MINUTES OF THE Meeting
of the
ASSEMBLY Committee on Taxation
Seventy-First Session
May 17, 2001
The Committee on Taxationwas called to order at 1:44 p.m., on Thursday, May 17, 2001. 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
Mrs. Vivian Freeman
Mr. John Marvel
Mr. Harry Mortenson
Mr. Bob Price
COMMITTEE MEMBERS ABSENT:
Mr. David Parks - Excused
Ms. Sandra Tiffany - Excused
GUEST LEGISLATORS PRESENT:
Senator Ann O’Connell, Clark County Senatorial District 5
STAFF MEMBERS PRESENT:
Ted Zuend, Fiscal Analyst
Cheryl O'Day, Committee Secretary
OTHERS PRESENT:
Lucille Lusk, Nevada Concerned Citizens
Carole Vilardo, Nevada Taxpayers Association
Tim Carlson, Nevada Test Site Development Corporation
Robert E. Shriver, Executive Director, Nevada Commission on Economic Development
Alfredo Alonso, BP Solar
Gaylyn Spriggs, Nevada Taxpayers Association
Senate Joint Resolution 20 of the 70th Session: Proposed to amend Nevada Constitution to provide requirements for enactment of property and sales tax exemptions (BDR C-709)
Lucille Lusk of Nevada Concerned Citizens (NCC) testified that, as S.J.R. 20 of the Seventieth Session was written, all five criteria presented would need to be considered for each exemption. The criteria did not provide for a judgment call, but constituted an “and” statement. Ms. Lusk addressed the first criteria, which required each exemption be determined to have no adverse material effect on state finances. NCC would have had no problem if the criteria applied only to consideration of prospective exemptions. However, she stated that, as written, existing exemptions could be made to address those new criteria upon their six-year review. Ms. Lusk provided an example of the effect on state finances by comparing existing church exemption with circumstances where there was no such exemption.
Ms. Lusk discussed her communications with the Legislative Counsel Bureau’s (LCB) staff. She had been assured that the intent was to continue reviewing existing exemptions pursuant to their original criteria. Also, that the Legislative Counsel Bureau would provide legal clarification of such intent would be provided prior to the resolution being addressed by the Assembly Committee on Taxation. Such legal clarification would be available for placement on the record to further ensure the resolution’s appropriate interpretation. Ms. Lusk hoped the potential for disruption and exemption loss was evident to the committee. She also voiced her hope that the information she had discussed with Kevin Welsh of the Legislative Counsel Bureau would be requested prior to any action being taken on the resolution. In the alternative, she suggested that the language could be amended, even at such a late date.
Mr. Brower stated that it seemed impossible for an exemption to not adversely affect the state’s finances. Further, an argument could be made by an affected entity that it would lose “$x amount” because of an exemption.
Ms. Lusk confirmed that was her exact concern. Limitation of future exemptions was not a problem, but she did not believe the resolution was intended to cutoff current exemptions.
Carole Vilardo, representing the Nevada Taxpayers Association (NTA), testified that the proposed resolution was a product of the “253 Committee” and that she supported S.J.R. 20 of the Seventieth Session. Ms. Vilardo discussed the dollar cost of exemptions and the “253 Committee’s” review. One discussion dealt with an attempt to “clean up and minimize the economic development abatements” and to include more criteria. The legislative committee was advised by legal counsel that if such action was desired because of tax base erosion, the legislature could change or terminate processes by statute. She advised that the legislative committee wanted to ensure that, in the future, there was a systematic review of exemptions. Further, when those reviews took place, the legislative committee wanted a consistent set of criteria in place and in use. Ms. Vilardo explained that was the reason for addressing the Nevada Constitution. The Nevada Taxpayers Association supported the resolution in both the Seventieth and Seventy-First Sessions.
Ms. Vilardo described Ms. Lusk’s review of the resolution as one with “fresh eyes” and also acknowledged Mr. Brower’s concern. She professed that there were exemptions whose “genesis” were unknown and could not be identified. A property tax exemption related to private movie theatres was one that no one could recall ever being used, nor the reason it was established. She did not believe Section 6, subsection (c) would stop someone from obtaining an exemption. Abatements were granted because the incoming business accounted for higher property taxes, wage taxes, etc., which offset the diminished tax. She concurred with Ms. Lusk that some agreement needed to be reached that all five criteria were not required in all instances. Such a statement could perhaps be included in a floor statement. Ms. Vilardo proposed, in the event of a problem, the resolution could be amended and return to the legislature for a third session. She did not believe anyone intended to cripple or stop the resolution. Neither did she perceive the legislature as intending to cause the concerns that had been addressed. It was also acknowledged that the criteria was needed for evaluation purposes.
Mrs. Freeman felt it was important that the resolution not be amended at such a late date. She agreed it could be included as part of a floor statement and the intentions made very clear for the record.
Chairman Goldwater stated that he did not believe legislative intent had much bearing on a constitutional provision.
Mr. Brower said he agreed, “If you are saying, ‘regardless of what we say on the floor, the language is the language.’” It was incumbent upon the committee to correct the language if there was a problem. A floor statement would not matter in the future with regard to legislative intent.
Chairman Goldwater agreed and discussed the rule of perpetuity. He advised that one could go back and attempt to show legislative intent from the Constitutional Convention but it was not helpful, nor was it binding.
Ms. Vilardo advised that there was similar discussion held in the Senate. There was to be a legal statement to clarify whether consideration of all five criteria was required for each determination. If the legal opinion dictated that all five criteria were to be considered, then Ms. Vilardo respectfully suggested the resolution be allowed to return to the next legislative session. It was imperative that the language was properly amended.
Mr. Anderson and Chairman Goldwater confirmed the resolution was exempt from the legislative time line and time was available for additional consideration.
Chairman Goldwater acknowledged the need for the resolution and the rush facing the legislature. He advised, however, that the tax structure issue would probably be addressed by the next legislature. If the proposed resolution passed both legislative and public votes, the entire exemption process as to tax structure review would be bound by the language.
Ms. Vilardo felt the concerns expressed only emphasized the need for the resolution. She reminded the committee members that, when enough political pressure was applied, exemptions were granted. She agreed that whatever went into the Nevada Constitution should be absolutely correct and defensible.
Chairman Goldwater believed the resolution needed to be amended but admitted it would be helpful during tax structure discussions.
Chairman Goldwater and Ms. Vilardo discussed the Chair’s suggestion that a proposition be added to any approved budget cycle, so that anything done in the form of an exemption was prospective for any budget cycle.
Ms. Lusk advised that she had engaged in a detailed conversation with Mr. Kevin Welsh of the LCB following the Senate hearing on the proposed resolution. He confirmed that the Senate determined satisfaction of all five criteria to be necessary for future exemptions. However, Mr. Welsh had stated the resolution, as written, allowed six-year reviews to be considered separately and pursuant to the original criteria. Ms. Lusk believed Ms. Vilardo was suggesting an amendment be prepared stipulating all five criteria be considered, although no one of them would be disqualifying by itself.
Mr. Brower added that he agreed with her suggestion that the criteria be reviewed collectively, without any one being a disqualifying factor. However, he felt it was incumbent upon the legislature to consider all factors when addressing exemptions. He pointed out that, as representatives of different constituents and groups, the legislature might fail from time to time; that being the nature of public policy. Mr. Brower suggested, allowing that it could be a step backwards, that perhaps no constitutional amendment was required.
Mr. Mortensen felt the criteria was very subjective and also questioned whether a resolution was needed.
Chairman Goldwater readdressed S.J.R. 20 of the Seventieth Session. He stated the legislature had the duty to make those types of determination; consequently, any vote on an exemption supposed legislative review. Such an assumption provided an artificial support for the exemption.
Mr. Brower agreed. He saw a problem with the fact that an affirmative vote did not require any explanation of how the criteria was met. Each factor was assumed reviewed and considered by the legislature upon an affirmative vote.
Mr. Mortensen discussed the joint resolution and compared it with S.B. 227. He felt the resolution met all five criteria.
Mr. Anderson addressed the constitutional question and felt the proposed resolution was in keeping with the normal language that formed constitutional provisions. He stated that such language tended to be somewhat vague and open without removing any legislative prerogative. He felt S.J.R. 20 of the Seventieth Session was acceptable as written. Mr. Anderson also agreed that the resolution met all five criteria and provided a template for future use.
Mr. Brower voiced his perspective that most constitutional amendments were specific in nature.
Mr. Anderson did not disagree. He was aware of examples for both sides of that perception.
Chairman Goldwater discussed an example of a challenge to a tax exemption. He suggested a follow-up statute providing empirical measurement of the criteria would be needed.
Mr. Marvel was not convinced the resolution was needed. His main concern was that exemptions were periodically reviewed and he believed that review could be accomplished legislatively. He too acknowledged that once a matter was made a part of the constitution, it would have a long life in such capacity.
Chairman Goldwater felt the review was the ultimate and positive outcome. He imagined that some future legislator would declare the criteria to be empirical and it would become statute. A determination to show whether or not an exemption had standing would be provided by the committee minutes and other legislative record. Whether or not an exemption should have been passed would be determined on those grounds.
Mr. Neighbors agreed with Mr. Marvel’s perspective. Mr. Neighbors discussed exemptions on equipment at test sites and that Nevada Revised Statutes (NRS) 361.157 and 361.159 went to “the conditions” with respect to exemptions on real or personal property.
Chairman Goldwater closed the hearing on S.J.R. 20 of the Seventieth Session.
Senate Bill 227: Revises and repeals provisions that exempt certain property from taxation. (BDR 32-892)
Chairman Goldwater called Tim Carlson forward.
Mr. Carlson introduced himself as the former director of the Nevada Test Site Development Corporation (NTSDC). In response to the Chair’s query, Mr. Carlson advised that he was representing NTSDC on a number of issues but was no longer the President/CEO. He advised that he had been working to encourage growth in Nevada, in one capacity or another, for the past 20 years. As to the importance of S.B. 227 and S.B. 273, Mr. Carlson believed the main incentives for industries to move to Nevada had been tax exemptions and the zero state income tax. He stated that S.B. 227 and A.B. 434 were extremely parallel in purpose. Exemptions for companies moving into Nevada have provided benefits in the form of jobs generated, homes purchased, a rise in the consumer base, et cetera. He admitted that Nevada was a small state with little to offer industries but advised that Citibank’s move to Nevada was a transfer that generated billions in revenue.
Mr. Mortensen questioned the reference to duration, “at least one year but not more than ten years,” as Section 1, subsection 2(a)(1). He wanted to know what determined the specific duration.
Mr. Carlson believed that referred to the four-year period in which one could apply and then obtain a ten-year lifespan of the abatement.
Robert E. Shriver, Executive Director, Nevada Commission on Economic Development (NCED), testified the length of an abatement depended on NCED’s adjudication of the case. It also depended on the pertinent local government’s desires since it was contacted on the effect to its tax revenues.
Mr. Mortensen felt the possibility of a one-year abatement coupled with the unknown quality provided by the local government’s input created a somewhat undesirable process.
Mr. Shriver admitted the issue addressed by Mr. Mortensen was a concern of Nevada Commission on Economic Development, as well.
Chairman Goldwater clarified tax abatements were not the reason businesses came to Nevada, but that they provided a quick benefit upon arrival.
Mrs. Freeman was in full agreement but wondered if tax abatements really made a difference. She felt the question was moot as so few taxes were paid in Nevada that abatements had very little effect.
Alfredo Alonso, representing BP Solar, testified that he agreed with Mrs. Freeman from the standpoint of the subject bill. Mr. Alonso admitted that the two exemptions discussed provided a limited incentive but, if an overall package was offered, those incentives and Nevada’s tax structure provided a tremendous opportunity. If such a package was offered it would create a dynamic that no other state could match.
Mrs. Freeman requested clarification of Mr. Alonso’s remarks and whether he was suggesting that energy industries be encouraged to come to Nevada.
Mr. Alonso discussed various renewable energy sources and how Nevada provided an excellent environment for such companies. Such businesses would help the entire state but would be especially beneficial to the rural areas.
Chairman Goldwater discussed federal law and advised that Nevada worked to encourage energy businesses to relocate to Nevada.
Mrs. Freeman and Mr. Carlson discussed renewable energy production and the specific incentives targeting those types of companies. Mr. Carlson confirmed that two sites were in Clark County but that three other rural sites were being considered.
Chairman Goldwater stated for the record that the proposed amendment would change the date from 2006 to 2005.
Mr. Shriver advised that he wished to propose an additional amendment related to rural and tourism-based development issues before the committee voted to amend and do pass the entire bill (Exhibit C).
In response to the Chair’s inquiry as to the reason for the late timing of the proposal, Mr. Shiver stated that both commissions chaired by Lt. Governor Hunt, the Nevada Commission on Economic Development and the Nevada Tourism Commission (NTC), had studied how to develop tourism in rural Nevada for a long time. They had only recently come to agreement as to how funds could be allocated without a general appropriation. They realized they might be able to divert some of the Nevada Tourism Commission reserve funds into a separate trust fund as a funding source for tourism project development. They would also be able to help develop the public infrastructure for driving tourists to rural Nevada. A number of rural representatives had been contacted and had shown interest in the proposal.
Chairman Goldwater inquired whether Mr. Shriver had contacted the Chair of the Assembly Committee on Ways and Means and the budget staff that monitored those reserve accounts.
Mr. Shriver assured the Chairman that they were not proposing taking the entire reserve account. They were proposing a dollar amount within the hundreds of thousands range initially.
Mr. Anderson asked why the question was not amended while on the Senate side.
Mr. Shriver stated they began the current process during the first week in May when they realized there might be some way to make the procedure work. He addressed the distinct difference in rural Nevada between economic development and tourism. Mr. Shriver reiterated that one of the purposes was to help rural Nevada better develop their tax revenues.
Mr. Marvel stated that, in the past, the smaller counties had taken tourism and economic development money and used it in such a way that tourism constituted economic development. He asked about Section 2, on page 2, of the bill where it discussed a $1.3 million balance.
Mr. Shriver understood that a trust fund would be used as a mechanism to award the grants.
Mr. Marvel believed the reserve had been “dipped into” a number of times during the current legislative session.
Mr. Shriver admitted the next biennium was not being considered but urged support for the amendment so that funds would be available in the future.
Mr. Marvel inquired whether the Nevada Commission on Economic Development would issue grants. Mr. Shriver emphasized that the grants would be “matching” grants. He confirmed they wanted the money commitment from the local governments.
Mr. Marvel asked whether the Senate would concur if the amendment was passed. Mr. Shriver advised that it had been discussed with some senators.
Chairman Goldwater said he had two concerns:
Mr. Shriver provided information as to the roots of his amendment, as well as on discussions he had with Carole Vilardo of the Nevada Taxpayers Association. S.B. 227 opened up NRS 231 and indirectly related to economic development, especially with respect to rural Nevada.
Chairman Goldwater inquired whether Mr. Carlson wanted S.B. 227 to be sent to the Assembly Committee on Ways and Means with a new program attached.
Mr. Carlson responded that it created a difficult situation.
Chairman Goldwater affirmed that the current proposal did not need to occur this session and confirmed with Mr. Shriver the issue could be readdressed next session.
Mr. Neighbors seconded Chairman Goldwater’s appreciation for the work Mr. Shriver was evidencing and would have supported the amendment, had the sponsors been comfortable with the proposal.
ASSEMBLYMAN MORTENSEN MOVED FOR AN AMEND AND DO PASS WITH THE DATE AMENDMENT IN PLACE.
ASSEMBLYMAN MARVEL SECONDED THE MOTION.
THE MOTION WAS PASSED UNANIMOUSLY BY THOSE PRESENT, AS ASSEMBLYMAN PARKS AND ASSEMBLYWOMAN TIFFANY WERE ABSENT.
Senate Bill 273: Exempts from local school support tax and certain analogous taxes certain systems designed or adapted to use renewable energy to generate electricity. (BDR 32-641)
Chairman Goldwater reviewed the work session notes for the committee.
Gaylyn Spriggs, Nevada Taxpayers Association (NTA), believed Senator Rhoads wanted homeowners to be able to place smaller systems on their property and receive the sales tax exemption because of the costs and benefits involved.
Chairman Goldwater agreed there were benefits, and pointed out the bill was environmentally friendly and was a short-term bill.
Mr. Brown inquired as to the amendment in the first reprint. He requested confirmation that bill addressed individual consumers although it did not seem to be restricted to them.
Ms. Spriggs stated the small systems discussed in the bill were not generators by definition, they were for personal use.
Mr. Brown requested clarification on the language that restricted the exemption to small, personal systems.
Mr. Marvel inquired whether there was any applicability for mining companies. Was there any system on the market big enough to suit a mine’s needs?
Ms. Spriggs understood the systems involved to be for smaller offices and/or homes.
Chairman Goldwater attested that the “green” exemption’s “sunset” put him at ease. He then considered the criteria of S.J.R. 20 of the Seventieth Session with respect to S.B. 273.
ASSEMBLYMAN MARVEL MOVED DO PASS ON S.B. 273.
ASSEMBLYMAN ANDERSON SECONDED THE MOTION.
THE MOTION WAS PASSED UNANIMOUSLY BY THOSE PRESENT, AS ASSEMBLYMAN PARKS AND ASSEMBLYWOMAN TIFFANY WERE ABSENT.
Senate Bill 557: Makes various changes concerning distribution of certain revenue from tax on certain motor vehicle fuel. (BDR 32-893)
Chairman Goldwater opened the work session on S.B. 557 and reviewed the pertinent work session notes.
Ted Zuend, the committee’s Fiscal Analyst, outlined the amendment for the committee and advised that it corrected the two errors Chairman Goldwater had discussed. It ensured that only locally maintained roads were counted. As originally drafted, S.B. 557 applied the same distribution intracounty although the “253 Committee” had never made a decision about intracounty distribution. That matter was being held over until the next interim because of the contentiousness of the issues. Mr. Zuend reiterated that the older formula specifying the division between the cities and the counties within a county was still applicable.
Chairman Goldwater inquired as to the new Section 1, subsection (d) and quoted language.
Mr. Zuend stated that some committee members had “taken a road trip” to inspect various types of roads. Also, the Nevada Department of Transportation (NDOT) had explained the different types of roads and how federal guidelines applied to them. S.B. 557 included the definition of a road as one that was improved, maintained, and that incorporated some form of drainage.
Mr. Anderson asked what happened with the more rural areas that needed assistance in maintaining their improved, unpaved roads.
Mr. Zuend confirmed that paved roads were not the only roads included in the definition and advised that the “253 Committee” had taken the road trip.
Mr. Anderson requested clarification as to when and to what degree the change would affect the counties. He reminded the committee that the only truly improved roads in some counties were the state-maintained roads.
Mr. Zuend assured Mr. Anderson and the committee that every county would initially receive the same funds as in 2001, unless the gasoline tax pool increased. There was also a guaranteed floor proposed in perpetuity, unless the total gasoline tax received was less than in 2001.
Mr. Neighbors admitted that the old formula was approximately 50 years old and could use some attention. However, under the new formula Lincoln and Nye Counties could be locked in for seven or eight years, unless they could show an increase in fuel tax or growth. That was his motivation for including a consumer price index into the bill. He reminded the committee that there were approximately six different formulas for the distribution of the fuel tax and there were a number of places from which the county would receive fuel tax revenue.
Mr. Marvel admitted that this matter was a concern for anyone who represented rural Nevada. Many of the county representatives worked closely with the Assembly Committee on Taxation and he believed they had come up with a formula they felt was appropriate. He felt the proposed legislation was fair.
ASSEMBLYMAN MARVEL MOVED FOR AN AMEND AND DO PASS ON S.B. 557.
ASSEMBLYWOMAN FREEMAN SECONDED THE MOTION.
THE MOTION WAS PASSED UNANIMOUSLY BY THOSE PRESENT, AS ASSEMBLYMAN PARKS AND ASSEMBLYWOMAN TIFFANY WERE ABSENT.
Senate Joint Resolution 11 of the 70th Session: Proposes to amend Nevada Constitution to authorize abatement of property tax for certain owners of single-family residences (BDR C-1435)
Senator Ann O’Connell, Clark County Senatorial District 5, advised the committee that county assessors currently possessed no authority to recognize any form of hardship. The subject abatement would be of benefit to many, including seniors and young families. She confirmed for Chairman Goldwater that she was in support of S.J.R. 11 of the Seventieth Session and was in favor of its passage.
ASSEMBLYMAN PRICE MOVED FOR A DO PASS ON S.J.R. 11 OF THE SEVENTIETH SESSION.
ASSEMBLYMAN MORTENSEN SECONDED THE MOTION.
THE MOTION WAS PASSED UNANIMOUSLY BY THOSE PRESENT, AS ASSEMBLYMAN PARKS AND ASSEMBLYWOMAN TIFFANY WERE ABSENT.
Chairman Goldwater adjourned the meeting at 3:13 p.m.
RESPECTFULLY SUBMITTED:
Cheryl O'Day
Committee Secretary
APPROVED BY:
Assemblyman David Goldwater, Chairman
DATE: