MINUTES OF THE
SENATE Committee on Taxation
Seventy-First Session
May 10, 2001
The Senate Committee on Taxationwas called to order by Chairman Mike McGinness, at 3:06 p.m., on Thursday, May 10, 2001, in Room 2135 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.
COMMITTEE MEMBERS PRESENT:
Senator Mike McGinness, Chairman
Senator Dean A. Rhoads, Vice Chairman
Senator Randolph J. Townsend
Senator Ann O’Connell
Senator Joseph M. Neal, Jr.
Senator Michael A. Schneider
COMMITTEE MEMBERS ABSENT:
Senator Bob Coffin (Excused)
GUEST LEGISLATORS PRESENT:
Assemblyman Richard (Rick) D. Perkins, Clark County Assembly District No. 23
Senator Jon C. Porter, Sr., Clark County Senatorial District No. 1
STAFF MEMBERS PRESENT:
Kevin D. Welsh, Deputy Fiscal Analyst
Rochelle Trotts, Committee Secretary
OTHERS PRESENT:
Philip D. Speight, Lobbyist City Manager, City of Henderson
James B. Gibson, Mayor, City of Henderson
Steven M. Hanson, Lobbyist, Finance Director, City of Henderson
Kurt Fritsch, Lobbyist, City Manager, City of North Las Vegas
Charles Horne, Mayor, City of Mesquite
Carole Vilardo, Lobbyist, Nevada Taxpayers Association
Guy Hobbs, Lobbyist, Nevada Association of Counties
John E. Sherman, Lobbyist, Finance Director, Washoe County
Linda Ritter, City Manager, City of Elko
David Pursell, Executive Director, Department of Taxation
Oscar B. Goodman, Mayor, City of Las Vegas
Marvin Leavitt, Lobbyist, City of Las Vegas
Virginia Valentine, Lobbyist, City Manager, City of Las Vegas
Dale Askew, Lobbyist, Clark County
John Sullard, City Manager, City of Boulder City
Chairman McGinness:
We will open the hearing on Assembly Bill (A.B.) 653.
ASSEMBLY BILL 653: Makes various changes to formula for distribution of certain revenues. (BDR 32-1459)
Assemblyman Richard (Rick) D. Perkins, Clark County Assembly District No. 23:
I would like to give you a quick introduction and history as to how we have arrived at this point. The bill is not perfect, and requires some changes. There was never an agreement, between the parties involved, before the deadline occurred. When we moved the bill out of the Assembly, I committed to work with all the involved parties to find a resolution that was “the least painful” to everyone involved.
It was first brought to my attention about 2 years ago that the prior formula was not working within our state. There was a sense that it was not moving in the direction that people thought it was going to be, and some entities believed it was harmful to them. I asked some folks, in 1999, to look for a legislative “fix” to see if they could work out their issues in the interim. When we came back together after 2 years, nothing really had occurred over the interim, and that is what brings us to the introduction of A.B. 653. It appears now there is an even bigger divergence in the distribution of revenues. I would also tell you, I think, you will hear today, some folks suggest this be handled as an interlocal agreement, instead of through legislation. I think the governments that are talking about this may not be able to come to a full resolution. This Legislature may need to be an arbitrator in finding that resolution. I would, also, tell you, I think, there have been significant movements on some of the topics, that folks are not “stonewalling” each other, and I do not think there has been any unfair play. I just think these folks feel very strongly about their individual positions.
Assembly Bill 653 is written to only affect Clark County. Subsection 2 of section 1 provides that the multiplier, the one-plus language, would come out of the formula, and the bill also takes out the CPI (Consumer Price Index) increase in the formula. That has been quite a topic of discussion recently, and I think there has been some agreement or movement, at least, in that direction. The one-plus language and the CPI language are in section 5, and that provides for a base adjustment allocation to the City of Henderson, which will be borne equally by the City of Las Vegas and Clark County.
Assemblyman Perkins:
I think everybody agreed that the old formula was not working, and that is why we have a new formula. But, I would submit to you, the new formula is not working as well as was intended, and, I think, there is some way for this Legislature to fix the problem. The negotiations on these three points, the one‑plus, the CPI, and the base adjustment, were actually started last February. During this legislative session, I know there have been a number of meetings, and though the entities involved were pretty polarized on some of the issues, they have come a long way toward working out this issue.
Lastly, I would submit to the committee that I do not think you can fix one piece of the three pieces and have everything work; they are inextricably interwoven. If a base adjustment does not occur, that affects how things move forward. If the one-plus language is done differently, that affects how much money comes in as well. They all work interdependently in how things move forward in the formula.
Philip D. Speight, Lobbyist, City Manager, City of Henderson:
(Exhibit C
“Consolidated Tax Distribution Performance Review” was distributed). Some of my comments may be a little
repetitive, but I would like to go through those. Assembly Bill 653 creates some inequities that have
existed since the inception of the new tax distribution formula that went into
effect in July 1998. Assembly Bill
653, as it related to Clark County, will allow the formula to be more
responsive to those communities that grow.
Since July 1998, the cities of Mesquite, North Las Vegas, and Henderson,
have had their revenues reduced
by $5.5 million when compared to what they would have received with the
old allocation formula. The extreme
example of these inequities is that Boulder City received an additional $4800
for each new resident between 1998 and 2000, while the City of Mesquite lost
$34 for each new resident moving into their community.
The bill provides for the following: A $4 million base adjustment for the City of Henderson, to be provided equally by the City of Las Vegas and Clark County, and the removal of the CPI yearly adjustment of the base, and the removal of the one-plus language, which penalizes growing communities. The $4 million base adjustment is derived from discussions, based upon the state Department of Taxation’s original recommendation to the committee in 1998. Removal of the CPI would allow for additional monies for those communities that grow, which was one of the tenets of the original legislation. The one-plus really corrects an arithmetic equation that was introduced as a smoothing process, and instead, it has really resulted in the extreme inequities, which have been previously asserted. The bill does not recover lost revenue for any of the affected entities. It is not a reversion back to the old formula, in fact, the cities of Mesquite, North Las Vegas, and Henderson will receive less revenue under A.B. 653 than under any pre-1997 formula, while Clark County, the city of Boulder City, and the city of Las Vegas will receive revenues greater than the pre-1997 formula. This is the product of negotiations and discussions that began in the 1997 Legislature. It is supported by the cities of Mesquite, North Las Vegas, and Henderson, and it is a Clark County “fix” only.
Senator Neal:
I just heard you and Assemblyman Perkins speak of this bill in terms of growth, the money which would go toward those growing communities, which is the reason why you would like the CPI, and the one-plus language, to come out of this proposal. I live in a community whose houses were built in 1962. It is an old community now, by any standard, over 30 years of age. Tell me just how this formula would affect my community.
Mr. Speight:
Both the cities of Las Vegas and Henderson have old parts and new parts. There is going to be a developing equation, where the dollars that are going to them, based upon the leveling, or the one-plus language, appears to be more suited to those communities that are older. However, I think what has occurred in the past, is that the base they have utilized has rolled in, to such an extent that there is currently really no excess going to those growing communities.
Senator Neal:
In my community, we have a couple of major streets, Carey Avenue and Martin Luther King Boulevard which run into another major street where they have built relative new homes. Carey Avenue runs the entire way out west to the mountains, goes a long way east, and carries a lot of traffic. My area also has an industrial compound, and all the people who work there live somewhere else, but they use our streets and roads to get to their jobs. Does this formula take into account the wear and tear upon our streets, once it has satisfied the needs of Henderson?
Mr. Speight:
I think if you look at an individual community, such as your own, it probably does not. But, if you look at the city of Las Vegas or the city of Henderson as a whole, when you take the old and new parts, the dollars that are coming into the funds that go to maintain these roads, then it becomes more equalized. We all have old parts in our communities to take care of, and large streets that are going across old and new communities. You blend all those together, and I would submit to you, the general fund for the City of Henderson has been reduced, by this formula, by 10 percent, and yet we are expected, also, as you are, and as the City of Las Vegas is, to take care of the old and new parts of our communities.
Senator Neal:
Are you suggesting then, that I am supposed to look past that which affects me?
Mr. Speight:
No, I am not saying that at all. I guess what I am really saying is, by taking all of the funds going into the community or the city, that their expectations are, as our expectations are, that we would have to take care of those large thoroughfares that go across our jurisdictions.
Senator Neal:
But, if the formula, the CPI, and that one-plus language, is taken out of this formula, where is the money going to come from? Would we have any excess money for those needs? I gather from what you are saying is the money, based on growth, would go to the newer communities. Is that correct?
Mr. Speight:
By taking the one-plus language out . . .
Senator Neal:
And, what about the CPI?
Mr. Speight:
Okay. What you are doing is you are allowing for more money to be channeled to those communities that grow. Yet, when you look at all of the budgets together, this revenue source, the consolidated tax, comprises approximately 50 percent of the general fund of the City of Las Vegas and the City of Henderson. In that respect, then, there would be other funds that would be coming in, at whatever the normal rates are, and I would, also, submit that the assessed value continues to grow in those communities as well, just as our older parts of the community continue to grow in assessed value.
James B. Gibson, Mayor, City of Henderson:
In January 1998, our city and other cities, including North Las Vegas and Mesquite, recognized the formula, as modified in 1997, appeared to have some problems which would result in some inequities in the way the growth dollars were allocated, and the way the bases were to grow for the cities in Clark County. We filed a one-time appeal, as allowed by law, and asked for a base adjustment of $5 million. The determination was made that the appeal would be denied, and we then entered into a series of negotiations and discussions, to take another look at the formula, so we might make a course correction, and stem the “bleeding” which appeared, to us, would continue over the course of time. One of the things we observed was that the per capita distribution of these dollars changed significantly, literally, overnight. We were receiving $15.30 per capita more than the City of Las Vegas was receiving, just prior to the change in the formula. From one year to the next, there was a swing of $48, and we were about $35 behind, in terms of the per capita across the city. Today, the City of Las Vegas is receiving, for every man, woman, and child who live in that city, $53 more than Henderson is receiving. North Las Vegas and Mesquite receive even less.
Mr. Gibson:
Our concern is that the fairness issue needs to be resolved, not that we should take advantage of anyone, in fact, one of the things that has been the hallmark of government in southern Nevada, is the spirit of cooperation among the governments. We sit on various regional boards and commissions together, we analyze our problems together, and we try to work through them together. Since the beginning of the session, we have been trying to work out our differences on this issue, and find a way to resolve them. One of the reasons Mr. Speight responded as he did to Senator Neal’s question, is that through the negotiating process, we have determined that we must have the $4 million base adjustment. We have also determined that we would give up the CPI altogether. We understand the arguments out there. We, also, have an older part of our city that requires more in the way of resources than the newer part of the city. In fact, until 1990, all we had was an old city. The entire infrastructure is still in need of upgrading and constant maintenance. You might be interested to know we have a wooden waterline which runs the course of Water Street, which is our primary downtown street, and there is a lot of work that needs to be done on it. Part of the resources we are looking for relate to the repair, maintenance, and replacement of some of the old infrastructure.
Over the course of time, we have come to believe the flaws in the formula can be fixed only by legislative action. Part of that is because we have had difficulty arriving at a solution by ourselves. I have to assume that all of the entities have operated in good faith in these negotiations, but we, frankly, have not been able to agree on all the pieces of the formula. Now, I mentioned the $4 million rebasing we are proposing; I, also, mentioned we are willing to amend the CPI out of this bill, and it is our view, at this time, the one-plus language still needs to come out, but it should be phased out. We have proposed that we reduce the one-plus language and phase it out 75 percent the first year, 50 percent the second year, 25 percent the third year, and be completely gone the next year.
As I understand the formula and the revenues, there is a base which is assigned to each of the communities, and then there are excess dollars which will be distributed according to the formula. What I understand our proposal to be is in the first year, 25 percent of the excess would be allocated based on growth, and 75 percent would be allocated by the one-plus language. In the second year, 50 percent would be allocated according to growth, and 50 percent would have the one-plus language still applied to it, and so on until it goes away. Let me just briefly share with you one of the things we think is an unintended consequence which is significant to us, especially in southern Nevada, but to the state as well. One of the objectives, as we understand the legislation, that was adopted in 1997, was to pay for growth, and Mr. Chairman and Senator Neal, it is not a question of the revenues just going where it is growing, but, rather that as we grow, the growth that occurs in each of our entities pay for itself so that you and I, and the people who move into our community are paying their way for coming here. This legislation was intended to provide an opportunity to give more assurance that growth would pay for growth, as opposed to just siphoning off dollars from other entities. One of the unintended consequences, that I see, is a growing sense that this may well be true, because the one-plus language penalizes growth at certain growth levels, and we have made a de facto policy decision that we should not grow any faster than wherever the penalty finally does apply. That is not a policy decision, that will strengthen the economic capacity of our region, and surely will not lead to the kind of economic environment we want to have across the state.
Mr. Gibson:
We have done a lot of thinking about how to respond to the current formula. One of the things we have discovered, is the only way we can maximize the return, through the formula, to help us pay for the growth that is happening in our city, and to get dollars for growth to pay for growth in our community, is if we were to slow, maybe even cut in half, the pace of growth in our city. And, that cannot be good for southern Nevada, and it cannot be good for the state. First of all, we have to do certain things when applications, mandated by the state, for land use and zoning come before us. There is a certain pace of things that must be kept up. We do not have the capacity, with our current charter, and under the law, to simply become another Boulder City. Another thing we face is we have a “pipeline” that already has projects in it. So, even if we determined that we were going to try and slow our growth somehow, there is not much we can do, if anything, with all the things that are already in the “pipeline.” So I submit to you, one of the things that has to come out of this legislative session, for all of us, is either a policy level discussion, or debate, where we are all at the table, and we determine that it is good for this state, that we slow growth in southern Nevada, or we have to make some adjustment to the existing tax distribution formula that stops penalizing that growth, so we are not forced to the conclusion that we must somehow, artificially, affect the way the market acts in our area. We recognize this is a difficult problem. It is not our objective to take something away from others, which is not what we have been trying to do. In fact, the proposal that eventually became A.B. 653 grew out of a wish list of things we wished could have happened at an earlier time. If we could have, we would have adjusted our base to recapture the entire $24 million that we lost from the old formula.
Mr. Gibson:
As you know, the cities of Henderson, North Las Vegas, and Mesquite are the only cities that are getting $24 million less than under the old formula. What is proposed in A.B. 653 would not restore us totally, but it would effectively stop the hemorrhaging. It would, hopefully, flatten out the line so that we do not continue to receive less and less against the old formula.
Now the position we are in today is one that is the most difficult of all, because we either have to win this, or negotiate it. If the parties who come to the table are unwilling to go the final step, it is my feeling that it puts us in a position where we are faced with the decision of having to determine what we do with growth. We have to be able to keep up the level of services, that we provide to Senator Neal’s and my neighborhoods. As long as we are not getting sufficient return on the growth dollars, we cannot continue to do that. It is not just the per capita; there is another measure one can look at, and that is the return on the assessed valuation. Prior to the distribution formula changed in 1997, the City of Henderson was getting about $15,000 back in distributed dollars, for every $1 million of assessed valuation. Today we are getting about $5000 for every $1 million of assessed valuation. At the same time, other communities are receiving exactly or approximately what they were getting, and in some cases even more.
This discussion and this issue are not new with the legislative session. The formula that we are talking about is a new formula. It is a new experience for all of us. It included wrapping in some additional revenues, and it included the elements of the formula that we are talking about today. This process began in 1997, it did not begin today. This is not a grab by the cities of Henderson, North Las Vegas, and Mesquite, to take dollars away from other people. It cannot be argued, that anyone is subsidizing government in our cities. Anytime you look at these kinds of formulas, they have to be viewed in the context of a process. No one could possibly have known what the consequences of adopting the changes in 1997 would be. In fact, we know, from talking with the experts, one of the feelings they had was we needed to let the formula run its course. We needed to let it work and operate. We were told, by those who knew the most, that we would probably lose about $1 million to $1.5 million in the first year that the formula was in effect. Our annual budget in those days was about $60 million. In the first year we lost $6 million. So, we saw a difference, before anyone else would have seen it, and we felt it before anyone else would have felt it.
Mr. Gibson:
Over time, we have seen the “hit” to our budget progress, and our concern here is that the consolidated tax distribution formula be seen as a process that began in 1997, where all of us came to the table willingly and expected that there would be changes. When we were told that we would be giving up $1.5 million, we were willing to do that, because we recognized the formula needed to be changed. But, what we have discovered, over time, in this process, is that there has to be fine-tuning. What we have offered is that we will forget the question of the CPI, phase out the one-plus language, and do it by legislation. Let us resolve it now, with the understanding that the committees will be working on these issues, for now, and maybe forever. But, we know that in the next legislative session, if there are anomalies that are discovered, or occur, in that period of time, then all of us should be back at the table, to try to make adjustments, so that there is a real opportunity to react to whatever the current situation happens to be.
Senator Neal:
When you speak of the old formula, are you speaking about the CPI and the one‑plus language remaining?
Mr. Gibson:
No. When I use the term “the old formula”, I am saying what was in effect before 1997. The current formula includes the CPI, the one-plus language, and all of our bases are what they are. There are a couple of other problems which, I think we all agree, needs to be changed. The excess has been calculated and added permanently to the base, and I think that is a problem.
Senator Neal:
What taxes were you collecting under the old formula?
Steven M. Hanson, Lobbyist, Finance Director, City of Henderson:
That was comprised of the sales tax, cigarette tax, liquor tax, real estate property transfer tax, and the motor vehicle tax.
Senator Neal:
Under the new formula, the current formula, what taxes are you dealing with?
Mr. Hanson:
Those would be the same taxes that have been combined into one pot, and then allocated based upon a formula.
Senator Neal:
Under the old formula these taxes went to the entities individually?
Mr. Hanson:
Yes, each type of tax has a different distribution formula.
Senator Neal:
Now we have the pot, and are we distributing those according to the new formula, the CPI, and the one-plus language?
Mr. Hanson:
That is correct, Senator.
Senator Neal:
From the funds you now receive, what type of city services do those funds augment?
Mr. Hanson:
In general, they support the municipal services in the areas of public finance, parks and recreation, general government, such as finance, and the human resources department. We have public works functions within the general fund that are supported by those funds.
Senator Neal:
Do these funds, as they presently are expended from this pot, go to augment any funds an ad valorem tax would be used for?
Mr. Hanson:
These funds would be used in other funds that have a tax base.
Senator Neal:
Would any of the funds go to augment any other projects ad valorem taxes would be used for?
Mr. Hanson:
No, Senator. Currently, we do not. All those funds stay within the general fund.
Senator Neal:
You mean you do not use the funds to pay for any services that the ad valorem taxes would be used for?
Mr. Hanson:
We have one transfer of about $2 million a year, that goes from the general fund, which is where these taxes are originally collected, to the engineering service fund, which is no different than an engineering department. We account for that as an enterprise fund.
Senator Neal:
I understand an enterprise fund has a wide range of things you can utilize it for?
Mr. Hanson:
This enterprise fund, which never makes very much money, is composed of our public engineers, and they charge their time to various bond issues, for the work they provide to the city relative to engineering services. There is generally a shortfall on that revenue, relative to the expenses of the engineers. So, the general fund transfers money yearly into the engineering service fund to make up for that deficit.
Senator Neal:
What is the present amount of your ad valorem tax base in the City of Henderson?
Mr. Hanson:
The appraised value in the City of Henderson is approximately $4.5 billion.
Senator Neal:
At what tax rate do you have?
Mr. Hanson:
We have a $0.15 operating tax rate in the general fund. We also . . .
Senator Neal:
I just want your overall tax rate. You know we have a cap of $3.64 . . .
Mr. Hanson:
The overlapping?
Senator Neal:
Yes.
Mr. Hanson:
We are at about $2.91 or $2.92. We also have a $0.24 public safety property tax override on the June ballot that may pass.
Senator Neal:
As I understand it, you had that once before, and it did not pass. Is that correct?
Mr. Hanson:
It was before the voters last November, and it was defeated.
Senator Neal:
Are you suggesting to the committee, the voters have now changed their minds and they are going to pass it this time?
Mr. Hanson:
One interesting thing about the November election was that there were approximately 15,000 voters that did not even vote on that question. That led us to believe we probably did not inform the public sufficiently for them to even create an opinion, as to whether or not they wanted to vote on the public safety question. I think this time around we are doing a much better job of informing the public as to why we are requesting that property tax rate increase.
Senator Neal:
For an overlapping ad valorem tax rate of $2.91, is that the lowest in the area there as compared to Las Vegas or North Las Vegas?
Mr. Hanson:
Generally it is lower than the overlapping rates in Las Vegas and North Las Vegas.
Senator Neal:
Do you need this money because you have not raised those taxes to the level of other entities?
Mr. Hanson:
We have raised our tax rates, in all cases, to the maximum level allowed by the state.
Senator Neal:
The $3.64.
Mr. Hanson:
No. The operating tax rate in the City of Henderson’s general fund is in the area of $0.14, and is as high as we can raise it legally. We have been out asking the voters, a number of times, to raise the property tax rates because we were limited by state laws by how high we can raise those taxes.
Senator Neal:
When you say operating tax of $0.14, what is included? What do you use it for? Paying the salaries of the city administration?
Mr. Hanson:
That is correct, Senator. That operating tax revenue goes into the general fund, the same fund the consolidated tax revenues go into.
Senator Neal:
Aside from salaries, in what other areas would this money be used?
Mr. Hanson:
The salaries and fringe benefits in the general fund are running about 75 percent of our total expenditures. The other expenditures would be . . .
Senator Neal:
Is that 75 percent of the $0.15?
Mr. Hanson:
It is 75 percent of total expenditures in the general fund. I guess on a proportionate basis, you could say 75 percent of the property tax revenues are used for salaries and fringe benefits.
Kurt Fritsch, Lobbyist. City Manager, City of North Las Vegas:
Right now we are in support of most of the amendments that have been made. North Las Vegas is not asking for a base adjustment, as Henderson is, though we did ask for a base adjustment at one time. Frankly, we were too late, because we were not initially invited to the table. It was nobody’s fault in particular, and we are not going to make it an issue, but it is still important for us to see the one-plus language and the CPI language come out.
However, the next step we have taken, in order to try to compromise with the other jurisdictions, is we are willing to leave the CPI in, based upon the arguments Clark County and Las Vegas have made. So, in my mind, that is a second “give” that we have made. The third “give” concerns me a little bit, because, again, it is money we believe should come to the City of North Las Vegas. We estimate we have lost about $4 million since the pre‑1997 legislation. It is not as much as the City of Henderson but is still a significant amount for the City of North Las Vegas, which, at $3.38, has the highest tax rate in southern Nevada.
If we agree with the phase-in, the City of North Las Vegas would lose about another $1.5 million over the coming 3 years. I have to think about this. The disappointing part is we have not been able to come to you with an answer from all the local governments. So, we are turning to you to make the decision. It is certainly not a situation you want to be in, nor one we want to be in either. But, we have put ourselves in that spot today, because of our lack of progress. I would like to say, on our part, we have backed away from what we felt was important to us. However, there is a point when we have to determine how much we are willing to give, because we are not getting the base adjustment. It may be easier for other entities to give on the phasing-in aspect, because, in this proposal, there is money coming to them in year one. It may be just an argument as to how much it is, but we do not get a piece of it. So, this is my concern about the phasing-in, but I do want to say that we have supported this process with Henderson and Mesquite.
Mr. Fritsch:
While we are not arguing per capita, per se, I think, a strong argument was made today. I think, the question you have to ask, on new revenues coming in, beyond the base which we all collect, is, “Why is a resident in one entity worth three times a new resident in my entity?” It does not make sense to have it skewed in such way. I think this exemplifies how the formula is skewed, because we do have differing amounts coming in. Henderson and North Las Vegas are the fourth and fifth fastest growing cities over 100,000 in the country. Mesquite may be the fastest growing city, under 50,000, in the nation. Las Vegas is growing as well, it is the tenth fastest. There has to be a balance in the way we put these revenues together in this state. I do not know if this is the end of it, but I certainly believe we need to take these steps to bring about these adjustments. I truly believe this is an equity issue in our mind.
Senator Neal:
Mr. Fritsch, you heard the question I asked the gentlemen from Henderson, relative to the older communities?
Mr. Fritsch:
Yes, we would see these revenues providing the opportunity to put money back into the mature part of North Las Vegas. And, we have been doing that. We put $2 million into the older parks in the City of North Las Vegas this past year. We are trying to use growth, to not only help pay for growth, but also by increasing the assessed valuation which provides the additional revenues from the increased assessed valuation. We are trying to “plough” those back into the mature section as well. I think if we had the money which should have come to us, it would have gone to the mature part of the community.
Senator Neal:
In my area we see a lot of traffic coming in and out of our community. The people who work in the industrial compound use the streets, and the money is going to the growth communities. When I go home, I have to run over a few bumps getting to my house. I am wondering whether or not the formula is going to be beneficial for the older communities. I am very concerned about this situation.
Mr. Fritsch:
We, in Las Vegas share your concern as well, because we have had to spend so much on public safety in the community. There are some areas which have lagged behind in the past, but, today, we have a tax override in place, which is set up to take care of the mature areas, particularly, the street maintenance. We do not have enough to take care of every street, every year, but it is a reoccurring amount, and we are trying to address those areas. As I mentioned, we are putting money into the mature area parks. The redevelopment areas are starting to take off. I am trying to get the neighborhoods cleaned up and revitalized, focusing on both the business and the residential sides, trying to upgrade those properties. My answer is yes. This is money we spread out which will come back, not only into the new portions of the community, but to the mature portions as well. This is where we are hurting, and where we need funds today. Now, I cannot tell you the exact amounts we would be putting into each function, because money still has to buy firefighters, police officers, and planners
Senator Neal:
I just noticed in the paper today you had an auction, and you sold off about $47 million in land sales. Where is the land located?
Mr. Fritsch:
It is in the far north, east of Decatur Boulevard and north of the Eldorado development. The powerlines run through the area. There are 1900 acres sold and there will, eventually, be a total of 7500 acres. The beltway bisects the property.
Senator Neal:
Why is there a difference in your overall tax rate from Henderson’s tax rate? Henderson is $2.91 and yours is $3.38.
Mr. Fritsch:
We have been taxed the heaviest in the past. I think it goes back to 1981 and how the taxes were set up. Everyone’s finances, then, were determined based upon debt. Over the years, we have had to come up with other tax overrides, which are primarily for public safety. We have two public safety overrides totaling $0.55, and we also have the $0.24 override to pay for municipal court and street maintenance. There is one other small override of about $0.10. These are the overrides we have added in the past, due in large part, because our assessed valuation has not increased at the same rate as our population. Henderson’s population is about half again as large as North Las Vegas. However, their assessed valuation is 2.5 times as much. This goes into the formula when we calculate how much each entity gets back. Since we have gotten a lower amount from the state, in those types of revenues, we have had to request tax overrides to make up the costs of providing similar services.
Senator Neal:
Why are you supporting Henderson?
Mr. Fritsch:
We support Henderson because it is a benefit to us. The future benefit would begin this year, and over the next 3 years, depending on which compromise we use, it could be from $0.5 million a year over the next 3 years to about $1.25 million for each year. It would help us out.
Charles Horne, Mayor, City of Mesquite:
I am here representing the fastest growing small city, not only in the state, but also in the country. As you can image we are certainly impacted by the new formula. When I came to office, it was my understanding, when this new formula was put into place, it would not penalize growth, and we were to give it a try. I believe that was the real intent of the architects of the formula. We believe in parity, level playing fields, and equity. I think the most dramatic illustration we can look at, in terms of how the formula is actually working, is the $4900 Boulder City receives per new resident, and the $34 to $35 that Mesquite loses per each new resident. This tells me we do not have parity through this formula. We just encourage all of us to work toward parity, so, no matter what our circumstances are in various parts of the state we know we are being treated on par with the other citizens of the state, and we can make adjustments locally to make whatever needs we have come to reality. Those needs in a fast-growing community are dramatic, but they are different than in an established community. We have to create infrastructure, and try to make growth pay for itself. I just appeal to you on the basis we seek parity. In fact, if it were possible, let us put everybody at $4900 per new resident. That would certainly be a worthy goal.
Carole Vilardo, Lobbyist, Nevada Taxpayers Association:
I believe the formula distribution, not the rebasing, needs to be changed. It needs to be changed so it applies statewide. My concern with the bill is its application only to Clark County. It was identified 18 months ago, when the excess was rolled into the base, and this was an unintended consequence. The excess was not meant to be rolled into the base. In my testimony to the Assembly committee, I generally said the same thing, “If anything was done to change the formula, it should be done on a statewide basis, and it should be done based on recommendations of the advisory committee.” I feel even stronger about it now since the advisory committee has run a series of numbers. It was determined the base should be separated, and should be a statewide issue. It was, also, determined the CPI should be left in, because you do have a problem in the areas which are not growing, but just keeping up with things. There was a change recommended, relative to how the population formula should be calculated, and was to be included in the formula for distribution. There was discussion about the one-plus language and how it should be modified.
The change made in 1997 by the advisory committee, relative to pooling the revenues, was needed. If you looked at the individual revenue sources making up the ”C-Tax” formula, or the “C-Tax” pool coming into the counties, you had formulas as old as 45 years which did not reflect Nevada’s local governments, how the counties had grown, or the types of entities in the county. We had 10 years of unintended consequences with the tax shift in 1981. Having the advisory committee do an ongoing review has been a benefit to the changes they have made. There are members of the advisory committee here who worked on some of the changes and recommendations, and I would ask, when you deal with this bill, you take the sections dealing only with Clark County, and with the formula distribution, and make those applicable statewide. The recommendations made, based on 2 years’ experience with the formula, would help to smooth out the spikes which have occurred. It would allow excess to go to growth, and it would allow the excess not to be built into the base. If we continue without making the change, we will have entities who would never see excess, because there will be none. The changes in the distribution would allow you to address the demand for infrastructure before normal growth revenue streams are realized.
Senator Neal:
You are confusing me. When you speak of excess, what are you speaking of, the CPI, one-plus, or what?
Ms. Vilardo:
What happens is the money going to each county is combined into a revenue pool and is distributed within each county.
Senator Neal:
You are speaking of the base?
Ms. Vilardo:
It is not the base yet. It is just all the money. Next you take a look at each of the entities getting a distribution from the money.
Senator Neal:
So that is the base?
Ms. Vilardo:
Yes, the base is then distributed on the prior 2 years of revenue receipts, and then base is added into the CPI. The excess is the amount left over.
Senator Neal:
Over the CPI portion?
Ms. Vilardo:
Exactly.
Senator Neal:
We are talking about the one-plus then?
Ms. Vilardo:
Now you have the second part of the formula, which is being called the growth formula. You have one-plus, and then a 5-year moving average, to determine how you distribute the revenues. You look at assessed value and population.
Senator Neal:
My understanding was the amount was in addition to the CPI, and it was not rolled into the base. When you said it was rolled into the base, it confused me.
Ms. Vilardo:
What did happen was the excess was supposed to be separate, but when it was calculated for the second year, and even the calculations for this year, it was included in the base. It was an unintended consequence of what happened in the distribution process.
Senator Neal:
So, you are saying the one-plus language allowed the distribution of the additional money over the CPI, and should not. It is just separate dollars; the excess received over and above last year’s distribution, and should not be rolled into the base for next year.
Ms. Vilardo:
Exactly, Senator. Mr. Chairman, I would ask your consideration in making these recommendations applicable to the entire state, not just Clark County.
Senator Neal:
Ms. Vilardo, are you saying because this additional money was rolled into the base this is the cause of the problem we are now confronted with?
Ms. Vilardo:
It is part of the problem. The fact is if you do not change you will get to a point where there is never excess. When you have revenues generated because of growth, your existing revenues will not take care of the older areas. And, this is why it is very important for you to have the excess separated from the base, and be put in statute, so it could not be misinterpreted in the future by anybody responsible for doing this distribution.
Senator Neal:
For my own edification, if this is part of the whole problem, what is the other part causing the problem?
Ms. Vilardo:
I do not know specifically what the problem is, but what you have here is the one issue identified in reviewing the effects of the formula. The other issue raised was the fact the population being used was based on 1 year. One of the recommendations of the advisory committee is we use a 5-year average to smooth out the spikes, which was of particular interest to the rural counties.
Chairman McGinness:
I think this “May 10 Memorandum” (Exhibit D) from the advisory committee is in your folders. A couple of issues are addressed in here, but I would ask you to stick to the one that is pertinent to today’s hearing.
Guy Hobbs, Lobbyist, Nevada Association of Counties (NACO):
I appreciate this opportunity to go over the work product you mentioned. In the previous meetings of the advisory committee, continued monitoring of the performance of the consolidated tax distribution formula was very prominently on most all of the agendas. We have been dealing with a number of these issues during the last 2 years. The one-plus language, particularly, had been brought to our attention for review. The CPI is somewhat of a new issue for us to review, and there seemed to be widespread agreement the CPI was necessary to the formula. We realized, approximately 1 year after the formula went into place, in 1997, the excess was being rolled into the base. It had the effect of increasing the base amounts dramatically each year, and putting additional pressure on the revenues which would be necessary to be raised each year to cover the base amounts. It threatened the future existence of there being any excess at all, which would obviate the need for any sort of one-plus or growth statistic, if there was no excess to eventually allocate.
The other issue which came up from time to time, was the relationship between the two growth statistics which were used to divide excess, the population, and the assessed value. From the inception of the new formula, we have been using a 5-year moving average for assessed valuation to smooth out volatility. This was not initially done with population. There was also some concern expressed, from time to time, as to how redundant the population statistics may be in relation to the assessed valuation statistics, as well as other matters which caused us to focus on all of these matters previously mentioned at our last meeting on April 26.
At our the last meeting we were following up on matters which had been on the advisory committee agendas. We were not specifically undertaking a discussion of A.B. 653 as written. As the advisory committee had originally worked on promulgating the formula prior to 1997, we viewed our role as being one of looking at this from a statewide tax policy perspective, and not, necessarily, getting into the local issues or concerns raised specifically in A.B. 653. Admittedly, there is a tremendous amount of overlap in subject matter, and, obviously, some of the issues raised today, through A.B. 653, have been raised previously to the advisory committee. So, there is some overlap between what we will discuss today and what you see in A.B. 653.
Mr. Hobbs:
First, we believe the excess and the base amount should be separated in the future from this point forward. As was mentioned earlier, the excess has been rolled into the base, and has inflated the bases substantially. The CPI has then been applied to the inflated values, and, again, it puts much more stress and pressure on the overall revenue growth simply to cover the bases. I believe at this point in time, only 4 of the 17 counties have any excess, and this has likely been part of the cause. We would like to stop this particular practice from going forward. This would be the first recommendation the advisory committee would make to the Legislative Committee to Study the Distribution Among Local Governments of Revenue from State and Local Taxes.
The second point relates to the inclusion of the CPI in the formula. Again, from the very beginning, members of the advisory committee had assumed this was a widely accepted feature. In our recent meetings, strong arguments were made for retaining the CPI as an element of the formula, and it was the recommendation of the advisory committee the CPI, in the form originally included in the formula, be retained.
John E. Sherman, Lobbyist, Finance Director, Washoe County:
These two recommendations, splitting the excess and the base, and the CPI, are basically one recommendation, but they were split in two for purposes of discussion. I just want to clarify, from the advisory committee’s perspective, those two things go together.
Mr. Hobbs:
We, also, undertook a discussion, again, of the usefulness of the one-plus factor in achieving the multiple goals set forth for the committee. The simpler one is bringing the 5-year moving average for population into conformance with the 5‑year moving average for assessed valuation. Through our discussion, we recognized spikes could occur, not only with assessed valuation but also with population. Certainly, there are cases where this can occur right now; such as, when census values come out and differ from the values used, when certified by the Governor’s office, or lower census values could have an adverse effect. We certainly predict this will happen once every 10 years. It could, also, have an adverse effect on an entity whose population values have been previously either over-reported, or whatever the case may be. It would help smooth out a condition which several of the rural counties face with the volatile population values.
Linda Ritter, City Manager, City of Elko:
You have probably noticed some conditions where you will have steep increases, as well as, steep declines in population. Your service levels cannot respond quite so quickly. By using a 5-year average, you could smooth it out a little, so you have time to respond. If you lose population, you do not immediately see a loss, and you can work through it over a 2- or 3-year period. We would definitely support a 5-year average.
Mr. Hobbs:
Returning to the matter of the one-plus, this has probably been the most widely discussed element of the formula, other than perhaps the bases from the inception of the change in formulas. First, let me give you some observations from the advisory committee. The first observation concerns the value to having a stabilizing statistic in the formula, which would help smooth out any volatility occurring over time. We have run numerous examples to show the presence of such a statistic had benefit. The question is whether or not the statistic should be one, or some fraction of one, and that is what we focused our effort on at our last meeting. Our recommendation was to reduce the statistic to 0.75 in the first year of phase-out, and 0.5 in the second year. Coupled with that recommendation would be a requirement the advisory committee, through the Legislative Committee to Study the Distribution Among Local Governments of Revenue from State and Local Taxes, study the matter further to determine, at each increment of reduction, the kind of effects we are having throughout the state. We are talking about this on a statewide basis, not just Clark County as the dialogue focused on earlier. In one county, I am aware of, the only reason they had a positive value after applying the two growth statistics, was the simple fact they were adding one to it. Both population and assessed value were negative, and the only way to make the growth statistic positive was to add the one value to it. Though they did not have any excess at the time, with the separation of base and excess, as we have recommended, they would likely have excess in the future. If you did not have a factor, which would accomplish making the values positive, they would have excess, but be unable to distribute the excess. And, that would be a very unfortunate consequence to have those revenues and not be able to distribute them because of a quirk in the formula. There was also a tremendous amount of discussion on how the phase-out could occur. Our recommendation, again, was to change the value from 1.0 to 0.75 in the first year, and 0.5 in the second year, and then report back at the next legislative session how to best continue the phase out.
Mr. Hobbs:
The other discussion would have had us running, essentially, what I refer to, as parallel formulas. You run 25 percent of the formula without one-plus and 5 percent with one-plus, then in the next year, 50 percent without, and 50 percent with, and then the next year would be 25 percent with and 75 percent without. That was certainly an alternative, but after the advisory committee took some testimony from the Department of Taxation regarding the difficulty in making some of the programming changes this rapidly, we felt somewhat merciful about making the recommendation we made.
Senator Neal:
What would be achieved by doing it two different ways?
Mr. Hobbs:
I think both of them, Senator, attempt to recognize there is probably a point at which the benefit of having a statistic, and the value of the statistic not being too high, so as not to suppress the manner in which resources are allocated toward growth. We do not know exactly where the point is, so, I think, under either situation, the goal was to try to move us there cautiously and slowly so we did not overshoot the particular mark.
Senator Neal:
You are dealing with a plus and a minus of the same quantity; the answer is zero, is it not?
Mr. Hobbs:
Mathematically, there may be a difference until you get to zero. Under the recommendation made by the advisory committee, in 2 years we would only be to 0.5 of the one and we would only have cut the one in half after 2 years. Then we would be recommending again to you through the Legislative Committee to Study the Distribution Among Local Governments of Revenue from State and Local Taxes, how to continue the reduction in the one-plus beyond that point. The other formula, likely, would achieve a more rapid phasing-out than would the method we have recommended to you.
Senator O’Connell:
I want to ask Mr. Pursell, knowing what a difficult time you have had with the old equipment trying get the numbers out for the committee, are you going to get the updated computer equipment you need and have requested?
David Pursell, Executive Director, Department of Taxation:
The subcommittee of the Senate Committee on Finance did close our budget with one small exception on some software licenses. But, yes, the subcommittee of the Senate Committee on Finance is recommending closure of our budget, and it does include the new equipment we have requested.
Senator O’Connell
How long after you receive the money will you be able to have the equipment up and running?
Mr. Pursell:
Well, the majority of the equipment is focused on an imaging and scanning project we are putting in place. The problem with the consolidated tax distribution is only one individual would be modifying the formulas through quite an extensive linkage of spreadsheets.
Senator O’Connell:
Mr. Chairman, I did not want to take up the committee’s time with this, but I thought it was important we have an understanding about when it is physically possible for us to be receiving the information.
Mr. Pursell:
I believe, with just the one individual we have right now, we are probably looking at 4 months. Additional programmers for the department were also approved which is certainly going to help once they become familiar with the different tax distribution programs we have in the department. It is not something we could do if this became effective the first of the next fiscal year. It would take longer than that to develop the program.
Senator O’Connell:
I guess, then, my question would be to Mr. Hobbs, or Ms. Ritter. Would you anticipate relying on the state to complete those number runs to give you the information, or is there another volunteer could be doing it?
Mr. Hobbs:
I am not sure our discussion actually got to that particular point. It would be premised on the assumption we would be running the parallel formulas, which, I believe, is what Mr. Pursell was referring to. It is one of the reasons for the recommendation from the advisory committee, to the Legislative Committee to Study the Distribution Among Local Governments of Revenue from State and Local Taxes, which was to simply change the factor. This is a much simpler mechanical thing to do than reprogramming to run the parallel formulas. Now, this is not to speak to the relative wisdom of the two approaches side by side. It was simply to recognize, given the resources we have in the Department of Taxation, we may not be able, practically, to accomplish it for the first year of the phase-down.
Oscar B. Goodman, Mayor, City of Las Vegas:
Municipal government in southern Nevada and, particularly in the City of Las Vegas, is very concerned we continue to be responsive to the needs of our constituents, and we do the job in an efficient manner. When I saw A.B. 653 in the form presented to the Assembly, I panicked. I knew if the CPI was going to be deleted, and the one-plus was going to be taken out of the formula, we were going to be in a position, because of our growth patterns and our revenue patterns, especially in what is happening with the economy at this time, where we were not going to be able to provide services to our constituents. The fire and safety, the police, the medical, the recreational, the parks, the justice system, the neighborhoods, all of these would be affected if A.B. 653 passed out of the Assembly as received. We are the heart and soul of southern Nevada, and I saw it really being ripped out if this legislation were to pass. We have issues down there which are, perhaps, unique to the urban area. We have to take care of our homeless, the mentally ill, the chronic inebriated, and the maturing neighborhoods. I was pleased some progress appears to have been made today in the concessions, based on some discussions we had, where it now looks like the CPI will remain in the formula, and the one-plus will be phased out. The basic disagreement now left would appear to be the contribution of the $4 million to Henderson. This does concern me, in the sense there is a disparate property tax as far as what we pay in the city of Las Vegas, and what the citizens of Henderson pay. To ask our citizens to come up with this kind of money is very difficult to justify. Our city council has passed a resolution in opposition to the bill as it is presently written, and we recognize, with all due respect, there has to be a modification to equalize the problem.
Mr. Goodman:
I am the chair of the Southern Nevada Regional Planning Coalition, and I want you to know how well the entities have gotten together and tried to address our issues. We have worked very hard on air quality, on transportation, and on the problems in southern Nevada. We have even made the homeless into a regional issue, which goes to show we can work together. This particular bill has really wrested that relationship apart. We will be able to continue to work together, but, we believe, this is not the way to go about it with a bill like this, which would have the drastic consequences if, in fact, it were passed. (Exhibit E is hard copy of a Microsoft PowerPoint presentation Mr. Goodman made during his testimony.)
Marvin Leavitt, Lobbyist, City of Las Vegas:
There are several comments I would like to make regarding some of the discussion we have heard here today. Assemblyman Perkins indicated, during his testimony, there was some universal agreement the old formula was not working. If we assume this to be the case, I sort of lose, in a way, the logic of determining if the new formula is working properly, by comparing it to the old formula. You want to see if the new formula is working, and compare it to the old formula, which we knew was not working, if we get a difference, does it mean the new formula is not working, or does it say the old formula was not working? In other words, if you can make the comparison, and if you lost revenue in comparison, it is sort of like me saying, “I anticipate getting a $10,000 raise this year, and since I only got a $5000 raise, I lost money.” Somehow or other I missed the logic of this kind of an argument saying there are big losses of revenue when we agree the old formula was not working.
The advisory committee has recommended the formula be modified to 75 percent in the first year and 50 percent in the second year, and then before it goes down further, we will take another look at it. I think there is some great logic in this, rather than putting into statute the 25 percent and 0 percent as suggested by the mayor of Henderson.
You know we have assumed, in our discussions, the only need for additional revenue comes as a result of growth in a community. Let me also suggest when a community is getting older and starts to decline, the appreciation has made the property tax somewhat less valuable. Also, the need for social services has increased. Maybe there is just as much need for additional revenues to a community, under those circumstances, as there is to a community which is growing, particularly when we see some of these growing communities behind locked gates, or in master planned communities, where the amenities are or are not normally put in by the city. The maintenance is not done by the city, and someone else does the roads.
Mr. Leavitt:
You know we talked about new people and maintaining per capita numbers, what do you say, for instance, when you have per capita growth and revenue of 5 percent, and your own community is growing by 20 percent. If you are going to maintain per capita under those circumstances, the tax is not growing as fast as you are. You have to steal or take money from someone else, unless, I have missed the mathematics of this somehow. That is the situation we face when we use per capita numbers. There is a problem with that. For instance, let us just take a community which is not growing at all, and the only thing they receive, under one circumstance, is money from the CPI, which would be the case if we completely eliminated the one-plus. The only thing they get is money from the CPI, and, obviously, just that happening alone is going to make their per capita revenue go up, is it not? It is going to go up when we speak of it in actual dollars, but if we speak of it in real dollars, when it is adjusted for inflation, their per capita would not necessarily go up.
Now one thing we have a problem with, as the mayor stated, is the $4 million tribute money. Maybe I should not call it tribute money, but I sort of look at it that way. I think there is a real problem.
The situation, in 1981, was we had a computed, allowed revenue figure, and we subtracted the sales tax coming into the entity, to get the allowed property tax. Now, when Henderson compared itself to other governments, they found out the sales tax occupied a greater percent of their total allowed revenue than other governments, and hence their property taxes were forced down lower than some other companion governments. Now let us look at the logic. They came to the committee on local government finance asking for an increase in revenue from, essentially, sales tax, to offset the fact their property tax was lower than other local governments, at this moment in time. The growth they would have gotten from property tax over the years was less, because they started out at such a low rate. Now I miss the logic here. Let us see if we can follow this through. Now they are saying, “What we want you to do is, we want certain governments to give up a portion of their sales tax or consolidated tax to us because of this problem.” Is this logical? The problem was originally caused by too much sales tax, and not enough property tax. We suggest if they want to solve the problem, it is not to try to take money away from Clark County and Las Vegas, but to come to the Legislature and ask for an increase in property taxes.
Mr. Leavitt:
Relating to the comments made about the Department of Taxation and their recommendations, let me just mention, the Department of Taxation serves in a staff function to the committee on local government finance. The committee on local government finance is the one who made the final decision relating to these appeals. To come back now and say, “Since the Department of Taxation recommended for us, but the appeal was denied, we think you should now make an adjustment on our behalf.” This would be the like me coming back and saying, “Kevin Welsh (Kevin D. Welsh, Deputy Fiscal Analyst) made a recommendation to this committee last year and you rejected it. That is unfair, and I want you to redo it now, because you shouldn’t even have a right to overrule Mr. Welsh.” Now, the body appointed by the legislature made the decision. The idea had been the Department of Taxation would make the final decision, and the legislature would have given the Department of Taxation the right to make the final decision. With the problem of the $4 million, again it seems to me, we are not going to go back to try to solve another problem. The problem here is not relating to the sales tax or the consolidated tax. The problem Senator Neal identified is the property tax side. If you want to solve the problem, give them a property tax override, because you can see their rate is substantially less than the other local governments.
In other words, we believe we should follow the recommendations of the advisory committee. We feel if there is any adjustment to be made between the entities, it should be made based on negotiations between the entities, and not arbitrarily taking money from one to the other. However, if you want to make an adjustment, we feel that the appropriate adjustment is to adjust the allowed property tax to something higher than the $0.15 that was previously discussed.
Virginia Valentine, Lobbyist, City Manager, City of Las Vegas:
I want to add the city council did pass a resolution supporting the advisory committee’s recommendations to the Legislative Committee to Study the Distribution Among Local Governments of Revenue from State and Local Taxes. In addition, the city has made an offer, in negotiations between the City of Henderson and Clark County, which you have. One of the things we wanted to point out is each entity benefits in different proportions to different sources for local governmental revenues. We would ask, with all the various property tax shifts under consideration, when you make those considerations, you consider, holistically, the cumulative impacts of all of those changes to each of the affected entities. We do realize some adjustment is necessary, but we do feel this bill goes a little too far.
Mr. Goodman:
We appreciate the courtesies you have extended to us, and, all I know, is we may be at the beginning of some tough times. We really have to work together. Las Vegas has all it can handle, as far as challenges. The Indian reservations are threatening the very lifeblood of our economy. We believe the way to address this, however, is through the advisory committee rather than to impose this burden upon the legislature.
Senator Rhoads:
We know problems lie ahead. We have just spent 2 hours with the Governor talking over revenues, incomes, and expenses. We all have to work together; there is no doubt about it.
Dale Askew, Lobbyist, Clark County:
Clark County is opposed to A.B. 653 in its present form. We think it should be amended. We agree with a lot of the testimony today about the consumer price index being included, amended back into the bill, and to remain at its full force. We, also, agree the one-plus language is an inhibiter to the excess money going to growth communities, and would agree it should be phased out over a period of time. Four years has been suggested as a phase out period, and we understand the advisory committee is making a recommendation as to the methodology to phase out the one-plus language. We, however, agree with the argument the City of Henderson is making with regard to how it should be phased out. Maybe, while the advisory committee is recommending a good statewide policy for phasing it out, we would ask your consideration for Clark County to phased it out in a faster fashion than the one the City of Henderson has described to you. With those two recommendations, we pretty much agree with the committee. We also agree the moving average should include the 5-year moving average for population, as well as, assessed valuation, and the so-called base should not be rolled up each year but, that it be held constant and allow the excess part to grow faster and at a larger amount. Finally, with regard to the base adjustment, if this committee concurs with the Assembly a base adjustment should occur, the City of Las Vegas and Clark County would indeed give money to Henderson to help them with their difficulties. We think Clark County’s exposure should be limited to 50 percent of whatever you decide as a proper base adjustment. The bill identified $4 million as the base-up amount to flow to Henderson, and if it remains, then we would expect our exposure to be 50 percent of the amount. Or, if it were reduced, as has been suggested by some of the other entities, then we would want our exposure reduced as well. So 50 percent of whatever you decide as the base adjustment.
Senator Neal:
I heard the phrase moving average, and I saw it in this report, what does it mean?
Mr. Askew:
Instead of picking a point in time, like a year or a fiscal period, and using it as a base statistic, I think they are suggesting using a 5-year average as a statistic, rather than 1 year as a statistic.
Senator Neal:
You should say a 5-year average rather than a moving average.
Mr. Askew:
I think, each year, incrementally, it moves up 1 year. So the 5 years keeps rolling forward.
John Sullard, City Manager, City of Boulder City:
We have always been concerned about the consumer price index being taken away. Removing the CPI would effectively, over time, cut a significant portion of our budget. Consolidated tax represents about 50 percent to 55 percent of our budget. Over a long period of time it would be detrimental to the city. In regard to the per capita numbers, you heard from the different people, we are pretty growth controlled. We grow 305 people a year. We are off less than 200 people between the state estimate and the actual census.
Chairman McGinness:
The meeting is adjourned at 5:01 p.m.
RESPECTFULLY SUBMITTED:
Mavis Scarff,
Committee Secretary
APPROVED BY:
Senator Mike McGinness, Chairman
DATE: