MINUTES OF THE meeting
of the
ASSEMBLY Committee on Taxation
Seventy-Second Session
March 13, 2003
The Committee on Taxationwas called to order at 1:30 p.m., on Thursday, March 13, 2003. Chairman David Parks 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 Parks, Chairman
Mr. David Goldwater, Vice Chairman
Mr. Bernie Anderson
Mr. Morse Arberry Jr.
Mrs. Dawn Gibbons
Mr. Tom Grady
Mr. Josh Griffin
Mr. Lynn Hettrick
Mr. John Marvel
Ms. Kathy McClain
Mr. Harry Mortenson
Ms. Peggy Pierce
COMMITTEE MEMBERS ABSENT:
None
GUEST LEGISLATORS PRESENT:
Assemblyman Tom Collins, District No. 1
Assemblyman Jason Geddes, District No. 24
Assemblyman Pete Goicoechea, District No. 35
Assemblyman Rod Sherer, District No. 36
STAFF MEMBERS PRESENT:
Ted Zuend, Fiscal Analyst
June Rigsby, Committee Secretary
Mary Garcia, Committee Secretary
OTHERS PRESENT:
Hal Keaton, Commissioner, Lincoln County Commission
Mike Baughman, Humboldt River Basin Water Authority
Joe Johnson, Toiyabe Chapter of the Sierra Club
Joe Guild, Southern Nevada Water Authority
Andy Belanger, Southern Nevada Water Authority and the Southern Nevada Water District
Julie Wilcox, Southern Nevada Water Authority
Chairman Parks called the meeting to order at 1:41 p.m. and requested the roll call. The hearing on A.B. 229 was opened.
Assembly Bill 229: Increases amount of tax that county of origin may impose on certain transfers of water. (BDR 48-1083)
Assemblyman Goicoechea, representing District No. 35 and a sponsor of A.B. 229, commenced testimony. Mr. Goicoechea stated the bill was co‑sponsored by Assemblyman Sherer, representing Lincoln and Nye Counties. To provide historical review, Mr. Goicoechea explained that, in 1989, the Las Vegas Water District had filed 146 applications in 27 groundwater basins. Those areas were located in Clark, Nye, White Pine, and Lincoln Counties. The total duty was 189,000 acre-feet of groundwater. According to Mr. Goicoechea, there were currently 114 applications in place, accounting for 175,000 acre-feet of groundwater.
Continuing, Mr. Goicoechea explained that Nevada Revised Statutes (NRS) 533.438 allowed for the imposition of a tax on groundwater. It specifically covered the situation where groundwater was appropriated in one county and exported to another county where it was put to beneficial use. He labeled the proposed legislation as “enabling legislation” because it would authorize raising the rate. By statute, the current rate was $6, and Mr. Goicoechea emphasized that was clearly not sufficient to invite essential negotiations between the rural counties and the Southern Nevada Water District (SNWD). It was also necessary to consider the economic opportunities lost to the rural counties with the loss of 170,000 acre feet of water. Mr. Goicoechea called the $6 rate “very cheap” since it amounted to less than $5 per month to the average residential user.
The rate increase proposed by A.B. 229 was from $6 to $60, an amount described by Assemblyman Goicoechea as a “deterrent” to the export of precious water rather than a revenue source. In terms of the economic health of his area, Mr. Goicoechea stated his preference would be for 170,000 homes or businesses in his community, rather than $10 million worth of revenue spread across four counties. Mr. Goicoechea cautioned the Committee that the revenue would not start until the water was actually exported. The applications had been in place for 14 years, resulting in lost economic opportunity for those rural counties. New agricultural uses or construction had not occurred because technically, under Nevada law, “first in time, first in right.”
Mr. Goicoechea clarified that, in all fairness, the Southern Nevada Water Authority had been negotiating “basin by basin” with some counties, especially Lincoln County; however, he judged the duty of determining who received the water allotments should reside with the State Engineer. Mr. Goicoechea spoke with confidence that nobody would disagree that the issue was one of equity and that the rural counties had to be made whole. On the subject of the proposed $60 rate, Mr. Goicoechea defended the seemingly high amount, saying if the value of an acre-foot of water was understood to be $3,500, the fairness could not be disputed. If the constitutional $5 cap were applied to that, it would amount to $67.50 in annual tax revenues.
Continuing, Mr. Goicoechea stated it was necessary to consider that the Arizona Water Banking Authority was charging $62 per acre-foot for interstate recharge of raw water. The “in-lieu-of” costs, as well as operating and management costs (O&M), drove up that amount by another $99. Citing the example of Fallon and the Truckee-Carson Irrigation District (TCID), irrigation water generated $33.90 per acre. Reiterating the $6 rate was clearly unjust, Mr. Goicoechea encouraged the Committee to examine the $600,000 for 170,000 acre feet of water over four counties. He declared it as extremely unfair. At $60 per acre-foot for 170, 000 acre-feet, the total revenue generated would be over $10 million; however, it could be 20 years before those revenues would be realized. Mr. Goicoechea emphasized the water had to first be exported from the rural counties and put into beneficial use before the tax could be opposed.
Summarizing, Mr. Goicoechea stated that the $60 tax rate had to be in place in order to bring the Southern Nevada Water District to the table for negotiations with the rural counties.
Chairman Parks requested clarification on the figure of 170,000 acre-feet. In response, Assemblyman Goicoechea stated there were 114 applications still in place covering 175,000 acre-feet. Chairman Parks commented that his quick mathematical calculations of 170,000 multiplied by $6 computed to just over $1 million. Assemblyman Goicoechea acknowledged his comment, but added that dollar amount had to be spread over several geographic areas, including Nye, Lincoln, and White Pine Counties. As such, $1 million was not a significant benefit to the four counties when compared to the loss of the water. Copies of the applications as filed could be made available to the Committee, according to Mr. Goicoechea.
Assemblyman Mortenson made reference to Assemblyman Goicoechea’s testimony on the cost for water paid by various entities, specifically figures of $35 and $70 per acre-foot. He asked who those entities were. In clarification, Mr. Goicoechea stated those figures applied to Fallon and the Truckee-Carson Irrigation District (TCID). He agreed it was $33.90 per acre, but not per acre-foot. Assemblyman Mortenson again asked about the testimony leading up to that. Mr. Goicoechea responded it was in reference to the Arizona Water Banking Authority. Presently, the charge for raw water was $62 per acre-foot, and with “O&M” and other costs, the total approached $161 per acre-foot when the water was actually recharged.
Assemblyman Griffin inquired about the $5 per month to the residential user and asked if that referred only to the water transferred and used. Assemblyman Goicoechea agreed and stated it applied to those 170,000 residential units that would be serviced by the 175,000 acre-feet. He added it was necessary to consider the fact the water should be and would be blended with Colorado River water. In response to Assemblyman Griffin’s comment that it was not “$5 across the board,” Mr. Goicoechea agreed.
Assemblyman Goldwater asked if there was a two-thirds voting requirement on enabling legislation. In response, Ted Zuend, Fiscal Analyst, clarified by stating, not all enabling legislation had that requirement because it was the governing body that increased the fee. Mr. Zuend added that the language said it “may impose,” not “must impose.” He speculated that it was enabling and did not require a two-thirds vote, especially in the Committee. He recommended a legal opinion might be appropriate, especially for a Floor vote.
Offering to clarify, Assemblyman Goicoechea explained the law had been in place since 1991. Although several contracts and negotiations had been in place, to his knowledge, the tax had never been imposed. He reemphasized it was clearly enabling legislation, and no board or county commission had ever imposed the tax.
Chairman Parks remarked that the Legal Division would be asked to review the issue.
Assemblyman Sherer commenced testimony as a co-sponsor of A.B. 229 and, as the representative of District No. 36, his territory included Lincoln and Nye Counties. He stated it was essential to bring various people to the table to negotiate, and that was the reason for proposing the fee increase. Mr. Sherer voiced optimism the legislation would promote better communication plus fairness in the utilization of their area resources. He cited water as the most critical resource and added, “Whiskey’s for drinking, and water is for fighting.” He concluded by saying that water was a precious resource to his area, and he encouraged the Committee to approve the measure.
Chairman Parks acknowledged the testimony and asked Assemblyman Geddes if he wanted to offer any comments. He declined. Chairman Parks asked for any remaining testimony from supporters of A.B. 229.
Hal Keaton, a member of the Lincoln County Commission, stated that, after their review, they were in total support of the bill without amendment.
The next witness in support of A.B. 229 was Mike Baughman, the Contract Executive Director for the 5-county Humboldt River Basin Water Authority (HRBWA). Copies of his prepared testimony (Exhibit C) were distributed to the Committee members. Mr. Baughman described his area as the northeastern part of Nevada and included portions of Elko, Eureka, Humboldt, Lander, and Pershing Counties. The principal activities of the Authority were focused on water use and water development within the Humboldt River Basin. Mr. Baughman recalled that, several sessions ago, the HRBWA had approached the Legislature to encourage consideration of both a fee increase and an annual indexing of that fee. The purpose was to reflect inflationary effects and increase the value of the buying power.
Mr. Baughman reiterated the Authority’s support of A.B. 229, and he emphasized that water continued to be the future for every county in Nevada. As the most arid state in the nation, simple supply and demand dictated placing high value on a limited commodity. In addition to being the driest state, Nevada was also one of the fastest growing in the nation. As such, water had increasing value in both metropolitan and rural areas of Nevada.
Continuing, Mr. Baughman explained that predicting the economic future in rural Nevada was not easy. It would be difficult to know if counties could justify using water that was available for export 50 years from now. To underscore his point, Mr. Baughman cited the example of Las Vegas saying, “Who would have imagined that Las Vegas would be what it is today had you been sitting there 40 or 50 years ago?” He voiced hope that the rural counties would be able to continue to expand and diversify their economies. Water would be an important element of that expansion.
On the issue of water transport, Mr. Baughman stated there was growing pressure to move water from water-rich counties to the water-poor counties. He elaborated by acknowledging that underground water was the property of the state of Nevada; however, it was a resource akin to the forages that belonged to the Bureau of Land Management or the gold resources located on federal government land. The gold, mined by private industry, created wealth in that county and then was exported out. That cycle was part of Nevada’s basic economy. Mr. Baughman emphasized that water should also be considered as part of the basic economy in rural Nevada (Exhibit C). Water would be critical for creating economic activity, which produced tax revenues that, in turn, alleviated the constraints facing Nevada.
Mr. Baughman encouraged the Committee to take a harder look at how the role of water was viewed in shaping the future of rural counties, especially in the value-added nature of water. To illustrate his point, he cited the example of a large power generation plant in Lincoln County that would require moving water through the power plant for export out of the county. That resulted in import of income to the county. Another industry, mining, also utilized a great amount of water through mine dewatering and the mining operation itself. Water was put in to the mining operation, gold was extracted and exported out of the area, and money came back to the rural area. Water was critical to the livestock industry, as well as to commodities such as hay growing. Those commodities were exported followed by the import of money to the area.
With those examples in mind, Mr. Baughman stated that putting water in a pipe and exporting it out of the county, with no fee or a modest fee, would result in virtually no economic return to the county. As such, water exportation did not contribute the way other industries did. Mr. Baughman implored the Committee to rethink water as a basic part of the economy that would create income and wealth. If water were processed through a manufacturing facility and recycled through the county of origin, there would be no need to assess a fee to capture that economic return; however, in situations where the water left the county without any beneficial use, there had to be a provision for economic return.
In terms of the level of the fee, Mr. Baughman echoed the testimony of Assemblyman Goicoechea in saying it did not appear the fee had ever been applied since its enactment in 1991. The unmitigated loss of water, compounded by the low rate of $6, did not encourage counties to be open to considering water export proposals. Most often, the rural counties opposed them.
Mr. Baughman reminded the Committee that the Humboldt River Basin Authority (HRBWA) was founded in 1993 for purposes of opposing the Eco-Vision Project. That proposal would have allowed for the export of 360,000 acre-feet of groundwater from the Humboldt River Basin into the Truckee Meadows and the Stillwater Area. Five counties opposed that project on the grounds that it would have robbed them of their economic future and that the proponents were over-speculating. Ultimately, the State Engineer denied those applications. Mr. Baughman emphasized the proposal had galvanized the five counties and made them aware that their economic future was flowing outside the region.
By raising the water tax per Nevada Revised Statutes (NRS) 533.438, Mr. Baughman was confident it would encourage identification and implementation of win-win proposals. A higher fee, as proposed in A.B. 229, would serve to discourage speculators whose plan would be to tie up water rights for future sale. The higher fee would provide revenues in lieu of taxes that otherwise would have been generated in the water-rich counties. It was a means to provide an accounting for the value of water that generated a lot of economic wealth in the area where it was used. Mr. Baughman summarized it as a “sharing of wealth” with the county of origin.
In terms of an appropriate level, Mr. Baughman stated the HRBWA supported the proposal of $60. After reviewing S.B. 526 of the 1991 Legislative Session, it appeared there had been no logical basis for the $6 fee. Senator Adler was the bill sponsor, and there did not seem to be clear logic for assigning a $6 rate. At that time, several legislators had gone on the record saying that $6 was not enough.
To support his testimony (Exhibit C), Mr. Baughman offered examples from other areas, such as the Arizona Water Banking Authority that assessed $55 per acre-foot. Duke Energy in New Mexico leased water from Clovis, New Mexico, for $146 for treated effluent. In Nevada, there were examples in the Truckee River system of $5,600 per acre-foot of surface water, as well as other groundwater deals. The Colorado Big Thompson system had business arrangements for $10,000 per acre-foot. In Colorado’s Greeley-Loveland system, there were deals for $3,500 per acre-foot. Albuquerque surface water off the Rio Grande River was fetching $4,000 per acre-foot. Mr. Baughman emphasized those figures added perspective to the suggested rate in the proposed legislation. He did not view A.B. 229 as strictly a southern Nevada bill; he believed it applied to all of rural Nevada.
Continuing, Mr. Baughman stated, if the real value of water was considered, for example, $5,000 per acre-foot, the proposed rate of $60 was reasonable, especially in light of the statutory limit. He described it as an “imputed value of what that resource is worth in terms of revenue.”
In closing, Mr. Baughman acknowledged Assemblyman Goldwater’s comments regarding the two-thirds vote requirement and admitted his agency questioned whether the proposal was truly a tax. It was called a tax in the 1991 statute; however, it was uncertain if that was an accurate term. The intent was to provide for the Las Vegas Valley Water District (LVVWD), a governmental entity, to pay fees to Lincoln, Nye, and White Pine Counties. The LVVWD, like cities and counties, was exempt from property taxes. If the basic intent was to provide for equity between importers and exporters, and many of the exporters were governmental entities, then it raised the question if they would be exempt if it were called a tax. From the standpoint of rural Nevada, Mr. Baughman judged the fee not to be a tax or something that fell under revenue caps. In his opinion it was economic activity, akin to a manufacturing company providing jobs. He encouraged the Committee to consider that point carefully.
On the subject of inflation, Mr. Baughman cautioned the Committee that consideration would have to be given to adjusting the fee on an automatic basis. In his view, it would be remiss to not factor in an annual inflator, especially when considering how low the fee was at $6. At some point, the fee would become useless because of inflation. The fees paid to the Arizona Water Banking Authority and to the Salt River Valley Users Association were increased 3 percent annually. The Duke Energy fees paid to the City of Clovis, New Mexico, were adjusted annually using the Consumer Price Index (CPI). There was a provision that the base amount would never be eroded below $146, as might be the case in times of deflation.
In summary, Mr. Baughman restated his support for A.B. 229 and raising the fee to $60 (Exhibit C). He encouraged the Committee to consider the merits of changing the word “tax” to “water transfer fee” and to providing a mechanism for annual adjustments for inflation. His final suggestion was to assess the fee on a “per thousand gallon basis,” as measured by a flow meter. Mr. Baughman elaborated by stating, when the State Engineer approved applications and water was moved via pipeline, there would be a flow meter to accurately record the amount of water produced. Monitoring reports would then be supplied to state agencies. On an acre-foot basis, that equated to approximately 350,000 gallons of water.
Assemblyman Marvel asked if the Humboldt River Basin Water Authority (HRBWA) had taken formal action on the proposed legislation, A.B. 229. Mr. Baughman replied that on February 12, the HRBWA had approved raising the fee.
Assemblyman Grady requested clarification of water transportation loss from its measurement at the meter to its destination point, approximately 90 miles. Mr. Baughman explained the water normally would be transported via closed pipeline and not through an open ditch; as such, the loss would not be significant.
Joe Johnson, representing the Toiyabe Chapter of the Sierra Club, commenced testimony in support of A.B. 229. He encouraged the Committee to address the issue of inter-basin transfers of water. In the past, the Sierra Club had advocated consideration for retention of a statutory amount of water; however, Mr. Johnson added that he was not proposing an amendment to A.B. 229 at the current time.
Assemblyman Collins, representing District No. 1, voiced strong support for A.B. 229. He recalled growing up in Las Vegas and swimming in a pond filled with artesian water. Although that benefit was lost in southern Nevada, there was compensation in the form of economic growth in Clark County. Mr. Collins concluded by saying when water was transported out of a county, opportunity for children was lost. It was a quality-of-life issue and a matter of fair compensation, in his judgment.
Chairman Parks requested that Assemblyman Goicoechea return to the witness table in order to clarify if raising the rate was designed to invite negotiations. Assemblyman Goicoechea agreed with that statement and explained that $6 did not invite any parties to the table. A fee of $60, with estimated total annual revenue of $10 million spread over three counties, would serve to stimulate negotiations between local boards and water purchasers. Mr. Goicoechea cautioned the Committee that he did not want the legislation to be perceived as a willingness on the part of the rural counties to sell their water for $60 per acre-foot. He added, “They might want less, or they might want more.” It served to open negotiations between parties and provide a bargaining position for the rural counties.
Seeing no additional witnesses in favor of A.B. 229, Chairman Parks called for testimony in opposition to the bill.
Andy Belanger, representing the Southern Nevada Water District and the Southern Nevada Water Authority, commenced testimony in opposition to the bill in its current form. If the purpose of the bill was to invite negotiations, Mr. Belanger judged the existing law to be adequate in that area. His agency had been in negotiations with Lincoln County and White Pine County on water matters. Mr. Belanger offered an amendment (Exhibit D) that would read, “the county of origin may further negotiate with parties for other compensation and may enter into interlocal agreements pursuant to NRS 277 to arrange for other benefits that would accrue to the county of origin, which facilitates the development of water resources in the county from which it is appropriated.” Continuing, the witness stated the amendment would clarify the legislative intent of S.B. 526 of the 1991 Legislative Session. It was clear that the $6 tax per acre-foot was put in place so that negotiations would take place. The $6 rate would be the minimum that could be appropriated.
Mr. Belanger referred back to Mr. Baughman’s testimony in which the assertion was made that, originally, there was no rational basis for the $6 fee. If that was the case, Mr. Belanger questioned the rationale behind the tenfold increase to $60. The witness emphasized his belief in the need for negotiations and his agency’s willingness to deal with all parties. He believed the proposed amendment to A.B. 229 (Exhibit D) would clarify the statute and facilitate those negotiations.
Assemblyman Griffin asked if the current practice of negotiations normally occurred or if the $6 fee precluded such practices. Citing the example of Lincoln County, Mr. Belanger explained that discussion included issues of cost- sharing of pipelines used for transporting water to southern Nevada. He emphasized the $6 per acre-foot was not the single point of discussion; there were other bargaining points. Mr. Griffin asked if the amendment, in addition to clarifying the law, would actually change anything in practice. Mr. Belanger declined to speculate on that situation.
Returning to an earlier question he had posed to Assemblyman Goicoechea, Assemblyman Griffin admitted to not fully understanding how water rates were assessed. He asked if the costs to acquire water rights were to be increased, would it be spread out or would there be different rates. He recalled hearing the figure of $5 per month; however, he interpreted that to be applicable to a small group of users. Mr. Belanger clarified by stating the $6 per acre-foot would only cover the cost of the water. In order to move the water from the county of origin to southern Nevada for municipal customers, there were additional infrastructure costs; for example, pipelines, distribution systems, and maintenance. Those transportation costs would be paid by all of the customers throughout the valley.
In response, Assemblyman Griffin asked if those transportation and infrastructure costs would be fixed, regardless of the cost of water per acre-foot. Mr. Belanger acknowledged the total costs were unknown; however, feasibility studies were underway to help determine financial impacts. He shared the concern voiced by Mr. Griffin and reiterated that his agency was willing to negotiate with the counties of origins on the issues. In closing, Mr. Belanger voiced optimism the amendment would clarify the need for negotiations on top of the basic $6 fee.
Assemblyman Grady requested clarification of the language, “$6 or $60,” and asked if there was a choice. Because the words “may impose” were used, Mr. Grady interpreted that to mean a “tax of $6 or $60 per acre-foot.” Joe Guild, representing the Southern Nevada Water Authority, offered to explain. Mr. Guild agreed with Mr. Grady and stated that if a tax were imposed under the current law, it would be at a $6 per acre-foot per year-rate. He saw no discretion in the statute; however, he cautioned the Committee that the bill was amending Nevada Revised Statutes (NRS) 533.438 and, as such, it was essential to look at the entire statutory scheme. The imposition of the tax was contained in NRS 533.438; however, NRS 533.4385 provided for planning to mitigate adverse economic effects caused by the transfer of water out of a county of origin. Mr. Guild advised the Committee that his upcoming testimony would elaborate on the subject.
Chairman Parks, referring to the added language in the proposed amendment, asked if the amendment had been shared with Assemblyman Goicoechea and Assemblyman Sherer, the bill sponsors. Mr. Guild replied in the affirmative and explained a copy had been given to Mr. Goicoechea earlier in the day, just prior to the Assembly Floor session.
On the subject of “arranging for other benefits that would accrue to the county of origin,” Chairman Parks asked if the witness could elaborate on what those benefits might be. Mr. Guild acknowledged it was a general statement and would not jeopardize confidential negotiations in progress with Lincoln County. As such, he explained benefits to the county of origin would principally include technical expertise in the areas of hydrology and water law. Some of those benefits already had been shared with White Pine County. Mr. Guild stated benefits also included the use of the infrastructure, for example the pipelines, the pumps, the electrical system, and water-well drilling equipment provided by the destination county. He viewed the statement as “broad” and one that could apply to any aspect of water development.
Joe Guild, representing the Southern Nevada Water Authority, commenced testimony in opposition to A.B. 229 and read from prepared remarks. As he understood the matter, the intent appeared to be raising the rate to $60, which he viewed as irrational in its amount. Echoing Mr. Baughman’s testimony, Mr. Guild stated the legislative history revealed no logic for the original $6 fee, presumably because there had been no model of such legislation in the western United States in 1991. In his judgment, and contrary to the bill proponents, the $6 fee had served to invite negotiations through the years. Lincoln County was at the table in negotiations with the Southern Nevada Water Authority, working to solutions with mutual benefits to all parties. Raising the fee, in Mr. Guild’s opinion, would not impact the current situation.
Returning to the original legislative intent of S.B. 526 of the 1991 Legislative Session, Mr. Guild quoted from the bill proponent’s Floor testimony. Senator Adler had said, “It is the Committee’s hope that the parties involved in these transfers would come together and negotiate an economic development package which would be acceptable to both sides.” In response to a question from Senator Neal, Senator Adler had replied, “The reason that we picked $6 is because it was the intent of the Committee that the importing county or entity and the county of origin meet to negotiate a plan, rather than impose a $6 per acre-foot tax.” Mr. Guild stated if the entire statute was viewed with that testimony in mind, it would be apparent the intent under NRS 533.4385 was “if a county of origin has not imposed a tax on the transfer of water pursuant to NRS 533.438, an applicant and the governing body of the county of origin may execute a plan to mitigate the adverse economic effects caused by the transfer of water from the county of origin to the other county.” Mr. Guild stated that was the current situation.
Continuing, Mr. Guild cautioned the Committee that if the tax increase were imposed, the rural counties would not be helped; rather, it would hinder opportunities for negotiations and could harm the counties. Currently, an entity that needed water in southern Nevada could approach a rural county with fully qualified and legal applications. Together, all parties could achieve water development and transfer systems that would benefit both the county of origin as well as the destination county. Mr. Guild added that it was unfortunate that the originating counties did not have the financial resources to create the infrastructure to develop their own water resources. The goal of the Southern Nevada Water Authority was to assist those counties in the development of their own resources through the use of infrastructure developments.
In conclusion, Mr. Guild stated the proposed amendment (Exhibit D) would codify a process already utilized by the Southern Nevada Water Authority with counties of origin. It would further clarify the original intent of S.B. 526 passed in 1991.
Assemblywoman McClain asked if the parties were strictly at the negotiation stage or whether water was already being transferred. Mr. Guild explained the Southern Nevada Water Authority (SNWA) was currently in negotiation and was not utilizing any water from rural counties. Ms. McClain responded, “Basically, we are changing the rules in the middle of negotiations.” She asked if that would hinder those negotiations, especially by raising the fee to $60. In response, Mr. Guild was uncertain if he could answer that question because he was not an attorney involved in those negotiations. Ms. McClain commented that by raising the fee tenfold, it would be expected to affect the ratepayer in southern Nevada. Mr. Guild countered by stating the fee increase would never factor in because the $60 fee per acre-foot, as a transfer fee, would probably make it economically unfeasible. He recommended the Committee seek a more precise answer from an upcoming SNWA witness.
Julie Wilcox, Director, Southern Nevada Water Authority, commenced testimony and offered to clarify previous points of discussion. She stated that without the $60 in statute, the SNWA was successfully negotiating with Lincoln County, and an agreement had been reached. Her agency would appear before the White Pine County Commission on March 26 for purposes of discussing a proposal with that county. Ms. Wilcox explained her agency had worked closely with the rural counties for the past 5 years to build partnerships and to create benefit to both parties. She emphasized that the current applications in the three rural counties had been divided into three sections. One part of the application would be turned over to the county of origin for its use. The second would be retained by the SNWA, and the third would be shared resources. In her view, Ms. Wilcox believed that demonstrated fairness at the negotiating table. Partnerships provided the rural counties with the fiscal tools necessary to develop water in their geographic areas.
Assemblywoman McClain asked the witness if compensation offered to the counties merited a $60 fee. Ms. Wilcox replied it was difficult to pinpoint an exact figure because of the tremendous costs. In the example of the Arizona Banking agreement, the infrastructure costs were high; however, Nevada differed because there was no need to lay pipeline, conduct environmental studies, or plan for long-term capital improvement. The existing facilities would be utilized, according to the witness.
Continuing, Ms. Wilcox explained a feasibility study of northern Clark County water was underway. It included estimates to lay the infrastructure there and was considered key for utilizing that area in the future. The feasibility study was expected to be completed in July; however, she added, “It’s going to be a big number. It’s going to be very expensive.” Ms. Wilcox elaborated by saying that environmental work was very difficult and time-consuming. The permits and environmental impact statements required management, and those processes compounded the actual building of the infrastructure and laying of the facilities.
Assemblyman Mortenson began to ask the witness why her agency was willing to pay Arizona $62, but was opposed to paying rural Nevada counties $60; however, he stated he was assured that her explanation of pipeline costs and infrastructure expenses sufficed to explain the difference.
Chairman Parks directed a question to the bill sponsor and asked if the proposed amendment had been reviewed. Assemblyman Goicoechea replied in the affirmative and stated he had shared the amendment with Assemblyman Sherer during the Assembly Floor session. Mr. Goicoechea reminded the Committee that he had sponsored the bill on behalf of White Pine County, an entity that supported the $60 fee. Testimony from Lincoln County had also revealed support for the $60 amount. He added, “If negotiations are going so well, why are they here supporting the bill?”
Assemblyman Marvel asked the witness if, when he was a Commissioner for Eureka County, he had negotiated with Barrick Gold and what the basis of negotiations was at that time. Assemblyman Goicoechea explained it was a water-mitigation fee for the export of water. The process was lengthy and reached the level of the Supreme Court. He concluded that negotiations did not always work. In response to Assemblyman Marvel, Mr. Goicoechea explained that $4 per acre-foot had been negotiated under the mitigation agreement. That had been challenged by the Department of Water Resources and culminated in the Supreme Court involvement. He summarized by saying that the issue had been resolved between Barrick Gold Strike Mines, Eureka County, and the Department of Conservation and Natural Resources.
In response to Assemblyman Marvel, Mr. Goicoechea stated that Eureka County had gained approximately $400,000 over the last 6-8 years. The payments were set at $100,000 per year for a 10-year period, with an understanding it could not exceed the $1 million level.
On the subject of mine dewatering, Assemblyman Goicoechea explained there was a long history between Newmont Gold and Barrick Gold. He stated his county entered into negotiations to assist Barrick so that their mining operation could continue. Newmont Gold and the TS Ranch, at that time, were getting a lot of surface water. In response to Assemblyman Marvel’s statement regarding the retention of water in Eureka County, Mr. Goicoechea said it was working out very well, and the mines were doing a great job. He cautioned the Committee to not confuse water from mine dewatering with water that was exported to another area for beneficial use.
Assemblyman Marvel asked if the complaint that water was being put into the Humboldt River was a reasonable complaint. In response, Mr. Goicoechea acknowledged, “We were losing the water. That was our issue with it.” Because the water was not being put to beneficial use down river, that was the reason for the mitigation process. Technically, it amounted to “watering the Humboldt.” As a result, it was shared equally up and down the stream; however, there was a valid argument about where the beneficial use occurred. In the mitigation process, Mr. Goicoechea summarized by saying they were only trying to facilitate the mines at that point, as well as to provide some enhancement to Eureka County. The water did clearly leave the county at that point.
Assemblyman Marvel requested clarification on the dollar amount, and Assemblyman Goicoechea replied it was $4 per acre-foot. He emphasized that Eureka County was not motivated by revenue generation; rather, it was an opportunity to facilitate both mining companies and the county.
Making specific reference to Section 1, subsection 5, Assemblyman Hettrick requested clarification of the language, “All money collected from a tax imposed pursuant to this section must be deposited in a trust fund for the county. The principal and interest can only be used for economic development, healthcare, and education.” Mr. Hettrick commented that some small rural counties had testified their total student population had declined significantly. Any money collected would be stuck in a trust fund, and the county would be unable to spend it. In addition to that issue, Mr. Hettrick voiced concern over the amendment that stated, “the county of origin may further negotiate.” He concluded it was nice from the standpoint of the county; however, the other party apparently could not negotiate. He recommended the language reflect the goal to codify the right to negotiations and change “may” to “must.” As it was drafted, it did not require an agreement between parties, only negotiations.
Concluding, Assemblyman Hettrick stated, “Beyond that, I don’t think we changed much, frankly.” Although he thought the intent was good, he voiced regret over the lack of genuine change in the law. He encouraged the parties to discuss possible modifications. Although, as written, it gave the rural counties “a little more teeth,” it failed to achieve a tenfold increase.
In response, Assemblyman Goicoechea defended the structure of the trust account. In his judgment, the principal and interest could be expanded, with the stipulation it could only be spent on education, healthcare, or economic development. The money could not be diverted to the General Fund. Realistically, if that could be provided in rural counties, Mr. Goicoechea felt confident of the value to his constituents.
Assemblyman Marvel asked if the witness considered tourism part of economic development. It had been his experience that the money had been mixed up in the rural counties, and tourism money had been diverted to economic development. In response, Mr. Goicoechea stated that tourism was clearly a facet of economic development in the rural counties.
Chairman Parks summarized the recommendation that all interested parties should meet to discuss bill language and resolve differences of opinion. Assemblyman Goicoechea agreed to the recommendation and reiterated his intent was to establish a bargaining position.
Ted Zuend, Fiscal Analyst, provided three documents to the Committee. In response to Assemblyman Goldwater’s inquiry on the two-thirds vote requirement, a one-page memo (Exhibit E) was distributed in which clarification of that issue was provided. The second (Exhibit F) was entitled “Work Session Document,” and provided background information on A.B. 204 and A.B. 208. The third (Exhibit G) was a bill explanation for A.B. 229.
Seeing no additional witnesses, Chairman Parks closed the hearing on A.B. 229. The meeting was adjourned at 2:44 p.m.
RESPECTFULLY SUBMITTED:
June Rigsby
Committee Secretary
APPROVED BY:
Assemblyman David Parks, Chairman
DATE: