MINUTES OF THE Meeting
of the
ASSEMBLY Committee on Taxation
Seventy-First Session
April 10, 2001
The Committee on Taxationwas called to order at 1:30 p.m., on Tuesday, April 10, 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. David Parks
Mr. Bob Price
Ms. Sandra Tiffany
GUEST LEGISLATORS PRESENT:
Assemblyman Don Gustavson, Representing Assembly District 32
Speaker Richard D. Perkins, Representing Assembly District 23
Assemblyman Lynn Hettrick, Representing Assembly District 39
STAFF MEMBERS PRESENT:
Ted Zuend, Fiscal Analyst
Kathryn Ely, Committee Secretary
OTHERS PRESENT:
Janine Hansen, President, Nevada Families Eagle Forum
Merrit Yochum, Vice Chairman, Independent American Party of Nevada
Juanita Cox, Representing The People to Protect America (PPA)
Lynn Chapman, Representing Families for Freedom
Tom Tatro, Fiscal Manager, Department of Motor Vehicles
Al Bellister, Representing the Nevada State Education Association
Pat Zamora, Director of Accounting, Clark County School District
Robin Keith, President of the Nevada Rural Hospital Project
Phillip Speight, City Manager, City of Henderson
Steve Hanson, Finance Director, City of Henderson
Kurt Fritsch, City Manager, North Las Vegas
Warren Hardy, Representing the City of Mesquite
Marvin Leavitt, Representing the City of Las Vegas
Mark Vincent, Director of Finance, City of Las Vegas
George Stevens, Director of Finance, Clark County
Mike Alastuey, Clark County Assistant Manager
Carole Vilardo, President, Nevada Taxpayers Association
Diane Steele, Family Court Judge, Eighth Judicial District Court
Dan Musgrove, Representing the City of Las Vegas
Irene Porter, Executive Director of Southern Nevada Home Builders Association
Richard Harris, Resident of Reno and Property Owner in Lake Tahoe
Barbara Byington, Assessor, Douglas County
Dudley Kline, Lake Tahoe Property Owner
Mel Schwake, Third Generation Carson Valley Rancher
Hilt Matherton, Lake Tahoe Resident
Assembly Bill 420: Repeals basic privilege tax for vehicles in prospective increments. (BDR 32-544)
Assemblyman Don Gustavson, representing Assembly District 32, presented testimony (Exhibit C) in favor of A.B. 420, which eliminated the 4 percent tax on the assessed value of a motor vehicle, payable each year upon registration. The bill proposed to abolish the tax in four stages (Exhibit D) beginning on July 1, 2002, without affecting the supplemental privilege taxes in some counties. Car taxes were under fire in many states. In 1998, twenty states had no state or local tax based on the value of vehicles; twelve states had the tax only at the local level. Only 16 states, including Nevada, had state level taxes on vehicles (Exhibit E).
The vehicle privilege tax reduced compliance with registration laws. Nevada residents failed to register their vehicles to avoid paying the “punitive levy.” Additionally, since vehicle registration was tied to a mandatory insurance program, many unregistered vehicles were driven without insurance. Registration evasion undermined the enforcement of traffic laws by making it difficult or impossible to locate the owner of a vehicle involved in an accident.
The vehicle privilege tax caused hardships for working class families, Mr. Gustavson declared. In most parts of Nevada, a vehicle was necessary for transportation to work or to grocery stores. Other tax sections of Nevada law exempted necessities. As this tax must be paid in a lump sum, families had difficulty budgeting for it.
The elimination of the privilege tax would increase revenues from other taxes, particularly sales tax. Using pie charts (Exhibit F), Mr. Gustavson illustrated the distribution of various taxes. He explained that money in circulation turned around about twice every week, generating sales tax each time. According to his calculations, potential sales tax revenue totaled $362 million.
In conclusion, Mr. Gustavson reiterated the vehicle privilege tax should be abolished because it was unfair. He believed that if it was not repealed, the legislature would soon be faced with a repeal initiative from angry constituents. He urged passage of A.B. 420.
Chairman Goldwater stated the tax department would probably expect payment of personal property taxes on vehicles if the motor vehicle privilege tax was eliminated.
Janine Hansen, President, Nevada Families Eagle Forum, stated that taxation consumed 60 percent of a family’s income. She encouraged the committee to support A.B. 420.
Merrit Yochum, Vice Chairman, Independent American Party of Nevada, enthusiastically supported A.B. 420.
Juanita Cox, representing The People to Protect America (PPA), (Exhibit G) urged support of A.B. 420. Families needed relief from “oppressive taxation.” In Nevada, driving was a necessity, not a privilege.
Lynn Chapman, representing Families for Freedom, supported A.B. 420 to assist families by repealing this tax.
Tom Tatro, Fiscal Manager, Department of Motor Vehicles, testified the department took no position on A.B. 420 but pointed out there would be a fiscal impact if it became law. At full enactment, the department would lose about $12 million annually from the 6 percent commission they collected. This impacted the next biennial budget and prevented the department from operating within the 22 percent of revenues collected (Exhibit H).
Al Bellister, representing the Nevada State Education Association, opposed A.B. 420. The motor vehicle privilege tax produced about $68.7 million in the 2000 fiscal year budget for the Distributive School Account, which was money outside the formula that was not replaced from the state General Fund. The schools had over-crowded classrooms, under-funded special education programs, a backlog of deferred maintenance, and a shortage of teachers.
Pat Zamora, Director of Accounting, Clark County School District, reported the district was the largest recipient of motor vehicle privilege tax (Exhibit I). He opposed A.B. 420.
Robin Keith, President of the Nevada Rural Hospital Project, testified the repeal of the motor vehicle privilege tax translated to a revenue loss of $216,093 for seven public, rural hospitals (Exhibit J). For a rural hospital, every dollar counted.
Assembly Bill 653: Makes various changes to formula for distribution of certain revenues. (BDR 32-1459)
Ted Zuend, Fiscal Analyst, referred to a fictitious table (Exhibits K) and explained current distribution of the consolidated tax revenues. The first money went to the enterprise districts. All entities, other than the enterprise districts, were guaranteed an increase based on the consumer price index (CPI). The growth factor for special districts was the assessed valuation averaged over a five-year period. For cities, counties and towns, the growth factor was a combination of the five-year increase in assessed valuation and the population. The formula multiplied the growth factor by the base monthly amount and derived a number used to determine excess allocation (Exhibit L). Mr. Zuend also provided a bill explanation (Exhibit M).
Speaker Richard Perkins, representing Assembly District 23, provided excerpts of transcripts (Exhibit N) to remind the committee the basic premise for the formula was to address growth. During the last session, Speaker Perkins realized, relative to the formula, the distribution of the funds benefited some persons more than others. A.B. 653 was a result of general discussions involving “a number of the larger entities in Clark County.”
This was a “Clark County only bill,” Speaker Perkins stated, which addressed the one-plus language, the removal of the CPI factor, and a base adjustment for the city of Henderson. These were not the only revenues that all entities received. Henderson lost more revenues under the current formula than under the previous, but A.B. 653 made no attempt to recover revenues that were perceived as lost.
Chairman Goldwater asked Speaker Perkins about the “issues that plagued the negotiations.” Briefly, Mr. Perkins replied, those were: the one-plus language, the inclusion of the CPI, and a base adjustment. The $4 million base adjustment to the city of Henderson was not in question; the question was which entities would bear the burden of the base adjustment. A.B. 653 removed the one-plus language, as was the CPI adjustment. The formula intended to pay for growth, but the CPI adjustment exhausted the revenue, leaving nothing for growth.
Phillip Speight, City Manager, city of Henderson, testified in favor of A.B. 653. After S.B. 253 of the Sixty-Ninth Session passed, counties received a share of the revenues that previously were reserved for the cities. Prior to passage, the city of Henderson believed it would receive a reduction of $1.5 million the first year; however, the city lost $6 million the first year, $7.2 million the second year and would lose $11 million the third year (Exhibit O).
Failing to reach a compromise with other entities, discussions began in October 2000, and A.B. 653 resulted. Mr. Speight restated the three main points: adjustment of Henderson’s base by $4 million; elimination of the one-plus language from the formula; and, the elimination of the annual increase of the base by the CPI. He further stated for the record:
…our appreciation of the hard work put forward by the staffs of Clark County and the city of Las Vegas on this issue. Also, for the record, we understand that the revised formula would be effective, for the distribution of funds, after July 1, 2001.
In conclusion, Mr. Speight revealed that under A.B. 653 the city expected to lose money.
Steve Hanson, Finance Director, city of Henderson, affirmed that Henderson was willing to accept a loss of potential revenue if it resulted in an equitable distribution of taxes among their governmental partners. Henderson supported the new formula based on financial projections supplied to the original committee and the ability to appeal the original base distribution. An uncorrected inequity in revenue distribution existed in Clark County due to an anomaly of high growth rates in some areas and slower growth rates in others. This disparity of growth did not exist in other Nevada counties.
Mr. Hanson presented a review (Exhibit P) of the Consolidated Tax Distribution, which showed the original intent, the impact of one-plus on distribution, inequities, and the distribution of dollars per new resident. Since the implementation of the new formula three years ago, Las Vegas received an additional $19.4 million, whereas Henderson lost $24.6 million.
Assemblyman Mortenson believed that allocating money based on each individual was fairer than the complicated formula. Mr. Hanson felt this was a good point, which had been discussed. The consensus of the finance directors in Nevada was that some communities had a high-assessed valuation with a low residential population that required services. To equalize that, the formula considered the impact of population as well as the assessed valuation.
Assemblywoman Tiffany realized the formula was a problem for Henderson. She asked if Henderson was the only entity to receive a base increase in A.B. 653. Mr. Speight replied this was part of the compromise of the three major entities. Under provisions of S.B. 253, an appeal was made to the Committee on Local Government Finance. In support of that appeal, the Department of Taxation issued a letter (Exhibit Q) indicating that Henderson should receive $3.999 million in a base adjustment. Ms. Tiffany asked about Mesquite, but Mr. Hanson was uncertain if that city received an adjustment. Assemblywoman Tiffany then asked the impact on Henderson of the elimination of the one-plus language. Mr. Hanson opined, if the language was not removed, the $24 million loss would continue to grow at an accelerating rate. However, removal would stabilize the losses.
Assemblywoman Tiffany questioned why the CPI was removed. Mr. Hanson explained that, of a 4.8 percent revenue increase, 2.7 percent was added to the base as a CPI adjustment, leaving 2.1 percent for the growth allocation. When the overall growth was 9.6 percent, the money for growth was insufficient to service the municipal needs. Ms. Tiffany asked what happened to Henderson if A.B. 653 failed. Mr. Speight expected a reduction of 11 percent in the general fund (or approximately $15 million), impacting the quality of services and reducing the staff levels.
Chairman Goldwater understood the formula was intended to include a growth factor and a CPI component. The formula factored in assessed valuation and population. CPI growth was in the assessed valuation. Mr. Hanson responded there was an inflationary factor in the assessed valuation, but as related to the 9.6 percent growth factor, it was immaterial.
Assemblyman Brown, representing constituents in the county, Las Vegas, Henderson and Boulder City, wanted to know if discussions were held with Boulder City. Mr. Speight said he spoke with the Boulder City manager and informed him of the direction they were moving. Mr. Brown asked what the impact would be for Boulder City. Mr. Speight replied it was $500,000 over a two-year period.
Kurt Fritsch, City Manager, North Las Vegas, supported Speaker Perkins and the position of the city of Henderson. North Las Vegas received the least; the average per capita distribution of the consolidated tax in Clark County was $364, while in North Las Vegas it was $237. The inequitable per capita amounts highlighted the problem. He asked what made a resident of North Las Vegas worth $127 less than anyone else in Clark County. The city supplied the same services and received the same demands. He believed they compromised on this by not pushing for a base adjustment. In the spirit of cooperation, he felt it was not in the interest of North Las Vegas to pursue it, just as it was not in their interest to pursue a flat per capita basis, which would be “devastating to Clark County and Las Vegas.” Rather, they sought equity, and A.B. 653 approached that. Depending upon the growth in revenues, the next three years could bring $5 to $12 million to North Las Vegas. In closing, Mr. Fritsch stated that North Las Vegas was the highest taxed community in southern Nevada due to the public safety overrides. Only one-third of the city’s budget came from the state.
Ms. Tiffany asked Mr. Fritsch how failure of A.B. 653 might impact North Las Vegas. He believed staff would be reduced, primarily through attrition, jeopardizing an ability to combat gang wars in the area. Chairman Goldwater responded, “There‘s nothing we’ll do in this legislature, whether by our actions or our inactions, that should or would or could compromise public safety.” He hoped that point was very clear to the local government representatives. Mr. Fritsch understood the committee had the communities’ best interests in mind.
Warren Hardy, representing the “Mesquitonians,” presented a letter (Exhibit Q) from the Mesquite City Manager expressing “unqualified support” for A.B. 653. Mesquite’s position was well illustrated by the presentation the city of Henderson made. The formula was intended to benefit the growth areas, but his presentation demonstrated that the benefit did not occur. Mesquite’s population growth was approximately 50 percent, yet it experienced revenue losses of 10 percent and anticipated that would continue.
Marvin Leavitt, representing the city of Las Vegas, testified the original legislation attempted to make growth pay for growth, with the goal to reduce competition between local governments. The old formula was unfair. To say whether the new formula (enacted in 1997) worked, should it be compared with the old formula? If the old formula was unfair, it was not a standard for comparison. Under the new formula, taxes did not grow as rapidly as growth in some communities of southern Nevada (Exhibit S). Regardless of growth, the cities had a service responsibility, a need to raise employee salaries and to provide for inflation. Mr. Leavitt explained that 55 percent of Las Vegas’ revenue was derived from consolidated taxes, compared to 20 percent from property taxes.
Mr. Leavitt addressed the per capita issue, earlier questioned by Mr. Mortenson. He believed, because it was an entity with responsibilities very separate from the cities, it would be unfair for the county to receive the same per capita distribution as a city. If a city grew at a rate of 20 percent per year and the tax grew at 7 percent in the same year, the city could not sustain equal per capita revenue. Mr. Leavitt admitted the new formula had not allocated enough money for growth in an area where there was rapid growth, but he felt it “inappropriate and unwise to eliminate the CPI factor” because every government west through different stages of growth, and the formula needed to be effective for all situations. Furthermore, Mr. Leavitt disagreed with the elimination of the one-plus. Southern Nevada was almost one community. The growth of one city affected the need for services in the entire community.
Assemblyman Mortenson did not understand where the assessed valuation entered the picture (Exhibit S), above or below the line. Mr. Leavitt replied the formula calculated the percentage change based on population and assessed value. Assessed value was a factor in determining the amount of money the entities received. Assemblyman Brown queried Mr. Leavitt for the weighting between the assessed valuation and the population increase under the growth portion. Mr. Leavitt declared the two were added together and were essentially equal. Mr. Brown did not understand the addition of bodies and dollars. Mr. Leavitt thought the formula was legitimate: it said growth and the need for services resulted from either increased population or from new businesses. The formula recognized that. Mr. Brown asked Mr. Leavitt if the base adjustment for Henderson, as part of A.B. 653, was reasonable. Any adjustment was out of line, Mr. Leavitt opined. Chairman Goldwater asked what opportunity did the local jurisdictions have to question the original base. Mr. Leavitt replied that in 1981, when the change from property tax to sales tax occurred and the formula was created, there was no recourse.
Assemblywoman Tiffany asked what growth Las Vegas anticipated compared to peripheral growth areas. Mr. Leavitt thought that in the near future Henderson would have the most growth, but there would be growth in all areas. He reiterated that the formula needed time to work regardless of the growth. The reason Ms. Tiffany asked the question was because:
…there‘s obviously got to be some bias in your argument about whether growth should be funded and how it should be funded, because of all of the entities that I see here, you [Las Vegas] probably, besides Boulder City, which got a landslide on this, are the least likely to benefit in the future from how you fund the growth part of it. So, I’m just trying to make sure, on the record, that we recognize where some of that bias comes from.
Ms. Tiffany thought that during negotiations, Las Vegas had accepted the one-plus idea but it looked as though Mr. Leavitt had “thrown everything back on the blackboard again, so does that mean you didn’t agree?” Mr. Leavitt replied, “We did not agree on the one-plus.” When asked if Las Vegas had absolutely not agreed on any of the provisions of A.B. 653, Mr. Leavitt responded, “That’s right.” Las Vegas agreed to eliminate the strict one-plus language to attain a lower level, possibly as low as 10 percent.
Ms. Tiffany opined the way Mr. Leavitt had presented it, the formula was biased toward what benefited Las Vegas as opposed to any other growth area. She did not believe his argument that the city that grows the least was hurt the most. Mr. Leavitt continued his explanation and answered more queries from the committee. Ms. Tiffany concluded the discussion by stating she thought the CPI portion of the argument was just a philosophical discussion whether Las Vegas could benefit or not, as opposed to collapsing that and having it wrapped into the growth areas.
Chairman Goldwater said Speaker Perkins distributed Mr. Leavitt’s testimony from October 1999 on S.B. 253, which stated, “Marv Leavitt, when establishing the formula, intends to be as neutral as possible for all local governments in that revenue would follow growth.” After reiterating that the $4 million base adjustment for Henderson was not retroactive compensation. Chairman Goldwater wanted to know whether Las Vegas could tolerate the $4 million base adjustment. Mr. Leavitt stated the city council had never voted on it. Mr. Goldwater pointed out city council members had been on television and played “hardball” with the issue, passing resolutions. He wanted to know from Mr. Leavitt what they intended. Mr. Leavitt gave a lengthy answer in which he opined that if the question appeared on the city council agenda, it would fail.
Mark Vincent, Director of Finance for the city of Las Vegas, said if the $24 million/$19 million adjustment that Henderson indicated on its slide was accepted, and if that change was in effect, the annual percentage rate and growth in consolidated tax revenues for Las Vegas would be 3 percent, whereas Henderson’s would be 19 percent. Mr. Vincent submitted that would not be fair. With respect to the CPI, he stated though a city did not grow in population or assessed value, the residents paid higher prices for goods and services by the consumer price index, and they were contributing a CPI increase to the revenue pool. Mr. Vincent felt the CPI was necessary to protect that increase. Lastly, in respect to the one-plus factor, without the growth factor, if a city grew 2 percent and another experienced no growth, under this formula the former received 100 percent of the revenue growth and the latter received neither the CPI nor anything else, and that was not a fair arrangement.
Chairman Goldwater suggested this might not be a static formula in perpetuity that the legislature met to make these adjustments. In a climate of rapid growth or decline, the formula may need to be adjusted. Mr. Leavitt commented that with decline, the ability to determine policy at the legislature diminishes.
Assemblywoman Tiffany believed that Las Vegas received the greatest share according to the Distribution Dollars Per New Residences in Exhibit P. No matter how the pie was sliced, she said, any town in high growth would receive less money. Mr. Leavitt responded that if an entity grew faster than the revenue, the per capita was less than that of one that did not grow. If population grew rapidly, but the tax grew at an unequal rate, the per capita revenue would drop, unless the total revenue of the county was equal to the per capita growth.
George Stevens, Director of Finance, Clark County, stated he did not disagree that the formula might not be as responsive to growth as it was intended (Exhibit T). It appeared to him that, though the formula was flawed, the proposed remedy could create greater inequities. Under the new formula, in the past three years Clark County gained $9.5 million but distributed more than that amount to cities and towns (Exhibit U). Under the new formula, the average per capita distribution was $270, under the old formula it was $271 and with the proposed it would be $273, but the individual entities varied greatly. For instance, the proposed formula distributed $956 per capita to Mesquite, but just $280 to North Las Vegas and $376 to Henderson.
For the past two decades, since the 1981 tax shift, residents of Boulder City, Henderson and Mesquite enjoyed significantly lower tax rates in support of municipal services than residents of Las Vegas and North Las Vegas, hundreds of dollars less per year for a comparable home. If the CPI factor was removed from the formula, small towns like Paradise and Winchester would receive declining distributions while the cost for services continued to rise.
Mike Alastuey, Clark County Assistant Manager, summarized the county’s position on A.B. 653, which proposed three changes in Clark County only:
Mr. Alastuey concluded by urging the legislature to base any per capita figures on Census 2000.
Chairman Goldwater asked Mr. Stevens whether a community in a rapidly growing economy, without the CPI adjustment in the formula, would still receive the benefit of the consumer price index due to the growth in revenue [from sales taxes]. Mr. Stevens disagreed and affirmed that if the population was flat and the assessed valuation was flat, the entity would never get an increase in the revenue, even if that entity contributed more to the coffer.
Carole Vilardo, President, Nevada Taxpayers Association, spoke in opposition to A.B. 653. Major changes to the formula were made for counties of under 400,000 people, and she believed during the 2003 Legislative Session, communities would ask to have that cap removed. She felt that regardless of the outcome of A.B. 653, the numbers should be applied statewide and adjustments should be made accordingly. Another concern was that because political issues had not allowed a resolution that satisfied a couple of jurisdictions in Clark County, it was not correct to change a formula without knowing the future impacts.
Ms. Vilardo understood the pressure Henderson felt as a fast-growing community, but asked, if there was a resolution addressing the statewide issue to be put into statute, would the 253 Technical Committee be willing to accept it?
Based on testimony from Speaker Perkins, Chairman Goldwater understood that Ms. Vilardo favored growth following the formula. She originally understood from the “excess” column, the excess would be a bonus. But in actuality, the Department of Taxation put the excess into the base and “rolled it,” which was one reason the pie of excess got smaller. In the 1981 and 1983 sessions, the CPI factor in the old formula helped states that experienced flat or declining growth, which were forced to cut operating budgets to maintain essential services. Despite huge increases due to inflation, some entities received no excess revenue because of their diminishing population base. The CPI factor helped sustained them.
As there were no further questions or testimony, Chairman Goldwater closed the hearing on A.B. 653.
Assembly Bill 652: Increases amount of ad valorem tax that certain counties may levy for support of family courts. (BDR 1-180)
George Stevens, Director of Finance, Clark County, testified that A.B. 652 was a request by Clark County to change the tax levy for the Family Court. Since the existing operating rate was levied in 1993, the six-judge court had grown to eleven, with a corresponding increase in support staff and ancillary programs. The revenue generated by the family court tax rate was millions of dollars short of the cost of operation. As the population continued to grow, so would the demands on the court. The tax levy now funded only 45 percent of what it originally funded in to-to. The goal of A.B. 652 was to provide flexibility to increase the rate as judges were added, particularly in years where there were higher priorities. At the maximum levy, the adjustment would cost the owner of a $100,000 home about $3.80 per year.
Diane Steele, Family Court Judge, Eighth Judicial District Court, spoke about the programs and accomplishments of the Family Court. Often families were unable to accomplish some things on their own so the county stepped in to assist. The programs supported by Family Court were:
Judge Steel stated Family Court had worked on a new logical model for case management so that no cases were overlooked, and an Internet program whereby people could download forms or review the progress of their cases. Implementation of the One Family/One Judge program, which was mandated by statute in the 70th Legislative Session, was in progress but lacked software and clerical support to implement smoothly.
Filings increased by 7 percent in 2000. Of the three judges provided by the 70th Legislative Session, 1.5 were assigned to the Juvenile Division. Judge Steele commented that a fulltime judge would be a welcome addition. The court worked with the ASFA to move welfare cases from the state to the county jurisdiction, an expensive undertaking. In conclusion, she stated there was a great need for additional funding.
Assemblyman Anderson thought there was a mechanism whereby the court system in Clark County retired debt with revenue from fees assessed through the judicial process. He asked if that was not in operation. Mr. Stevens responded that very little, if any, of the Administrative Assessment Fees, went to Family Court; most went to the municipal courts and justice courts. Chairman Goldwater asked if there were costs that might disappear once funded. Mr. Stevens stated that a portion of the existing levy went toward the retirement of debt on the original building. But as the number of judges expanded, capital dollars would be rolled over to further expansion of the facilities.
Assemblyman Marvel asked how much the “3 cents” raised. Mr. Stevens replied about $10.8 million.
Carole Vilardo, spoke in opposition to A.B. 652, not because of the intent but rather because the original tax was 1.92 cents to benefit the courts in Clark and Washoe Counties with establishing the Family Court. Her frustration was that district court judges came before the legislature to receive salary increases. Each judge ran an additional $200 to $300 annually for operations associated with the position—the bailiff, the secretary, the clerks, etc. The 1.92 cents, she stated, was primarily intended for the facilities. Statute normally provided that the operating expenses or bonding expenses for which the government proposed to levy a property tax would go before the voters. On property tax, A.B. 652 missed a step by not going before the voters. She submitted there was a point at which approaching the legislature for the approval of A.B. 652 circumvented what law permitted and that which could be done “by going to a vote of the people.”
Chairman Goldwater closed the hearing on A.B. 652.
Assembly Bill 654: Authorizes governing body of city or county to impose tax on nonresidential structures or require dedication of certain land for regional parks. (BDR 22-477)
Dan Musgrove, representing the city of Las Vegas, reported that the Las Vegas city council requested A.B. 654, which enabled the city council to pass an ordinance to set a nonresidential construction tax based on the valuation of building permits. The Southern Nevada Regional Planning Coalition established a regional standard of 2.5 acres of parkland per 1000 residents. Based on that ratio, the city of Las Vegas projected a deficit of 1,515 acres of parkland over the next 20 years. The only dedicated funding available to communities for parks acquisition and development was the residential construction tax, which funded only a portion of parks and development for new growth but did not address existing or future shortfalls. For Las Vegas to provide parks to meet the needs of growth, at the average of $250,000 per acre for development, the city would require $3.87 million over the next 20 years.
Nonresidential construction had a broad impact on the general welfare of the region. Valley-wide, every job created by nonresidential development resulted in an increase of 2.1 persons per job and a need for an additional 109 square feet of parkland, or one-quarter acre for every 100 jobs created. Mr. Musgrove felt it would be appropriate to tax nonresidential construction to minimize the deficit in funding for neighborhood and regional parks.
Quality of life was important to the selection of nonresidential development sites. Local governments needed the tools to allow growth to pay for growth. The residential construction tax was a portion of that, but the jobs and people that nonresidential growth brought should also pay a fair share.
In cooperation with Southern Nevada Home Builders and commercial developers, Mr. Musgrove proposed an amendment to A.B. 654 (Exhibit W), with the intent that the residential construction tax be used only for neighborhood parks. The nonresidential tax would be used for the regional parks, and the regional parks be built within the areas where the nonresidential construction taxes were collected.
Assemblyman Marvel asked if any regional parks were projected. Mr. Musgrove replied the master park plan identified areas in which regional parks might be built, but no land had been purchased. Some land had been obtained from the Bureau of Land Management.
Assemblyman Mortenson inquired about the difference in size between a regional park and a local park. Mr. Musgrove testified that the regional park exceeded 50 acres while a neighborhood park was 25 acres or less. Mr. Musgrove confirmed it was true that tremendous growth would be necessary to raise enough money in 10 years to develop a regional park, but those taxes would be just a portion of the funding source.
Assemblyman Brown was concerned that the funds would benefit only the perimeter developing areas. Were there 50-acre parcels for building a regional park in the older areas of Las Vegas? Mr. Musgrove pointed out there would not be the growth in those areas to generate the funds for development. However, there were regional parks in the older areas.
Irene Porter, Executive Director of Southern Nevada Home Builders Association, stated the association had some objections to the original A.B. 654, but supported the changes made by the proposed amendment. Regional parks should not be built with a single source of revenue. They would serve both old and new areas of the city so they should be using bond-issued general fund and the nonresidential park tax.
Chairman Goldwater closed the hearing on A.B. 654.
Assembly Joint Resolution 8: Proposes to amend Nevada Constitution to provide for separate taxation of certain property regulated by interstate compact. (BDR C-785)
Lynn Hettrick, representing Assembly District 39, testified that due to the bistate compact, which created the Tahoe Regional Planning Association (TRPA), there was very restricted land use in the Tahoe area; the land became extremely valuable and the property taxes “skyrocketed.” If a family with a small parcel of land and a cabin decided to keep the land “pristine” and not develop it to the fullest extent the TRPA permitted, the family eventually was forced by high taxes to sell the land, which was then developed using the full TRPA coverage right, built out as far as permissible, and consequently Lake Tahoe became more polluted. A.J.R. 8 (Exhibit X) proposed to provide property tax relief, only to the land in the bistate compact area, as was done with agricultural land, and ultimately have recapture of the tax when the land sold. As a constitutional amendment, A.J.R. 8 required passage by the committee in two sessions and then went to the voters, concluding a five-year process.
Assemblyman Marvel inquired if A.J.R. 8 should be patterned after the Greenbelt Amendment where the tax was backed up seven years to pick up the tax. Mr. Hettrick proposed an amendment similar to the agricultural Greenbelt Open Space exemption in the Nevada Constitution; however, there was a problem with language that stated “development which is restricted pursuant to the interstate compact.” Part of the property to be covered in A.J.R. 8 was not restricted due to the compact.
Richard Harris, resident of Reno and property owner in Lake Tahoe, testified his family was considered the “poster child” for this project. His grandfather purchased 32 acres at Lake Tahoe in 1926 and the land had been in the family for 75 years. The land contained a 764-square-foot summer cabin. There were no plans to improve the property, considered some of the most environmentally sensitive on the lake. Up to 2001, property taxes were $7,600 annually (the property was valued at just over $1 million), because the land was in the most restricted land use area of Lake Tahoe—the Spooner Planning Unit. Yet the family could do nothing with the land. If the cabin burned down, it could not be rebuilt, nor could they expand the cabin. They could do nothing with their land other than maintain it. The Douglas County assessor advised them in the fall of 2000, the appraised value might be raised from $1 million to $15 million. The taxes would have risen to $105,000 annually. Mr. Harris negotiated with Mr. John Parra of the assessor’s office, and obtained an appraisal of $9.2 million with an annual property tax of $70,000. In further discussions and consideration of the extreme limitation on the property use and development, the appraised value in 2001 was $4.6 million, with taxes of $35,000 per year.
In due course, the family will be forced from the land. However, because of the extreme restriction, no one who purchased the property could have anything other than the small cabin. By virtue of property sales, the property value shot up; but by virtue of the TRPA, the land could not be developed. Mr. Harris solicited some relief whereby the family would agree that they would not develop the property and in return it would be treated in the same manner as an agricultural exemption, recognizing fully that all of the taxes would be recaptured upon the sale of the property. Mr. Harris felt the family was being driven toward an alternative they did not want—the sale and development of their land by an outsider. He hoped that consideration could be given to the landowners at Lake Tahoe who found themselves in the position of trying to preserve and maintain the integrity of the land, but who were being pushed out of the basin.
Assemblyman Marvel mentioned that some former colleagues called this situation “inverse condemnation.” Mr. Harris agreed, though as an environmental attorney, he had studied the issue closely, and he believed as long as the TRPA regulations left some use of the property, there was not a “compensable taking.” That was not an avenue available to him, he stated. The family neither asked to have the land placed in the Spooner Planning Unit nor were they informed by the TRPA that this restriction was imposed on their property; it was not done with their consent or knowledge.
Chairman Goldwater asked why the current law in A.J.R. 8, line 14, “an open-space real property having a greater value for another use than for which it is being used” could not be applied. Mr. Harris affirmed that was a cogent point to mention. It was addressed in his letter (Exhibit Y). He obtained an opinion that the definition of open-space would not encompass his parcel because they had a seasonal residence, which they used for about 45 days per year. Chairman Goldwater interjected that served as statutory definition, if the statutory definition could be modified, that might be better. Mr. Harris felt that would be an easier course of action, far better than the arduous process of a constitutional amendment. According to Mr. Harris, Mr. Hettrick had looked into this and concluded that there could not be a statutory adjustment for this matter required a constitutional amendment.
Assemblyman Hettrick explained that Douglas and Washoe Counties realized the dilemma and tried many ways to assist these taxpayers. If he could obtain an opinion to cover Mr. Harris’ situation, he might return and offer that as language in a bill. But A.J.R. 8 covered all the people involved. According to legal counsel, there was no provision in the Nevada Constitution to allow a lower tax rate for property that was used differently.
Barbara Byington, Assessor, Douglas County, reappraised the Tahoe area this year by comparing sales around properties. Mr. Harris’ value came down when they realized the restriction. She felt it was a good idea to designate his parcel as agriculture land. However, there could be no crops because the TRPA even dictated what flowers and trees could be grown on the land.
Dudley Kline, had owned property at Lake Tahoe since 1939 and saw a sizeable increase in property taxes but could do less with the property because of the TRPA, which allowed him only a 30 percent land coverage. This removed many options to assist with tax payments. This year, Mr. Kline saw a 79 percent increase in his taxes. In 2000, he paid $11,881; in 2001, he would pay $21,272. Though he had lived there since 1960, he would not be able to live at the lake much longer. He and others in his situation sought tax relief to be able to keep their homes.
Mel Schwake, third generation Carson Valley rancher, stated that without the Green Belt Law, he could not continue to ranch. He understood the Nevada Constitution to say that the standard for valuation for taxation is “just,” not “market,” valuation. Therein, he felt, might be a solution that needed exploration. By the actions of the U.S. Forest Service purchasing much of the supply of private property one of the ironies was that, in the exchanges between the basin and Las Vegas, Las Vegas got an additional supply of private property, which acted as a pressure relief valve in terms of demand, the opposite happened in the basin: as the supply of private property was further reduced, the land prices were “driven through the roof.”
Hilt Matherton, an Electrical Engineer, Bently Nevada Co., had lived on the east shore of Lake Tahoe since 1969. It required three years for him and his wife to build their modest 1,400-square-foot home by hand. Property assessments rose dramatically and it was becoming impossible for him to pay his property taxes. If the trend continued, he would lose his home. He felt this unfair as he had done nothing wrong, but the system seemed intent on replacing him with someone from a much wealthier class. He hoped the system could be changed.
Mr. Marvel was concerned that “these people will be broke” before A.J.R. 8 passed.
Chairman Goldwater adjourned the meeting at 4:35 p.m.
RESPECTFULLY SUBMITTED:
Linda Lee Nary
Committee Secretary
APPROVED BY:
Assemblyman David Goldwater, Chairman
DATE: