MINUTES OF THE
SENATE Committee on Taxation
Seventy-second Session
March 25, 2003
The Senate Committee on Taxation was called to order by Chairman Mike McGinness, at 2:00 p.m., on Tuesday, March 25, 2003, in Room 2135 of the Legislative Building, Carson City, Nevada. The meeting was videoconferenced to the Grant Sawyer State Office Building, Room 4406, 555 East Washington Avenue, Las Vegas, 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 Sandra J. Tiffany
Senator Joseph Neal
Senator Bob Coffin
COMMITTEE MEMBERS ABSENT:
Senator Randolph J. Townsend (Excused)
GUEST LEGISLATORS PRESENT:
Senator Raymond (Ray) D. Rawson, Clark County Senatorial District No. 6
Senator Michael (Mike) A. Schneider, Clark County Senatorial District No. 11
STAFF MEMBERS PRESENT:
Rick Combs, Fiscal Analyst
Gale Maynard, Committee Secretary
OTHERS PRESENT:
Don Henderson, Acting Director, State Department of Agriculture
Joseph L. Johnson, Lobbyist, Toiyabe Chapter/Sierra Club
Alan Glover, Lobbyist, Clerk/Recorder, Carson City
Curry Jameson, Broker/Owner, Realty Executives of Northern Nevada, Nevada Association of Realtors
Brad Spires, Broker/Associate, RE/Max Realty Affiliates, Nevada Association of Realtors
Penny Mayer, Broker/Owner, Mayer and Associates, Incorporated, Nevada Association of Realtors
Kathy Burke, Recorder, Washoe County
Frances Deane, Recorder, Clark County
Russell M. Rowe, Lobbyist, Nevada Development Authority
Robert E. Shriver, Executive Director, Division of Economic Development
Somer Hollingsworth, President, Chief Executive Officer, Nevada Development Authority
Donald D. Snyder, President, Boyd Gaming Corporation, Nevada Development Authority
Chuck Alvey, President, Chief Executive Officer, Economic Development Authority of Western Nevada
Senate Bill 314 has been pulled from today’s agenda, therefore we will be discussing Senator Rhoads’ bill, S.B. 370.
SENATE BILL 370: Authorizes board of county commissioners to impose additional tax on transfer of real property for control of invasive species. (BDR 32-39)
Senator Dean A. Rhoads, Northern Nevada Senatorial District:
I showed a video in Senate Natural Resources the other day. Rural Nevada was hit hard, particularly Humboldt and Elko Counties. I am a rancher and would not benefit any more than anyone else by this bill.
To give you an example, I normally put up about 2000 tons of hay and because of the drought, I figured on 800 tons of hay, but the grasshoppers came and I ended up cutting 60 tons of hay. Poisoned bait was used. You can buy a 40‑pound sack for $80, and we probably had 50 to 80 sacks of poison that were baited by hand, but the grasshoppers still came. The valley hired an airplane to crop dust at a cost of about $130,000 in Elko County and it hardly made a dent.
We are probably going to be hit harder due to the mild winter. There have been several programs considered for this year with the State Department of Agriculture and I know the U.S. Bureau of Land Management and U. S. Forest Service are getting involved. This particular bill will allow the commissioners to impose a tax of up to the rate of $.05 for each $500 of value on each deed transferred. The county recorder will collect the tax and the tax will go to the State Treasurer for the Plant Industry Program, which will administrate it. However, there has to be an amendment on page 12 of S.B. 370 with the definition of “invasive species.” The words, “not native” have to come out and the Department of Agriculture has some language to replace this. At any rate, this is basically the bill.
Chairman McGinness:
Are there any questions for Senator Rhoads?
Senator O’Connell:
Since this is permissive, I am assuming it is your county that will impose the tax? What kind of number are you looking to raise?
Senator Rhoads:
In our area of Elko County, we are looking at $200,000. The county spent, probably, $150,000 last year to assist us, and that was only 50 percent of what we had to spend.
Senator O’Connell:
Is the consideration for the tax to be left on there, or is there a sunset clause and something that can be imposed upon need?
Senator Rhoads:
Yes.
Chairman McGinness:
On page 1 of S.B. 370, the Clark County Recorder’s Office wants to eliminate lines 9 through 11, where it starts “property conveyed.” When this bill passed the Senate last session, this language was not in there.
Rick Combs, Fiscal Analyst:
Actually, the language was in there last session when it was passed, and I think this is just a redraft of the first reprint from last time. There was an exemption prior to last session that assumable mortgages not be subject to the real estate transfer tax. I believe liens and assumable mortgages are what the language is trying to address. I believe it is a technical provision, which can come out.
Senator O’Connell:
Since we have a number of bills dealing with the real estate transfer tax and a number of people here today, Mr. Combs, I wonder if we could get you to give us the chapter on what is currently being collected and where the money is going to now. If you could give us a little background on this, it might be helpful.
Mr. Combs:
Reference to the real estate transfer tax, currently the mandatory tax, is pursuant to Nevada Revised Statutes (NRS) 375.020 and is $1.25 in a county with a population of 400,000 or more and in all other counties is $.65 per $500 of value on the deed of transfer. Currently, 10 cents from the proceeds of this tax goes to the low-income housing trust fund and the remaining amounts go to the Local Government Tax Distribution Fund. In Fiscal Year (FY) 2000, this generated approximately $23.9 million for the Local Government Tax Distribution Fund.
Senator Rhoads:
Is this statewide?
Mr. Combs:
Yes. I do not have the details regarding how much each local government receives from the fund. There is also an additional provision in NRS 375.025 which authorizes 1 tenth of 1 percent of the value on optional real estate transfer tax to be imposed in counties other than Clark, and this goes into the general fund of the county, where it is used for open space acquisition of land and these types of issues in NRS 375.075.
Senator O’Connell:
There are a number of exemptions to the property tax are there not? I wonder if you could give us the exemptions.
Mr. Combs:
The section, which lists these 16 exemptions, is in NRS 375.390 (Exhibit C).
Senator O’Connell:
Mr. Combs, one last question on this. Do we have any kind of a number at all if we were to eliminate the exemptions, of what amount of income we could expect from the real estate transfer tax?
Mr. Combs:
I do not have those numbers and I am not sure how easy it would be to obtain this information. The fact that these are exempt means they are not being reported and have not been collected. There are a number of transfers from spouse to spouse and these types of issues where you would really want to look hard at the policy and the reason for having this exemption in place, and by removing this exemption, if it is going to do anything you did not mean to do. If this is something you want to take a look at, we would try to get the information as quickly as possible. We would have to rely on the counties to provide this information.
Don Henderson, Acting Director, State Department of Agriculture:
This bill was introduced to our understanding as S.B. No. 468 of the 71st Session and was passed by the Senate, but did not make it through the Assembly. However, if this bill were to be passed this session, the Department of Agriculture will work closely with the counties involved to make sure any raised revenue goes to good use by providing on-the-ground control and management of invasive species and pests.
At this point, the Department of Agriculture receives no direct funding from the State by which to control or otherwise manage invasive species. The only state funding we occasionally receive are one-shots, dealing with specific pests such as imported red fire ants, or Africanized honeybees. The exception to this is our annual contract with the Nevada Department of Transportation, who is contracted to treat and control noxious weeds within the state’s rights of ways, and the Department of Agriculture appreciates these one-shots.
The only other funding source for invasive species comes from the federal government, either through specific programs or by grants. Often, these federal funding sources are earmarked for a specific species or situation, such as funding for surveying and controlling Mormon crickets or grasshoppers, and can only be applied on public lands, not on private.
From the department’s perspective we would like the opportunities and flexibility offered by S.B. 370. It allows counties to voluntarily raise revenues through real estate property transfer tax and work with the department to control invasive species, which are a concern to their county, and those species that may be located on private property.
Based on our reading of S.B. 370, it is the counties’ call on whether they want to implement this added assessment or not in order to generate the funding needed for the invasive species issues affecting their county. The only suggestion I might have relating to this bill is the definition it offers for the term “invasive species” found on page 12, line 1. By including the terms of “not native” in this definition, it would exclude using this funding to manage native invasive species such as Mormon crickets and clear-winged grasshoppers.
Based on problems we have had with these native species over the past 2 years in Northern Nevada, and we expect problems to occur this summer, I believe there will be several counties who would be interested in using this funding option presented in S.B. 370 to generate revenues to combat these species.
With this observation, I have prepared an amendment to S.B. 370, (Exhibit D). This revised amendment would strike the words, “not native to Nevada” and include “all species representing a threat to the economy, environment or public health of this State” as designated by rule making by the department director. This would broaden the use of funding source if this bill is passed.
Senator Rhoads:
In section 18, page 12, line 6, would it be better to have this act become effective upon passage and approval rather than the July 1, 2003, date?
Mr. Henderson:
This is a good observation. The sooner the better, if we are going to address real issues for this season. The only issue would be the county commissioners would have to implement this assessment and then there would be a period of time before there were some revenues generated.
Chairman McGinness:
Mr. Henderson, you indicated the money would go back to the county it was originated from, but I do not see the language in the bill.
Mr. Henderson:
If I may direct you to section 17 on page 11, subsection 5. This indicates to me there would have to be some kind of agreement with the county on how this money would have to be spent. I assume they would want to spend it on the species in their county.
Chairman McGinness:
I was led to believe this might have been part of the problem why the bill died in the Assembly last session, because it was not earmarked to go back to the county of origin. Do you have any information on this?
Mr. Henderson:
I think there were a couple of misconceptions from the last session. I would stress this is voluntary and would not be initiated unless the county commissions enacted the additional tax, therefore it would not apply to all counties, but only to those who wanted to participate. The way I read this is somewhat vague and may be modified to make it more specific as to the intent. I think, from a department perspective, we would have to consider going into some kind of an agreement with each county involved to specify what the funding would be used for. This would be my preference on dealing with this statute.
Chairman McGinness:
We will talk to the sponsor of the bill and see if he needs to make the language more clear.
Joseph L. Johnson, Lobbyist, Toiyabe Chapter/Sierra Club:
I had signed in support of this bill; subsequently, I have some concerns about the redefinition of “invasive species.” I wanted to support the additional revenue for this management, but now it appears they are talking of homegrown problems. I do not mind if the county would be able to raise the money for Mormon cricket or grasshopper control. The club does not necessarily support the control measures proposed. With the broader issue of “invasive species,” there is some concern that redefining, legislatively, the definition of invasive species as broadly as proposed may impact other programs of control well outside the intent that I think this bill brings forward. I would reserve time to consider this and add subsequent testimony on the issue.
Alan Glover, Lobbyist, Clerk/Recorder, Carson City:
We would like to go on record with S.B. 370 and agree with the Elko County Recorder on page 1, lines 9 through 11. As you recall, last session your committee deleted this exemption out of the law and it would place it in conflict with present statute.
In section 10, page 7, is the taxpayer’s bill of rights that affects recorders. Having been involved in the drafting of this legislation, Mr. DiCianno and Ms. Vilardo told us very strongly, and if you look on line 40, the term overpayment in “real property transfer” is deleted, and replaced by “any tax.” We could be responsible for any tax and, specifically included in this legislation 2 years ago, “real property transfer” so the bill of rights only applied to that provision we administered in there. We could prepare some language, I suppose, but if you could, have your legal staff look at this. I would not like to be responsible for those taxes the Department of Taxation collects.
On Senator Rhoads’ suggestion this bill be in effect on passage and approval, our problem with this is we need to notify a variety of people this tax will affect. Fifty percent of our recordings are by mail and we need to send them notice of the tax change. If we do not have time to notify these people, when they send us their recording and the fee is not correct, we have to send it back to them and this delays the recording of a deed or some other instrument. I understand Senator Rhoads’ position and that you would like to get the money as soon as possible before the season starts. There are a lot of things that would have to go into effect before this could happen, such as changing our Web pages, brochures, and other things before the implementation.
Chairman McGinness:
Is there anyone else to testify on S.B. 370? We will close the hearing on S.B. 370 and open the hearing on S.B. 385.
SENATE BILL 385: Increases tax on transfer of real property. (BDR 32-1180)
Senator Raymond (Ray) D. Rawson, Clark County Senatorial District No. 6:
This is a proposal that came forward so it would be on the table and could have consideration. I know the Assembly side has considered a real estate transfer tax, but I think it was written differently and there is never any assurance it would reach the Senate side.
The bill proposes raising the tax to $1 per $500 taxable value. The first handout is from the State of Nevada Legislative Counsel Bureau (Exhibit E), Request for Comparison of State Real Property Transfer Tax Rates. The first page gives you a basic summary of other states and their rates, and the rest of the memo breaks it down in detail on how they actually calculate this.
You can look at some states such as Illinois $3.75, Maine $2.20, Maryland $2.50, Michigan $3.75, and a number of the Eastern states are higher, again, like New York $5, and Vermont $6.25. There is also the state of Washington $6.40. This literature is for you to have the information in front of you for consideration.
The next memo (Exhibit F), Senator Rawson Response for S.B. 385, is two pages and basically shows the estimate of what would be raised by this tax. You can see historically what has been raised and the percent change, all but 1 year it has been above 10 percent, and estimates were based on a 10 percent increase in values and sales. In the first year, it would raise $55 million and the second year $60 million. These are the best estimates and probably on the low side, so there would not be any dependence on something not coming in.
The reason for bringing this proposal forward is it would help with the issue of growth. If you have more growth and more sales, it is something that would bring revenue associated with this and it would take some time in our current tax base to be able to realize the value of what we have to spend in the first year someone comes to Nevada. I think this proposal should be considered along with others.
Senator O’Connell:
When you speak of the $55 million and the $65 million, are you talking in new taxes or in total taxes?
Senator Rawson:
In new taxes, and basically, it is adding $1. Our highest rate in Clark County is $1.65, and less than this in other areas at $.65. This would essentially add a $1 and it would be more than double in some areas and less in others. This figure was used as a benchmark to calculate what a $1 would do if you were to raise the tax.
Senator O’Connell:
Do you happen to know what the tax presently brings in?
Senator Rawson:
I believe it is on (Exhibit F).
Mr. Combs:
If you look at (Exhibit F), you will see the estimate was based upon the portion brought in from the 10 cents to the Low-Income Housing Trust Fund and are in millions of dollars for each year starting from FY1996 through FY2000. It is telling you what 10 cents brought in and, again, this is the only portion the State currently gets. The fact it goes into this trust fund, a lot of the money is allocated out.
Chairman McGinness:
We have a number of county recorders to testify on S.B. 385.
Curry Jameson, Broker/Owner, Realty Executives of Northern Nevada, Nevada Association of Realtors:
I represent an organization of 11,000 members and a native Nevadan. I am currently active in the organization with sales and nationally with issues of mobilization and federal taxation. In issues of mobilization, almost every other request we deal with is transfer tax issues across the country.
We are opposed to S.B. 385 along with S.B. 270.
SENATE BILL 270: Establishes source and procedure for funding grants to regional organizations for economic development. (BDR 32-781)
This afternoon, you will hear from a number of individuals who are realtors in your communities, officials from local school districts, members of labor unions and ordinary citizens. The common bond among these organizations and individuals is simply being opposed to an increase in the real property transfer tax.
As members of the committee know, the real property transfer tax is a tax imposed on each recorded transaction involving the transfer of residential or commercial real property. The tax is levied on the assessed value of the property as it changes hands from one person or entity to another. Based on a law passed by the Legislature during the 1999 Session, both the buyer and the seller are jointly, and this is key, both are liable for the payment of this tax. Meaning the item is negotiable between the parties. I can guarantee in the possible passage of this bill, it will be negotiated and consequently, the tax will drive up the cost of housing. The seller factors the cost of the tax into the home or increases the pressure on down-payment constraints, as the buyer must come up with additional funds.
On a daily basis, when a Realtor goes out and the seller asks for an opinion of value, the question asked is, What are the proceeds upon sale? If you add in $1000 to $2500 to the bottom line, I can guarantee you, they are going to raise the price of the house.
The rate varies by county, and, in general, the rate stands at $.65 per $500, or $1.30 per $1000 of assessed value. In Clark County (Exhibit G), the rate is $2.50 per $1000; and in Washoe County, it is $1.50 per $1000. The bulk of the funds are utilized by local government and local school districts to fund their respective activities. However, 10 cents of the funds just mentioned, goes to the State for the purposes of funding low-income housing. Under S.B. 385, while the transfer tax rate would increase between $.20 and $2, the fund would be allocated to the State government for nonhousing-related needs.
While we are opposed to any increase in the real estate property transfer tax rate, we believe this is bad public policy to utilize the transfer tax for nonhousing needs. I will say the market has been great and has been so since January of 2002, but it is cyclic. It is not sustaining. I have seen the highs and lows, being in the business for 27 years, either by interest rates or housing prices. Currently, we have enough erosion of the great American dream, which is housing affordability. You hear it all the time. In my profession, we are dealing with this on a daily basis.
I would like the committee to hear from two of my colleagues, Mr. Brad Spires and Ms. Penny Mayer, who will go into greater detail as to why the Nevada Association of Realtors opposes these measures. At the conclusion of both these reports, I ask that you allow me to conclude on these issues.
Brad Spires, Broker/Associate, Re/Max Realty Affiliates, Nevada Association of Realtors:
I am a Realtor in Douglas County and one of the things concerning me the most about this bill is it hits first-time home buyers the hardest. If you remember when you bought your first home, there are two things looked at to determine your ability to buy a home: how much money you make monthly, and how much you have for a down payment. When you only have so much money to make a down payment, the issue becomes the cost of closing on the house.
In Nevada, 56 percent of the families make less than $50,000 and these are the first-time homebuyers. These are the people who have scraped together the nickels and dimes to afford this home. As they go forward into the negotiation process, the minimum amount put together is greatly impacted when this transfer tax is raised.
There is a program sponsored in part by the U. S. Department of Agriculture (USDA), particularly in Douglas, Lyon, Mineral, Storey, and other outlying counties, under their rural housing program. I have had the pleasure of placing people in homes due to this program offered by the USDA. This program allows people who may have good credit, but based on a low monthly income, would not be allowed a home purchase. It is very fixed on what the buyer can pay and what the seller has to provide. If this number is increased by $300 or $400 on a $150,000 home, it is enough to take out the ability for a person to buy a home. The USDA underwrites the monthly to help buy a house. If we do something which takes away the ability of a federally funded program for people to own a home in Nevada, it takes away from the American dream and is a regressive tax, hurting the people who most need a break. I urge you consider this and think back when you were purchasing your first home.
Penny Mayer, Broker/Owner, Mayer and Associates, Incorporated, Nevada Association of Realtors:
I am a Realtor based in Sparks and we are the oldest, established real estate firm in Nevada. My concern is this tax is not broad-based and is targeted specifically at one industry and one entity, real estate and the consumer. The tax discriminates against real estate, while buying other forms of property such as stocks and bonds avoids the tax all together. As a Realtor, I am opposed to any tax increase discriminating against investing in the commodity where I make my living. I have to be concerned about raising taxes. Home ownership is a key attractor to Nevada for people looking to make this State their home.
There are currently 16 exemptions to the tax in chapter 375 of NRS. While each of these exemptions may have a sound economic and commercial basis, the end result is an already narrow tax base made narrower. In Washoe County, the recorder’s office, in one month, recorded 1694 deeds and of these, almost half, 757, paid no tax because they fell under one of these exemptions. The practical result of this is most of the exemptions allow commercial transactions and rarely do they exempt any residential transactions.
An example of this is the sale of MGM Grand Hotel in Reno to Bally Entertainment Corporation. No transfer tax was owed because it was a stock transfer, one of the 16 exemptions. This is incredible, one of the largest casinos in the world and a prominent building in Reno, and no transfer taxes were collected on this. As commercial transactions become more complex in the modern real estate market, it becomes more and more difficult to administer the tax. This is a tax paid upon recording a deed. Mr. Glover mentioned the deed could not be recorded until the tax is paid. There is a lot of pressure by buyers, sellers, Realtors, title companies, and lenders to record and close the escrow.
There is something you may not be aware of, if you have not purchased a home lately. Often loan documents are drawn for a specific amount of time, and if you do not close an escrow in time, those loan documents may have to be redrawn and, in many cases, the interest may have changed. This could affect the purchaser and seller on the closing of the escrow. Raising the rate of an inequitable and difficult-to-administer tax would only make it more difficult. Therefore, the primary payer of the tax is not Nevada businesses that escape paying the tax through the exemption process, but the Nevada families who carry the burden of this tax. The tax has a narrow base from which to collect and we support a very broad-based tax and this is not.
Ms. Mayer:
Over 80 percent of our land is owned or controlled by local, state and federal governments, less than 10 percent is in private hands and of this, a smaller portion pays the taxes after the exemptions. Furthermore, the tax is not a stable source of revenue. The real estate market is sensitive to economic spirals and becomes a poor source of revenue under this measure and the current state of our economy.
I was here 2 years ago speaking on this very topic and one of our former members reported the market was flat in Elko to the point that people were actually walking away from their properties, rather than selling them, and in these cases, there is no money being collected.
The high volatility in this tax generates large fluctuations in its yield. In the recessionary times of the 1980s, the real estate market declined by over 50 percent and in the 1990s, with the spiral downward, home sales fell by 20 percent. Nevada has enjoyed a robust real estate market for some years, we are also mindful of the difficult times lying ahead for the nation as a whole and our State. The real estate industry, with new home sales and the residential resale market, is keeping the national economy afloat.
Finally, the taxes are collected differently in all 17 counties, with 17 different district attorneys interpreting the law for 17 different county recorders. If the tax goes to the State General Fund, there will be issues of fairness in collections and payment. These are not issues to be taken lightly when you are talking about collecting taxes.
Mr. Jameson:
The combined impact of these proposals could have a devastating impact on the real estate industry and more specifically on your constituents, the consumers. Several proposals currently before the Legislature already hit the consumer’s pocketbook from a real estate perspective, with proposed increases in the property tax rate and now, at the time they sell and buy homes, due to the transfer tax. The real estate industry is not standing back and saying no new taxes for anyone, we do not support this. We have always supported a broad‑based tax and this organization along with the real estate industry. In addition to the proposals before you today, the Assembly is also considering one proposal in particular that will substantially increase the transfer tax rate by over 300 percent.
I am looking at Impact of Proposed Real Property Transfer Tax for Clark County and Washoe County (Exhibit G). Realtors understand the need of the State to identify additional revenues to make up for the record deficits, however, we believe any solution to the problem should be broad-based and not targeting a specific industry. We strongly urge you to vote against S.B. 385 along with S.B. 270.
Senator Neal:
In your testimony, you had indicated this would be a burden upon the seller, how would this be?
Ms. Mayer:
As Mr. Jameson mentioned, the transfer taxes are negotiable, so either the buyer or the seller could pay it. If the seller pays the transfer fees, it would be coming out of their net proceeds and, in some cases, may have to come out of pocket to close a transaction.
Senator Neal:
At what point are the taxes paid and to whom?
Ms. Mayer:
I believe the taxes are paid at closing, and to the recorder. In order for a county recorder to record a deed, tax had to have been paid. No escrow officer in a title company will allow a deed to be recorded unless the tax has been paid.
Mr. Jameson:
A typical transaction in a real estate scenario with people who have already invested would be their next step up in the marketplace, a reinvestment in the community. What happens is a first-time homebuyer has been building enough equity to start moving up; this is the whole housing tract and the American dream. If you find a huge transfer tax, it makes a great deal of difference of reinvesting into another property, which may indicate they do not want to do it because their net proceeds are not strong enough. This is where it becomes regressive for the housing tree and the whole housing pyramid.
Senator Neal:
What if the tax is included in the sale price of the home? I assume real estate people put homes up for sale and somehow get an appraisal of the house and know what to sell it for, why would this not be a part of that arrangement?
Mr. Spires:
It is a number used to increase the sale of the house and to increase the net proceeds the seller wants, it also drives up the number the buyer needs to buy the house, and because this is not a financable number, the tax must be paid in cash at closing.
Senator Neal:
Why would this not be a financable number?
Mr. Spires:
The lenders will not loan on a tax, only on the purchase of the home.
Senator Neal:
If the State requires it, right now we have a transfer tax being paid and I would assume whoever buys the house will have to pay this tax. We are talking about what would be in addition to, we are not talking about anything new.
Mr. Jameson:
I happen to be the Department of Housing and Urban Development (HUD) broker for northern Nevada, and a federal requirement will not allow this. It is not a financable situation, no matter what State law said in HUD homes. We are dealing with a great number of affordability homes within the HUD structure and, unless HUD changes its rules, will not be allowed for what is determined as a buyer cost.
Senator Neal:
I am trying to understand what we are talking about here. Are you saying this will affect the people purchasing the home?
Mr. Jameson:
Every time we talk transfer tax, it comes down to an affordability issue. You may look at $1000 or $1500 or whatever is put on the table, but each time you talk about this, it is another percentage based on a qualifying ratio that cannot happen for your typical homeowner.
Ms. Mayer:
In Washoe County, our entry-level housing is usually the $140,000 to $160,000 range. I have spent the last 5 days with one buyer in the entry-level market checking my computer, and when we find the house we have to go immediately or else it will be sold in a day. This is the kind of person who will be affected; people having very little money will qualify for a certain payment enabling them to buy a certain home. The lenders also require you have a little extra money in your pocket when they close at escrow. As this transfer tax could increase, it would eliminate people from the housing market.
Senator Neal:
What if the bill had been for 40 cents rather than a dollar?
Mr. Spires:
It is the issue more than the dollar figure. The fact remains, a small number of people in Nevada are paying the tax that goes into a General Fund across the board. The procedure of any increase for the first-time homebuyer, whom I represent, often is that anything added on that requires them to have more money in their pockets to buy their houses is going to prevent them from buying homes. A recent study stated for each additional increase of $1000 to a down payment in Nevada, you eliminate 2400 families who cannot buy a home.
Senator Neal:
Who has quoted this data?
Mr. Spires:
It was Professor Alan Schlottmann, Director of Research for the Lied Institute for Real Estate Studies at the University of Nevada, Las Vegas (UNLV).
Ms. Mayer:
One of our concerns is this tax is very much a narrow-based tax, placed on a very small segment of society in Nevada, and there are other ways of generating revenue that would be more fair to everyone.
Mr. Glover:
Over the last year, the recorders had decided to work on an overhaul of all the exemptions in the statute and we were strongly advised this would not be the best year to come to the committee with changes in the real property transfer tax. However, since these bills have been introduced, this changes the dynamics.
Chairman McGinness:
If we took away all the exemptions, what would the number be?
Mr. Glover:
We do not have the numbers in our office, but there are numbers I can get to you. I believe Washoe County has some number on how many additional transactions would be taxed, and I think you can work the math from there. It is not easy, but certainly if you eliminated all the exemptions, it would be a very easy tax to administer. You come to the counter and you have a deed, it is taxable, end of conversation. This is the problem: we are spending a lot of time discussing these items with our customers, whether or not to pay the tax. Every time you increase the tax, the level of frustration or interest in paying or not paying goes up. We are seeing more people bring in their attorneys, or we get calls from their attorneys trying to get around the tax by claiming an exemption. If you eliminate exemptions, you raise more money and make it easier to administer. Is this legally acceptable? Maybe not.
The other thing that should be laid on the table is taxing stock transactions. This occurs in a number of states, especially back East. It varies, and it is just like gaming, if that stock sells, it triggers paying the transfer tax. I know some from Clark County have some constituents who would not want to pay a transfer tax on a billion dollar hotel that changed stock, but if you want to raise money, this is how you do it. It is not on the backs of the home owners, it is on some of the large corporations who do stock transfers. Can this be done in the State of Nevada? I do not know.
Chairman McGinness:
Mr. Glover, if you or Ms. Burke have any information on exemptions and some possible numbers, we will appreciate having them.
Kathy Burke, Recorder, Washoe County:
What we have done in the past 2 months in Washoe County is come up with figures for the months of January and February. We have a total in January 2003 of 2564 conveying documents. Out of this, 1177 were actually taxable documents, and the rest, 1387, were exempted. For the months of January and February, the most popular exemption is the trust exemption, exemption No. 8, and it is difficult to administer. For the month of February, there were 2509 total conveying transactions, of which we collected transfer tax from 1187, having to prove 1322 exemptions.
What I am saying is it is an extremely difficult task to administer this tax and the county recorders have not been provided with an easier way to collect the tax. I consider it judgmental and we were elected, but judging becomes a little bit more difficult. We receive daily attacks on real property transfer tax.
Chairman McGinness:
Do you have any idea of what dollar figure would be generated if these exemptions were not implemented?
Ms. Burke:
No, Senator, but I do have a State of Nevada Declaration of Value form (Exhibit H) and they do not necessarily have to declare the value of a property to us if it is going to have an exemption attached. There is a form for each of you to see how difficult it would be to fill this out for us so we can administer the tax. The onus comes back to the person filling out the form. We can go with the theory of the “customer is always right.” There are 16 exemptions and I do not know how much money would be collected.
Senator O’Connell, on all of the exemptions, as Mr. Glover said, it would be an ideal situation. However, on exemption No. 2, I do not believe we are going to get the United States Government to pay this transfer tax and I do not think we are going to get out from making deeds to the government nonexempt from real property tax.
Senator O’Connell:
Would you have any idea, in breaking down these numbers, how many of the 1177 and 1187 were commercial transactions?
Ms. Burke:
No, we do not. They do not have to declare this on the Declaration of Value especially given a place to fill in what they want. You would not know what property is taxable and which is not. We index by grantor and grantee and not by the property. When the document comes in, we do not know what it is or how large it is. We have an assessor parcel number on it and this is the assessor’s information, and we do not know what it is when you bring it in. If you came in and told me, “I am bringing you this deed and the value of my property is $100,000,” I am not going to call you a liar; I am going to take your $100,000 figure. Later, if there is time, I will audit.
Senator O’Connell:
This is one of the reasons I had the exemptions read, especially due to the amount of money we lose on commercial properties, specifically.
Chairman McGinness:
We did not mean to get off the track, Mr. Glover. Let us get back to S.B. 385.
Mr. Glover:
This tax is really a very difficult tax to administer. When you buy a dollar candy bar, you are going to pay 7 cents tax on it. Something going through escrow is quite easy because you have a true sale and you have an escrow agent handling it. However, if there are transfers without consideration and we are trying to determine the value, as the committee gave us some guidance last session and we used two areas, a sale within the last couple of years or the assessor’s value, this is something we could work with.
This tax is not actually fair because you can actually beat the system if you know how to work it; this is the problem at our end. The other point is since there are 17 different recorders, and an equal number of district attorneys (D.A.), if we have a problem and go to the D.A. for advice, we can get 17 different opinions on this exemption. If you are going to process this type of legislation, one of the things we would like, as recorders, is to have someone on the state level in the Department of Taxation, Office of the Attorney General, or someone else we call give one opinion on how an exemption should be interpreted. We are really not capable of auditing on a lot of these cases; therefore, the tax is not administered properly.
What could happen, because the tax is going to be so high, is someone could challenge us in court due to the way Carson City interprets an exemption as compared to what another county might determine. The person challenging could easily win because a tax must be administered equally and fairly across the State of Nevada and, I can tell you, it is not. We do need to correct this, even if you did not do anything with increasing the taxes, this issue of fair taxes should be settled.
Ms. Burke:
We do not have a fight or disagreement with the fact invasive species need to be taken care of. We are trying to explain how difficult this tax is to administer, we are seeing it escalate on top of a problem already existing for us and we are asking for help before we start stacking things on top of it. The Realtors and escrow companies do bring in a lot of deeds, however they are not the only people who bring in deeds. We receive 50 percent of them by mail, through attorneys’ offices, and they come from individuals. I have examples of deeds, and every time you vest something it gives you a different status and gives you a different share within the property. Tenants in common hold status one way, joint tenants hold it another way, and you have different rights and you have different end results. What is the value of what they are receiving? What is it now and what is it later? These are the things we deal with every day in trying to explain these exemptions and we do not have the answers or answers we feel comfortable with. After talking to most of the recorders, we are all administering the tax a little differently, based on case by case.
Senator Neal:
What happens when you find out a person has willfully falsified the value of a property?
Ms. Burke:
There is a process through NRS 375 currently and the implementation of this is a lengthy process. I called my D.A. in reference to this and I know what is going to happen, because no one likes to pay taxes and we are considered the enemy. I would call the district attorney’s office.
Senator Neal:
Have you ever used this section of the law?
Ms. Burke:
We just gained this statute and in the past, I have had to go to the D.A., have gone back and collected on a few. I have also returned money that should have been exempt. There are exemptions you can return with interest and penalties now. It is more complex and I do not know of any recorder who is charging those penalties and interest. How do you charge them? It is getting more difficult for us to do this for a few dollars and then you get to calculate those figures.
Senator Neal:
Is it because the person falsifying the value will only be charged with a misdemeanor, is that why it is not being enforced?
Ms. Burke:
It may not be the only reason, but the enforcement can only come if you have enough people to be able to enforce it. In Washoe County, there is one person who audits real property transfer taxes and at the same time is also accountable for every dollar that comes into our office. I do not have the staff to police this.
Frances Deane, Recorder, Clark County:
I took office January 6, 2003, inheriting the real property transfer tax auditor from the previous administration. When I asked my predecessor where the auditor was in his auditing process, he told me the auditor was still looking at the year 2000. There are so many opportunities for exemptions to be used and the fact is there is only one person to perform the functions of auditing and maintaining an up-to-date real property transfer tax system. We do not have the staff and the volume is overwhelming.
Senator Neal:
Do you know if the casinos in Clark County are taking advantage of these exemptions?
Ms. Deane:
With all due respect, Senator Neal, I bet you know the answer to that better than I do.
Chairman McGinness:
If there are no further comments on S.B. 385, we will close the hearing on this bill and open hearing on S.B. 270.
SENATE BILL 270: Establishes source and procedure for funding grants to regional organizations for economic development. (BDR 32-781)
Senator Michael (Mike) A. Schneider, Clark County Senatorial District No. 11:
This bill is for economic development and I believe strongly about it, that is why I am bringing it forward.
Senator O’Connell:
I would like to state for the record my husband is a Realtor and holds a broker’s license.
Senator Schneider:
The city of Washington, D.C. requested charts in 2002 to see how they stood in taxing the citizens of their city in comparison to the rest of the country. They decided to compare themselves to the largest city in the 50 states. What I want to show you is a family of four in Las Vegas and the tax burden on our citizens, the taxes they really pay including income, property, sales, and auto taxes. These are the real taxes the citizens pay. Las Vegas ranks No. 48.
This tax has nothing to do with the business taxes. It taxes the employees, the citizens here. I think we really ought to look at this and understand we have some good tools, but we need to get them the money so they can sell the message. This is why I am here. Unless we can push the message and diversify our economy, we are going to continue to have the economic problem we have.
Russell M. Rowe, Lobbyist, Nevada Development Authority:
I would like to introduce Somer Hollingsworth, President, Nevada Development Authority, next to him is Donald D. Snyder, President, Boyd Gaming Corporation, and Chuck Alvey, President and Chief Executive Officer, Economic Development Authority of Western Nevada, and Bob Shriver, Executive Director, Nevada Commission on Economic Development.
We will not take up much of your time. We have some brief comments and will address any questions you may have about this proposed legislation. I would like to submit a proposed amendment to S.B. 270 (Exhibit I), which is something we have been discussing among ourselves with Senator Schneider, with Realtors, and the home builders association. I cannot say this amendment addresses their concerns, but it goes a long way towards reaching something that might be amendable to all of us involved. The amendment looks lengthy, but essentially it takes our proposed 10-cent increase on the real property transfer tax and applies it only to nonresidential properties, namely commercial and industrial properties.
We took the definition of residential dwelling unit from chapter 278 of NRS, which is the land use and development code in the statute section. We added the dwelling unit has to be individually owned and would include residential units such as condominiums and town homes, but would not include apartment complexes. We ask you to accept this amendment. We have been working with other interested parties and trying to reach some terms we can live with. The development authorities are very open-minded, aware of the issues and how any proposed tax increase affects businesses in Nevada, and they want to work with everyone to come up with the best solutions.
We do have a concern, as mentioned by previous speakers, about impacting the price of homes in Nevada. We thought by adding this amendment, which will only apply to nonresidential properties, we will create a much closer nexus between economic development and this proposed legislation. Economic development will bring businesses to this state and those businesses and industries will create additional property transfers in the commercial and industrial sectors. We can try and capture some of those transfers and money to turn it back into economic development and create the cycle. This is the theory behind the amendment and we hope you look upon it favorably.
In terms of how much revenue it would generate with the $.10 increase on the current rate, it will bring in $20 per $100,000 in property transfer. We were able to get our numbers from the research staff of the commission and figures from the Nevada Association of Realtors.
Senator O’Connell asked what percentage of transfers was devoted to commercial and nonresidential, the number we came up with was about 30 percent. We have used 31 percent, based on a number obtained from the Nevada Association of Realtors stating 69 percent of the value of transfers came from residential properties. It is still a rough estimate, but we believe we are in the ballpark.
Using the 2001 property transfer tax figures will generate about $1.3 million with a 10-cent increase on nonresidential properties. It is not a lot of money, but for the development authorities, it is a significant amount.
Historically, economic development was to be funded by a tax on jet fuel and the revenue went into a general fund. In 1991, the jet fuel tax was transferred to the counties to be used for their airports in each county and this is what the money is used for today. Therefore, economic development is a program that does not have a funding source. It comes from the General Fund, but there is no specific revenue source to support it in the State of Nevada.
Senator O’Connell:
You can verify this, but between the tourist commission and the economic development, we have $11 million you currently operate on, is this correct?
Robert E. Shriver, Executive Director, Division of Economic Development:
The amount of money currently in our budget program has been divided into two areas. One total funding capability or resources available to us, including pass-through monies from federal programs with our total in economic development, would be a little over $7 million.
Senator O’Connell:
Is this the tourist commission?
Mr. Shriver:
The tourist commission has a little over $11 million.
Senator O’Connell:
My concern is we start off with the correct numbers, and I do realize how it is dispersed, but between the two agencies, economic development and the tourist commission, you are looking at that amount now. Mr. Hollingsworth, the amount you are looking for is about $3 million? Is this the amount you mentioned to me?
Somer Hollingsworth, President, Chief Executive Officer, Nevada Development Authority:
We are looking for whatever we can get. The dollars we do not have are so large, in comparison to our competitors that anything helps because it is money not in our budget on a local level.
Senator O’Connell:
Did we discuss a $3 million figure?
Mr. Hollingsworth:
The $3 million figure included single family residential and we decided not to put residential in the package and this is how we came up with a little over $1 million figure.
Mr. Shriver:
In response to Senator O’Connell’s question, it might be relevant to give you some figures on where we are in terms to our neighboring states. These figures are generated through the National Association of State Development Agencies (NSDA). So they try to compare apples and apples. We try to get out of their programs that are not generic to economic development, such as tourism. Many state agencies include this as part of their package, we do not. There are training monies, loan fund programs, and others we try not to compare ourselves to while trying to get as lean and balanced as to what our budget looks like when compared to others.
Out of 49 states that reported to the NSDA group, we ranked No. 48 with the total amount of State funding at $3.7 million. The state of Wyoming, which is the smallest populated state, received state funding of close to $19 million and we understand some of this is generated through resource extraction taxes. Oregon receives $50 million, Utah is $63 million, Idaho receives a little less than us at $2.5 million, although they are much bigger and jump past us when you add in federal and other programs and resources available to them. Arizona is larger at $4.5 million, California is about $42 million a year, and New Mexico is at about $13 million in state funding alone. This gives you some numbers to look at.
Senator O’Connell:
In the interim of 2000, we had a committee set up to establish the business courts, but part of this was also to look at economic development of which I was chairman. We went through and found out, during those hearings, it is impossible to bring new venture capital money into a state without the state having a comparable funding to this cause.
The people do not feel their investment is a sound investment if the State does not believe in the program as well. We had several, quote, “experts,” unquote, who came in to testify for us and looked at how we were going to develop this or find a model program. We also found you cannot do this without a university that is specifically concentrating on new technology.
This became the hand-and-glove situation, therefore, if the committee is serious in looking at this, we need to dig up the minutes from those hearings to see what is involved and if you wanted to raise this kind of money for economic development and in what direction you thought this should be spent. These two things are extremely important to the growth of any kind of economic development.
Donald D. Snyder, President, Boyd Gaming Corporation, Nevada Development Authority:
I have spent a lot of time as a banker and now I am involved with the gaming industry. I also spent a significant amount of time supporting the university system. I think it is extremely important the university be fully integrated into our economic development and diversification efforts. My commitment to economic development and diversification existed a long time and is an important part of what I do for the university today. I am an active member of the UNLV Foundation and am active with the new subsidiary foundation created, known as the UNLV Research Foundation, specifically designed to find research dollars and invest them in economic development and diversification.
Our state cannot become the state we want without economic development and diversification. This is why I am involved, and when I started to get more actively involved, it became clear to me our biggest challenge was limited resources. I was appalled at the lack of funding we had available in a very difficult business. I was also shocked at how I spent my time as one of the leaders of the Nevada Development Authority (NDA), going to fund-raisers and asking people for funds, as opposed to asking people to move their businesses to Nevada. This funding is critical to us changing our priorities so we can spend our time doing what we need to do to make a difference in this state. I am asking your support for relatively modest funding that will have a tremendous impact on how we do business and what we do with our state.
Mr. Hollingsworth:
We have a very unique situation for both the state and at the local level. The cities our local development authorities compete with the most receive the majority of their funding from the public sector. Our situation is just the opposite. The majority of our funding comes from the private sector. The competing State agencies have budgets dwarfing our own Nevada Commission on Economic Development program. As development authorities, we are constantly on a fund-raising campaign targeting the private sector, instead of using our resources to attract new companies to southern Nevada. We are spending dollars and time creating local awareness to ensure we will have enough revenues necessary to operate.
In spite of being outspent and outmanned year after year, we attract more business than Phoenix, Tucson, Salt Lake City, and Albuquerque in all categories. If we had a source of funding that was dependable and constant, allowing us to compete on a level-playing field and focus on recruiting companies to southern Nevada, imagine what we could accomplish. The time for Nevada to become a leader in diversification is today.
The future of our next-door neighbor, California, is dim. Employers are facing major problems with workers compensation, paid family leave, high-energy bills, and the costs of funding a huge, social program system that has become entitlements. All of this is driving excellent quality companies out of the state. We need to be able to tell companies our story; we need to have the revenue that allows us to meet our competition at the state and local levels head-on.
We know Nevada’s pro business attitude: our work force, our energy costs, our total package is the best in the United States. As development authorities, we need a dedicated source of funding so we can implement long-term planning rather than short-term planning.
Our goal in Nevada should be for us to reach a point in our economy that when the next downturn comes we have, by diversifying our economy, created a large sector of high quality and high-paying jobs wherein any downturn will be a nonevent.
Senator Neal:
How many gaming people do you have represented on your organization? Is the gentleman representing Boyd Gaming Corporation the only one?
Mr. Hollingsworth:
No, sir. We have John Redmond, president of the MGM Grand Resorts.
Senator Neal:
Do they give you any money?
Mr. Hollingsworth:
Yes, sir.
Senator Neal:
How much?
Mr. Hollingsworth:
I do not remember. I would rather the people I represent tell you. They do contribute to the NDA, like others do.
Senator Neal:
How long have you had gaming represented on your board?
Mr. Snyder:
I do not know how long gaming has been represented on the board. Stations Casino is a member and continues to be a dues-paying member of the NDA. MGM Mirage has been on for as long as I can remember and Boyd Gaming Corporation’s involvement goes back before the time I became involved and I have been the president of Boyd Gaming Corporation for over 6 years. I think I can reflect on how this involvement has transpired over the last few years. There was a time when many in the gaming industry felt NDA was a competitor. They felt this way because the type of jobs and the level of wages brought in were not sufficient to carry their own weight. There has been a lot of dialogue at the NDA within the business communities, between the nongaming business community, and the gaming community to identify the types of jobs that make the most sense. There has been a substantial change Mr. Hollingsworth can talk about more, in terms of how we approach the types of companies and the types of jobs, to make sure we get the right type of business as part of economic development and diversification. This effort has gone a long way towards building a relationship between the gaming and the nongaming industries and a very positive one through the executive committee in the NDA.
Senator Neal:
Mr. Hollingsworth, what type of industry are you seeking?
Mr. Hollingsworth:
The kinds of industries I have been directed to seek on my board are those industries that create high quality and high-paying jobs. Last year, for example, the average wage for the 50 companies we brought in was over $22 per hour and these companies have to have benefits. We will not look or help a company if it does not have quality benefits for employees or does not create high quality and high-paying positions. The average wage in the State of Nevada we use as a benchmark is $15.48 per hour. We will not take any company before the Commission on Economic Development for incentives unless it at least meets this benchmark. The marching orders were strong from my board when I come in 1995. I believe in 1996 or 1997 we were somewhere around $10.50 per hour, and this last year, we are up to $22 per hour.
Senator Neal:
I am glad to hear this. The word out in the community is there was a division between diversification and the gaming community and they were not satisfied with participating and diversifying the State because it would impact upon their jobs. I am glad to hear you are not afraid of diversifying anymore. Does the rest of the industry share your views?
Mr. Snyder:
I cannot speak for the entire industry, but I can certainly speak for those who are most actively involved with our efforts with NDA. Mr. J. Terrence Lanni is the chairman and chief executive officer of MGM Mirage, and he has spoken very strongly in favor of economic development and diversification and has been very supportive of his company’s involvement in the NDA. I think there has been a substantial change and it is reflected in the progress the NDA has made in attracting a different type of company with a different type of employee. A positive evolution has taken place and there is a much broader base of support within the gaming community than there has ever been in the past.
Chuck Alvey, President, Chief Executive Officer, Economic Development Authority of Western Nevada:
I would like to acknowledge our secretary and membership chairman, B. J. North. As Mr. Snyder has indicated, a lot of effort goes into our membership because 72 percent of our funding comes from the private sector through fund-raisers, memberships, and ad sales. Mr. Hollingsworth laid the foundation, but one of the things I would like to point out to you is the economic development authorities across the state work closely together and this is a terrific way to operate. There are a number of people in this room today who are not speaking, with whom we work as a team to share the best ideas. In some cases, if Mr. Hollingsworth or I cannot hang onto a lead in our region, we do everything we can to keep them in the other person’s region and get them into Nevada.
The point I would like to make most strongly is the return on the investment. Even with the limited resources we have, for every dollar we spent, we generated about $112 last year in impact to the community. In terms of taxes back to the State and local governments, for every dollar we spent, we generated about $19 worth of taxes back into the system. I would submit to you that approving this bill is not just raising taxes and adding more. It will feed the system and become something that self-perpetuates, particularly in the commercial realm. The more companies we are able to recruit here, means more commercial real estate activity and more taxes generated into the State and local government so we can do more. Think what we can do with the additional support.
What we need more than anything else is to be able to market ourselves. We know what a great place we live in and what kind of a great business climate this is, but there are still companies we deal with every day that think Reno is a suburb of Las Vegas, that we are a gaming-only industry and do not realize our respective gaming employment is at 16 to 21 percent in our communities, and think Nevada is a dry, dusty state without much business opportunity.
The dollars this bill provides will help us with plans this organization has to market this State differently to get to those decision makers and get them to recognize what a great business climate we have here. It involves marketing, site selectors, and dealing with outreach to target industries.
There is a program called business builders which is a business and retention program that takes care of a thousand businesses in our community, finding out what their needs are, what their trends are, and how we can help them. Not only do we take care of them, but we also generate more leads from these companies and develop more in the community. I would urge you to consider this bill for the fact these people are entrepreneurs who start business and are employed by business who purchase goods and services from businesses, and we stress high-paying jobs and benefits in order to raise the quality of living in our State.
Senator Tiffany:
This is a comment to the whole committee. I agree with Senator O’Connell and other people about this bill needing to be driven from the top. Did your board or any of you talk to the Governor to elevate this in his level of priority?
Mr. Hollingsworth:
I have had a lot of conversations with the Governor on different subjects. His backing of economic diversification has been there. One time he was chairman of the NDA, therefore, he understands what we do. We have not sat down and specifically talked to him about this bill.
Senator Tiffany:
If the Governor had earmarked and put a little more money into the NDA, it would be a sign from the top saying we are interested. Utah is the perfect example of how economic development should happen. If you cannot get the Governor involved and get this type of priority, I do not know. What you are asking for is peanuts in compared to what you need to do.
Mr. Snyder:
The Governor did put the science engineering and technology into his budget, which was a significant item and stands behind this commitment.
Senator Tiffany:
But this is only $125,000. You are talking about the administrative position?
Mr. Snyder:
No. I am talking about the science engineering and technology building on the UNLV campus, which is a $75 million building. I forget how much the Governor has put in from his capital budget to support the construction of the building. From an economic development and diversification standpoint, it is the most significant statement we can make in this State about our commitment to bringing high-tech companies into Nevada. What the $1.3 million allows us to do is take advantage of this expanding infrastructure the Governor has committed to through his budget in making this State more attractive to the type of industries that have high-paying jobs and will make the investments we are looking for. This is a way of leveraging the commitment he has already made through the capital budget.
Senator Tiffany:
So, his commitment was the capital improvement projects at the university?
Mr. Snyder:
That is right. We spent time talking with the Governor about the importance of the building to encourage him to put it into his capital budget and he did.
Senator Tiffany:
Would you have rather seen the $35 million go into your General Fund budget instead of the Capital Improvement Program? I am not trying to set you up, but $1 million is nothing in comparison to what you need when you look at the infrastructure from the top down, compared to what Utah is doing. There are other economic development agencies in local governments. How are they funded?
Mr. Hollingsworth:
They are funded through the local government. The city of Henderson sets aside a number of dollars from its budget to fund these programs and Las Vegas sets aside a number of dollars to fund its budget. The only one who does not have an economic development division in southern Nevada is the county, and we represent the county.
Senator Tiffany:
Do they give you some funding?
Mr. Hollingsworth:
Yes, they do.
Senator Tiffany:
How much is the funding?
Mr. Hollingsworth:
They give us $35,000.
Senator Tiffany:
Thirty-five thousand? Do you know how much Henderson has gotten, or the city of Las Vegas has in their budget?
Mr. Hollingsworth:
No. I do not know what their budgets are.
Mr. Alvey:
If I may, for the record, we are funded. None of the local governments from the north, in our area, have economic development departments, per se. We develop them and they rely on us. About 12 percent of our funding comes from Washoe County, and the cities of Reno and Sparks.
Chairman McGinness:
This money goes back to each county directly proportional to the amount of money collected in that county. Probably the most difficult area for economic development is the area Senator Rhoads and I represent, which is seven-eights of the landmass of the State. The people in most of our counties are not going to raise enough money to host coffee. How can we address this?
Mr. Schriver:
If you would look in S.B. 270, section 3, our intent is to use the money in areas that are not generating a significant amount of funding and we see this as part of our role to pick up the slack in those communities that who cannot afford this or, in the case of some counties, that are not generating sufficient funding in commercial or nonresidential properties.
Mr. Alvey:
There is also a provision for the current grant levels not to change. Although it does not solve the fiscal problems, there are many times when we get a prospective client in our office who does not fit our community’s size, so we are constantly looking to make sure we know the assets available in the outlying counties to refer them. When we brought site selectors into the area, we actually included economic developers from those areas to our meetings, so the selectors would know about those particular opportunities. It does not solve the financial problem, but we are working cooperatively.
Chairman McGinness:
Is there anyone else to testify on behalf of S.B. 270?
Ms. Burke:
In reference to the differences of the properties, you can see what an administrative nightmare this is going to create for every recorder trying to record. The understanding needs to be that when you come into a recorder’s office, especially one the size of Washoe or Clark Counties, you do not have time to review every document. I am now recording 1100 documents per day. I believe in Clark County it is three to four times this amount. They come in packages of deeds. You do not get to scrutinize each one. You are lucky to meet all the recording requirements already in place. This will slow down the recording process. I have worked very hard to streamline my recording process.
At month’s end I have eight recording stations working at the same time, recording documents with people waiting. These recordings come in a package that includes everything for your transaction from the title company. We do not have time to review the type of property. The recorders will have an extremely difficult time determining the type of property. Maybe someone from the State would assume the responsibility and make those determinations if every one of these bills goes through that are asking for additional real property transfer tax.
In Washoe County, our rate is currently $.75 per $500 value. On a home costing $100,000, the transfer tax is $150. Then you add the $.05, the $.10 the $1, and the $.50 from the Assembly side, your transfer tax is now $480 on your $100,000 transfer. Transfer meaning everything that transfers, not necessarily a sale. If you deeded from yourself to your grandchildren, you would pay real property transfer taxes.
Senator Neal:
I went to the District of Columbia to see how they record their documents. For the first 2 pages, they charge $40 and the next 3 pages they charge $70, and for each additional page after that they charge $7.
Ms. Burke:
Our recording fees are extremely low. It is at least $2 for each additional page in most counties I have looked at. There are states like Arizona and Washington that have a flat tax on this, but of course they have other taxes as well. Everyone is a little bit different.
Senator O’Connell:
Generally speaking, there was a presentation by a company the committee might be interested in hearing from. It is a company that deals with tax collection in the cities of San Francisco and Chicago, and they have a system where there is no up-front charge. There is, however, a charge on each transaction and this is where they make their money.
This committee may be ready to entertain some ideas on how we can go about starting to collect money on the books now that is not being collected and at no charge to the State. There is a tracking on the company for checking purposes, but I do not remember the name of this company at the moment.
I think we might need to take a look at this before April 11, 2003, especially if we are looking at needing funds now. This seems as if it is becoming a more critical area for us and we are not collecting taxes that are out there for us right now.
Ms. Burke:
During my 18-year employment, no one has audited us to see if we are collecting correctly. Trying to collect this tax is extremely difficult and I have to applaud my staff. You have to build relationships with everyone in order to collect this tax and you have to earn trust. These things are difficult. The larger your counties get, the more difficult it gets to maintain trust and build relationships. I have had opportunities where I was able to physically go out and audit. In Washoe County, they know our doors are open and we are here to answer their questions, but this does not mean things do not slip by. Not everyone is going to call us.
Senator Coffin:
I heard a bill in another committee looking to abolish the recorder office. But after hearing the testimony today, I am beginning to wonder about the political power in the hands of the recorder. There is a lot of discretionary power in their ability or non-ability to pay close attention to certain transactions. I look at this and wonder why we should give this power to the county commissioners when we have persons like you who already have it. This gives me something to think about.
Ms. Burke:
Everyone is passionate about his or her job, and we believe if you look at this, we have a lot of duties that are totally behind the scenes and, honestly, you can eliminate anyone you wish, but it becomes more of a dictatorship. I believe people should be able to choose their elected officials and should not be stacked together.
Chairman McGinness:
For the record we have written testimony from Judith White, Greater Las Vegas Association of Realtors (Exhibit J).
Mr. Glover indicated he may have some language and we may want to take a look at this. Is there any other testimony on S.B. 270?
This meeting is adjourned at 4:15 p.m. until Thursday.
Gale Maynard,
Committee Secretary
APPROVED BY:
Senator Mike McGinness, Chairman
DATE: