MINUTES OF THE ASSEMBLY COMMITTEE ON TAXATION Sixty-eighth Session March 21, 1995 The Committee on Taxation was called to order at 1:15 p.m., on Tuesday, March 21, 1995, Chairman Price presiding in Room 332 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Mr. Bob Price, Chairman Ms. Jeannine Stroth, Chairman Mr. Pete Ernaut, Vice Chairman Mr. Morse Arberry, Jr. Mrs. Maureen E. Brower Mrs. Joan A. Lambert Mr. Mark Manendo Mr. John W. Marvel Mr. P.M. Roy Neighbors Mr. Brian Sandoval COMMITTEE MEMBERS EXCUSED: Mr. Larry L. Spitler Mr. Michael A. (Mike) Schneider, Vice Chairman GUEST LEGISLATORS PRESENT: Speaker Joe Dini STAFF MEMBERS PRESENT: Mr. Ted Zuend, Deputy Fiscal Analyst OTHERS PRESENT: Mr. James "Butch" Peri, Peri and Sons Farms, Inc. Mr. Dave Purcell Mr. Dick Rowe, Director of Agriculture ASSEMBLY BILL NO. 306 - Exempts irrigation pipe and center-pivots from property tax. Chairman Price opened the hearing on A.B. 306 and asked Speaker Dini, as sponsor of this measure, to begin his testimony. Speaker Dini thanked the committee for hearing this bill and gave a brief overview of it. He introduced Mr. James Peri, the largest onion raiser in not only Nevada but the United States, who does his farming in Mason Valley. In water conservation programs, due to the drought the last eight years, Mr. Peri has experimented with a lot of ways of saving water. He has come today prepared to discuss some statistics and results of their findings but primarily he is promoting the use of sprinkler irrigation to water the growing fields in the valley. Speaker Dini pointed out there is a section in the statute providing that concrete- lined ditches are exempt from personal property tax but sprinkler systems that move are not permanent and, therefore, are not exempt from the personal property tax. With Mr. Peri's record of what water conservation can do, and with Nevada being such a water-short state, he feels this is a good idea to bring forward. That is, we should exempt the pipes that are moveable, thereby, putting them in line with the concrete-lined ditches. He then turned the floor over to Mr. Peri from Yerington. Mr. Peri thanked the committee for allowing him this time; he introduced himself as being from Yerington, NV and explained he is commonly known in the area as "Butch" Peri. He stated he has never been able to understand the way the tax bill is set up insofar as cement ditches, underground pipeline, etc., and why they were exempt from the personal property tax. That law that set this system up was passed in 1954 so it has been in effect some time. In 1985 the growers saw there were some real problems in this state if you wanted to be in the agricultural business. They started looking into irrigation systems, studying sprinkler systems, drip systems, etc. They soon realized they were not only paying sales tax on the material they were purchasing (which they were not complaining about), but they are also continuing to pay personal property tax on this material year after year. In comparing the different types of irrigation systems you would find that concrete- lined ditches are not permanent. With the different temperatures in the changing seasons, the ground pitches and moves necessitating constant repair and replacement. He advised the members the life of a concrete ditch is about ten years, maybe fifteen at the maximum. Some of the new type of plastic pipes used in sprinkling systems will last forever. He reviewed for the committee the extent of the onion growing industry in Mason Valley, explaining they are involved with markets throughout the entire United States. They are able to keep up with the growing demand by using sprinklers and drip systems, however, they are extremely expensive. The single most expensive thing in the agriculture field in modern day economy is irrigation systems. He submitted a letter from United States Senator Harry Reid (Exhibit C) encouraging the growers and the state of Nevada to pursue all avenues for the conservation of water. Mr. Peri stated that he, as a farmer, will do everything he can to cooperate in the conservation process not only for the agricultural business but a combined effort to save Walker Lake. A bill, introduced by Speaker Dini, was passed during the 1984 Session, commonly referred to as the agricultural subsidized power rate. Mr. Peri feels we would be better off if we had the foresight as it relates to water as Speaker Dini did then with the power. Referring to the measure under consideration today, he pointed out they have the single most expensive system within the agricultural business and they are getting taxed on it every year as a personal property tax. They do not feel it is right. For example, the cost of installing an irrigation system is $1,500.00 per acre. That is for mainlines, booster pumps, laterals, etc. Drip systems are pushing $1,000 per acre with the filter systems, so it really is an expensive proposition. He expressed the concern that the growers are doing all they can but they need some help with the property tax in their operations. Mr. Marvel asked how many months they use their irrigation system and was advised it was approximately five months. Mr. Dini interjected the fact that the legislature has already exempted the personal property tax on concrete-lined ditches and he feels this is more important than that method. However, because the sprinkling system is moveable, it is not exempt. He feels there is an inequity in the law. There is a considerable amount of extra work involved with using the sprinkler system as the pipes have to be moved off the land during plowing and planting season. Mr. Peri concurred and briefly described how much more involved that type of irrigation is. In response to a question from Mr. Marvel, Mr. Peri replied the life expectancy of the pipe within a sprinkler system is 15 years. Ms. Brower asked when we could get a fiscal note and was advised by Mr. Zuend we might already have one but he would check and get one out to the committee. Mr. Price pointed out that we may not have a fiscal note as usually in a bill like this, it is a little more complicated and would require a county by county tax assessor to turn in a report. Mr. Zuend volunteered to check on that but feels it may still be on the list to be finished. Mr. Zuend had prepared a short memorandum and accompanying notice outlining the provisions of this measure and these were distributed as Exhibit D,(l and 2) Speaking next was Mr. Dave Purcell, Deputy Director, Division of Assessment Standards, Department of Taxation who stated they had done a fiscal note on this measure that was signed March 14th so there is one available. The view of the 17 county assessors was directed towards center-pivots and wheel lines but did not include drip systems. The survey showed that in the 17 counties there was 2.7-million dollars of depreciated equipment of that type and if you apply the state average of $2.86 to that, it is about a $78-thousand revenue impact. Mr. Neighbors asked Mr. Purcell about the projected service life on that type of equipment and was advised it is depreciated through the personal property manual and he believes 15 years is the lifetime expectancy. The next person to speak was Mr. Richard Rowe, Regional Manager for the Department of Agriculture. He stated he appreciates the opportunity of speaking before the committee in favor of this bill and agrees with the previously made statement, that agriculture is the third largest industry within the state. Over the last 20 or 30 years the price the hay farmers, cattlemen, etc., get for their commodities has stayed relatively constant but the cost of doing their farming operations has risen considerably. Because of that reason there is a certain percentage of our farmers that are in poor financial shape. Approval of this bill would prove to be a help to a lot of those people. Mr. Rowe pointed out at the present time, the average household spends about 12% of its income for groceries; if we can keep the cost to the farming industry down, maybe we can keep that 12% figure rather than going up to the world average of 40% for groceries. At the present time, the bill exempts livestock, honey bees, boats, campers, etc., so he cannot see any reason why we do not keep everything on the same footing. He volunteered to answer any questions the committee might have. Introduced next were letters from Winnemucca Farms, Inc., (Exhibit E) and the Nevada Farm Bureau Federation (Exhibit F) both highly supportive of this bill. Chairman Price asked for further testimony on A.B. 306, there being none, the hearing on this bill was closed. A MOTION WAS INTRODUCED BY MR. ERNAUT, SECONDED BY MR. MARVEL TO PASS A.B. 306. MOTION PASSED UNANI- MOUSLY. ASSEMBLY BILL NO. 272 - Revises provisions governing payment and distribution of tax on net proceeds of minerals. Mr. Marvel reported on the findings of the sub-committee studying A.B. 272 and asked Mr. Ted Zuend to elaborate on the changes. Mr. Zuend distributed copies of an amendment (Exhibit G) the sub-committee has drafted and submitted for adoption. He added there are several changes now that must be made to that proposed amendment and he has prepared a list of changes (Exhibit H) which was distributed to the committee. He pointed out that both the Department of Taxation and the mining industry have concurred in these changes; meaning the mines are willing to pay according to these proposals and the department can administer them. Mr. Zuend went over the schedule item by item explaining the terms of the proposed amendment and the subsequent proposed changes. There were no questions or comments on the proposed amendment nor on the proposed changes. A MOTION WAS MADE BY MR. ERNAUT TO AMEND AND DO PASS WITH THE PROVISION OF INCLUDING APRIL 20TH ON SEC- TION 4, SUBSECTION 2 RATHER THAN APRIL 10TH. SECONDED BY MR. MANENDO. MOTION CARRIED UNANIMOUSLY. Mr. Ernaut pointed out this bill basically is much more a measure to help local government than it is alleviating any tax burden on the mining industry. He complimented Assemblyman John Marvel for taking the initiative in getting this bill introduced. Chairman Price advised those present he had received a copy of a letter from Assemblyman Anderson on behalf of the Persian War veterans who are requesting tax exemption. He explained over the years we have added certain exemptions to veterans involved in wars and it is his feeling we should now expand that exemption to the Persian War veterans as well. He asked the committee to join him in seeking a bill draft to any veterans on active duty during the Desert Storm or Persian Gulf War. A motion was introduced to request a BDR for the tax exempt status by Mr. Ernaut, seconded by Mr. Neighbors, unanimously carried. There being no further business, the meeting was adjourned at 2:10 pm. RESPECTFULLY SUBMITTED: Nykki Kinsley, Committee Secretary APPROVED BY: Assemblyman Bob Price, Chairman Assemblyman Jeannine Stroth, Chairman Assembly Committee on Taxation March 21, 1995 Page