MINUTES OF THE Meeting
of the
ASSEMBLY Committee on Taxation
Seventy-First Session
April 12, 2001
The Committee on Taxationwas called to order at 1:30 p.m. on Thursday, April 12, 2001. Chairman David Goldwater presided in Room 3142 of the Legislative Building, Carson City, Nevada. Exhibit A was the Agenda. Exhibit B was the Guest List. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.
COMMITTEE MEMBERS PRESENT:
Mr. David Goldwater, Chairman
Mr. Roy Neighbors, Vice Chairman
Mr. Bernie Anderson
Mr. Greg Brower
Mr. David Brown
Mrs. Vivian Freeman
Mr. John Marvel
Mr. Harry Mortenson
Mr. David Parks
Mr. Bob Price
Ms. Sandra Tiffany
ASSEMBLY MEMBERS ABSENT
Mr. Morse Arberry Jr. (Excused)
STAFF MEMBERS PRESENT:
Ted Zuend, Fiscal Analyst
Nykki Kinsley, Recording Committee Secretary
OTHER LEGISLATORS PRESENT:
Assemblywoman Kathy McClain, Assembly District 15
Assemblywoman Chris Giunchigliani, Assembly District 9
OTHERS PRESENT:
Joseph Brown, Attorney, Jones Vargas Law Firm, Representing Speedway Motor Sports, Inc.
Robert Schriver, Executive Director, Nevada Commission on Economic Development
Tony F. Sanchez III, Attorney, Jones Vargas Law Firm, Representing Speedway Motor Sports, Inc.
Berlyn Miller, Vice Chairman, Nevada Commission on Economic Development
Chris Powell, General Manager, Las Vegas Motor Speedway
Joseph F. Heitzler, President and CEO, Champion Auto Racing Teams (CART)
David Howard, Public Policy Director, Reno-Sparks Chamber of Commerce and the Nevada State Chamber of Commerce Association, and the Northern Nevada Apartment Association
David Pursell, Executive Director, Nevada Department of Taxation
Chris Ferrari, Issues Manager, The McMullen Strategic Group
Ryan Works, Public Policy Intern, Reno-Sparks Chamber of Commerce
Deborah Cahill, Director of Government Relation, Nevada State Education Association (NSEA)
Roberta Ross, Manager, The Ross Manor, Residential Hotel and Apartments
Patrick Zamora, Director of Accounting, Clark County School District
Ardel Jorgensen, Director, Clark County Department of Business License
Carole Vilardo, Executive Director, Nevada Taxpayers Association
Paul (Luke) Puschnig, Legal Counsel, Las Vegas Convention and Visitors Authority
Robert Barengo, Legislative Counsel, Reno-Sparks Convention and Visitors Authority, (RSCVA)
Gregory Ferraro, Nevada Resort Association
Daniel Musgrove, City of Las Vegas and Southern Nevada Regional Planning Coalition
Timothy Smith, Vice President of Finance, Reno-Sparks Convention and Visitors Authority
Joanne Main, Tax Audit Manager Reno-Sparks Convention and Visitors Authority
Assembly Bill 657: Proposes to exempt from sales and use taxes certain items used by professional racing teams or sanctioning bodies and provides exemption from certain other taxes for such items. (BDR 32-1454).
Joseph W. Brown, Attorney, Jones Vargas Law Firm, spoke in support of A.B. 657. Mr. Brown explained the Jones Vargas Law Firm represented Speedway Motor Sports, Inc., a New York Stock Exchange company that owned six of the major racecar venues in the United States, one of which was the Las Vegas Motor Speedway.
In March 2001, the Las Vegas Motor Speedway hosted the Winston Cup Series, which brought more than 260,000 fans for the weekend of racing, the largest event of any kind ever held in Nevada. The company's major stockholder and guiding force was Britton Smith. Mr. Smith and Chris Powell, the General Manager of the Las Vegas Motor Speedway, informed Mr. Brown that legislation incentives for the racing industry would cause a major influx of racing teams, which would abandon California, Pennsylvania, Indiana, North Carolina, and other locations throughout the United States, in favor of Nevada.
Robert Schriver, Executive Director, Nevada Commission on Economic Development, testified in support of A.B. 657 with proposed amendments (Exhibit C). Mr. Schriver stated A.B. 657 encouraged high value-added industries with the opportunity to relocate their operations to Nevada. The relocation of the industries would be an economic benefit for Nevada, and in particular the Clark County area, because of the Las Vegas Motor Speedway. The racing industry offered significantly higher income levels due to the expertise required of the individuals involved.
Chairman Goldwater asked if the industry was using the sales and use tax and property tax abatements offered by the Nevada Commission on Economic Development. Mr. Schriver responded that under the terms of A.B. 657, the industry would qualify initially. The life expectancy of the equipment involved did not lend itself to the current program set up and would require weekly meetings to handle the workload.
Mr. Marvel asked if the racing industry was exempt in other states. Tony Sanchez III, Attorney, Jones Vargas Law Firm, representing Speedway Motor Sports, Inc., responded to Mr. Marvel’s question. The states of Indiana, North Carolina and Florida had some type of economic development that provided for those exemptions. Mr. Marvel asked if A.B. 657 would contain a sunset provision or if would it be perpetual. Mr. Brown replied that there would be an automatic review after six years.
Mr. Schriver said that a part of the requirement of the Nevada Commission on Economic Development was to make a report to the Legislative Commission on an annual basis. The commission was also required to present a package to the Joint Committee of the Assembly Committee on Taxation and Senate Committee on Taxation, and would be able to supply information needed on the annual report.
Assemblyman Brown asked if racing teams were presently coming to Nevada. Mr. Brown responded that there were teams located in California, Indiana, North Carolina, etc., and some racers were locating in Nevada. However, A.B. 657 would enable entire teams to relocate to Nevada. Assemblyman Brown asked if the conditions in Nevada were inviting to racers without the bill, and Mr. Brown answered no. Assemblyman Brown asked what was discouraging the race teams, and Mr. Brown explained other states had existing incentives that drew the racers.
Speaking in support of A.B. 657, Berlyn Miller, Vice Chairman, Nevada Commission on Economic Development, said the bill would help Nevada and industries such as the airports, due to the increased activity that the racing teams brought.
Testifying in support of A.B. 657, Chris Powell, General Manager, Las Vegas Motor Speedway, stated that the National Association of Stock Car Auto Racing (NASCAR) Winston Cup that occurred four weeks ago in Las Vegas brought over $125 million in revenue to southern Nevada. The hope was to bring more events to Nevada and passage of A.B. 657 would encourage that to happen. The motto at the speedway was "Build it here, test it here, race it here." There were approximately ten facilities at the speedway, which different types of cars were able to race on, whether the Winston Cup cars on the mile-and-a-half super speedway, sprint cars on the dirt track, or the quarter-mile drag strip, etc.
Mr. Powell added with the passage of A.B. 657, he could see Las Vegas holding the same position for motor sports on the west coast that Charlotte, North Carolina, played in NASCAR racing on the east coast. There were approximately 75 to 100 stock car teams based within a 45-minute drive of Charlotte, North Carolina, which was located near many racing areas. The race teams stayed in North Carolina because it was economically beneficial to them. The legislation currently in question could pull racing teams from the National Hot Rod Association and from Championship Auto Racing Teams (CART). The economic benefit to the state would be tremendous.
Chairman Goldwater asked why the sales tax was prohibiting this activity from occurring at the present time. Mr. Powell responded that tradition played a large part, as well as geography. At the present time, there were only five NASCAR Winston Cup events west of the Mississippi. In the case of open wheel racing, it was tradition; with NASCAR it was geography. The genesis of drag racing was the streets of southern California; consequently, the bulk of drag racing venues was based in Southern California.
Chairman Goldwater repeated his question pertaining to the sales tax itself. Mr. Brown said the “no sales tax” incentive encouraged racing teams to relocate. Chairman Goldwater asked if Indiana had a personal income tax. Mr. Brown replied that it did.
Mr. Powell admitted the sales tax benefit would be enough incentive for those teams bound by geography or tradition. He could not make that statement in the case of NASCAR because the majority of those events were held on the east coast.
Mr. Sanchez explained the cost of the equipment brought into Nevada and the use tax considerations were paramount issues, as the vehicles were very expensive. Chairman Goldwater asked Mr. Sanchez, once the entities moved to Nevada, would they be subject to personal property tax and would they request an exemption from that as well. Mr. Brown responded that he was unsure but would provide that information to the committee.
Mr. Marvel asked if the vehicles would be manufactured in Nevada. Mr. Powell responded that race cars were built by the piece, and parts were acquired at various places, and were not assembled on an assembly line. He added the assembly would quite often take place in Nevada.
Assemblywoman Freeman asked Mr. Brown what the impact would be on the General Fund if the request for exemption was successful. Chairman Goldwater said there was a fiscal note attached to A.B. 657. It was an indeterminate amount because the activity did not currently take place in Nevada. Exemptions had been given in the past for purposes of economic development on activities that had not been occurring before the exemption was passed, for example, the art tax exemption. Mrs. Freeman referenced a Senate resolution and said the resolution required that a tax exemption had to achieve a genuine social or economic purpose and not have an effect on the finances of the state. She asked how those issues would be addressed. Mr. Brown believed testimony from the next witnesses would answer Mrs. Freeman’s questions.
John Force, Team Owner, National Hot Rod Winston Series, testified in support of A.B. 657. Mr. Force was based in Indianapolis, Indiana, and in California, but was a homeowner in Incline Village, Nevada. His career had been good to him, and he moved to Nevada to save money. He represented the approximately 6,600 drivers in the Winston Series, many of whom were looking for a place to locate and invest. Mr. Force stated he owned 6 transporters and had 40 employees. He had three race teams, partially located in Indianapolis due to the savings the county offered. When a shop was built in Indianapolis, everything from sewer systems to lightings was offered at reduced costs. However, they had to pay federal and state taxes.
Mr. Force said reinvestment was desirable and if the teams were allowed to keep their money and reinvest the funds in Nevada, they would move to Nevada, reinvest in their shops, and their teams would be able to grow. He had 27 cars and California took a great deal of the profits. The younger racers could not afford to live in California but did not want to live in the cold climate of Indianapolis; they loved Nevada, especially Las Vegas. If A.B. 657 passed and the racers moved to Nevada, their income and savings would be reinvested through gambling, purchases, and airline fares.
Testifying in support of A.B. 657, Joseph F. Heitzler, President and CEO, Championship Auto Racing Teams (CART), said CART was listed on the New York Stock Exchange under the symbol of MPH. As one of four international sanctioning groups, CART sanctioned 22 locations worldwide, 15 domestic locations and 7 international. Mr. Heitzler expounded, saying that auto racing was the fastest growing spectator sport in paid attendance and television audience categories. For the past five years the sport had experienced a 25 to 28 percent compounded growth rate. CART had an economic environment of approximately $650 million dollars that affected local economies, sponsors, and the particular cities or countries that hosted those types of events. The three engine manufacturers in the sport were Honda, Toyota, and Ford-Cosworth. Other significant manufacturers made up all other details that were associated with putting their product on a racetrack. Mr. Heitzler stated the car industry was approximately a $2.6 billion dollar industry.
Continuing, Mr. Heitzler said the specific benefit to Nevada would be that CART was the only racing/sanctioning organization that could relocate its headquarters. Formula-One was based in Monte Carlo and London, NASCAR was based in Daytona, and the International Racing League (IRL) was based in Indianapolis. None of those intended to relocate in Nevada. He said CART would move to the state by January 15, 2002, if A.B. 657 was successful. The corporate move would include up to 132 persons. The average annual wage of those persons was $80,000. Mr. Heitzler stated Nevada’s weekly television exposure would go live to 293 countries between February and November. The plan was to expand the corporation with a museum and an IMAX theater, so that tourists would have the opportunity to see classic and historical racecars that had won many international and domestic races. There was also the possibility that sponsors would establish regional offices in association with the corporate headquarters.
Mr. Heitzler said the real characteristics of auto racing were speed and technology. It was a highly competitive business. Therefore, the closer the engine manufacturers were to the racing teams, the better. Honda Racing Development, Ford Racing Development, and Toyota Racing Development were all presently located in southern California.
Each owner of a franchise was allowed to race two cars, but there were four to five backup cars for those two cars, in case one was damaged beyond repair. Each car occupied 15,000 square feet and each had 30 to 35 people who attended to it. If an owner had four or five cars, it was an investment of approximately $18 million to $20 million. There was a very vigorous environment of hospitality and methodology of travel, so each team might have four to five tractor-trailers that would bring shops to local races. The teams averaged between $80,000 and $120,000 in salary. An average-sized team of $12 million would save approximately $250,000 to $400,000 by relocating to Nevada. The incentive was not the tax issue, but rather the competitive issue. The $250,000 to $400,000 could be invested in the competitiveness and skill levels to put a racecar on a track.
The benefits to CART from relocating to Nevada included the lifestyle, the Millennium Scholarships, and the promotion of racing as entertainment rather than merely sport. Through live broadcasting, CART would have the attention of the world, which brought attention to the state as well. With the tax incentives, focus could be placed on the product and reinvestment could be put toward hiring better people and providing better facilities. Mr. Heitzler believed another benefit to CART was the accessibility to state legislators, which was not the case in the two states where they were currently located.
Mr. Heitzler said the decision to relocate to Nevada relied solely on the passage of A.B. 657. Mr. Marvel asked Mr. Heitzler if the legislation was processed, would that guarantee CART would relocate to Nevada. Mr. Heitzler responded “yes.” Mr. Marvel said there was still a constitutional 2 percent sales tax and said A.B. 657 would not exempt that tax. Chairman Goldwater responded that caveat was in A.B. 657.
Ms. Tiffany asked if there was another state competing with Nevada for the relocation of CART. Mr. Heitzler responded yes, there was a proposal before the Florida Legislature. Mr. Brown stated CART was looking at Nevada along with other states. He had shown Mr. Heitzler a draft of A.B. 657, and Mr. Heitzler had stated that if A.B. 657 passed, CART would stop looking for another place to relocate. Mr. Heitzler stated the timeliness of state leaders and the Nevada Legislature had been impressive. He reiterated that CART would play a significant role in Nevada.
Ms. Tiffany asked if the corporate headquarters would be placed at the speedway in Las Vegas. Mr. Heitzler responded they would be close to, if not on the property.
In review of the amendments to A.B. 657 (Exhibit C), Tony F. Sanchez III, Attorney, Jones Vargas Law Firm, said the bill was in two sections. The first section addressed the 2 percent constitutional state tax that would need to go on a ballot. A proposed amendment to Section 1 added the “Transport haulers of a professional racing team and sanctioning bodies.” Subsection 61.6 (1.b), deleted "other than tires or accessories,” as it did not appear to be necessary to make that exemption in Nevada. New definitions were added and the same changes would be made to the 5 percent tax that would not appear on a ballot. Mr. Sanchez said, most importantly, in the last provision of Section 10, it was proposed that the 5 percent became effective upon enrollment and the 2 percent state tax would be on the ballot. Those amendments would give an incentive for the teams to relocate to Nevada without having to wait until 2003.
Mr. Parks said page 2, line 19, referenced consumable fluid and asked if there was a more specific definition for the term "consumable." Mr. Heitzler explained "consumable" fluid; each race team would build facilities that would house the dyno-computer technology that tested the engines in a soundproof booth for a specific period of time, and whatever fuel was used would be the fuel that went into that engine to run it for that specific time. Mr. Parks suggested adding Mr. Heitzler's explanation to A.B. 657 as a definition. He asked, if the bill was passed by the legislature but was turned down by the voters, would a continuation of the 2 percent tax still exist. Mr. Heitzler said “yes.”
David Howard, Public Policy Director, Reno-Sparks Chamber of Commerce and the Nevada State Chamber of Commerce Association, testified in opposition to A.B. 657. He said A.B. 657 was the sixth bill opposed by the entities he represented because it was another tax exemption and further erosion of the tax base. He said there were currently $678 million in sales tax exemptions.
ASSEMBLYMAN ANDERSON MOVED TO AMEND AS RECOMMENDED AND DO PASS A.B. 657.
ASSEMBLYMAN MARVEL SECONDED THE MOTION.
Mr. Brower disclosed that he practiced law with the Jones Vargas Law Firm and would abstain from the vote.
Mr. Mortenson asked how A.B. 657 would affect taxes that were already being collected by the raceway in Las Vegas. Chairman Goldwater replied that a fiscal note had been submitted that showed little impact.
David Pursell, Executive Director, Nevada Department of Taxation, stated the department canvassed various promoters in the state to get an idea of what the impact would be, but had no real information to offer.
THE MOTION PASSED. MR. BROWER ABSTAINED FROM THE VOTE.
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Chairman Goldwater closed the hearing on A.B. 657, and opened the hearing on A.B. 656.
Assembly Bill 656: Authorizes annual payment of business tax under certain circumstances. (BDR 32-394)
David Pursell, speaking in support of A.B. 656, said existing statute only allowed for quarterly payments of sales taxes by businesses. A.B. 656 permitted small business owners with less than one full-time equivalent employee per quarter to file annually instead of quarterly, which saved the company time and check-writing costs, and saved the state postage and printing costs.
Mr. Pursell advised the committee that a suggested amendment to A.B. 656 (Exhibit D) would be in Section 1, page 1, line 17, and deleted the words "that date" after the word "following" and inserted "the quarter in which the business ceases its operations."
Mr. Marvel asked how many returns were received per year. Mr. Pursell responded approximately 3,800 companies that had one full-time employee.
Speaking in support of A.B. 656, Chris Ferrari, Issues Manager, The McMullen Strategic Group, thanked the department for bringing forth the bill and assisting small businesses.
Ryan Works, Public Intern, Reno-Sparks Chamber of Commerce, said the chamber was in support of the bill.
ASSEMBLYMAN MARVEL MOVED TO AMEND AND DO PASS A.B. 656.
ASSEMBLYWOMAN FREEMAN SECONDED THE MOTION.
THE MOTION PASSED UNANIMOUSLY.
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Chairman Goldwater closed the hearing on A.B. 656.
Vice Chairman Neighbors reconvened the committee meeting at 2:13 p.m. and opened the hearing on A.J.R. 11.
Assembly Joint Resolution 11: Proposes to amend Nevada Constitution to allow legislature to authorize this State to operate lottery for support of public education. (BDR C-1200)
Assemblywoman Kathy McClain, Assembly District 15, introduced A.J.R. 11. She felt it was time to change the Nevada Constitution to allow for a state lottery. She explained, in the past, state lotteries were different from those at the present time. The lottery business had a shady reputation and so it was prohibited in the state's constitution. At the turn of the previous century, there had been an attempt to repeal that ruling, but the attempt was not successful because Nevada was a nongaming state. In the 1960s attempts to repeal it were opposed because people were afraid a lottery in Nevada would involve the federal government, which would then get involved in all of the state's gaming businesses. In the 1970s it was tried again, and some of the same concerns stopped the effort. There was considerable opposition by the gaming industry, as it was believed a lottery might cut into their revenues. Ms. McClain said a lottery today would not make a dent in gaming revenues, but would enhance state revenues.
Mrs. McClain found the research on state lotteries very interesting. She informed the committee there were 45 of 48 states that had a state lottery and many had come into existence during the 1970s and 1980s. She found in Missouri that $155 million received from the lottery would go into the public education system. Most states with lotteries were not doing badly, but the lotteries would not supplant any other tax revenues. Mrs. McClain said the purpose of the state lottery in Nevada would be to fund education.
Mr. Marvel asked how many states earmarked the revenue from lotteries. Mrs. McClain replied nearly all the states stipulated where the revenue from lotteries would be spent. Mr. Marvel said in the past one of the reasons people had objected to a state lottery was because the funds were earmarked.
Assemblywoman Freeman heard that in California, the state General Fund allocations had been reduced by the amount of funds received from the lottery. She asked if that was the way it was currently done. Mrs. McClain was not familiar with that issue.
Mrs. McClain wanted to get a dialogue started regarding the issue of lottery. Her goal was to assist public K-12 education. Mrs. Freeman said in 1987 a resolution was introduced, and she signed onto it. She received calls from all over the country that expressed people’s dismay over the fact that Nevada had even talked about having a lottery. She asked if the same attitude was still prevalent in the country. Mrs. McClain had not heard anything from other states. Mrs. Freeman said she thought it was a topic worth discussion; there were some places north of Reno at the California border that sold lottery tickets, and did a booming business. Mrs. McClain said in southern Nevada residents drove to the border to buy tickets, and there were always a lot of cars parked in that area.
Mr. Brown asked if there had been any discussion in regard to tightening up the language in A.J.R. 11. A particular distribution scheme might be subject to debate as it related to fairness and equity. Mrs. McClain said the language was broad because the drafters of the bill felt something needed to be put in the bill up front to say how the funds should be allocated. Lottery monies would fluctuate, but would not impact the Distributive School Account (DSA) and would not affect how the General Fund dollars would be allocated. Some states did better with their lotteries than others, strictly due to population. She said a state lottery in Nevada would involve a lot of tourists and the tourists should be included in the population of Nevada for the purpose of sales of lottery tickets.
Deborah Cahill, Director of Government Relations, Nevada State Education Association (NSEA), testified in support of A.J.R. 11, which she believed would generate discussion and was an option available to the legislature. The resolution did not require the legislature to establish a lottery. She said it was understood that the funds from a lottery fluctuated and she had the same concerns as Mr. Brown in regard to a fair and equitable distribution, but she felt the legislature could resolve that issue when moving forward with the enactment of a lottery. The NSEA had not abandoned their initial discussion that there was a need to stabilize and broaden the tax base with another source of revenue, but they felt that A.J.R. 11 was worthy of the committee’s consideration.
There was no further testimony, Vice Chairman Neighbors closed the hearing on A.J.R. 11, and opened the hearing on A.B. 655.
Assembly Bill 655: Exempts certain establishments from taxes on rental of transient lodging. (BDR 20-1302)
Mrs. Freeman, who testified as a neutral party on A.B. 655, felt it was worthy of discussion before the committee. She and Assemblymen Anderson and Brower received a letter from Wheeler Enterprises concerning the room tax on residential rentals. Many motels were used for long-term housing for the poor and mentally ill. She pointed out the requirement for exemption from the sales tax was 28-day occupancy.
Mr. Anderson stated that the e-mail he and his colleagues received indicated that the needs of persons who were the tenants of those hotels fell under social services. The individuals who left state institutions and entered transitional programs often needed rental programs prior to reestablishing credit. Motels met that need. Mr. Anderson said when some young adults turned 18, their parents "invited" them to leave home. Those young adults were sometimes required to find temporary lodging during the last few weeks of their high school education, and the hotels in discussion provided that housing. He did not believe that when the tax was initially set up the intent was to tax these marginal hotels; instead, the intent had been to tax day-to-day lodgers.
Mr. Marvel asked Mr. Anderson if he had reviewed the Bond Council's opinion regarding the issue. Mr. Anderson said he had not. Mr. Marvel said the council had concerns on what effect A.B. 655, if approved, would have on the bond rating because the funds had already been pledged. Mr. Anderson responded that the question was how many motel rooms were under the program. Mrs. Freeman also responded to Mr. Marvel’s question stating that low-income housing needed to be addressed.
Roberta A. Ross, Manager of the Ross Manor Hotel and Apartment, testified in support of A.B. 655. The 162 units under her management were rented nightly, weekly, and monthly; 62 percent of the units were rented weekly and 38 percent were rented monthly, with prices ranging from $80 for most to $150 per week for 11 of the units. Ms. Ross said 90 percent of the occupancy came from residents of Reno. She was concerned about guests who were unjustly taxed by the interpretation of statutes, which imposed taxes on weekly rental of transient lodging. Ms. Ross first became involved with the type of rental situation being discussed when her aunts purchased and restored a residential hotel in 1972. The hotel was bought in a condemned state and was resold in 1979, but it was received back in 1985 by foreclosure from the four Berkeley men who purchased the hotel thinking they would make a lot of money from weekly rentals but did not. The intent was to close the building completely because the building had become a haven for drug addicts, dealers, prostitutes, and pimps. However, some truly "quality" people lived there.
In recent months, Ms. Ross became aware of A.B. 655, and contacted Mr. Anderson regarding the tax issues it addressed. She also contacted Ruth Wheeler, the person responsible for the initialization of A.B. 655, and had conversations with the motel association and various hotel and motel operators. She strongly believed the changes the bill brought had been needed for years. The original room tax law was initiated with the intent to tax tourists to create a more viable tourism industry and was not intended to tax the working poor residents of the state who could not afford to pay for housing on a monthly basis. She asked why her guests and all weekly renters should pay taxes on their rent when by definition the facility was not a motel. Ms. Ross submitted Exhibit E that illustrated property type classifications and discussed the classifications and the taxes involved. She urged the passage of A.B. 655.
David Howard, representing the Northern Nevada Apartment Association, said after working with various people he was unsure whether A.B. 655 was the appropriate vehicle for solving the problem. He believed there were equity problems but did not think A.B. 655 was the necessary tool to deal with them. However, he said, the Northern Nevada Apartment Association pledged its support to work on another solution.
Patrick Zamora, Director, Accounting, Clark County School District, testified in opposition to A.B. 655, and spoke from prepared text (Exhibit F). The district used the room tax in order to repay principal and interest on bonds sold for school construction and modernization. A.B. 655 would affect $450 million in outstanding bonds secured by the pledge of room taxes. Another $250 million in bonds that were to be issued later in 2001 would also be affected because they were pledged for repayment from room tax revenues.
Ardel Jorgensen, Director, Clark County Department of Business Licenses, testified in opposition to A.B. 655 because it affected transient lodging, billings, and collections in Clark County (Exhibit G). Ms. Jorgensen stated there would be a “significant revenue loss.” The bill eased the way for individual businesses to comply with and claim an exemption, which required an annual audit and cost the county additional revenues. Furthermore, as most establishments charged daily, weekly, or monthly rates that bundled tax into the rate, if the exemption succeeded, there would be no incentive to change the rate and the owner would realize more profit.
Chairman Goldwater asked if a different classification was needed by statute or ordinance. Mr. Jorgensen said a different definition of a resident hotel, or something that was not tied to length of stay, would be helpful.
Mrs. Freeman said that Mr. Howard had offered to address the issue of transient housing. It was critical that the problem be addressed. Most of the anger she heard from constituents was directed to the room tax and the way it was used. Her constituents wanted some assurances that the room tax would be used for its intended purpose.
Carole Vilardo, Executive Director, Nevada Taxpayers Association, had two concerns. Any change made now to reduce the revenue could impact the entities that had outstanding bonds. A.B. 655 addressed Nevada Revised Statutes (NRS) 268.0195 and 244.33565, and obviously had a statewide application because there were no population limits. She recommended the committee also consider NRS Chapter 244A, which was the unincorporated town law, in order to have consistency.
Paul (Luke) Puschnig, Legal Counsel, Las Vegas Convention and Visitors Authority, testified in opposition to A.B. 655 and provided the committee with a letter from Swendseid and Stern (Exhibit H). Mr. Puschnig said the bill would directly impair and impact the bonds that were outstanding. Those bonds were obligations of the state, and the state needed to honor its obligations.
Chairman Goldwater brought to the committee’s attention that while bonds for capital projects might seem ideal, they were problematic when changes were needed; those bonds restricted the ability of legislators to legislate.
Robert Barengo, representing the Reno-Sparks Convention and Visitors Authority (RSCVA), testified in opposition to A.B. 655 stating the bill would impact the bonds of the RSCVA. If someone moved into a room, stayed 28 days and then did not move, they would not be required to pay the room tax.
Chairman Goldwater commented the legislature could not affect the revenue stream; the rates would need to be changed.
Timothy Smith, Vice President of Finance, RSCVA, testified in opposition to A.B. 655 because he felt it affected at least 100 properties within Washoe County. Of the 250 licensees, more than 100 motels were not part of the 28‑day category whose taxable revenues of over $31 to $32 million annually could be reduced by the bill. Of the 12 percent tax revenue collected in Reno, and the 11 percent collected in Sparks, a major portion went to the RSCVA; however, the current Reno Convention Center project also received revenue from the taxes. Three-eighth percent of the tax revenue went to the state, which involved in excess of $100,000 annually that could be affected. There were four taxing districts within Reno that collected money for Reno Parks and Recreation that would be affected, as would Washoe County. Mr. Smith reiterated that RSCVA would be impacted the most, and they did not know what would happen if the funds were not received. Incline Village would experience a reduction of the $9 million annually promised for promotion of the area as a destination.
Mr. Anderson asked if the RSCVA was collecting room tax from timeshares at Incline Village. Mr. Smith responded that there were two ways for a guest to use such facilities to avoid paying the tax. They could prepay the first 28 days or after 28 days of paying the tax, they no longer paid the tax. The RSCVA appeared before Washoe County and presented a third option to avoid paying the tax by producing a contract for a 60-day stay.
Mr. Anderson said he was curious about the Incline Village question relative to length of stay. Mr. Barengo responded timeshares in Incline Village were for two weeks. The room tax was paid to Washoe County. Mr. Anderson requested a written explanation from Mr. Smith and Mr. Barengo.
Joanne Main, Tax Audit Manager, RSCVA, testified in opposition to A.B. 655. She said the Incline Village issue was brought forward because of pro-rated rents. Long-term leases were signed and if the lease was broken the lessee was subject to the tax. Mr. Anderson asked Ms. Main if the tax was collected at the same rate that it was collected from a person who was lodged in a temporary facility for a short period of time. Ms. Main answered "no." Mr. Smith stated the tax rate was the same throughout the county with the exception of Sparks.
Ms. Main said another avenue for tax nonpayment in Reno and Washoe County was for a person to pay the tax at some point and then move every month for as long as they wanted and never pay any more tax, as long as they had the receipt showing they had stayed the previous 28 days in another establishment.
Mr. Anderson expressed concern that all persons should be treated on a fair basis, including those at the bottom end of the income bracket. Mr. Barengo replied for the record that the tax rate was the same for all persons. He said he and Ms. Main would discuss the matter further with Mr. Anderson.
Chairman Goldwater asked Mr. Barengo whether there was a difference between a General Obligation Bond and a General Revenue Bond. When the state pledged revenue from a certain tax source, there were a number of things the state could do to affect that contract. It was important to understand that simply doing something like what A.B. 655 attempted would not impair the contracts as long as the state could raise the rates and live up to whatever contractual obligation there was behind the revenue bond. Mr. Goldwater said it would be fine to repeal the rate tax for those referenced in A.B. 655, as long as the tax was raised on the remaining ratepayers. Mr. Barengo replied it would be necessary to read each of the covenants in each of the bond documents to ensure that specific revenue was not pledged for a specific term of time, which was often the case.
Chairman Goldwater asked if the state actually pledged that specific revenue from the short-term transient housing. Mr. Barengo said the bond was pledging a specific stream of revenue to meet a bond issue. The counties collected the revenue rate over a specific period of time and if the revenue rate changed, the covenant of the bond would be violated.
Mr. Anderson asked if Washoe County experienced a giant growth of motels, would it result in more revenue to the RSCVA. Mr. Barengo replied that was correct; however, the rate would not change. Mr. Anderson said they were not changing the rates, just the number of rooms that would be open to the rate. How would the state be affected, he asked, if new hotels offset revenue. According to Mr. Barengo, the wording of each covenant would need to be interpreted, and NRS 268, et seq. and NRS 264, would need to be reviewed for how the law stated the bonds were pledged.
Mr. Zamora said Clark County bonds were General Obligation Bonds and secured by an additional pledge of revenue from room taxes and real estate transfer tax. If those revenues were not sufficient the bond would become an obligation of the school district.
Ms. Ross thanked those who had offered to help. She emphasized the 28-day exemption was for a city resident who paid his/her taxes for the 28-day period. After the 28 days, an individual would not have to pay any more taxes. If an individual lost his job and went on unemployment for two weeks, and returned to a residential hotel room, he would pay the tax again. She reiterated if there was any hiatus in the 28-day period, the taxes would have to be paid again.
Mrs. Freeman asked Mr. Barengo if the RSCVA would pledge to work to solve the problem of transient housing. He replied “yes.” Mrs. Freeman said there were legitimate concerns from the committee and appreciated Mr. Barengo's answer that the RSCVA would participate in a resolution on that issue.
There was no further testimony so Chairman Goldwater closed the hearing on A.B. 655. Chairman Goldwater opened the work session and informed the committee of the work session document (Exhibit I) prepared by Ted Zuend, Fiscal Analyst. A.B. 53 was the first bill on the work session.
Assembly Bill 53: Repeals business tax under certain conditions. (BDR 32-830)
Chairman Goldwater said A.B. 53 eliminated the existing business license tax on the first day of the calendar quarter following the effective date of the general business tax and repealed the business license tax upon legislative or voter approval of the Nevada State Education Association (NSEA) initiative, which failed [recently in the Supreme Court] (Exhibit I). The sponsor of A.B. 53 supported a contingent repeal of the business license tax because two separate methods of taxing businesses was unnecessary and would particularly burden many small businesses. The Nevada Taxpayers Association opposed A.B. 53 because of the now voided provisions in the NSEA initiative and the fixed percentage of spending for K-12 education. The NSEA opposed A.B. 53 because a reduction in General Fund revenue could ultimately result in less tax revenue available for education programs.
Assemblyman Tom Collins, Assembly District 1, said because the Supreme Court struck down the need to remove the business license tax, he suggested an amendment to A.B. 53 to not repeal the business license tax but to increase the tax $10 a quarter to cover the shortfall in the state budget. Chairman Goldwater said that was a new subject, so there would not be action on that proposal at the current time.
ASSEMBLYMAN ANDERSON MOVED TO INDEFINITELY POSTPONE A.B. 53.
ASSEMBLYMAN MARVEL SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
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Assembly Bill 137: Makes changes relating to statutory limitation on total ad valorem tax levy. (BDR 32-1069)
Chairman Goldwater said A.B. 137 provided an exemption to the $3.64 combined property tax cap levy that resulted from voter approval of the state or local debt, if the ballot question contained a clear statement that set forth the amount of the levy and explained that the levy would be exempt from the cap (Exhibit I). A.B. 137 was introduced on behalf of the State Planning Commission for school facilities. Proponents of the bill argued it was an effective way to allow local governments, and particularly school districts, to seek voter approval of bonds for facility needs without having to consider, through the Debt Management Commission, the effect the debt service rate would have on local government operating rates or competing bond proposals.
In response to committee members' suggestion that consideration be given to exempting the state rate from the cap, thereby freeing additional tax rates for local governments, a proponent pointed out that local government operating rates could quickly consume any freed-up rate before a bond issue could be approved. A.B. 137 provided additional bonding capacity without allowing local governments to encroach on that bonding capacity through higher operating rates. Proponents also pointed out that six counties were at or near the combined rate, and at least one local jurisdiction and another four counties had entities within 30 cents of the cap. Proponents indicated that A.B. 137 made it less necessary for the state to provide funds for facilities where counties had no ability to bond because of the $3.64 rate limit. During the hearing for A.B. 137, one member of the Assembly Committee on Taxation believed the ability to issue bonds above the cap should be one of limited duration. The member also felt the exception for debt service should be applicable to those only in counties at or near the tax rate limit.
Chairman Goldwater stated opposition to the bill was on two fronts: 1) it violated the spirit of the 1979 and 1981 legislative actions to lower and limit property taxes for Nevadans similar to the tax limitation imposed by Proposition 13 in California; and, 2) Nevada was not a low-tax, small-government state and the bill placed a bigger burden on Nevada taxpayers.
Chairman Goldwater stated a vote of the people was needed to raise the $3.64 cap.
Mr. Anderson asked whether the Chair would entertain a “do pass” motion on A.B. 137. Chairman Goldwater would accept the motion but stated that Assemblywoman Giunchigliani suggested an amendment to A.B. 137, on page 2, line 8, that deleted "after voters of this state or….” The intent was for the state to not issue, nor vote for, bonds. There might be concerns, Chairman Goldwater admitted, about affecting the cap, but as long as the public had a right to vote and knew the intent, then the vote should be respected.
ASSEMBLYMAN ANDERSON MOVED TO AMEND AND DO PASS A.B. 137 WITH THE AMENDMENTS SUGGESTED BY MS. GIUNCHIGLIANI, WHICH ASSURED THE VOTERS PARTICIPATION IN THE PROCESS.
ASSEMBLYWOMAN FREEMAN SECONDED THE MOTION.
THE MOTION FAILED. CHAIRMAN GOLDWATER, ASSEMBLYWOMAN TIFFANY, ASSEMBLYMAN BROWER, ASSEMBLYMAN MORTENSON, ASSEMBLYMAN BROWN, AND ASSEMBLYMAN NEIGHBORS VOTED NO. ASSEMBLYMAN MARVEL ABSTAINED FROM THE VOTE.
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Assembly Bill 243: Proposes to exempt from sales and use tax sale of farm machinery and equipment, and provides such exemption from certain analogous taxes. (BDR 32-866)
Chairman Goldwater explained A.B. 243 provided an exemption from all local sales tax for the sale or use of farm machinery and equipment (Exhibit I). The machinery and equipment would remain subject to the 2 percent sales and use tax. Proponents of the bill had pointed out that most of the states bordering Nevada did not apply a sales tax to sales of major farm equipment, resulting in many Nevada farmers purchasing equipment outside the state. While the farmers would owe a use tax on the purchases, the Department of Taxation had limited resources to enforce the collection of the use tax from farmers who made their purchases outside the state. As a result, Nevada farm equipment dealers had difficulty competing with border state dealers who had an immediate 7 percent price advantage, resulting in a number of Nevada companies being forced out of business.
Chairman Goldwater stated there had been no opposition to the bill, although there had been several concerns raised about the exemption as drafted. One concern was to ensure that the exemption did not apply to vehicles used on farms that were registered with the Department of Motor Vehicles and Public Safety. A second concern was that the exemptions would apply only to major equipment used exclusively for farming operations. The Nevada Taxpayers' Association had also offered an amendment to allow Nevada dealers to sell to out-of-state purchasers without a tax directly from the dealership, similar to the provisions applicable to vehicle sales that allowed Nevada dealers to compete for sales to non-residents.
Mr. Zuend reviewed the amended language in A.B. 243 (Exhibit I, page 6), which was modeled after legislation in Colorado. It defined farm machinery, farm tractors and equipment, and stipulated that the farm machinery sold would be delivered within 15 days to a location out of state. A Nevada dealer could sell to farmers from Idaho, Oregon, Utah, or other states, without charging local sales tax.
Chairman Goldwater stated that Speaker Emeritus Dini, who sponsored A.B. 243, wanted to begin the process for exempting the 2 percent sales tax, which was standard language and began the process of voter approval.
ASSEMBLYMAN MARVEL MOVED TO AMEND AND DO PASS A.B. 243.
ASSEMBLYWOMAN FREEMAN SECONDED THE MOTION.
MOTION CARRIED UNANIMOUSLY.
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Assembly Bill 317: Makes various changes relating to library districts. (BDR 33-233)
A.B. 317 changed the funding support for the consolidated library district from an earmarked property tax to budgeted appropriations approved by the Clark County Commission (Exhibit I). The sponsor of the bill, Assemblyman Collins, believed earmarked property tax rates resulted in less budgetary oversight and could lead to extravagant spending by the library district trustees. Library spending should be considered in conjunction with other county programs through the appropriations process, and the district's receipt of sales tax revenues created an inequity among the library districts in Clark County. The sponsor noted the Internet's rapidly evolving technology might make traditional brick and mortar libraries less important as time went by.
Opponents of A.B. 317 believed a reduction of support for libraries would result because libraries would cease to be a priority for county commissioners.
ASSEMBLYMAN NEIGHBORS MOVED TO INDEFINITELY POSTPONE A.B. 317.
ASSEMBLYMAN MARVEL SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
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Assembly Bill 404: Revises provisions relating to exemptions from certain taxes for veterans. (BDR 32-129)
A.B. 404 doubled the property tax and privilege tax exemptions for veterans, disabled veterans and surviving spouses over a two-year period beginning in FY2002-03 (Exhibit I). A.B. 404 expanded a pool of eligible veterans by changing the eligibility standards to include all veterans who had received a certificate of satisfactory service or discharge other than a dishonorable discharge. Following the two-year increase, the exemption amounts would be indexed to the changes in the Consumer Price Index (CPI). Supporters of the bill pointed out the veterans and disabled veterans exemption had not been increased since originally enacted and the veterans were deserving of an increase. Opponents of the bill were generally concerned about the revenue losses to schools and local governments and the need to address Nevada's fiscal problems before additional exemptions were granted. Committee members were concerned about expanding the exemption to include peacetime veterans with less than an honorable discharge.
Mr. Neighbors was concerned when he heard the fiscal impact would exceed $9 million dollars. He asked the Research Division of the Legislative Counsel Bureau to obtain an accurate count of the veterans in each county. The fiscal impact would be $9 million if all 250,00 veterans took advantage of the exemption. Mr. Neighbors distributed a handout to the committee (Exhibit J) showing the number of veterans who had taken the tax exemptions for FY1998-1999 and FY1999-2000. The vehicle tax exemption information was not available for FY 1998-1999, but in FY1999-2000 the number was 24,240. Property tax exemptions for FY1998-1999 were 1,695, and for FY1999-2000 1,666. The disabled veteran exemptions were 117 for FY1998-1999 and 113 for FY1999-2000. The real number of veterans who applied was closer to 25,000 persons, not the projected 250,000. Mr. Neighbors would delete any mention of "discharge" in the bill other than "dishonorable," and he would add the word "honorable."
ASSEMBLYMAN NEIGHBORS MOVED TO AMEND AS RECOMMENDED AND DO PASS A.B. 404.
ASSEMBLYMAN PRICE SECONDED THE MOTION.
Mr. Parks, Mr. Marvel, and Mr. Neighbors disclosed that they were veterans and took advantage of the exemption. Mr. Brower stated he would become eligible if A.B. 404 became law. Mr. Anderson asked what would be the net loss for schools. Mr. Zuend replied $1 million in 2004 and $1.2 million statewide. Mr. Anderson stated he could not support A.B. 404 because of the impact on the school districts.
THE MOTION CARRIED WITH MR. ANDERSON VOTING NO.
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Assembly Bill 653: Makes various changes to formula for distribution of certain revenues. (BDR 32-1459)
A.B. 653 substantially revised the distribution formula for consolidated tax revenue within Clark County and required that Clark County and the city of Las Vegas transfer $2 million each of base revenues to the city of Henderson (Exhibit I). Proponents of the bill, particularly officials from Henderson, suggested that the existing formula was unfair to faster growing communities because it did not redirect enough excess revenue to those communities. They supported allocating all revenues in excess of the amount received during the prior year based on the relative growth rates of various jurisdictions, thereby eliminating the CPI guaranteed for local governments. Henderson officials also noted they had lost nearly $25 million while Las Vegas gained nearly $20 million compared to the old distribution formula. Opponents of the bill generally agreed with the notion that the existing formula did not direct enough of the revenue to faster growing communities. They believed that the "1-plus" portion of the formula should be modified or eliminated, and universally opposed eliminating the CPI guarantee, and pointed out that even communities that were not growing had to pay for cost increases including cost-of-living increases for employees. The opponents also disputed Henderson's analysis and indicated it was unfair to compare the results of a new formula with the old distributions because everyone had agreed that the old distribution formulas were not working.
Chairman Goldwater said another opponent believed it was unwise to adopt a formula for Clark County that was different from those used throughout the rest of the state. There were mechanisms within the existing legislation to adapt the formula, as needed, to changing circumstances.
ASSEMBLYWOMAN TIFFANY MOVED TO DO PASS A.B. 653.
ASSEMBLYMAN BROWN SECONDED THE MOTION.
Chairman Goldwater called for discussion on A.B. 653.
Mr. Parks asked if there was a sunset provision in the bill that required the legislature to return to the table with a formula that was more equitable to all parties. Chairman Goldwater replied there was no sunset provision.
Mr. Mortenson thought, with all due respect to the existing formula, A.B. 653 was well thought out. He supported the bill. Mr. Neighbors noticed an opponent believed there was a mechanism within the existing legislation to adapt a formula, as needed, to changing circumstances. That was not new information so he supported A.B. 653.
THE MOTION PASSED WITH MR. MARVEL VOTING NO.
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Assembly Bill 457: Temporarily revises provisions governing distribution of portion of basic governmental services tax revenue to increase amount allocated for educational purposes. (BDR S-1152)
A.B. 457 redirected, in equal parts over the next two fiscal years, all vehicle privilege tax revenues from local governments within Carson City, Douglas County, Elko County, and Washoe County to the Distributive School Account (DSA) to support salary increases of up to 2 percent in each biennium for education personnel in every school district in the state. The bill also allowed those counties to increase property taxes to replace revenue lost by their local governments (Exhibit I).
Chairman Goldwater said A.B. 457 should be amended to correct several technical problems before any positive action was taken. A sponsor of the measure supported an amendment to remove Elko County from the bill because that city and county had already reached the $3.64 combined property tax cap. The teachers' union and others concerned with K-12 education supported the bill, but the effected local governments opposed the bill. One opponent pointed out that the legislature should address the problems associated with educational salaries by imposing a uniform statewide property tax rather than compelling selected counties to replace the revenue through higher local property taxes.
Mr. Marvel said he would be voting against A.B. 457 because 4 counties would be subsidizing 13 counties. Chairman Goldwater offered an amendment to place a two-year sunset provision on the proposed tax, which indicated a short-term solution to a long-term problem. Some action was necessary. Mr. Marvel asked how local governments were expected to make up the difference. Chairman Goldwater would send to those county managers a letter that stated both he and Assemblyman Beers would pledge their time to assist the managers to address revenue shortfalls. He summarized the amendments as: technical amendments, the removal of Elko, a sunset of two years, and a committee letter pledging his time and assistance to the county managers.
Assemblywoman Freeman believed there were problems with A.B. 457. Washoe County would have a shortfall of about $9 million dollars, as she understood it. She could not support the bill. Mr. Parks stated he reluctantly supported A.B. 457 because there was no other legislation that addressed the issue.
ASSEMBLYMAN PARKS MOVED TO AMEND AND DO PASS A.B. 457.
ASSEMBLYMAN ANDERSON SECONDED THE MOTION.
THE MOTION PASSED WITH ASSEMBLYMAN MARVEL, ASSEMBLYWOMAN FREEMAN AND ASSEMBLYMAN BROWER VOTING NO.
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Assembly Bill 411: Proposes to exempt medical devices ordered or prescribed by providers of health care from taxes on retail sales. (BDR 32-1189)
Chairman Goldwater reviewed A.B. 411, which proposed to exempt various medical devices from taxes on retail sales if approved by the voters at the 2002 General Election (Exhibit I). Proponents stated the taxation of the devices was unfair because they were medically necessary, and it placed an additional burden on those who had difficulty paying. Opponents of the bill said the exemption resulted in a shift of the tax burden to other taxpayers. Additional exemptions were premature until the state developed an overall tax policy to address the budgetary problems that currently existed. The committee had previously discussed the issue of the tax being paid by Medicaid recipients and it had been pointed out there was a Senate bill that was attempting to correct that problem.
ASSEMBLYMAN MARVEL MOVED TO INDEFINITELY POSTPONE A.B. 411.
ASSEMBLYMAN NEIGHBORS SECONDED THE MOTION.
In response to a request for clarification, Carole Vilardo, Executive Director, Nevada Taxpayers' Association, said the Senate Committee on Taxation had amended their bill, restricting it to medical devices provided by a medical supplier through an establishment that had a contract with the state Medicaid program. Ms. Vilardo believed the bill would pass the Senate the next day.
THE MOTION PASSED UNANIMOUSLY.
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Assembly Bill 420: Repeals basic privilege tax for vehicles in prospective increments. (BDR 32-544)
Chairman Goldwater stated A.B. 420 repealed the vehicle privilege tax in equal increments (Exhibit I).
ASSEMBLYMAN MARVEL MOVED TO INDEFINITELY POSTPONE A.B. 420.
ASSEMBLYMAN NEIGHBORS SECONDED THE MOTION.
THE MOTION CARRIED.
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Assembly Bill 434: Provides exemptions from certain taxes for property used in researching, developing, constructing and operating facilities to generate electricity from renewable resources. (BDR 32-1054)
Chairman Goldwater explained A.B. 434 provided a property and sales tax exemption for property used in researching, developing, constructing, and operating facilities to generate electricity for renewable resources (Exhibit I). Proponents believed the measure solved the energy problems evident with the development of renewable energy resources, and they noted the bill was intended to have a current fiscal effect because the exemptions applied only to prospective facilities. It was suggested the issue be clarified through an amendment to expand those types of renewable resources that might qualify for exemptions. Opponents to the bill resisted providing another exemption without addressing the general problems in Nevada's fiscal system. The Nevada Taxpayers' Association suggested an amendment to include a sunset provision. Committee members expressed concerns about granting to businesses exemptions that were larger than the abatements for other businesses, which had qualified for tax abatements, and about making geothermal facilities eligible for exemptions. Various parties had proposed a number of additional amendments to the bill.
Mr. Mortenson remarked A.B. 434 said no entity might receive tax exemptions or abatements prior to the effective date of the bill. Therefore, the bill would not affect any entity that had not constructed or initiated research and development. No taxes should be lost and there was only an anticipation of taxes gained if more industries were brought to the state. He hoped the committee would support the bill. Mr. Mortenson distributed a letter with proposed amendments to A.B. 434 to the committee (Exhibit K).
Chairman Goldwater asked why the amendment was in the preamble and not in the statute. Mr. Mortenson stated the amendment was in the statute via the timing. Chairman Goldwater asked why was the effective date October 1, 2001, and not at passage and approval. Mr. Mortenson said it was just for organizational purposes; the effective date could be changed to passage and approval.
Mr. Zuend said an amendment was needed to specifically exclude facilities in operation at the time of passage from qualifying for the exemption. The bill did not need language to make the effective date October 1, 2001, because unless otherwise stated, that was the effective date for all bills passed (Exhibit I, page 7).
Mr. Mortenson stated he would like to amend the bill to say no existing facilities would be granted, or could take advantage of, the tax exemptions or abatements (Exhibit I, pages 8-14). Chairman Goldwater stated current sales and use tax abatement statutes allowed existing businesses to take the abatement/exemption. Mr. Mortenson replied that was not the intent of A.B. 434.
Mr. Anderson stated that lines 2 through 42 used the word "he," and wondered if the "he" referred to the Department of Taxation. Mr. Mortenson stated it should say "the Department of Taxation." Mr. Anderson also asked if the bill could read “the provisions of these chapters are only provided to facilities that begin after the effective date of the bill.” Mr. Zuend believed Mr. Mortenson's amendment attempted to eliminate the Director of Science and Technology and the "he" was in fact that position. Mr. Anderson reiterated his question asking whether an amendment would address Mr. Mortenson's concerns if it stated the exemption would be good only for those entities that came into existence after the effective date of the bill, and it made the bill effective after passage and approval. Mr. Zuend answered “yes” and a passage and approval effective date made more sense than the October 1, 2001, date.
Mr. Anderson said he would make the motion to amend and do pass after clarification of who "he" was, that it would be effective on passage and approval, and not available to currently existing entities.
Mr. Marvel asked if there was already the mechanism in place to give the exemption without adding another piece of legislation. Dave Pursell, Executive Director, Department of Taxation, replied the original bill had been "tied" to the Director of Science and Technology position, with the idea that the expertise of that position would have helped the Department of Taxation to determine if the types of businesses referenced met the criteria of renewable heat. He understood the position was being amended out, because the position would not exist, and did not know whether the Department of Taxation had the expertise to make those decisions.
Mr. Marvel felt, in regard to the exemptions, the department could petition the Commission on Economic Development, Mr. Pursell would make the final decision, and there would be no need for legislation. Mr. Pursell answered a new business would have the option to go before the commission to determine if they qualified for either an abatement or deferral program.
Mr. Mortensen said the economic development criteria were rigorous, intended to disallow expansion of industries and tax abatements. A small company that had relocated to Nevada with the intention of doing research and development on hydrogen fuel cells would not qualify because it was not large enough. Mr. Pursell responded there were guidelines and specific criteria that a business must meet. He doubted he could answer Mr. Mortenson's question because it required a case-by-case review of whether a company applied for the deferral program or the abatement. He reiterated there were criteria a business would have to follow. Once the criteria were met the department would track that issue and allow for either the deferral or the abatement.
Mr. Mortenson said previous testimony revealed existing rules were restrictive. The amendment allowed new entities in Nevada to do research and development on renewable resources, and perhaps provided some high paying jobs. The potential for future taxes for the state was good after the sunset provision expired; tax abatements were allowable for ten years, after which companies would begin to pay taxes.
Chairman Goldwater asked whether the sales and property tax was a barrier to companies that wanted to relocate in Nevada. Mr. Mortenson believed an abatement of the tax would certainly be an incentive.
Mr. Anderson suggested the bill should be effective on passage and approval and only for properties that were newly established after that date. He continued to question the "he,” and could not support the bill until it was clear who "he" was.
Mr. Marvel believed A.B. 434 presented an administrative nightmare for the Department of Taxation, and with due respect to Mr. Mortenson, he could not support it.
Mr. Neighbors questioned the sunset provision. Mr. Anderson explained there was a 10-year provision but he would include a shorter period in his amendment if necessary. Mr. Mortenson said there was a sunset of ten years on the time the abatements could exist, but not an actual sunset provision on the program. He conceded a willingness to put a sunset of five years on the program itself.
ASSEMBLYMAN ANDERSON MOVED TO AMEND AND DO PASS A.B. 434, WITH THOSE AMENDMENTS SUGGESTED IN THE DOCUMENT PROVIDED BY MR. MORTENSON (EXHIBIT K), WITH A PROVISION IN SECTION 4 TO CHANGE THE EFFECTIVE DATE TO PASSAGE AND APPROVAL, AND WITH A SUNSET PROVISION EFFECTIVE JANUARY 1, 2006.
ASSEMBLYMAN PARKS SECONDED THE MOTION.
THE MOTION CARRIED WITH ASSEMBLYMAN MARVEL VOTING NO.
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Assembly Bill 455: Enacts Simplified Sales and Use Tax Administration Act. (BDR 32-494)
A.B. 455 enacted the Simplified Sales And Use Tax Administration Act, which allowed participating states to begin the process of simplifying their sales tax system to remove the undue burden of collecting the tax by out-of-state vendors (Exhibit I). It was hoped the adoption of the Simplified Sales and Use Tax System by a group of states would result in the collection of Nevada sales taxes by out-of-state vendors who had no physical presence in the state but sold to Nevada residents through the Internet, catalogs, and other home shopping programs. Wide spread support had been voiced for the proposal from groups such as the retail industry, the Nevada Taxpayers’ Associations, Nevada Education Association, and chambers of commerce. No one had expressed opposition to the measure. The bill required a few minor technical amendments. Chairman Goldwater suggested to further amend A.B. 455 to require that a seller who did business with a political jurisdiction in Nevada must register to collect sales taxes from Nevada residents and businesses (Exhibit I, page 14).
ASSEMBLYMAN NEIGHBORS MOVED TO AMEND AND DO PASS A.B. 455.
ASSEMBLYMAN MARVEL SECONDED THE MOTION.
Mr. Brower thanked the Chair for his efforts on A.B. 455.
THE MOTION PASSED UNANIMOUSLY.
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Assembly Bill 480: Proposes to exempt funeral supplies from taxes on retail sales. (BDR 32-613)
A.B. 480 proposed to exempt funeral supplies from retail sales taxes if approved by Nevada voters in the 2002 General Election (Exhibit I).
ASSEMBLYMAN MARVEL MOVED TO INDEFINITELY POSTPONE A.B. 489.
ASSEMBLYMAN ANDERSON SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
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Assembly Bill 501: Makes various changes relating to taxes imposed for support of school districts. (BDR 34-1004)
A.B. 501 authorized an enactment of an additional room tax of 1 percent and an additional real property transfer tax of 60 cents per $500 of value for school capital projects outside of Clark County (Exhibit I). The bill also allowed school districts in eligible counties to submit advisory questions to voters concerning the imposition of a residential construction tax, room tax, real property transfer tax, and sales tax for capital projects. A.B. 501 was introduced on behalf of the State Planning Commission for school facilities. Proponents had argued that taxes authorized in 1997 for capital improvements in Clark County School District should be available to all other school districts in the state, and school districts should be able to seek voter approval of additional taxes for capital projects for schools.
Opponents disagreed, and pointed out the need in Clark County was unique because of the ongoing rapid growth in the community, which resulted in the continuing need for school capital projects. They noted that other school districts, such as Washoe County School District, had not demonstrated the same need and had been able to secure necessary financing through voter approval of bond questions. Opponents had also pointed out that the bill would be of little benefit to school districts in counties with economic problems, which would realize minimal revenue from higher room and real property transfer taxes.
Assemblywoman Chris Giunchigliani, Assembly District 9, proposed an amendment to assist the Elko County School District problem regarding the "pay-as-you-go" versus the capital outlay, which was referenced in a handout (Exhibit L). The proposed amendment, which she did not advocate, made A.B. 501 solely for rural counties by striking Section 3 and all references to it, and changing Section 6 to apply to counties of 100,000.
Gregory Ferraro, representing the Nevada Resort Association, said Ms. Giunchigliani addressed their concerns in her construction of the amendments (Exhibit L) and they would not oppose A.B. 501 with those amendments.
With some reservations, Ms. Giunchigliani agreed to the amendments. The greatest burden at the present time was the rural counties and their needs, but she felt Washoe County should have been included.
Mr. Neighbors asked how A.B. 501 would work. Ms. Giunchigliani replied the original bill expanded the room tax and the real estate transfer tax to be applied in all other counties. In 1997, she used the same wording in a bill, but Washoe County removed themselves from the bill, as did the rural counties. The interim committee grappled with the issue of ongoing needs for school construction. A recommendation had been made to copy what had been done in Clark County, and expand the program. Another issue in A.B. 501 was to establish maintenance of effort so that not just any school district, or any individual school, could qualify. The school district, or individual school, needed to prove they had enacted every available tax before the program could fund them. The other portion of A.B. 501 required an advisory question. “If that passes, then the county commission must establish that tax that was requested, which then allows for the maintenance of effort to have been made,” Ms. Giunchigliani explained.
Chairman Goldwater stated that the amendment to the bill would delete all of Section 3, Section 4 and Section 5. Ms. Giunchigliani felt the decision was up to the committee. She believed if the amendments were adopted, the committee would need to assist Washoe County in some similar way during the legislative session.
Mr. Anderson said Washoe County clearly had a different set of problems from those of Clark County, not too dissimilar from those of the rural counties. Of the eight urban high schools, four were older than 40 years. Another was 25 years old. Mr. Anderson felt Washoe County should be recognized with the rural counties.
Ms. Giunchigliani pointed out that the amendments to A.B. 501 did not expand the 25-cent sales tax and the residential construction tax in rural counties. In Section 2, the residential construction tax could be expanded because it would be based on an advisory question. Perhaps that might be an area where Washoe County, or even Clark, could be considered. Washoe County was included in A.B. 501; the amendments removed it and focused solely on the rural counties.
Ms. Giunchigliani asked where the caps were for Washoe County. Mr. Zuend replied that the city of Sparks was currently $3.44 and Washoe County was at $2.54.
Mr. Anderson believed the rural counties needed the help, but “to cast Washoe County in the same boat with the great growth in Clark County is not reality.” While new schools would open in the next two years, the growth was not comparable. Ms. Giunchigliani guaranteed she would continue to work during the session on the issue.
On behalf of the northern Nevada members of the gaming association, Mr. Ferraro said gaming industry would assist in finding a solution to school construction needs.
ASSEMBLYMAN NEIGHBORS MOVED TO AMEND DO PASS A.B. 501.
ASSEMBLYMAN MARVEL SECONDED THE MOTION.
THE MOTION PASSED UNANIMOUSLY.
Mr. Anderson reserved his right to vote against the bill when it was heard on the floor of the Assembly.
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Assembly Bill 652: Increases amount of ad valorem tax that certain counties may levy for support of family courts. (BDR 1-180)
A.B. 652 increased the allowable property tax for the support of a family court in Washoe County from $1.92 to 3 cents per $100 of accessed valuation (Exhibit I). Proponents had noted the existing tax supported less than one-half of the cost of operating a family court in Clark County and the increase would raise the support to two-thirds of the cost. The caseload of the family court was constantly increasing and the legislature had added additional judges. Opponents had noted that the original tax was designed to support the development of facilities for family court operations and not to pay for their operating costs. They also opposed the further earmarking of property tax revenues.
ASSEMBLYMAN MARVEL MOVED TO INDEFINITELY POSTPONE A.B. 652.
ASSEMBLYMAN MORTENSON SECONDED THE MOTION.
THE MOTION PASSED UNANIMOUSLY.
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Assembly Bill 654: Authorizes governing body of city or county to impose tax on nonresidential structures or require dedication of certain land for regional parks. (BDR 22-477)
A.B. 654 authorized cities and counties to impose a construction tax on nonresidential structures to support the development of regional parks (Exhibit I). Proponents indicated it provided a mechanism to develop regional parks in the same way the existing tax on residential construction was being used to develop neighborhood parks. They had submitted amendments to the bill that eliminated an increase in residential construction tax and changed the definition of regional parks to include only sites exceeding 50 acres. With the proposed amendments, the Southern Nevada Homebuilders also supported the bill. There had been no testimony in opposition to the bill.
Daniel Musgrove, representing the city of Las Vegas and Southern Nevada Regional Planning Coalition, requested several amendments (Exhibit I). One in Section 5, subsection 2(a), reduced the $2,000 to $1,000. Another changed page 3 of A.B. 654, lines 21-23 to read "benefit of persons who live or work in the residential or nonresidential park districts or service areas within the city or county," to assure the money collected through residential areas was used for neighborhood parks and the money collected for nonresidential areas was used for parks in those locations. An amendment to Section 5, page 4, lines 8-9, read "regional parks which are located in the park district or service area from which it was collected." The final change defined "regional park" to mean a site of 50 acres or above.
ASSEMBLYMAN BROWN MOVED TO AMEND AND DO PASS A.B. 654.
ASSEMBLYMAN MORTENSON SECONDED THE MOTION.
THE MOTION PASSED UNANIMOUSLY.
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Assembly Bill 655: Exempts certain establishments from taxes on rental of transient lodging, (BDR 20-1302)
Assemblywoman Freeman wanted to redefine the definition of resident. She was not ready to make her amendment suggestion and asked to return to the committee the next week to discuss the issue. Chairman Goldwater would make that opportunity available.
Chairman Goldwater informed the committee there was no longer a quorum, and they could not act on A.B. 655 or A.J.R. 11. He further explained that A.J.R. 11 was exempt from the current deadline, and could be discussed at a later date.
There was no further business. Chairman Goldwater adjourned the meeting at 5:05 p.m.
RESPECTFULLY SUBMITTED:
N. Jolene Jones Miley
Transcribing Secretary
APPROVED BY:
Assemblyman David Goldwater, Chairman
DATE: