MINUTES OF THE
SENATE Committee on Taxation
Seventy-First Session
May 21, 2001
The Senate Committee on Taxationwas called to order by Chairman Mike McGinness, at 7:05 a.m., on Monday, May 21, 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 Ann O’Connell
Senator Joseph M. Neal, Jr.
Senator Bob Coffin
Senator Michael Schneider
COMMITTEE MEMBERS ABSENT:
Senator Randolph J. Townsend (Excused)
STAFF MEMBERS PRESENT:
Kevin D. Welsh, Deputy Fiscal Analyst
Rochelle Trotts, Committee Secretary
OTHERS PRESENT:
James B. Gibson, Mayor, City of Henderson
Oscar B. Goodman, Mayor, City of Las Vegas
Michael Alastuey, Lobbyist, Clark County
Philip D. Speight, Lobbyist, City Manager, City of Henderson
Marvin Leavitt, Lobbyist, City of Las Vegas
Chairman McGinness:
We will reopen the hearing on Assembly Bill (A.B.) 653.
ASSEMBLY BILL 653: Makes various changes to formula for distribution of certain revenues. (BDR 32-1459)
James B. Gibson, Mayor, City of Henderson:
As we indicated to you last week, we had determined there was another methodology for doing the calculation of rebasing of the base adjustment. We ran the numbers and met with City of Las Vegas and were able to find a compromise. The problem is in reworking the numbers. The burden fell more to Clark County whose agreement we lost in the process. We have come before you without a three-party agreement, whereas last week we had an agreement with Clark County and a disagreement with the City of Las Vegas. Depending on which calculation we use, the new calculation permitted us to reach an agreement with the City of Las Vegas.
We are concerned the bill does not languish here and that it moves forward. I think there is an agreement the CPI (Consumer Price Index) would remain in and the one-plus language would be phased out, although I am not sure there is a full understanding of the application of the one-plus language. It is our view the application of the one-plus language should, in the first year, but the one-plus language would apply to the excess, except for 25 percent of the excess; the second year it would be 50:50; the third year 25 percent would be subject to the one-plus language and the other 75 percent would not; and the fourth year 100 percent of the excess would not be subject to the one-plus application. That is a little different from what some people are talking about, but it is something we have agreed upon.
We have also agreed to the rolling average on the growth factor as well as agreeing the excess should not be rolled into the base. This is a fix that ought to apply only in Clark County or in counties with a population over 400,000.
There is an agreement that Henderson’s base may be adjusted by $4 million and the dispute is on how we accomplish this. The bill proposes half of it to come from Clark County and half to come from the City of Las Vegas. The City of Henderson does not care how it is allocated, we just care that it happens. We have not been able to find a resolution, but think it is a fair representation of where we are. The City of Las Vegas is agreeable to $1 million of the base adjustment and Clark County is agreeable to $2 million, but Clark County wants to go dollar for dollar with the City of Las Vegas. So we have resolved a $2‑million base adjustment with the entities; the problem is getting the other $2 million.
Senator Coffin:
Is the idea to keep this in motion until we can finally reach a resolution, or will somebody make a move that will throw it “out of whack”’ again, no matter what the tax distribution committee (Legislative Committee to Study the Distribution Among Local Governments of Revenue from State and Local Taxes) decides?
Mr. Gibson:
We have purposely avoided the use of the language “fair share,” it is already taken. It is our contention, while the formula in effect up until 1997 was not working the way it should have, the formula we have today made an over-correction at the expense of the more rapidly growing entities. The one-plus language has served to penalize growth and the last thing we need in Clark County is to have a situation where the debate is about whether growth pays for growth. Growth has actually been penalized in terms of the flow of the revenues. We believe the formula over-corrected, but we are not prepared to suggest the whole formula should be thrown out. We realize things need to be flexible enough for us to get a lengthier picture. But, what we can see already is the one-plus language has had a devastating effect no one predicted was going to happen. It was predicted there would be a shift, but not a shift of the magnitude that has occurred.
Senator Coffin:
Is the purpose of the language in the bill to avoid a north/south redistribution again?
Mr. Gibson:
That is correct, we have tried to contain this to Clark County.
Oscar B. Goodman, Mayor, City of Las Vegas:
The City of Las Vegas offered $1 million which was unacceptable to Henderson because they wanted to have $4 million and the county was saying they would match us dollar for dollar and the most we could ever get to was the $2 million figure. I felt, based on our negotiations last Friday, we were able to accomplish that because we were giving $1 million out of the excess and that equated with the county’s contribution to a $4 million figure, over a period of time, to the City of Henderson. The important thing we have to understand here is we cannot look at this piecemeal. Every time you tinker with one portion of the formula, be it the CPI or the one-plus, it affects the other aspects of the formula. That is why it is difficult in order to come here and say we have reached an accord. Basically the mayor of Henderson is correct. We agree in principle on the CPI, the one-plus language, and the growth factor, but I am not sure it means much without our also agreeing or resolving the question of the base adjustment. As it stands now we are willing to work with them and to achieve a compromise in an effort to attain something that is fair. But we are going to be very protective of that million-dollar figure. We are the older part of the valley, we are the more mature part, and we have services we provide that other entities do not provide. The $1 million is as far as we are going to go.
Michael Alastuey, Lobbyist, CLARK County:
The testimony you have heard so far is on target. There is general agreement on the aspects of correction to the formula proposed by the tax distribution committee, retention of the CPI, and separation of the base and the excess this coming July 1. Those are coupled so that the CPI could be applied to both. There is a 5-year moving average population and the one-plus is to be phased out.
It is true there are two different methodologies under consideration for phasing out the one-plus, and the county can live with either of those that have been proposed so far. The county’s position remains; we would match the rebasing effort if there was one in the bill, dollar for dollar, with the City of Las Vegas up to $2 million share on the part of Clark County. Our position has not changed since the early part of these negotiations. It is true, in the attempt to re-do the formula last week, the agreement on the part of Clark County was lost because we felt the recalculation did impose an undue burden on Clark County.
In observing the Henderson-suggested formula between the middle of last week and now, the method by which any rebasing is accomplished is of concern as well. The apparent opportunity the mayors felt in exploring use of the excess to accomplish the rebasing, as opposed to a simple rebasing as is now stated in the bill, poses some issues, both policy and technical in the formula, we think are fairly grave and suggest you proceed cautiously. If there is to be rebasing, let it be simply stated in the bill. To attempt to avoid discussion of rebasing by taking it from so-called excess creates the need for a set of artificial calculations that are very convoluted. Number one, it would be very difficult to put accurately in a bill without unintended consequences. So, if there is a rebasing, our plea is to do it simply, directly, and honestly.
Chairman McGinness:
Committee, if you recall the memorandum of May 10 (Exhibit C) from the tax distribution committee, they are talking about the formula which begins on the bottom of page 2 where it says, “Item: continuation of discussion.” You also have the City of Henderson’s proposed amendment (Exhibit D).
Senator Neal:
Did the tax distribution committee recommend we keep the Consumer Price Index in and phase out the one-plus language?
Chairman McGinness:
Correct.
Senator Neal:
The phaseout would start with the first year at 75 percent, and then 50 percent the second year, then it would come back in the next session and the legislature would take a look at it.
Chairman McGinness:
Correct.
Senator Neal:
What damage does it do to any of the groups to have it done that way?
Philip D. Speight, Lobbyist, City of Henderson:
The difference between the two proposals, one being the tax distribution committee’s as it relates to 75 percent of the one-plus in the first year, and 50 percent plus in the second year, is those two numbers are applied against the entire excess. The City of Henderson, as well as Clark County, the City of Las Vegas, and Mesquite request, of the entire excess pie, you take 25 percent of the pie away first then apply the one-plus language to 75 percent of the remaining portion of excess that is available. In year 2, you then split the excess 50:50 and apply the entire one-plus language against 50 percent of the excess. The difference is significant in that until you get to approximately 1 percent plus, there is no real significant financial impact. In other words, until we get down to 1 percent instead 75 percent, the 75 percent impact to those cities being penalized is negligible.
Senator Neal:
Does the City of Henderson agree with this proposal?
Mr. Speight:
We agree to the proposal to split off 25 percent of the excess and then apply the one-plus language to 75 percent.
Senator Neal:
I thought that was what the tax distribution committee was attempting to do.
Mr. Speight:
No, they applied 75 percent plus to the entire “pot” of excess, which is different.
Senator Neal:
What I am trying to understand is the difference in terms of loss of dollars to any one of the entities.
Mr. Alastuey:
Essentially, both phasing methods take 4 years. The phasing method preferred by the City of Henderson, where the excess is split into two components, each one calculated partially under one-plus and absent one-plus, makes that 4-year phasing a little quicker on the front end. Clark County would be comfortable with either phasing method.
Marvin Leavitt, Lobbyist, City of Las Vegas:
The tax distribution committee actually discussed both methods of determining how you do the excess and finally came up with the language written in the proposal. Most of the discussion we had in the past had simply been on changing the one to something else as it relates to the formula. We had not run any numbers relating to dividing the excess into two parts.
The committee recommends we go 75 percent, then 50 percent, and then take another look at it before we go to the last two parts, which is 25 percent and then zero. The idea being, we want to take a look at this incrementally so we do not get ourselves “married” again to something else that could turn out to be a problem for us when we have a chance to look at it in 2 years to see what was the actual effect of doing this. That is the reason the tax distribution committee recommended the 2 years; we would take a look, and then adopt the subsequent 2 years if we found out it was necessary.
Right now the formula only recognizes the reason for dividing for excess money is the growth in the community as measured by the assessed value and the population growth. Perhaps there are other things requiring a need for services. We had talked about what to do when you have a community in a stable condition but yet has older areas requiring additional services like the homeless situation as an example. For instance, there is nothing in the bill to provide any extra money for recognizing such a situation when it happens to a community that is going from one side of growth to where we recognize almost only growth. Then maybe there is something else we need to do like do these first 2 years, take a look, and if it is necessary do the last 2 years.
Senator Neal:
The position in which the tax distribution committee has taken is acceptable to the City of Las Vegas?
Mr. Leavitt:
That would be acceptable to us.
Senator Neal:
We have the county and the City of Las Vegas in agreement on one issue and the City of Henderson in disagreement on the other.
Chairman McGinness:
Mr. Speight, you are in agreement with the tax distribution committee’s recommendations except for the phaseout, am I correct?
Mr. Speight:
That is correct. The City of Henderson, Clark County, and the City of Las Vegas had some negotiations over the last 4 months and that was the agreement we had arrived at, as well as with the City of Mesquite and the City of North Las Vegas. The City of Henderson’s preferred position is for you to take the “pot” and start taking away the base.
Senator Neal:
I would go with the tax distribution committee’s recommendation which would keep the Consumer Price Index in and start to phase out at 75 percent and go to 50 percent, then hold it and come back to the next legislative session and look at it 18 months from now.
SENATOR NEAL MOVED TO AMEND ACCEPTING THE RECOMMENDATION OF THE TAX DISTRIBUTION COMMITTEE AND DO PASS AS AMENDED A.B. 653.
SENATOR O’CONNELL SECONDED THE MOTION.
Chairman McGinness:
Are we going to address the allocations in the bill from the Assembly, the $2 million?
Senator Neal:
The motion is to accept the recommendation of the advisory committee and the $2 million was not a part of the motion, but we can discuss it and see if we want to add it. It will probably be going to conference.
Chairman McGinness:
I think your observation this is going to conference is correct. The recommendation is to amend the bill with the recommendations of the tax distribution committee.
THE MOTION CARRIED. (SENATOR TOWNSEND WAS ABSENT FOR THE VOTE.)
*****
Chairman McGinness:
I adjourn the meeting at 7:34 a.m.
RESPECTFULLY SUBMITTED:
Rochelle Trotts,
Committee Secretary
APPROVED BY:
Senator Mike McGinness, Chairman
DATE: