The Senate Committee on Transportation was called to order by Chairman William R. O'Donnell, at 1:45 p.m., on Tuesday, March 23, 1999, in Room 2149 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 William R. O'Donnell, Chairman

Senator Mark Amodei, Vice Chairman

Senator Lawrence E. Jacobsen

Senator Maurice Washington

Senator Raymond C. Shaffer

Senator Valerie Wiener

Senator Terry Care

GUEST LEGISLATORS PRESENT:

Senator Jon C. Porter, Sr., Clark County Senatorial District No. 1

STAFF MEMBERS PRESENT:

Paul Mouritsen, Committee Policy Analyst

Crystal Suess, Committee Secretary

OTHERS PRESENT:

Tom Skancke, Lobbyist, Las Vegas Convention and Visitors Authority

Tom Stephens, Director, Nevada Department of Transportation

Charles Fahr, President, Nevada Car Rental Association

Mary O’Donnell, Concerned Citizen

L. Duane McPherson, Lobbyist, President, Spring Creek Association

Irene E. Porter, Lobbyist, Southern Nevada Home Builders Association

John P. Sande III, Lobbyist, Nevada Franchised Auto Dealers Association

David L. White, Vice President and General Manager, Dale White Motors, Elko

Dolly Volini, Republic Industries

Daryl E. Capurro, Lobbyist, Nevada Motor Transport Association

Pete English, Chief Investigator, Bureau of Enforcement, Registration Division, Department of Motor Vehicles and Public Safety

David Carter, Concerned Citizen, Nevada Bombardier Dealer

Pat Zamora, Accounting Director, Clark County School District

Tom Ciesynski, Chief Accountant, Washoe County School District

Richard Rapone, Concerned Citizen

Bill Gregory, Lobbyist, Nevada Car Rental Association

Bernard Kaufman, General Manager, Airport Rent-A-Car

Robert A. Ostrovsky, Lobbyist, The Hertz Corporation

Sue Guss, City Manager, The Hertz Corporation

Scott Kendrick, Regional Vice President, Enterprise Rent-A-Car

John Mallow, Franchisee, Budget Rent-A-Car, Las Vegas

Chairman O’Donnell began with a work session on several bills. He started with Senate Bill (S.B.) 339.

Chairman O’Donnell called for a motion.

SENATOR JACOBSEN MOVED TO DO PASS S.B. 339.

SENATOR SHAFFER SECONDED THE MOTION.

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Chairman O’Donnell stated the next order of business would be Senate Bill 381.

Chairman O’Donnell stated he had spoken to all concerned parties and requested permission of the committee to draft an amendment (Exhibit C) to allow electronic devices to be used and allow the evidence to be submitted if the driver is immediately stopped by a police officer. Essentially the electronic devices would be used as a tool, similar to the radar gun, to clock speeds of offending vehicles. The person involved in the infractions would have to be identified and informed they would be getting a ticket. He asked the committee to allow for the drafting of an amendment that would reflect the wording in Exhibit C.

SENATOR SHAFFER SECONDED THE MOTION.

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Chairman O’Donnell stated the next order of business would be Senate Bill (S.B.) 430.

Senator Jon C. Porter, Sr., Clark County Senatorial District No. 1, pointed out S.B. 430 has many purposes, but most importantly it has to do with the economic viability of our state and the safety of our visitors and residents as they come and go from our great State of Nevada. He noted that Interstate (Highway) 15 (I-15) is one of the main corridors in the western part of the United States from the coast of California to the Canadian Border. Senator Porter acknowledged that it is a huge resource for the transport of goods and services among states. It is also a major artery into Salt Lake City, Utah, which will host the 2000 Olympic Games, through the State of Nevada. He informed the committee that for the 2000 Olympic Games, alone, the State of Utah has invested over a billion dollars improving its highways for the economic viability of the state. Senator Porter stated that he supports S.B. 430 for economical viability in Nevada. He pointed out that Interstate 80 (I-80) is the major east/west corridor of the United States and a major corridor in the western part of the United States. It is also a major access to Salt Lake City for the 2000 Olympic Games. Additionally, I-15 and I-80 handle over 85 percent of all commerce into the western region of the United States and are the single largest tourism corridors in Nevada’s market for the gaming and resort industry.

Senator Porter warned that passage of Proposition 5 in California would have a major impact on Nevada’s economy. This is another major reason for S.B. 430. He stressed that Nevada is facing more and more stiff competition for its dollars. With more states increasing their investment to bring in tourism dollars, Nevada is looking for a way to solve future transportation issues. Senator Porter maintained that Nevada has an obligation to protect those individuals traveling to and from Nevada, but the bill itself really addresses the means for the State of Nevada to fund construction of projects outside of its corridors and entryways. He explained that Nevada is currently prohibited from expending dollars for construction needs in its sister states. Senator Porter drew the committee’s attention to the particular language found on page 2, subsection 3, paragraph (b) of this bill that would provide for state monies to be expended for the construction, reconstruction, improvement, operation and maintenance of highways within an adjoining state when the highways are at or near the common boundary of Nevada and an adjoining state. He suggested that Tom Skancke address the committee to bring members up to date on what Nevada has been doing in this vein and to report on the return the state has received from its investment.

Tom Skancke, Lobbyist, Las Vegas Convention and Visitors Authority stated that since 1990 the State of Nevada has been heavily involved with I-15, the major tourism commerce highway from southern California to Las Vegas. He related that in 1991 a team of lobbyists and grass-roots specialists worked with members of Congress and Nevada and California officials to secure approximately $54 million for the Barstow Interchange at the junction of I-15 and I-40, to eliminate a major bottleneck. He said that in 1987 Mike Sloan, Circus Circus Enterprises, had hired consultants to look at that corridor. In the last 8 years a group of interested parties has been looking to secure funds for the widening of a 30-mile stretch of I-15 from Barstow to Victorville. Mr. Skancke stressed the widening project is very significant to the survival of Clark County’s gaming and tourism industry. Las Vegas has 32 million visitors annually and approximately 18 million travel on I-15. He emphasized that the major bottleneck on I-15 has really inhibited people from getting to and from Las Vegas. What was once a 4-hour drive has turned into anything from 9 to 19 hours on any given weekend, particularly if it involves a 3-day weekend. He said that Senator Porter had asked him to address the issue based on the history just given.

Mr. Skancke related that in 1991 the Nevada Department of Transportation Board of Directors contributed $4 million that assisted Congress and the State of California in the cost associated with the construction of the Barstow Interchange. In 1998 Nevada, with additional funds from Congress and California, secured a total of $300 million for improvements to I-15. Nevada contributed $9 million to that project. Nevada’s total investment for I-15 improvements for the last 9 years has totaled approximately $14 million. In return Nevada has received approximately a $300 million return on its investment. S.B. 430 would allow the State of Nevada to contribute non-gasoline tax dollars, which are constitutionally prohibited for use in out-of-state projects.

Senator Porter iterated his senate district consists of 8000 square miles, which includes every corridor in southern Nevada. In addition to the key area of I-15 into Las Vegas, is the stretch of highway between Laughlin and Needles, California. He said that this particular stretch of highway is in California and is also a major death trap. It is a major artery into one of Nevada’s thriving resort communities. He stressed that the corridor is in serious need of repair and the State of Nevada must make a commitment to assist the State of California in securing funds for the needed repairs. Senator Porter expounded that this bill would help to provide access to dollars to help with that particular project as well as improvements and repairs to I-15 and I-80.

Chairman O’Donnell questioned whether obtaining funds for necessary improvements to the Needles highway would increase the share of visitors to the Laughlin area. Senator Porter replied that Laughlin is a prime example of what well could happen to the rest of the tourism industry in Nevada. He elucidated that Laughlin is currently experiencing a serious downturn because of the expansion of Indian gaming in Arizona and California. The community of Laughlin believes the Needles highway is the principal corridor into the Laughlin area; and to improve tourism and bring the corresponding tax dollars into the state, it should be made a No. 1 priority. Senator Porter stated that there is an imperative and very serious need for the entire state to take care of the community of Laughlin, and this bill would provide additional funds to do that.

Chairman O’Donnell asked how much money is under discussion. He wanted to know if the bill would put two-thirds of the money collected into the General Fund and then deduct one-third for deposit into the Highway Fund. Senator Porter responded that the bill provides for one-third of monies collected be available for this type of project. There is no final estimate on the Laughlin project currently being done, but commitments are being sought from California on that particular project. He said that Mr. Skancke could provide more information.

Mr. Skancke explained the Laughlin-Needles project is a two-phase project. The ultimate buildout would be four lanes from Needles, California to Laughlin, Nevada. He noted the estimated cost of the project is $47 million. Mr. Skancke pointed out the immediate need is for a two-lane highway with turnouts and possible turning lanes, which would result in a three-lane highway. He stated that the current condition of that highway is substandard. There are portions of the road that are washed out and there is no striping on the highway due to poor maintenance by San Bernardino County. He added that because it is a county road and there are only 120 voters in Needles, it is not a very important item on the county’s agenda. He continued by saying the road is the major arterial off of I-40 to Laughlin and it needs some major improvements. The estimated cost for a two-lane road with turnouts, passing lanes, and turning lanes is approximately $23 million.

Senator Porter explained the bill is more global that Laughlin. He stressed that there are needs on all of Nevada’s corridors. This bill is purposely broad in nature to allow all the accesses to Nevada to be addressed with this funding source.

Tom Stephens, Director, Nevada Department of Transportation (NDOT), stated NDOT is not supporting any of the car rental bills because passage of any of them would change the tax situation. He explained S.B. 430 takes out one-third of the rental car tax currently going to the General Fund and allots it to the state Highway Fund. Mr. Stephens said his understanding is that $6 million is currently going to the General Fund, which is one-third of the rental car tax. He pointed out that if this bill passed one-third of that amount, approximately $2 million, would go into the state Highway Fund earmarked to be used for projects in adjoining states. Currently, there are limitations on what can be done with Highway Fund money that comes directly from registration fees and the gas tax. Mr. Stephens reported funding for projects located close to the state borders are permitted. When the projects are far afield whether funding is permitted becomes more questionable. The $10 million that has been offered to the State of California for the widening of I-15 between Barstow and Victorville is an actually an offer of federal funds, not state funds. He stated this bill clears the hurdle for allowing state dollars for projects out of state.

Senator Porter commented that the two major arteries into the State of Nevada are by air and land. He warned that Nevada is facing very serious economic challenges. He stated that this bill provides a tool, moving into the new millennium, to address the state’s serious transportation needs. He asserted legislators must look into the future and deal with these complex issues. Senator Porter advocated a change in the way the state does business. He said this is one of the mechanisms Nevada can use to prepare for the future. The Laughlin-Needles artery is just one example of serious needs the state must consider.

Senator Jacobsen questioned whether improving the Laughlin-Needles corridor appears anywhere in NDOT’s 5-year plan. Mr. Stephens replied NDOT has recently initiated discussions with Clark County to bring the portion of the Needles highway that is in Nevada onto the state system. When this is done NDOT will be improving the last part of the corridor. He added that as far as the portion of the road located in San Bernardino County, California, there is nothing in NDOT’s Transportation Improvement Program. Mr. Stephens emphasized that the NDOT budget will never contain funds for this portion of highway because there is no funding vehicle for out-of-state highway projects and, further, it is not a state highway.

Senator Jacobsen queried whether Nevada had participated with neighboring states in any other road projects. Mr. Stephens responded that Nevada has participated in the Barstow Interchange project and is proposing to participate in the widening of the highway between Barstow and Victorville. Mr. Stephens added Nevada also does some cooperative projects at Lake Tahoe, with California.

Senator Jacobsen asked Senator Porter why he decided on this particular method of funding. He inquired whether Senator Porter had considered seeking a toll road to fund this type of road improvement. Senator Porter explained he had tried to look at more than the Laughlin challenge. He said in consort with Mr. Stephens’ comments, there are other corridors that have challenges. He felt it would be a good source of funds for other parts of the state and it seemed an equitable way to return some dollars from taxes generated from the rental car industry which reaps the benefits of Nevada’s tourist economy.

Senator O’Donnell opined that through calculations, it appears as if this bill will divert $2.6 million. He believed the $2.6 million in question had already been allocated from the General Fund to other budgets. Senator O’Donnell inquired whether Senator Porter would be averse to changing this formula. He suggested taking more of the short-term lease tax and putting the funds into the General Fund to make up the shortfall. Senator Porter explained the purpose of the bill was to generate monies. However, since he is not an expert as to sources of funds, this was merely one idea presented. Senator Porter stated he was not opposed to looking at all options but reiterated the critical matter is that as a state Nevada determines its own priorities. He said if transportation issues are not addressed today, legislators will not be here 10 years down the line talking about arteries and corridors because Nevada will be out of business.

Senator O’Donnell commended Senator Porter for succinctly putting forth the issue. He also felt a top priority would be to make sure the arteries which go from Nevada resort areas to where the tourists emanate, whether it be airports or highways, be of the best quality the state can provide. Senator O’Donnell stated Nevada generates its revenue from tourism and if tourists fail to come because they cannot get back and forth safely, Nevada is doing itself a huge disservice. Senator O’Donnell thanked Senator Porter for bringing the bill forward for discussion. He stated some work might have to be done to plug the hole left by the diversion of the $2.6 million before a vote is taken.

Charles Fahr, Lobbyist, President, Nevada Car Rental Association, stated the association had no opinion regarding this bill.

Chairman O’Donnell closed the hearing on S.B. 430 and proceeded to S.B. 302.

SENATE BILL 302: Requires audible alarm on certain gates. (BDR 10-226)

Senator O’Donnell turned the meeting over to Vice Chairman Amodei and proceeded to distribute copies of X rays of his wife’s arm to committee members. He then introduced his wife to the committee.

Mary O’Donnell, Concerned Citizen and wife of Senator William O’Donnell, stated that approximately 6 years ago it came to her attention there was a very grave danger in Nevada that she believes must be brought to the attention of the Legislature. Mrs. O’Donnell related that on March 15, 1993, she was in Carson City visiting and getting a Jeep to take back to Las Vegas for her daughter. She said early in the morning she and her three youngest children went to the Carson City Airport. They arrived at the airport at approximately 8:45 a.m. She reported the entry to the hangars for the private planes at the airport has automatic gates. Mrs. O’Donnell said when she drove her car up to the gate, it did not open. After several tries, backing up and going forward, the gate still did not open. She looked around for an employee or anyone present, but there was no one in sight. Mrs. O’Donnell reported there was a pedestrian gate to the side, but it was padlocked. She saw no other way to gain entry. Mrs. O’Donnell said she was aware there was a button on the gate, because they had used it on the day she had arrived. She related that she told her two youngest children to stay in the car and she went over to the gate that was part of a chain-link fence. She reported that within reach of her hand, on a pole, there was a keypad with a button on it. She said she pressed the button to open the gate. She related that when she pressed the button to open the gate, the gate jolted so fast she was unable to get out of the way. She said her hand was trapped in the gate. The gate itself was between two other poles and as the gate was moving to the right it was pulling her in between the two poles and the chain-link fence. Mrs. O’Donnell stated the gate had her arm and had her twisted all the way inside to the point her face had actually hit the pole. She said when her arm hit the pole it snapped and was broken in two places. When her bone snapped, she was able to pull herself free. Mrs. O’Donnell stated she was in extreme pain and in shock. She managed, with her son’s help, to get herself to a little shack located at the side of the fence to get help.

Mrs. O’Donnell reported she would be permanently disabled in her left arm for the rest of her life. She said her point is that through this ordeal, the family became aware the gate was malfunctioning. She stated there was technology available when the gate was installed which should have been utilized. Mrs. O’Donnell related there are electric gates at the family home in Las Vegas. These electric gates have that technology installed in the gate opener. She explained the technology utilizes a device called a Tekpak (Exhibit D. Original is on file in the Research Library.). The Tekpak is a very inexpensive item that delays the gate before it opens. The Tekpak employs a 4-second delay and it also emits an audible warning beep before opening. Mrs. O’Donnell reported the family has discovered there have been many people throughout the United States that have been maimed and killed by these gates. She stated it is in the best interest of public safety to check into automatic gates already existing in the state. She added that since 1992 any automatic gate installed was required to have this device. However, any gate installed prior to that date, may not have one, and there is no one designated to see if the gate has been retrofitted with the safety device. Mrs. O’Donnell declared without the safety device, the gate is basically a trap. She wanted this danger brought to the attention of the Legislature so that, hopefully, a safety device on automatic gates might be mandated to avoid injury to others.

Senator O’Donnell stated the family sued the company that made these gates. He reported there is a clutch device on these gates which, when adjusted to the maximum, has no give whatsoever. He explained that the lack of "give" is essentially what broke his wife’s arm. Senator O’Donnell stated the clutches are supposed to be set so that if there is any resistance whatsoever, the gate is allowed to free wheel, which means it does not move. He said problems were identified at the airport. Kids were drag racing up and down the landing strip and an individual had cranked and tightened the clutch as much as it could be tightened so there was absolutely no give. Senator O’Donnell related the audible warning device and time delay device are prevalent on gates today. However, there are a lot of gates throughout the state that do not have any warning devices and have no delay. He said that once you actuate the gate, or punch the button to open the gate, the gate immediately travels. He added if a person is in the way of the gate, or happens to be close and gets caught in it, that person is at the whim of this mechanical device.

Senator O’Donnell stated the gate company notified all of its distributors that there was a problem with this gate. He said since the distributors were not responsible, they were never instructed to inform the users of the gates of the danger. He warned if there is a dangerous situation it needs to be corrected. Senator O’Donnell stated that this is a very dangerous situation. He offered that he understands that in January 1999, this same gate manufacturer had a gate in Florida that killed an adult woman. Senator O’Donnell stated if the gate company had warned gate owners and provided some type of gate actuator, with perhaps a delay or an audible warning, that woman might be alive today. Senator O’Donnell explained the bill requires the gate companies, in a type of recall fashion, to retrofit gates without delay or warning devices that are located all over the state.

L. Duane McPherson, Lobbyist, President, Spring Creek Association, stated Spring Creek is an agricultural/residential community located in Elko County. He said the community has 5,420 lots and covers approximately 30 square miles. Mr. McPherson declined to go into all the amenities, but said 96 percent of all the lots in Spring Creek are agricultural/residential. Thus, many of the property owners have horses, cattle and other animals. He related that the Spring Creek residents are concerned that the bill is intended for all main-gated, common- interest communities. However, after hearing Senator O’Donnell’s testimony, Mr. McPherson suggested inserting the word "automatic" gate into the language in line 1. Mr. McPherson said he had some pictures of what the Spring Creek community gates look like. Basically, the gates are intended to keep cattle and livestock out. He related the association’s interpretation of the bill caused concern that the Spring Creek residents might be required to alarm those types of gates, also. He suggested a clarification of the wording would alleviate the association’s concern. [Research Library note: See pages 13-56 of Exhibit D]

Irene Porter, Lobbyist, Executive Director, Southern Nevada Home Builders Association, stated she could appreciate the problem that occurred and she believed it was a tragedy these accidents are happening. She said she could concur with a mandate that all automatic gates have some type of warning device so nobody gets caught in them. Ms. Porter iterated that after hearing the testimony and looking at the bill, she became confused. She stated the bill appears to only amend those sections dealing with common-interest communities, which would not cover the gate at fault in Mrs. O’Donnell’s accident. Ms. Porter said she could speak from a personal perspective because she lives in a common-interest community with gates which have the delay devices built in, but do not have audible alarms. She related she has lived there for 20 years and the community has not had a problem with its six gates, because the gates have delay devices. The gates are posted, as well.

Ms. Porter opined that it appears to her that if the problem of people being injured in gates which might be in commercial areas such as an airport, amendments to the bill are needed to take care of all the gates in locations other than in a common-interest community. Ms. Porter suggested the wording should be changed to reflect "automatic" gates and mandate some type of delay action in them. She stated she is not aware of how loud the audible alarms are, but in most cases in housing complexes where houses are right beside the gates, the noise could be quite annoying. Ms. Porter stated there were hundreds of vehicles crossing through the gates of a 400-unit development daily. She felt a delay device in those instances would be much better than an audible warning. Ms. Porter offered to work with committee members to find acceptable wording for all areas of the bill that need clarification.

Senator O’Donnell ended the hearing on S.B. 302 and began the hearing on S.B. 372.

John P. Sande, III, Lobbyist, Nevada Franchised Auto Dealers Association, announced there were over 45 dealerships located throughout the state presently in support of this bill. Mr. Sande handed out an explanation of S.B. 372 that defined each section indicating what the bill accomplishes (Exhibit E). The bill proposes revisions to Nevada’s Franchised Dealers Act regulating relationships between manufacturers and dealers of new motor vehicles. He pointed out that every state has such legislation. Mr. Sande said Nevada has a good law, however, as time changes and new businesses practices evolve, the law needs to be updated. He then read from the handout (Exhibit E) explaining the changes sought in the bill.

Senator O’Donnell thanked Mr. Sande for his explanation and asked whether there was any opposition to the bill. Mr. Sande responded that he did not see anyone present who would wish to testify against the bill. He related that he had been told the manufacturers were not prepared to proceed to today, but would testify on Thursday.

Senator Care referred to sections 5, 6, and 8 that contained some language that relate to requirements for the manufacturers which ideally could be covered in a contract. Senator Care wanted to know if the manufacturers had refused to agree to specific contract language, which necessitated putting the requirements into the bill.

Mr. Sande responded that one of the provisions relates to providing in a nondiscriminatory manner new, very popular vehicle lines coming into existence. He said Nevada dealers have various examples of why this is necessary. The dealer from Elko will testify to the fact that he could not get a certain Dodge product, even though he is a good dealer, because the manufacturer determined not to sell it to him in Elko. This bill would prohibit discriminating among dealers.

Wayne A. Frediani, Lobbyist, Executive Director, Nevada Franchised Auto Dealers Association, testified there have been some other instances throughout the state where sport utility vehicles, which are a popular item, have been withheld because dealerships would not provide additional display areas or hire individual salespeople to represent that one particular product line. He said the bill would basically ensure that if a dealer is franchised to sell a model and meets all his franchise obligations, the dealer would be able to get any additional models that come out. Mr. Frediani added there have been two cases that have gone all the way through the hearing process to the Nevada Supreme Court and are still not resolved at this time. The association is hoping to address some of these issues with this bill.

Senator Jacobsen asked just what a contract contains. He explained he was interested in knowing if the contract language set a time frame, contained a right-of-refusal clause, provided for terminating the contract and how that could be accomplished, and anything else that would allow either side to arbitrate.

Mr. Sande replied there were different franchise agreements in different states. He explained any contact must first comply with Nevada law, which does have some recognition of the fact, an auto dealership for example, unlike certain other types of businesses, is considered to be unique because of the fact it relies upon the representations or hopes of providing services for a long period of time. Mr. Sande stated millions of dollars are spent on facilities, and basically the law says the manufacturer cannot modify, transfer, fail to renew, except if there is a "bad apple." He said that in the instance of a bad apple, the legal procedure is set forth for going to hearing before the Nevada Department of Motor Vehicles and Public Safety. Mr. Sande said the franchise agreements are very specific, but they are also very complex and cover a lot of areas. He added that in this case if there were a franchise agreement entered into after the effective date of this act, the agreement would have to comply with the terms and conditions of this bill, if approved.

Senator O’Donnell referred to section 8 dealing with confidentiality of consumer information. He asked whether this section still allows pertinent information on the consumer to be given to the manufacturer for recall purposes. Mr.Sande responded that portion of the bill would only apply if the customer objects to release of information or if the disclosure is otherwise unlawful.

Senator O’Donnell expressed concern about address or telephone information not available due to the objection of the consumer that would prevent the manufacturer from reaching the consumer regarding a recall. Mr. Sande admitted this had been considered and the bill might have to be "tweaked" to alleviate this concern. He added that there are other ways for the manufacturer to get the address of the vehicle owner. He related that most manufacturers do not rely upon the dealers; manufacturers are able to go directly to the Nevada Department of Motor Vehicles and Public Safety (DMV&PS) and find out where the automobile is located.

Senator Care referred to Nevada case law, which says that there is a special relationship between the franchise and the franchisee. He said there are cases that discuss what is fair and not fair. Senator Care asked why the dealers want the Legislature to decide what is fair or unfair, as opposed to the courts making that decision.

Mr. Sande stated there is a very specific act that addresses a lot of these areas, in Nevada as well as elsewhere, where it has been determined the relationship between an auto dealership and the manufacturer requires special attention. He added since the law is already on the books and it works well to give both parties an idea of what is acceptable and what is not, this bill is to add certain protections that are necessary in the new environment where manufacturers are attempting to satisfy shareholders, and where mergers and acquisitions are being accomplished. The fiduciary relationship may suffer under the new environment. Mr. Sande stated this bill gives both parties an idea of what is acceptable and what is not acceptable and eliminates the necessity of filing an appeal with the DMV&PS for every little thing.

Senator O’Donnell asked if there was any further testimony on S.B. 372.

David L. White, Vice President and General Manager, Dale White Motors, Elko, read from prepared testimony in favor of S.B. 372 (Exhibit F).

Dolly Volini, Republic Industries, told the committee that Republic Industries in Nevada was formerly known as Auto Nation, USA, which has nearly 12 auto dealerships in southern Nevada currently. She said she was present to support the Nevada Franchished Auto Dealers Association in their efforts in regard to S.B. 372.

Senator O’Donnell announced those opposing this bill are not here today because of a time conflict. Next Thursday (April 1, 1999) has been scheduled for their testimony. Senator O’Donnell then called for a 5-minute break.

Vice Chairman Amodei called the meeting back to order and opened the hearing on S.B. 430.

Senator William R. O’Donnell, Clark County Senatorial District No. 5, testified that this is a very simple bill. He related that in 1993 legislation was passed that allowed short-term lessors or car rental companies to charge a 6-percent tax. He explained that of the 6-percent tax collected, 2 percent goes to the General Fund and the car rental companies get to keep the remaining 4 percent. Senator O’Donnell said the audits show the remuneration back to state government is approximately $8 million per year. He explained that during a time of shortfall, the extra $16 million per year going into the pockets of companies such as Hertz, Avis, Budget and a number of other car rental companies in Nevada will now go into the General Fund. Senator O’Connell conveyed that if this bill is passed it becomes effective July 1, 1999. He explained that it is a revenue enhancement, although the tax is already in place; it is merely that the state is not now getting the money. Senator O’Donnell told the committee there are several projects that will be identified for this money, but the distribution is yet to be worked out. He promised to provide a list of the projects when it is finalized. Senator O’Donnell related that the reason for the bill back in 1993 was to take into account the disparity between the registration fees in our state versus the other states. He said the justification for the tax was to offset Nevada’s high registration fees so the car rental companies could maintain the same national advertising while keeping the same profit levels. Senator O’Donnell added that there is a companion bill to this particular legislation, which is S.B. 450. He offered to give testimony on S.B. 450 if there were no questions on S.B. 430.

Senator Amodei asked whether there were any questions on S.B. 430. Since there were no questions, he opened the hearing on S.B. 450.

Senator O’Donnell related that years ago in 1957 the Legislature established the privilege tax for driving on Nevada roadways. He explained any vehicle that is 10 years old, or older, pays $6 in state privilege tax. Senator O’Donnell imparted that there are privilege taxes that some of the counties in Nevada have added on to the state’s privilege tax; e.g., for Clark County roads and the disparity for fair share in Washoe County. He continued saying that when the law was enacted in 1967, $6 was worth $30 today. Senator O’Donnell opined that the amount of money received by the state for cars over 10 years old, or older, is being eroded by inflation. Thirty years from now, if nothing is done, the state will be looking at approximately $1.50 in actual value for the $6 tax charged those vehicles. Senator O’Donnell communicated it will cost the state more money to collect the privilege tax than the tax is worth. He stated that this bill intends to lower registration fees and reschedule them to a 20-year schedule. Senator O’Donnell said that at present Nevada has extremely high registration fees. He explained the reason for this is because Nevada only schedules those rates for the first 10 years, however, if the bill is made revenue neutral and the registration fees are scheduled out for 20 years, for the first 5 years the price of registering a car can actually be lowered. He noted this action would do two things. It allows individuals who may contemplate evading Nevada’s registration fees by registering cars in Oregon or Utah to opt for registering their cars in Nevada. Senator O’Donnell added that the bill would make the revenue stable for the Supplemental City-County Relief Tax (SCCRT) fund which now depends on a 10-year schedule. He stated if car sales dipped in a 2-year period of time, it would result in a 20 percent loss of revenues. Senator O’Donnell went on to say if the tax were to be extended to a 20-year schedule and there were a 2-year bad sales period for new automobiles it would result in only a 10 percent fluctuation in revenues. He stated that even though the bill is revenue neutral, it would stretch out the privilege tax computation for 20 years instead of 10 years.

Senator O’Donnell conveyed that the next thing this bill does is to allow anyone owning a car registered under the present schedule to remain on the present schedule for as long as they own the car. He explained that when a person buys a new car, after this bill is passed, the new registration would be on the 20-year schedule. Senator O’Donnell stated that basically the bill would stabilize the fund and flatten the curve, or registration fees, so that everyone pays a more equal share.

Senator Amodei asked Senator O’Donnell to look on page 2, line 37 of the bill, which has the 10-year schedule for computing the privilege tax. Senator Amodei asked whether after July 1, 1999, someone buying a 10-year-old truck, which was at a 5 percent valuation on the 10-year schedule for the present owner, would have to pay tax based on a 50 percent valuation, per the 20-year schedule.

Senator O’Donnell stated the privilege tax for the buyer would go to 50 percent of the assessed value of the vehicle. However, if the seller purchased a new car, under the 20-year schedule the privilege tax would be $100 to $120 less, annually. Senator O’Donnell added that the bill is very technical in nature, but overall it stabilizes the tax and allows for more compliance by vehicle owners because the incentive is for vehicle owners to register their vehicles not to attempt to evade Nevada registration in favor of registration in another state.

Senator Amodei called for any other testimony on S.B. 450.

Daryl E. Capurro, Lobbyist, Nevada Motor Transport Association (NMTA) stated he had spoken to the chairman with respect to this bill. He said the association’s concerns have to do with the manner in which subsection 2 is handled. The current schedule has a separate section for trucks and truck-tractors with a declared gross weight of 10,000 pounds or more. The association would like to leave this section of the schedule as is because, theoretically, the way the bill is written, problems could arise. The NMTA is a party to what is called the International Registration Plan with every other state in the United States. In other words, in states with companies based in their state that operate in Nevada, those states collect the registration fee for Nevada. Those states could be faced with the possibility of having to apply either the 35 percent or the 25 percent depending on differing schedules for depreciation. Mr. Capurro stated that would have to be balloted, in his view, with those states and it would create a real problem with respect to the interstate nature of the collections. He said the NMTA would like to see subsection 2 be restored to its current status and, if the bill goes further, there be a new section that puts in the language that was intended by the senator for vehicles that were re-registering, not the new registrations. Mr. Capurro told the committee he did not have specific language to insert in the bill, but in essence, the NMTA would like to see subsection 2, of section 2, remain the way it is currently in the law. He expressed that he had no problem with the remainder of the bill. Mr. Capurro agreed with Senator O’Donnell’s testimony that pointed out there has not been a change in the minimum tax in a number of years. He stated for that reason, subsection 3, of section 2, would be perfectly acceptable.

Senator O’Donnell informed the committee the bill is revenue neutral. It does not raise any new additional taxes; it simply reschedules. He added that there is a provision in the bill to allow a specific type of vehicle, an electrical vehicle, to pay a gas tax over the life of vehicle. Senator O’Donnell explained that every year, when an electric vehicle owner registers, the cost to the owner would be approximately $100, which was determined to be the appropriate gas tax money if the vehicle burned fuel instead of electricity. He conveyed the state could not afford to set a precedence whereby electric vehicles are allowed to run the roadways without contributing to the Highway Fund.

Mr. Sande stated the Nevada Franchised Auto Dealers Association supports the concept of the bill.

Dave Carter, Concerned Citizen, Nevada Bombardier Dealer, read from prepared text in support of S.B. 450 (Exhibit G). Senator Shaffer pointed out that the new electric vehicles are faster than 35 miles per hour. Mr. Carter stated that the vehicles to which he is referring fit into the category of low-speed vehicles (LSVs).

Senator Shaffer asked whether the LSVs are similar to golf carts. Mr. Carter stated the LSVs are not golf carts; they are an upgraded version of what were previously used as transformed golf carts on highways. He explained that this vehicle has been designed and engineered from the start to replace the transformed golf carts and to incorporate the safety features as required by the National Highway Traffic Safety Administration (NHTSA).

Senator O’Donnell iterated that the bill, as written, allows the LSVs to cross a 45-mile-per-hour street, but not drive on it. Mr. Carter concurred, adding that the crossing can only occur at a controlled intersection.

Pete English, Chief Investigator, Bureau of Enforcement, Registration Division, Department of Motor Vehicles and Public Safety, stated the department takes no position on S.B. 450; however, the information provided to staff has been reviewed and the numbers in the bill are right on the mark. He told the committee that the only concern the department has with regard to this bill is the effective date. Mr. English elucidated that the new technology under Project Genesis goes into effect on August 2, 1999, and the department needs some time to stabilize the new system before program changes are initiated. Mr. English suggested since this bill would require program changes that the effective date be changed to July 1, 2000.

Senator Shaffer inquired as to what should be done about electric vehicles, which are currently licensed and drive 60 to 70 miles per hour. Mr. English responded that those electric vehicles are subject to the same registration laws as gas-powered motor vehicles.

Senator O’Donnell asked whether there were any electric cars registered in Nevada. Mr. English replied in the affirmative. He noted that they are not the LSVs represented in S.B. 450.

Senator O’Donnell queried whether the registered electric vehicles pay any additional registration fee for gas-tax purposes. Mr. English said that he was not certain and he would have to check further. He thought, however, electric vehicle registration would be on the same schedule as a motorized vehicle.

Senator O’Donnell asked what would happen if all the cars in Nevada were electric. He wondered if there would be any highway funds. Mr. English responded there would be no highway funds.

Senator O’Donnell asked Mr. English to supply the committee with the number of high-speed electric vehicle registrations. Mr. English agreed to do so.

Senator O’Donnell stated he firmly believed that in the future the internal combustion engine will be a thing of the past as far as motorless transport. He opined that with the advent of alternative fuels and electricity there would be a greater number of electric cars.

Senator Wiener commented she had been reviewing the charts given the committee (Exhibit H) and she recalled Senator O’Donnell twice stating the bill was revenue neutral, which she could understand would be true over a period of time. She called attention to the first 9 years on the chart on page 2, where significant changes in percentages appear because the registration fee is based on twice the number of years as previously. Senator Wiener acknowledged revenue neutral would be the long-term effect, but she asked whether there would be a short-term effect that would be adverse to agencies or anyone who normally benefits from the percentages as they are now.

Senator O’Donnell explained that there would be some adverse effect to the type of person who only bought cars that were between 10 to 20 years old. He said that person would pay more for registration fees; however, it would not be very much more. Senator O’Donnell expounded that essentially the reason this proposal is feasible is because there are quite a few cars out on that tail. Those cars are actually the higher polluters of the environment, but they pay the lowest privilege tax of all the vehicles on the road. He clarified that the incentive in the bill is to take away the disincentive from buying a new car and getting rid of the old one.

Pat Zamora, Accounting Director, Clark County School District, read from written testimony (Exhibit I). He asked the committee to review the schedule he had attached to the last page of his written testimony. Mr. Zamora said that based on the information he had received from Paul Mouritsen, Committee Policy Analyst, Research Division, Legislative Counsel Bureau, he had prepared the schedule going one year into the future with 98,000 vehicles purchased from July 1, 1999 through June 30, 2000. He commented if everyone was under the new rate, the new depreciation schedule would produce approximately $8.4 million more in privilege tax. Mr. Zamora maintained that if only the vehicles coming over the next year were included in the new schedule, it actually produces a decrease of $7.8 million. He explained that the information the Clark County School District does not have in order to make an accurate judgement is how many vehicles are going to moving on to the new schedule and how many vehicles would be moving into the state and be registered under the new schedule. Mr. Zamora drew attention to the rest of his prepared schedule in which he had run some simple scenarios where he took one-fifth of all the existing vehicles and put them on the new formula; that produced a shortfall of approximately $4.6 million. He said that one-fourth of the vehicles moving over to the new rate produced a shortfall of $3.7 million; one-third produced an approximate $2.4 million shortfall. He maintained that not until one-half of the vehicles were on the new rate does the change in rates appear to become revenue neutral.

Senator O’Donnell asked whether the bottom line was that numbers available indicate in the long-term the new depreciation schedule will probably generate funds for the district, but the short-term effect is not clear. Mr. Zamora replied that Senator O’Donnell’s understanding was exactly correct.

Senator O’Donnell declared the committee did not want the school districts to go without. He iterated the whole intent of the bill was to provide a revenue neutral, not a revenue deficit or a revenue-enhancement bill. Senator O’Donnell stated it was important to get the numbers right before proceeding.

Tom Ciesynski, Chief Accountant, Washoe County School District (WCSD), testified that by relying on the data presented by Mr. Zamora the WCSD is in the same position. The WCSD is not in opposition to the bill; but then again the district cannot take a hit in the initial year of the transition. Mr. Ciesynski stated registration fees represent significant revenue in WCSD’s General Fund as well as its Construction Fund.

Senator O’Donnell queried whether WCSD would be willing to work with the committee chairman and staff to develop the proper scenario whereby the depreciation schedule change would be revenue neutral. Mr. Ciesynski replied in the affirmative.

Richard Rapone, Concerned Citizen, and Neighborhood Bombardier Dealer, testified in support of S.B. 450. Mr. Rapone said he wanted to reiterate the testimony of Mr. Carter and endorse Mr. Carter’s comments favoring the LSV portion of the bill.

Senator called for any additional comments on S.B. 450 or S.B. 444. He then asked if there was anyone present to testify against S.B. 444.

Bill Gregory, Lobbyist, Nevada Car Rental Association, asked if he could read a brief letter provided by Larry L. Spitler, Lobbyist, Nevada Car Rental Association, who was chairman of the Assembly transportation committee when this measure was originally passed.

Mr. Gregory stated:

Bernard Kaufman, General Manager, Airport Rent-A-Car, testified in opposition to changing anything in the law, as it is now. He commented that the bill introduced and passed in 1993 was intended to help the small car rental companies compete with the large car rental companies. Mr. Kaufman said that, as Mr. Spitler stated in his letter, the larger car rental companies are able to take all their licensing throughout the country and put it in one big bowl resulting in much less than Nevada charges right now, which is approximately $400 per car. He recalled the local car rental companies determined to attempt to keep costs down because of the help in offsetting the registration fees. Mr. Kaufman offered that, as an industry, the local car rental companies have kept the costs down. He maintained that fees for car rentals in Nevada are one of the lowest in the nation. Mr. Kaufman declared that the companies were able to do this because of the registration offset. He warned that if the offset is taken away it will kill the small companies. Mr. Kaufman urged the committee to leave the law exactly as it is. He opined that if S.B. 450 is passed and it lowers the cost of the registration to everyone, the 6-percent tax would still go on the ticket. That means the state will get much more of an overage than is being received now. Mr. Kaufman calculated if S.B. 450 were to pass and S.B. 444 were to fail, the state would still end up with a lot more money and the small car rental companies could survive.

Mr. Fahr testified he did not have more to add to the previous testimony, but the Nevada Car Rental Association and the small businessman certainly believe that passage of this bill would hurt the car rental business tremendously. He stated it could devastate some of the smaller companies.

Senator O’Donnell asked Mr. Fahr how long he had been in the car rental business. Mr. Fahr responded he has been in the car rental business for 20 years. Senator O’Donnell questioned how long Mr. Fahr had been in business in Nevada. Mr. Fahr replied he had been in the car rental business in Nevada for 20 years. Senator O’Donnell asked Mr. Kaufman how long he has been in business. Mr. Kaufman responded he had been in business for 15 years.

Senator O’Donnell stated this measure was passed 6 years ago. He questioned how the car rental companies operated before the measure passed. Mr. Kaufman answered that the companies had a very difficult time competing with the larger national companies and that is precisely why they asked for the measure in the first place. Mr. Kaufman stressed that if this relief had not been forthcoming he would have been out of business already. He explained the larger car rental companies are bringing in as large as 6,000- to 7,000-car fleets and he has only a 250-car fleet. Mr. Kaufman added that if the smaller companies have to pay the average registration fee of $400, while the larger companies can aggregate all of their registration fees and cut the average registration fee to $200 it makes a huge difference. Mr. Kaufman warned, again, if the offsetting tax is rescinded, the companies will be forced to raise their prices and the tourists will have to pay more for car rentals.

Senator O’Donnell asked how many times the car rental companies register a car. Mr. Kaufman replied that the cars are registered once a year.

Senator O’Donnell queried whether the registrations used to be done twice a year. He said it was his understanding the 6-percent tax was enacted because the cars were registered twice a year. Senator O’Donnell concluded that if the companies are now only registering their vehicles once a year, they need only one-half as much money.

Senator Care asked, adjusted for inflation, what has happened with the price of renting a car for a 3-day weekend in Las Vegas in the last 6 years. Mr. Kaufman answered that the price has risen less than 5 percent. He added that in that time frame the cost of purchasing cars has increased 40 percent.

Robert A. Ostrovsky, Lobbyist, The Hertz Corporation, testified the committee will be hearing from a number of different rental car companies today and the city manager of Hertz in Las Vegas. Mr. Ostrovsky said he had a couple of comments to make before the committee heard directly from the others. He recalled one of the questions asked of the previous testifiers was what the car rental companies did before 1991. Mr. Ostrovsky stated the chart is evidence of what happened to privilege taxes starting in about 1991 to 1998. He called attention to the value of what used to be paid in taxes prior to that bill being passed and what has happened to the privilege tax since then. Mr. Ostrovsky pointed out that although the rental car companies retain 4 percent of the 6-percent tax levy, the companies only retain the amount of dollars needed to reimburse them for the privilege tax. He clarified that if there is money left over after the reimbursement process, the remainder of the money goes back to the state. Mr. Ostrovsky explained that one car rental company might keep 3.5 percent; another, 3.75 percent; and one might keep the entire 4 percent. He said he understood that some car rental companies are retaining the entire 4 percent and still going out-of-pocket. He opined the tax situation has worked very well to keep rates low and offered to discuss the rates in Nevada, as opposed to other tourist-attraction states.

Mr. Ostrovsky provided a document to the committee titled, "Annual Comparative Costs by State" (Exhibit J). He noted that the information the committee might be most interested in is the column entitled "average tax." He pointed out that 34 states have zero in that column, as does Nevada. Mr. Ostrovsky commented either those 34 states do not have a privilege tax applied to these types of vehicles, they do not apply a privilege tax to any vehicle, or they have a pass-through tax of some kind in place to reimburse the rental car companies. He said that you could see on the chart, from the State of Tennessee on down to the bottom line of the chart at Missouri, there is no average tax because it is not levied. Mr. Ostrovsky expounded that what is being done in this state is not unusual. He stated that there are 14 states that have fairly high taxes. He referred the committee to the line for West Virginia, which says the average tax is $1,192.69 and the status of license fees is "legislation pending." Mr. Ostrovsky said it his understanding that legislation has passed in West Virginia to reduce the tax. He commented that car rental companies are particularly interested in those states with which Nevada must compete directly for tourists who may look in other directions for conventions if the costs associated with coming to Nevada are too high.

Mr. Ostrovsky stated there are 42 rental car companies operating in the state. He opined that since he is representing Hertz he should probably favor this bill because, if it passes, the advantage is going to go to the big companies. Mr. Ostrovsky voiced concern that the little companies, many of whom are here today, who scramble off-airport for a small share of the market, use this 4-percent tax to their advantage. The big companies use the money to their advantage, also, because they can use international rates. Mr. Ostrovsky declared it has made a level playing field, but if a company is out there fighting a fleet of 5,000 cars with a fleet of 200 cars, it becomes a struggle. He said another reason the tax should be left in place is because the industry represented is unlike a lot of industries. He expounded that the committee will hear a bill this session, there was one heard last session, to raise the collision-damage fee; there will also be a bill heard asking to increase fees charged for an additional driver. He claimed the interesting thing is that few other businesses must come before the Legislature to ask to increase a fee to pass on to their customers.

Mr. Ostrovsky elucidated that the car rental industry is one of the few that must come to the Legislature for approval prior to instituting changes in fees; this makes it impossible for the industry to respond quickly to market needs. He asserted this bill would take away some advantage the car rental companies have in their ability to operate and keep prices low in Nevada. Mr. Ostrovsky pointed out the car rental business is a regulated industry, much more regulated that some other industries in terms of what customers can be charged, and the companies maintain it is unfair to take this 4-percent tax credit away from the industry. He maintained the action would hurt the industry in the long run and it would very quickly have an enormous impact on the industry by taking away $16 million. It would also hurt the industry in its ability to meet obligations under long-term contracts with other companies already in effect.

Mr. Ostrovsky insisted that the system has worked well. He said industry representatives can understand that in a year when revenues run short, this tax certainly makes an interesting place to find new revenue without having to break faith with the Governor’s stand not to sign a tax bill. Mr. Ostrovsky said he finds it interesting that the thing now is to shift taxes around from one taxpayer to another. He maintained that this is what the bill is doing—shifting from one taxpayer to another. He commented that in respect to changing and flattening these fees, there may or may not be some advantage. He said it seemed the fees would be lowered for the first year a car is purchased, but then the rate of decrease flattens out so it would not save money over the long run. Mr. Ostrovsky iterated the car rental companies do not have vehicles that fall in the $50 range and, currently, do not have electric vehicles.

Sue Guss, City Manager, The Hertz Corporation, Las Vegas, testified that the cost of doing business is the cost of doing business. She stated that when costs changed, so do the prices. Ms. Guss related she was not here 6 years ago when this fee was imposed and does not know all of the circumstances that went into the decision at that point in time. She asserted if the car rental companies lose the 4 percent, it would affect operating costs and must be passed on to the customer. Passing the cost on to the customer results in a raise in rates, which then tends to make one more expense that could impact Las Vegas as a destination point. Ms. Guss explained that over the past 6 years, since the 4 percent was allowed, the car rental companies have been able to keep costs much lower than in any other state near Nevada. She mentioned she had been with Hertz for 18 years and Nevada rates are the lowest she has seen in any of her job locations with Hertz.

Ms. Guss called attention to the fact that the companies only keep what is used. She said the 4 percent is the allotment of the companies, but if the entire 4 percent is not used, the rest of the money is returned to the state. Ms. Guss stated when the companies are only turning the cars once a year instead of twice, all of the money being collected not being used for vehicle registration fees is going back to the state. She urged the committee to take that into consideration. Ms. Guss emphasized the loss of 4 percent of the tax as proposed would have a very great impact on the car rental industry.

Senator Wiener stated the reversion of funds was an interesting concept and queried how much money has been turned back to the General Fund since this 4-percent tax has been in place. Ms. Guss said she could only speak for The Hertz Corporation, but would supply the committee with that information.

Senator Wiener suggested that other companies could also tell the committee how much money they had turned back to the General Fund. It would be interesting to see how much money the state has recaptured.

Mr. Ostrovsky stated he would be happy to go on the record now by relating that, in 1998, The Hertz Corporation remitted an excess of $427,256; in 1997, $295,362. He remarked that in 1998 Hertz used 3.3 percent of the tax; in 1997, 3.5 percent. Mr. Ostrovsky said the amount varies from year to year. He related that he has spoken to the Hertz accounting people, who actually pay these taxes on behalf of the corporation, and found the amount has gone up and down. Mr. Ostrovsky emphasized that what Hertz has done is not necessarily consistent with some other fleets. He believed there would be some car rental companies that would report they have had to spend out-of-pocket, above the 4 percent allowed them, to pay the registration fees.

Senator Shaffer asked how many vehicles are rented to local residents and local businesses, not just tourists. Mr. Ostrovsky referred the question to Ms. Guss and added there might be people in the audience who represent rental car companies whose cars might be more heavily used by local residents.

Ms. Gus responded that she was not sure she could speak to a definite percentage of people from the local market renting cars. She offered that in the industry, Hertz, as well as other car rental companies, is interested in doing business in the local market. Hertz has opened three new locations within the last 3 months catering to the local market. She stressed it is Hertz’s intention to service the customer who arrives at the airport as well as the customer in the local marketplace.

Senator Shaffer remarked that if the committee passed this bill the local people would be substantially impacted as well. Ms. Guss concurred.

Senator O’Donnell questioned how local citizens would be substantially impacted. Ms. Guss replied the rates would have to be raised to offset the costs of registration fees.

Senator O’Donnell requested Mr. Kaufman come forward and join the Hertz representatives at the testifiers’ table. Senator O’Donnell reiterated the testimony from Hertz representatives that they would raise their rates if the 4-percent tax was withdrawn. Senator O’Donnell recalled that Mr. Kaufman had testified earlier that he needed the 4 percent because it is necessary to the little guy; the tax does not help the big guy, but it helps the little guy. Senator O’Donnell questioned how the program worked if it really helps the smaller rental car companies and not the larger ones. He further questioned if the larger companies were to raise their rates, would it not allow Mr. Kaufman to raise his rates as well.

Mr. Kaufman responded that all rates would be raised. He explained everyone in the business would have to raise their rates if the 4-percent tax is taken away. The cost to the small local company is $400 per car for registration. Mr. Kaufman stated he has no way to offset or average out that amount. There is no way he could avoid raising the rates if he was not allowed to use the 4 percent to offset that cost. Mr. Kaufman explained the competition, referring to the larger companies such as The Hertz Corporation, could take all of their license fees throughout the 50 states; e.g., $390 in Nevada, $25 in Oregon, $35 in Missouri, etc., and put them all in one bucket so that the cost for license fees average out to $150 or $200 per car. He emphasized that the smaller companies could not do that; there is no other place to go. Mr. Kaufman stated a small company such as his with a 240-car fleet has a cost of $390 or $400 per car in Nevada because there is no way to average his costs. He expounded that the big companies can take this cost without raising the rates because they can put all the costs associated with Nevada licensure and add them to the costs for licensure from their other branches throughout the United States and average their costs to remain competitive even without the 4-percent tax offsetting funds. Mr. Kaufman stated he could not do this if the level playing field were to be eliminated.

Senator O’Donnell clarified that, according Mr. Kaufman’s testimony, the larger companies really do not have to raise their rates, but the smaller companies do. Mr. Kaufman interjected that the decision to raise or not raise rates would be up to the individual company.

Senator O’Donnell asked Ms. Guss whether Hertz would raise rates if the entire 6-percent tax had to be rebated back to the state. Ms. Guss replied Hertz would certainly look at the expenses versus the revenue and what impact it would have on the corporation’s bottom line.

Senator O’Donnell queried whether that was a definite yes, a definite no, or a maybe. Ms. Guss responded that the answer is maybe. She clarified that Hertz would have to see how it impacted its profitability as a company and then make a determination as to whether or not raising the rates would be the right thing to do.

Senator O’Donnell said that he could tell Ms. Guss exactly what the impact would be on the profitability, $16 million per year. He queried whether Hertz could absorb its portion of the $16 million. Ms Guss declared that Hertz could absolutely not absorb its portion.

Senator O’Donnell remarked that if Hertz does not absorb its portion and raises its rates, then Mr. Kaufman could raise his prices, too. Ms. Guss answered in the affirmative.

Senator O’Donnell asked why the state does not levy a 2-percent tax and allow the companies to raise their rates up to where they belong so that there is no shell game whereby the state is getting blamed for the 6-percent tax and the car rental industry is benefiting from 4 percent of it.

Senator O’Donnell related that he had rented a car once at the Reno airport. He said that when he rented the car he was told that he had to pay the 6-percent tax. When he commented, "really," knowing full well where the tax came from, the clerk explained the state made the company do it. Senator O’Donnell related he again used the word, "really." The clerk offered that the company had no control over the collection of the tax. The tax had to be collected and given to the state. Then, Senator O’Donnell proceeded to tell him the whole story.

Ms. Guss asked whether the car had been rented from the Hertz Corporation. Senator O’Donnell declined to name the company, but revealed it was one of the big four. He elucidated it was quite an experience and the state was hammered because the state was the one that instituted the tax. He opined that what the gentlemen behind the counter did not reveal is that the company was keeping up to 4 percent of the tax to offset registration fees.

Senator O’Donnell asked whether Mr. Kaufman’s company was Nevada-based. Mr. Kaufman answered it is.

Senator O’Donnell queried whether it would satisfy the problem if Nevada companies were exempted from turning all the tax back to the state. Mr. Kaufman responded that it would probably take care of the small companies, but if that happened, the larger companies, if they really wanted to do something, could run the smaller companies out of business completely.

Senator O’Donnell questioned whether they could do that now, anyway. Mr. Kaufman responded that it was possible. He also agreed exempting Nevada companies would help his business, but he was not sure whether it would be legal to exempt some businesses from paying taxes that would be assessed to the same type of business. Mr. Kaufman opined it might put the whole industry in disarray.

Senator O’Donnell informed Mr. Kaufman that exemptions are currently used with the airlines. He said if the airline is Nevada-based it is given a tax credit for airline landing fees. Senator O’Donnell concluded that the airline tax exemption, which is in effect, sets precedence. He asked Mr. Kaufman whether he was in favor of such an exemption, or not. Mr. Kaufman responded, speaking as an individual with a small company, he would gladly accept the help. Mr. Kaufman stated he could not speak for the whole Nevada Car Rental Association, because if he were speaking for them, with all the various members, he was uncertain if the association members would agree. He stressed that, as an individual, he would be happy for the tax exemption.

Senator Care asked whether Mr. Kaufman could give the committee an idea, without naming names, of the range of profit margins for Nevada-based small fleet operations. Mr. Kaufman proffered an estimate of 2 percent. Mr. Kaufman said many people may not understand this, but the cost of doing business is very expensive when a company is responsible for putting a car on the road. He elucidated that a business with a 250-car fleet would need a $4 million to $5 million credit line, which relates to a lot of interest being paid and a very small profit margin. Mr. Kaufman emphasized that if a company can do a higher volume, there is always the thing in the discount store business; i.e., stack it high, sell it cheap and you can make money. He said that relates to the fact that if more were sold a lesser percentage would be acceptable. Mr. Kaufman stated the car rental industry is not a big money maker unless there is a high utilization and the cost of operation is kept down. He added that there are many, many factors that must be considered.

Scott Kendrick, Regional Vice President, Enterprise Rent-A-Car, read from prepared testimony (Exhibit K). Mr. Kendrick told the committee that he wanted to comment on the issue brought up about spreading costs nationally. He stated he could tell the committee that Enterprise’s costs for registering vehicles are borne locally here in the state. Enterprise does not spread costs nationally, so the company must recoup those costs locally. Senator O’Donnell asked whether Mr. Kendrick was a member of the Nevada Car Rental Association. Mr. Kendrick replied that Enterprise Rent-A-Car is a member.

Senator O’Donnell queried whether Mr. Kendrick heard the previous testimony that said small companies would be disenfranchised because the big companies could take registration fees and spread them over a lot of different states. Mr. Kendrick responded that he would assume that is a theory held by the testifier, but it is incorrect in the case of Enterprise.

Senator O’Donnell questioned whether he had testified that 25 to 30 percent of Enterprise’s profit would be taken away if this bill passed. Mr. Kendrick replied that was the best guess of the company.

Senator O’Donnell asked if Mr. Kendrick was saying that 30 percent of the profit of Enterprise Rent-A-Car is predicated on the tax established in 1993. He wondered how high Enterprise was going to raise rates if the tax is eliminated. Mr. Kendrick responded that his company has not done a study to determine exactly how high rates would have to be raised, because they were hoping it would not be necessary.

Senator O’Donnell remarked that, according to testimony, the 4-percent tax represents one-third of the company’s profit. Mr. Kendrick replied the figure would probably be between one-quarter and one-third.

John Mallow, Franchisee, Budget Rent-A-Car, Las Vegas, testified the franchise is run by his brother and him as a family business. He told the committee he has been with Budget for 32 years as a franchisee and he believes he knows how inbound customers perceive a value. Mr. Mallow said Budget is one of the first contacts a customer has when they come to Nevada—other than a taxicab. He added that Budget is one of the last contacts they have when they leave Nevada. Mr. Mallow stated it is very important that the rental car industry perceives itself, along with the hotel and restaurant industries, as being a good value for Nevada. He commented that the three industries have a lot of competition in California, Florida and other destination markets. Mr. Mallow said that he would hope everybody would give a lot of thought to how the car rental industry is perceived by the tourists and convention visitors in Nevada.

Senator O’Donnell asked whether Mr. Mallow had a lot from which he sells his cars. Mr. Mallow answered that his franchise has three lots and for the last couple of years his business has lost money.

Senator O’Donnell questioned whether he advertised specials. Mr. Mallow responded that specials have been advertised, but the new car consumer is going more and more to the businesses that lease cars.

Senator O’Donnell queried why Mr. Mallow does not keep his cars for a year. Mr. Mallow replied that he tries to keep cars under the manufacturer’s warranty.

Senator O’Donnell wondered if this proposal would drastically hurt Mr. Mallow’s business. Mr. Mallow replied that, oddly enough, he had just done a survey because the business is involved in a fight with the union, which is attempting to organize in his company. He said that the survey was done for his employees about a week past. Mr. Mallow iterated that the survey showed the business’s daily dollar average is $37.53 per car. He added that the average pre-tax profit is 4 percent. Mr. Mallow commented that when Mr. Kaufman says the profit margin is approximately 2 percent, he is right.

Senator O’Donnell asked whether Mr. Mallow was saying that 50 percent of the tax the state imposes is his profit. Mr. Mallow agreed. He said that without the 4 percent of the tax, he would have to raise his rates like everybody else. Mr. Mallow stressed his business could not average the licensing fee with cars located in other states because his franchise is locally owned.

Senator O’Donnell questioned whether Mr. Mallow would raise his rates if the tax were done away with altogether. Mr. Mallow responded that he has to keep a margin of profit; 2 percent is not very much when the value of a fleet is being considered. He emphasized that his company does not own the cars. Basically, the bank does, and they need to see profitability in a company to extend it credit.

Senator O’Donnell asked if the rates would be raised 6 percent. Mr. Mallow said he did not know. He added that it depends on the competition; that is the free enterprise system.

Senator O’Donnell remarked that it seems to him that when the bill was passed in 1993 the real profitability of corporations was obfuscated. He surmised the corporations’ profitabilities are hiding behind the tax; the tax is the profit. Senator O’Donnell stated that if the rental car businesses did not have the tax, they would have to raise their rates. He opined that, in reality, the businesses did raise their rates by 4 percent in 1993, because the 4 percent represents their profit.

Mr. Mallow countered by stating that the cost of cars has gone up and so has the interest per car, per month. He added that employees have to be considered; they want raises, too.

Senator O’Donnell questioned all the hoopla that said the rental car companies would not raise their rates if they got the tax. Mr. Mallow opined that he did not think rates had been raised higher than inflation. He said he could only speak for himself, but he watches his competition every day and he feels they have all stayed in line with inflation.

Senator Care asked whether Mr. Mallow had the franchise prior to the 1993 legislation. Mr. Mallow replied in the affirmative.

Senator Care queried what the profit margin was prior to 1993. Mr. Mallow responded that the profitability then was probably right on a par with today’s margin; it has not gone up or down. He emphasized that banks look at rental car businesses very closely, and bigger companies have stockholders who review their profitability.

Ms. Volini told the committee she respresents Republic Industries, which is the parent corporation of Alamo Rent-A-Car, National Car Rental and Car-Temps USA. Republic Industries crosses into the leisure market that affects tourism with Alamo, the business market with National, and the replacement vehicle market in a very small percentage with Car-Temps USA. Ms. Volini iterated that basically Republic Industries agrees with all the testimony today in opposition to S.B. 444. She added that Alamo and National are two corporations that collect less money than is paid out in taxes, registrations, titles and fees. Ms. Volini summarized that the portion of tax being collected by Alamo and National, which helps create the level playing field for the smaller, independent rental car companies, falls short of fully compensating them. She said this is considered the cost of doing business that they inherit.

There being no further testimony, the hearing on S.B. 444 and S.B.450 was closed.

Senator O’Donnell announced that the meeting on Saturday on S.B. 491 will start at 9:30 a.m.; the meeting location will be switched, from Room 2149 to Room 1214, because there will be an incredible number of people at the hearing. He stated that all the bills must be out of committee by April 9, unless the committee elects to work the Saturday before Easter.

Senator Jacobsen asked that the record reflect two special people are in the audience today, Bill Bilyeu, former speaker in the Assembly, and his wife Nancy.

The meeting was adjourned at 4:35 p.m.

RESPECTFULLY SUBMITTED:

Sandy Arraiz,

Committee Secretary

APPROVED BY:

Senator William R. O'Donnell, Chairman

DATE: