nevada residents was added along with an educational display. Senator Neal said, for the record, this particular bill and cleanup language helped just one individual.

Senator Schneider said he would like to see a larger viewing room to accommodate students who come to see the art. Mr. Whittemore said The Bellagio Resort and the Mirage Hotel and Casino were currently considering the idea. Senator Schneider said he would encourage the properties to work with the school district to develop a program. Mr. Whittemore said the school program would only get better and better for the citizens of this state.

Chairman McGinness called attention to Proposed Amendment for Senate Bill 318 (Exhibit O). He stated the title industry along with the county recorders and the tax department had worked to find a solution to this problem. He noted this amendment would delete sections 1 through 11, replacing them with new sections 1 through 3. He explained the amendment.

Alan H. Glover, Lobbyist, County Fiscal Officers Association, and Carson City, said the compromise was fragile but would work. He emphasized Linda Slater, Recorder, Douglas County, had polled county recorders in the state and 13 gave positive responses and 2 were unavailable. He noted Washoe County and Clark County were both represented at the meeting. He said the bill was workable and gave recorders some "teeth" to attempt to collect the tax by providing information as to who are the buyer and seller of the property.

Dino DiCianno, Deputy Executive Director, Department of Taxation, echoed Mr. Glover’s comments. He said it was workable and he supported the bill and the amendments at this time.

There being no further business, Chairman McGinness adjourned the meeting at 7:45 p.m.

RESPECTFULLY SUBMITTED:

Alice Nevin,

Committee Secretary

APPROVED BY:

Senator Mike McGinness, Chairman

DATE: