MINUTES OF THE Meeting

of the

ASSEMBLY Committee on Taxation

 

Seventy-First Session

April 24, 2001

 

 

The Committee on Taxationwas called to order at 2:03 p.m., on Tuesday, April 24, 2001 and convened as a subcommittee.  Chairman David Goldwater presided in Room 3142 of the Legislative Building, Carson City, Nevada.  Exhibit A is the Agenda.  Exhibit B is the Guest List.  All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

 

 

COMMITTEE MEMBERS PRESENT:

 

Mr.                     David Goldwater, Chairman

Mr.                     Roy Neighbors, Vice Chairman

Mr.                     Bernie Anderson

Mr.                     Morse Arberry Jr.

Mr.                     Greg Brower

Mr.                     David Brown

Mr.                     John Marvel

Mr.                     Harry Mortenson

Mr.                     David Parks

Mr.                     Bob Price

Ms.                     Sandra Tiffany

 

COMMITTEE MEMBERS ABSENT:

 

Mrs.                     Vivian Freeman - Excused

 

STAFF MEMBERS PRESENT:

 

Ted Zuend, Fiscal Analyst

Cheryl A. O’Day, Committee Secretary

 

OTHERS PRESENT:

 

Marvin A. Leavitt, CPA, Director, Office of Administrative Services, City of Las Vegas

Carole Vilardo, Represented the Nevada Taxpayers Association

Mary Walker, Represented Carson City, Douglas and Lyon Counties

Robert S. Hadfield, Executive Director, Nevada Association of Counties

Thomas J. Grady, Executive Director, Nevada League of Cities and Municipalities

Ralph Felices, Acting Administrator, Compliance Enforcement Division, Department of Motor Vehicles and Public Safety

David Pursell, Executive Director, Nevada Department of Taxation

 

 

Senate Bill 65:  Makes various changes to provisions relating to legislative committee to study distribution among local governments of revenue from state and local taxes. (BDR 17-698)

 

Chairman Goldwater opened the hearing on S.B. 65 and called Marvin A. Leavitt forward.  Mr. Leavitt advised that S.B. 65 originated with the “253 Committee” and provided an extension of that committee until July 1, 2005.  S.B. 65 also changed the committee name to “The Legislative Committee for Local Government Taxes and Finances.”  He felt the name change recognized the committee’s true mission and its major projects.  Mr. Leavitt believed the committee would need to agenda a number of issues including the tax effects of electric utilities discussed in Section 1 of the proposed legislation.

 

Mr. Leavitt advised that some smaller counties had over 50 percent of their valuation come from the value of electric utilities.  Electric utilities had been valued as a single unit, which included the generation plant, transmission lines, and whatever activity performed to sell power.  Taxes had been distributed based on line miles.  Question for the future was how distribution was performed when one company owned the generation plant, another company or companies own the transmission lines, and many nonequity companies sold the power.  He felt there was a major problem as to how those entities were going to be taxed and how those taxes were distributed to the various governments.  He was concerned that counties could be bankrupted if the procedure was not handled correctly.  Mr. Leavitt confirmed for Chairman Goldwater that there was no opposition to S.B. 65 in the Senate.

 

Chairman Goldwater had heard of no opposition to S.B. 65.  He requested and received Mr. Leavitt’s confirmation that the proposed bill provided for the “253 Committee’s” continuance, changed its name, and outlined its duties.

 

Mr. Marvel asked how the proposed legislation would affect counties that were very dependent on line miles.  He felt S.B. 65 could have a devastating effect on those rural counties.

 

Mr. Leavitt agreed and examples were discussed.

 

Mr. Marvel compared Humboldt County to other counties and stated that transmission lines could not assume the entire value being lost.

 

Chairman Goldwater agreed there were concerns and discussed how public utilities had been used as taxing entities for a long time.  They had been treated as a form of “subgovernment” because they were regulated and possessed some level of stability.  In a deregulated environment, they were now “for profit” businesses and could not continue to be used as vehicles for taxation.  He hoped that issue would be addressed.

 

Chairman Goldwater called for questions and opposing testimony before closing the hearing on S.B. 65.

 

 

Senate Bill 124:  Requires allocation and remittance of money collected from certain taxes to be made directly to incorporated cities. (BDR 32-894)

 

Chairman Goldwater read over the intent of S.B. 124.

 

Mr. Leavitt testified that the proposed legislation related to gasoline taxes.  The amount of those taxes was computed at the state level and the funds were sent to the counties.  The counties then made immediate distributions to the cities.  Some cities within the rural counties suggested that they would receive the moneys somewhat faster if disbursed directly from the state to the cities.  Mr. Leavitt saw the bill as streamlining an existing process.  He had heard of no objection to that proposal.

 

Chairman Goldwater polled the committee and the audience for advocates and further testimony.  He noted Carole Vilardo’s advocacy and called again for opposition.  He confirmed with Robert Hadfield that he was not in opposition to the bill.

 

Mr. Marvel asked if the Nevada Department of Motor Vehicles and Public Safety (DMV&PS) would be administering the process in the future.

 

Mr. Leavitt reiterated the computations were done at the state level.  He advised S.B. 124 would not change anything but the end distribution.

 

Chairman Goldwater stated for the record that Carole Vilardo was in favor of S.B. 124 and there was no opposition.  He then closed the hearing on S.B. 124.

 

Senate Bill 203:  Makes various changes relating to ad valorem taxes to pay for operation of regional facilities. (BDR 31-890)

 

Chairman Goldwater opened the hearing on S.B. 203.

 

Carole Vilardo introduced herself as representing the Nevada Taxpayers Association (NTA) and testified in support of S.B. 203.  She reminded the committee that a bill was processed last session on a detention facility to support five counties via a five-cent property tax.  Discussion was held very late in session.  That timeframe did not allow Speaker Dini the opportunity to amend the bill to specify that the five-cent tax was to be used for regional projects by all local governments.  It was agreed that “253” would determine the appropriate language and address the matter again in the current legislative session.  That was what S.B. 203 encompassed.

 

Ms. Vilardo confirmed the five-cent tax that was allowed to five counties last session but was available to all Nevada counties under S.B. 203.  She advised that it contained permissive language to allow for regional projects for which there would be interlocal agreements.  Basically, it provided for anything that would benefit two or more counties so that those counties would not be required to each build their own facilities.  Additionally, if interlocal agreements were entered into, local governments would be required to set their budgets for the amount of tax they used each year.  Although five counties were granted that ability, two counties did not use the process because their budget did not require them to use the operating moneys afforded them.  She advised that there was one technical amendment that was needed but had not been noticed while bill was before the Senate.  Ms. Vilardo directed the committee’s attention to page 2, Section B, at line 10, where the language “if the regional facility for children …” She advised that “for children” was part of the old language and needed to be deleted.  She then quoted the proper language for the committee.

 

Chairman Goldwater confirmed with Ms. Vilardo that her proposed amendment would better define “regional facility” as well as “administrative entity,” and that it met with her approval.

 

Mr. Marvel asked Ms. Vilardo what happened in those counties where they were up against the “3.64 cap.”  Especially where some counties were up against their cap and others were not.  He asked if some counties would not then be subsidizing other counties.

 

Ms. Vilardo confirmed that those counties up against their cap would not be able to levy the five-cent tax.  She confirmed that the current legislation provided enabling language only, that no specific action was being proposed.  She added that, in the future, counties at their cap might very well have bonds retiring that would then free up some property tax revenue.  The actions provided for were contingent on interlocal agreements being put into place.  Operation costs would also need to be determined.  She advised that the “253 Committee” addressed “rate creep” issues and S.B. 203 was a tool to help counties maximize the use of their dollars.  In response to Mr. Marvel’s questions, Ms. Vilardo stated that if a county was up against its cap it most likely could not afford to build or share in building of a facility much less maintain it.

 

Mary Walker introduced herself as representing Carson City, Douglas and Lyon Counties.  They were three of the five counties that worked together and cooperated to provide for a regional juvenile detention center in Silver Springs, the model for S.B. 203.  The bill passed last session enacting the five-cent tax was strictly enabling language and for all counties with populations less than 400,000.  The bill was for the benefit of all counties except Clark County.  When interlocal agreements were entered into for the purpose of providing regional facilities, it was mandatory that the long-term funds necessary were identified.  She advised that the bill was very important in encouraging long-term commitments between counties.  Further, with the regionalization of some services, costs to individual counties had been cut.

 

Mr. Anderson requested confirmation that the population cap was not part of the current legislation.

 

Ms. Walker advised that the population cap was addressed last session.  She stated that previous legislation originally addressed counties of 100,000 or less but it was requested that Washoe County be included.

 

Ms. Vilardo assured the committee that there was no population cap attached to S.B. 203.  The cap was removed to allow Clark County the possibility of entering into cooperative arrangements with Lincoln and Nye counties.

 

Chairman Goldwater called for questions or further testimony on S.B. 203.  The Chair then closed the hearing on S.B. 203.

 

 

Senate Bill 557:  Makes various changes concerning distribution of certain revenue from tax on certain motor vehicle fuel. (BDR 32-893)

 

Chairman Goldwater stated he had been advised there were some problems with S.B. 557.  He then requested Ted Zuend, Committee Fiscal Analyst, review those issues for the committee.

 

Mr. Zuend advised that the bill did not reflect the legislative intent in several places and that he had spoken with the bill drafter.  Amendments to remedy situations would be prepared.  He addressed a major problem at page 2, line 7.  Existing language allowed for the counting of state-maintained roads.  One of the interim committee’s goals was to ensure that the only roads counted in the formula were locally maintained roads.  There were definitions from the Nevada Department of Transportation (NDOT) to be inserted.  The second problem dealt with page 3, lines 3 through 10, with respect to the intracounty revenue distribution.  The interim committee had not made any recommendations regarding the second-tier distribution of the gasoline tax.  He advised that the existing formula should be kept in place.  That language was tied to the language of subsection 1 and would adopt the new formula for the intracounty distribution of the gasoline tax.  He questioned whether the intent was to only count local mileage on the second-tier distribution or to continue counting state mileage.

 

Mr. Leavitt testified for the record that he agreed with Mr. Zuend as to the intent of the study.  It had been agreed that distribution within the county would not be a part of the proposed legislation.  He felt that changing the miles should be left until the full effects could be ascertained since there could be some very serious ramifications.  He described the current legislation as a five-year project to draft a very simple bill on a very complex subject and advised that there had been many steps taken to reach the current proposal.  Most, if not all, would agree the formula had been in existence for many years but it did not adequately measure the need for gasoline taxes to maintain roads.  The current formula considered roads that were not maintained by the taxing entity.

 

Mr. Leavitt advised that S.B. 557 provided a new formula of two-thirds population and one-third road miles, which should be revised every ten years, and contained provisions in the event numbers were disagreed with.  He stated that the “253 Committee,” predominantly made up of public works trained individuals from around the state, had discussed the subject matter.  S.B. 557 provided that when distribution was based on two-thirds population and one-third road miles, that amount would be compared with the amount the local government received in that fiscal year.  Local governments were provided a “hold harmless” guarantee.  No one would lose money as long as the total revenue available from the fund was not less than the total amount available that fiscal year.  If less, the local governments would receive a proportional amount.

 

In response to Chairman Goldwater’s question, Mr. Leavitt advised the committee the appeal process was based on miles of roads.  He confirmed the formula only dealt with distribution to the county level.  The reason for the guarantee was, as the formula existed, there were counties that would lose money based on the new formula.  He then discussed inflation concerns and how S.B. 557 did not provide for an inflationary increase for those counties that were held harmless since there was no inflation factor in the tax.  That might be a weakness of the tax.  He utilized sales tax as an example and offered how sales tax increased by growth in the economy but also by price-level changes.  Gasoline tax, the subject at hand, did not grow by price-level changes, only by volume changes.  Additionally, costs of roads rose when gasoline prices went up, even as revenues could be going down, because some of the same petroleum products were used to build roads.

 

Mr. Leavitt stated S.B. 557 was the result of a large amount of discussion and provided examples.  He discussed the impossibility of comparing rural dirt roads with Las Vegas boulevards and how population might be a fairer indicator of the volume of use.  As population increased, so did road width.  He believed they had provided for a fair distribution of costs of roads.  Those who represented rural areas might be concerned because several rural areas would be “frozen” by S.B. 557, even though they would not lose money.  He described conversations with rural county representatives who, although they did not like the process, agreed that the proposals were fair.  With that in mind, he advised that an examination of the health of the rural counties needed to be performed.  He questioned what was going to be required to maintain their financial health over time.  He admitted to some possible confusion.  Mr. Leavitt stated that the “253 Committee” was shown as reporting to two different committees, which was due to the first committee’s upcoming expiration date.  The report would then be presented to the second committee named to provide a permanent reporting requirement.

 

Mr. Neighbors acknowledged that about six counties had been subsidizing others.  He addressed his concern that Elko and Nye counties were going to take “million dollar hits” and that they might be frozen for up to eight or nine years.  He acknowledged that, under the current formula, Clark County was probably not getting the funds it should, based on its population.  However, during that time, NDOT had maintained some 500 miles of downtown Las Vegas roads utilized in the formula.  That created a credit of sorts for Clark County.  Mr. Neighbors asked how those 500 NDOT miles would be dealt with in the new formula and whether Clark County would continue to receive credit for them.

 

In responding to Mr. Neighbors, Mr. Leavitt discussed taxes levied on Clark County that no other county was required to pay.  He admitted there were outstanding questions on issues such as freeways built by Clark County taxpayers when freeways in every other part of the state were built by NDOT.  Further issues involved local governments’ assumption of responsibility for certain roads and the state’s taking charge of the beltway.

 

Mr. Neighbors was concerned with more than just the beltway and he provided other examples.  He admitted he wished there could be some form of inflationary consideration since rural counties could get to the point where funds received would simply be for maintenance.  The possibility of stifling growth then became a concern where the poor could become poorer.

 

Mr. Leavitt admitted that it was difficult to estimate the growth in revenues from the tax and how fast the road mileage grew in various parts of the state.  He expected a certain amount of slowing down, even in Clark County.  There was no way of knowing how long it would be until some of the rural counties caught up with Clark County.

 

Mr. Marvel asked how many counties had imposed the full extent of their authorized tax for road maintenance.

 

Mr. Leavitt confirmed there were a number of counties that had imposed their full tax.  He referenced discussions as to whether or not to penalize those counties that had not levied the allowable tax.  There was a very close vote by the subcommittee that decided the counties ultimately penalized themselves.  Also, there were counties where there was very little gasoline distribution within the entire county; consequently, imposing a higher rate would not necessarily provide any real assistance.

 

Mr. Marvel requested confirmation that some of the tax money was intended for local road maintenance use.

 

Mr. Leavitt agreed the funds were to be used locally.  If the tax was not levied, the county itself missed out, since the funds did not go into a statewide fund.

 

Mr. Marvel asked and Mr. Leavitt confirmed that those same aspects were discussed within the Senate.

 

Chairman Goldwater pointed out some issues where fairness needed to be ensured.  He advised that he was not necessarily opposed to such changes and the subject matter of the bill was a good example of why the legislature met every other year.  Some things had to be monitored and improved as possible.

 

Robert S. Hadfield, Executive Director of Nevada Association of Counties (NACO), reiterated that the subject matter of S.B. 557 was not an easy issue.  The focus of discussions was what constituted a better way of distributing funds.  He confirmed there were nine counties that did not levy the gasoline tax allowed.  He described how two counties had only one gas station in the entire county and it was obvious to all that the urban areas had issues that needed to be addressed.  The overall view was that the appeal process was fair.  He allowed that the times of little growth for each county would alternate with periods of growth.  Further, the counties knew the process was in capable hands and, if there were real problems, they would have someone to contact on those matters.

 

At Mr. Neighbors’ inquiry, Mr. Hadfield confirmed whether some counties were not levying their full gasoline tax had no bearing on the formula.  Those funds were separate from what was addressed in S.B. 557.

 

Thomas J. Grady, Executive Director, Nevada League of Cities and Municipalities, confirmed that there was a lot of give and take by the urban areas.

 

Ralph Felices introduced himself as the acting administrator for the Compliance Enforcement Division of the DMV&PS.  He advised that the DMV&PS was neutral on S.B. 557 and had no objection.  He discussed their one concern:  there were two separate types of accounting systems involved.  They were not sure of the exact impact or the cost involved in changing programs.  He knew some changes to the Lockheed program would be required to allow for the new formula.  It was expected that a fiscal note could be provided to the committee by mid-day Thursday, at the latest.  Further, he suggested implementation of the bill be held off until July 2002 to reduce the impact to state agencies.

 

Mr. Marvel asked when the DMV&PS was scheduled to take over collection of the gasoline tax from the Nevada Department of Taxation (NDT).

 

Mr. Felices believed it would be January 1.  He advised the impact to NDT would be a six-month impact to the DMV&PS that would begin January 1 or July 1.  With the extension, there would not be two state agencies impacted during the same period.

Mr. Price inquired why, if S.B. 557 was a Senate bill, Lockheed had not provided the report earlier.

 

Mr. Felices responded that there had been no initial concern over evaluating the system and computations.  They had been aware some changes would be necessary.

 

At Chairman Goldwater’s query, Mr. Felices advised it cost between $5,000 and $25,000 to revise the program every time the formula changed.

 

David Pursell introduced himself as the Executive Director of the Nevada Department of Taxation (NDT).  On the NDT’s part, their program was on an Excel spreadsheet.  They would be working with NDOT for the period they would have program before it was transferred to the DMV&PS.  They felt they could change the program while it was tenured at the NDT to accommodate the formula change.  At the Chair’s inquiry, Mr. Pursell stated those involved believed they could build the program to meet the need.

 

In response to Mr. Marvel’s question as to whether the timeframe discussed had a fiscal impact on NDT, Mr. Pursell did not believe it would.  He continued and assured the committee they would proceed according to the oncoming transfer date and act as necessary.

 

Chairman Goldwater called for further testimony before closing the hearing on S.B. 557.

 

The Chair advised he would entertain motions on S.B. 65, S.B. 124, and S.B. 203.

 

********

 

            ASSEMBLYMAN ANDERSON MOVED FOR A DO PASS ON S.B. 65.

 

            ASSEMBLYMAN MARVEL SECONDED THE MOTION.

 

            THE MOTION PASSED UNANIMOUSLY BY THOSE PRESENT.

 

********

 

            ASSEMBLYMAN MARVEL MOVED FOR A DO PASS ON S.B. 124.

 

            ASSEMBLYMAN ANDERSON SECONDED THE MOTION.

 

            THE MOTION PASSED UNANIMOUSLY BY THOSE PRESENT.

 

********

 

ASSEMBLYMAN MARVEL MOVED FOR AN AMEND AND DO PASS ON S.B. 203.

 

            ASSEMBLYMAN ANDERSON SECONDED THE MOTION.

 

            THE MOTION PASSED UNANIMOUSLY BY THOSE PRESENT.

 

********

 

 

Chairman Goldwater held S.B. 557 over for further review and adjourned the meeting at 3:02 p.m.

 

 

RESPECTFULLY SUBMITTED:

 

 

 

Cheryl A. O’Day

Committee Secretary

 

 

APPROVED BY:

 

 

 

                       

Assemblyman David Goldwater, Chairman

 

 

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