MINUTES OF THE SENATE COMMITTEE ON TAXATION Sixty-eighth Session March 14, 1995 The Senate Committee on Taxation was called to order by Chairman Sue Lowden, at 1:30 p.m., on Tuesday, March 14, 1995, in Room 224 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Senator Sue Lowden, Chairman Senator Kathy M. Augustine, Vice Chairman Senator Ann O'Connell Senator Dean A. Rhoads Senator John B. (Jack) Regan Senator Ernest E. Adler COMMITTEE MEMBERS ABSENT: Senator Randolph J. Townsend (Excused) STAFF MEMBERS PRESENT: Kevin D. Welsh, Fiscal Analyst, Legislative Counsel Bureau Lisa Clearwater, Primary Secretary to Senator Lowden OTHERS PRESENT: V. Brett Mulligan, District Director for Hon. Barbara F. Vucanovich, M.C. Judy Morgan, President, Nevada Silver and Gold Chapter 95, California Retired Public Employees Association C. O. Watson, Executive Director, Nevada Association of Tobacco & Candy Wholesalers Michael Raifaisen, Manager, Sosnick Companies and Capital Cigar and Candy Wholesalers Harvey Whittemore, Partner, Lionel Sawyer and Collins, Lobbyist for McLane and Company, Inc. Pat Coward, Lobbyist, Retail Association of Nevada and Nevada Grocery Industry Council Ron Mestre, Member of the Board, Retail Association of Nevada Debbie Sheltra, Owner, Short Stop Food Stores Gary Hunter, Manager, Capital Vending Company Warren Hardy, Lobbyist, City of North Las Vegas Janice Wright, Deputy Executive Director, Department of Taxation Kevin Welsh, Member, Carson Airport Authority Marvin A. Leavitt, Lobbyist, City of Las Vegas Chairman Lowden stated the committee would begin with the hearing on Senate Joint Resolution (S.J.R.) 15 since V. Brett Mulligan, District Director for Hon. Barbara F. Vucanovich, M.C., had time constraints and would need to testify first. SENATE JOINT RESOLUTION 15: Urges Congress to pass legislation prohibiting states from imposing tax on income from pensions of nonresidents. (BDR R-1580) Vice Chairman Augustine read her prepared testimony (Exhibit C), and asked for committee support of S.J.R. 15. Ms. V. Brett Mulligan read a letter addressed to Vice Chairman Augustine from Hon. Barbara F. Vucanovich (Exhibit D) which expresses her views regarding the resolution. Ms. Mulligan also provided a copy of the Source Tax Statement of U.S. Senator Harry Reid (Exhibit E) for the committee's consideration. Senator Regan asked if Ms. Mulligan knew why if Barbara Vucanovich introduced legislation in 1988, what Congress has been doing for the past 7 years, or four sessions of Congress. Ms. Mulligan replied, saying Congresswoman Vucanovich has been trying very hard to get this legislation passed. She said Congresswoman Vucanovich is very hopeful that, as cosponsors grow, the legislation will ultimately be passed by the Congress. Senator O'Connell asked Ms. Mulligan what the opposition is to this legislation. Ms. Mulligan said, as financial times get difficult for the states, there is difficulty getting support from those states which have source income tax bills. Senator O'Connell said she is wondering if pressure needs to come from state legislators, one state to another, as opposed to approaching it through a congressional act. She asked Ms. Mulligan if the state legislators, for instance in California, are not too concerned about this issue because those constituents no longer reside in the State of California. Ms. Mulligan said it is her understanding, not being familiar with the tax structure in California, the State of California and many others like it depend on these sources of income to fund their state coffers. She explained it is sometimes difficult to convince some members of Congress that these monies should be kept in the pockets of people in their current state of residence. Vice Chairman Augustine, responding to Senator O'Connell's question, said because of the vast number of California Congressional Districts, and the tax being beneficial to the State of California, that is what has kept this under wrap. She said she is hoping with the change in composition of the Congress, the legislation will be passed during the current session. She added one state cannot impose laws on another state; therefore, the legislation must come from the federal level. Senator O'Connell asked if the committee has any statistics regarding what these tax payments mean, in terms of dollars, to California. Judy Morgan, President, Nevada Silver and Gold Chapter 95, California Retired Public Employees Association, said she would like to address Senator O'Connell's question. She stated she is a victim of the tax. She said part of the trouble with California is that over 800 retirees currently residing in Nevada still pay California taxes. Senator Regan said it is his understanding, from conversations with retirees who are being burned by California taxes, the State of California is not only taxing Nevadans on their retirement, but is taxing them on their gross income as well. Senator Adler commented a bill was passed in 1987 which made it illegal to enforce a judgment against a pension through the State of Nevada. He said the State of California cannot technically collect the tax in the State of Nevada, but said California attaches the pension check before it leaves the State of California in order to collect the tax. He said some of the tactics employed by the state of California are pretty ridiculous. He explained California claims taxes on wages earned in other states. He stated although federal pensions are technically exempt from state taxes, because they are invested in federal securities which are tax exempt, California still attempts to collect tax on federal retirement as well. He said California pretty much plays "hard ball" with the franchise tax board and does not give any breaks. * * * * * SENATOR O'CONNELL MOVED TO DO PASS S.J.R. 15. SENATOR ADLER SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR TOWNSEND WAS ABSENT FOR THE VOTE.) * * * * * Chairman Lowden opened the hearing on Senate Bill (S.B.) 115. SENATE BILL 115: Revises provisions governing prevention of competition by wholesale dealers of cigarettes. (BDR 32-1160) C. O. Watson, Executive Director, Nevada Association of Tobacco & Candy Wholesalers, introduced Michael Raifaisen, Manager, Sosnick Companies and Capital Cigar and Candy Wholesalers. Mr. Watson stated there is an amendment which just changes the title of the bill. Mr. Watson presented the committee with three letters (Exhibits F, G, and H) addressed to the Senate taxation committee members. The first, dated January 19, 1995 (Exhibit F), expresses his concerns regarding the bill and asks for committee support of S.B. 115. The second letter dated February 14, 1995 (Exhibit G), includes an attachment (Tobacco Tax Guide) which is a recap and summary showing cash/trade discount from manufacturer's invoice price per carton, plus cost of doing business and cartage charges by state. The third letter, dated February 14, 1995 (Exhibit H), includes a state-by-state comparison of the price per carton and state excise tax versus Nevada excise tax. Mr. Watson read portions of Exhibits F, G and H, in making his presentation to the committee. Senator O'Connell asked Mr. Watson if he could provide the committee with comparative information regarding California, Arizona, Idaho, Utah, Oregon, and New Mexico. Mr. Watson said Idaho is listed at $14.94 per carton of cigarettes, but said they have $.70 less tax than Nevada, making their effective price per carton $15.64. Senator O'Connell again asked Mr. Watson for figures on California, Arizona, New Mexico and Utah. Mr. Watson stated California does not have a law of this type. He said they have only a fair trade law, not a cigarette law. Senator O'Connell asked Mr. Watson if he knows the price of a carton of cigarettes in California. Mr. Watson stated he does not know. Senator O'Connell asked if anyone in the audience had that information. Mr. Raifaisen stated the current state tax on a carton of cigarettes in California is $3.70. Mr. Watson said the tax in Arizona is $5.80 per carton. He went on to quote certain statistics from Exhibit H, concluding by saying Nevada has the lowest retail price per carton of cigarettes of any of the 26 states listed in Exhibit H. He requested committee support of S.B. 115. Mr. Raifaisen said the Sosnick Companies have been doing business in the State of Nevada for approximately 12 years, 10 of which he has been the branch manager. He said the last 2 years have been extremely tough on the cigarette industry as far as distributors are concerned in the State of Nevada. He said the current law allows distributors to give away 2.5 percent of their profits. He stated it is not his choice to do that, but said competition has forced him to do so in the State of Nevada. He stated due to the current law which was effective January 1, 1994, Solsnick Companies have experienced a loss in revenue because of the decrease in profit margin (which the 2.5 percent discount took care of). He said he was forced to impose a wage freeze on all of his employees in the state of Nevada that exists to this day. He noted on June 1, 1994, he had a sales force of 7« people (explaining that one person serves half time as a sales person and half time as office staff). He stated on June 1, 1994, he reduced that sales staff to four people, a reduction of almost 50 percent, due to the reduced profit in the cigarette industry as far as distributors are concerned in this state. He said he supports S.B. 115. He emphasized the passage of S.B. 115 would only raise the price 2 cents per pack to the retail trade. He remarked his 23-years experience tells him the retail trade will pass the increase on to the consumers. Vice Chairman Augustine asked Mr. Raifaisen for verification that his profit on a carton of cigarettes costing $14.41, is $.125. Mr. Raifaisen replied, "Close to it, around 11 to 12 cents per carton is what we make on a carton of cigarettes." Vice Chairman Augustine asked Mr. Raifaisen what their profit would be if this bill passes. Mr. Raifaisen said it would be about 28 to 29 cents gross profit per carton. Harvey Whittemore, Partner, Lionel, Sawyer & Collins, appearing on behalf of McLane and Company, Inc., stated Mr. Kevin McLane was out of the state, but would like to appear before the committee if the committee wishes to reschedule an additional hearing on S.B. 115. He insisted Mr. Watson is dead wrong on this issue. He said this law should not simply be amended, but should be repealed. He stated it is the highest form of price protectionism that exists in the state of Nevada. He said what Mr. Watson is asking the committee to do is to protect the protectionism and also to improve it. He said during the last session of the legislature, out of deference to a number of individuals who wanted to work with Mr. Watson's group, they attempted to reach a compromise. He said the compromise was accomplished in the form of Assembly Bill (A.B.) 295 of the Sixty-seventh Session of the Nevada Legislature. ASSEMBLY BILL 295 OF THE SIXTY-SEVENTH SESSION: Revises provisions regarding sale of cigarettes by wholesale and retail dealers. (BDR 32-1181) Mr. Whittemore maintained the committee members who were involved in the discussions relevant to A.B. 295 of the Sixty- seventh Session will recall that the discussions were extremely difficult because the committee tried to come up with a policy which basically suggested that those who were unwilling to compete in the market would be guaranteed a certain price. He declared that is not the Nevada way; it is clearly not the American way, but the bottom line is they thought it appropriate in terms of a legislative process that they develop a compromise. He said they did that. He said they see no reason to change that law unless the committee is prepared to repeal it. He said he does not have any quarrel with the statistics which were presented to the committee by Mr. Watson. He conceded it is difficult to compete, but added there are retailers who would like to have the option of purchasing a product at a price which is being offered by more than just one person at a guaranteed price. He said if Nevada has price protection with respect to cigarettes, the lawyer in him says we better have it with respect to other products as well. He reiterated his opinion that this bill is very poor legislation in terms of both the policy and the continuation of legislation of this type in general. He said he knows it is difficult to compete with low-profit margins, but sees the solution as providing service and developing relationships to sell those products. Vice Chairman Augustine told Mr Whittemore, "They were only talking a penny a pack." She asked him why this issue was brought forward during the last legislative session, and if he knew who brought it up. Mr. Whittemore responded saying it was Mr. Watson. He said, "This is a continuation of the second bite of the apple." Vice Chairman Augustine asked Mr. Whittemore if he would refresh the committee on what A.B. 295 of the Sixty-seventh Session actually did last session. Mr. Whittemore said the bill substantially revises the definition of basic costs of cigarettes to allow discounts and allowances for people who have greater purchasing power to buy in quantity at a lower cost and then pass the lower price on to the retailer. He explained what the bill does is legislatively declare it appropriate for those individuals who, in fact, purchase cigarettes at a lower cost to sell to the retailers at a lower cost. Vice Chairman Augustine asked Mr. Whittemore why a retailer would be opposed to what a wholesaler wants to do, when that particular retailer is not purchasing from the wholesaler. She pointed out these particular wholesalers sell to the little mom and pop outfits in the rural areas, adding they are not the Wal- Marts or McLanes in Clark or Washoe counties. She asked Mr. Whittemore why a big conglomerate would be opposed to what a small wholesale industry wants to do within Nevada when that conglomerate is headquartered outside the state. Mr. Whittemore said the concept is not with regard to the mom and pop operations. He said what they are trying to do is to protect the moms and pops and the small people from purchasing cigarettes at a price which is different than the most competitive price. He said if the committee sets the floor there will still be those people who will negotiate above the floor with respect to the price, but this bill will set the minimum. He stated the reason the bill was drafted in 1993 was because the Nevada cigarette wholesalers went to the Department of Taxation and reported there were people selling below the cost of cigarettes when, in fact, they were not. He said the cigarette wholesalers were trying to resolve a problem that the Department of Taxation had. He said if there is to be a debate as to whether price protectionism is appropriate, that debate should center on whether the whole chapter relating to cigarette taxes should be repealed. Vice Chairman Augustine said Mr. Whittemore had not specifically answered her question. She asked again why a big conglomerate like McLane and Company, Inc., headquartered in the state of Texas, is opposed to something that a small wholesale operation is doing in the state of Nevada. Mr. Whittemore said they do compete. He said, "There is no reason for them to..." Vice Chairman Augustine interjected saying they can go into Wal- Mart and buy 50 cartons of cigarettes if they want... Mr. Whittemore said: If you did that, if you said why do we care, we would be required to force every one of their purchasers to have a price increase. All the Southland 7-Eleven franchisees, all the people that we sell cigarettes to would have to have a price increase because we are trying to protect individuals who are unwilling to compete; and now, if you set the floor, you are saying that those relationships where we can reach a based upon price are now all going to all of a sudden go back for reasons other than competition, other than price. If you are saying that it is the policy of the state to have price support or price protectionism, then all industries should have it. Then, again, you would be in a situation where if you want to make that policy you are going to say that everybody in Nevada is going to be protected. I do not think that is in the best interest of the consumers. I can tell you that the casino industry will absolutely say, 'Wait a second, you are now making me buy the cigarettes that we are going to give out as complimentary or sell in our gift shops that we pay more money for.' It is just not good policy and has nothing to do with personality, it has everything to do with policy. Senator Regan ask Mr. Whittemore where 7-Eleven franchisees can purchase their cigarettes. Mr. Whittemore said 7-Eleven franchisees, by contract, can purchase cigarettes either through McLane and Company, Inc., or other approved distributors. Senator Regan asked Mr. Whittemore who approves the distributors. Mr. Whittemore said, pursuant to the franchise agreement, it is either negotiated or agreed to. Senator Adler asked Mr. Whittemore if this would be passed on to the Indian smoke shops as well. Mr. Whittemore said he does not believe so. Mr. Whittimore stated when the Department of Taxation sees an increase, their price followers allow them to increase the price. Pat Coward, Lobbyist, Retail Association of Nevada and the Nevada Grocery Industry Council, introduced Ron Mestre, Member of the Board, Retail Association of Nevada, Member, Nevada Grocery Industry Council, and Owner of Bi-Rite Markets in Northern Nevada. He also introduced Debbie Sheltra, Owner, Short Stop Food Stores. He stated they would be testifying in opposition to S.B. 115. Mr. Mestre said he wanted to address the issue of the $2.50 discount. He began by saying nobody is protecting him. He said if the tobacco wholesalers are unable or just unwilling to compete, that is their problem. He said he does not think the state should protect them from that 2.5 percent. He said if the Legislature raises the 2.5 percent, it would mean that his wholesaler could no longer sell cigarettes to him at the current price. He asserted even though they are talking about pennies, he sells cigarette cartons at 9 percent profit. He said his labor cost is 11 percent. He stated he does this because he is no different than the tobacco wholesalers. He said although tobacco wholesalers are here telling you that they are only tobacco wholesalers, tobacco sales represent only a portion of their business. He emphasized they sell health and beauty aids, beef jerky, juice, groceries, condoms, etc., etc. He explained when figuring a low margin of profit, profit equals markup times turnover. He said if one has a high turnover, one can have a low margin of profit, and vice versa. He said he has the same problem when ARCO sells gasoline for 2 cents a gallon below his cost, but no one is protecting him. He stated he must let his potential customers know he has more merchandise, better variety, and better prices on merchandise inside the store than ARCO to promote his store, but that is his problem. He said if a wholesaler elects not to do the 2.5 percent or not to do the electronic transfer which means cash on delivery, or actually cash before delivery, that is their option and their problem. He stated the wholesalers who are complaining, Sosnick and Cormart, are in California, and are not just little guys here in Nevada. He proclaimed he is a little guy in Nevada, Debbie Sheltra is a little person in Nevada, and said they are not getting that same kind of protection. He said because he elects to pay his bill in the terms that he does, he is buying cigarettes for less money than Debbie Sheltra. He pointed out if McLane Pacific wants to pay their bill through electronic transfer and pass that 2.5 percent on to him then he should be entitled to it because if they do not, and he continues to sell cigarettes for the same price, that 2-cents a pack, in his little company of five superette markets in the Reno-Sparks area, amounts to $400 per week. He said if he cannot pass that price increase on to his customers he will have to absorb the loss. He drew attention to the fact that his company is trying to sell tobacco more responsibly. He said they have a 1-hour seminar per employee where the employees watch videos and read literature on how to sell tobacco responsibly. He said the seminars cost his company money, adding they are usually paid at the rate of time-and-a-half. He surmised the seminars will be required at more frequent intervals as the laws get more restrictive. He said if the retailers continue to raise their prices and lose business to California, Nevada will lose $4.62 per carton in state tobacco and sales taxes. He stated his need to remain competitive. He added the state needs for him to be competitive. He asserted 60 percent of the cigarettes now sold in Nevada are sold in convenience stores and Indian smoke shops. He stated his concern is that if this bill is passed McLane Pacific, from whom he buys, will have to raise their wholesale price to him because they will not be able to pass on the 2.5 percent electronic transfer discount that he now enjoys. He urged the committee to vote no on S.B. 115. Senator O'Connell asked Mr. Coward if he had any figures from the Nevada Retail Association about what it cost Nevada the last time the state raised their cigarette prices. Mr. Coward said he did not have those figures, but said he would get them for her. Mr. Mestre asked Senator O'Connell if she would like to know what effect the price increase has on an individual. He said when the prices increased, business dropped about 20 percent. Vice Chairman Augustine said what she thinks is happening is that a retailer can set their prices, but a wholesaler cannot increase his price. She said the wholesaler is limited by the profit margin. Mr. Mestre maintained it is the other way around. He said the Legislature is setting the wholesaler's minimum price, but the wholesaler can charge as much as he chooses to. He said this bill would set a minimum price. He asked the committee not to raise the wholesale price to him. Vice Chairman Augustine said, "But they all have a bottom line price that they buy from the big tobacco companies, is that correct?" Mr. Mestre said evidently where this came from is that the State of Nevada chose to protect the wholesaler's cost of doing business, adding he has no idea why. He reiterated the state of Nevada does not protect his cost of doing business. Vice Chairman Augustine said what she was asking him is whether the tobacco companies sell to all wholesalers in this country at a baseline price. Mr. Mestre answered in the affirmative. Vice Chairman Augustine asked Mr. Mestre if the current statute allows the wholesaler to add whatever he wants to. Mr. Mestre said the wholesaler adds the tax plus whatever he wants to. He said he can charge $30 per carton if he chooses. Vice Chairman Augustine asked why in the world he would choose to make only 12.5 cents per carton. Mr. Mestre said his decision is based on the theory of supply and demand. Vice Chairman Augustine said she thought the committee would be limiting the wholesalers on what they could sell to the retailer. Debbie Sheltra said she has been a small, independent grocer for 25 years. She commented she is very serious when she comes before the committee with a problem, and has done her research. She said her average customer sale is $2.47, which could represent one pack of cigarettes and a piece of gum, so if her prices are not competitive, the guy who wants to buy one pack of cigarettes will not stop at her store, he stops at a 7-Eleven which is one block on either side of her. She said her wholesaler will not be competitive and her prices would make her totally noncompetitive if this legislation is enacted. She concurred with Mr. Whittemore's desire to "have this legislation go away." She urged the committee to vote no on S.B. 115, and added she would like to see the other legislation repealed as well. Gary Hunter, Manager, Capital Vending Company, testified his company is a small Carson City vending company and also a licensed Nevada cigarette wholesaler. He said he is the former chief of revenue for the Department of Taxation. He said he retired last year after 26 years with the Department of Taxation. He stated he spent hundreds of hours on this issue while working for the Department of Taxation, and was shocked to see this issue before the Legislature again this year. He said after the 1993 session he figured it was resolved. In response to Senator Augustine's question as to why this was brought before the Legislature in 1993, Mr. Hunter said the Nevada Tax Commission asked for it to be brought up. He stated this has been an issue with the Department of Taxation on two different occasions. He said after hundreds of man-hours in meeting after meeting, and the expenditure of thousands and thousands of taxpayer dollars they could not make a decision on what many call price fixing or guaranteeing profits. He asserted if the Legislature passes this bill, they will be taking money out of his company's account and transferring it to his suppliers, the cigarette wholesalers. He reiterated his company is in the cigarette vending business. He explained cigarettes in vending machines are sold in approximately 25 cent increments, preventing them from passing on a 2-cent increase. He said if they are to face a 2-, 5- or 10-cent increase right now, they would not be able to raise their price. He said they pay more for cigarettes from their wholesaler, which is a Reno wholesaler, than Costco sells them for. He stated the reason they do not buy them at Costco is for convenience and service that the wholesaler provides. He said they value that service and will pay for it, but he thinks an increase at his expense is not right. He said he hopes the committee will seriously look at this bill in view of changing times and cutbacks in government bureaucracy because this type of protective legislation does not have any place in Nevada. He stressed Nevada does not guarantee the price of toasters, and should not guarantee profits on cigarettes. Mr. Watson said he would like to respond Senator O'Connell's question as to the volume of cigarettes. He presented the committee with Exhibit I which shows the state totals of cigarette packages sold from 1983 through 1994. Senator O'Connell stated that her question was: "the last time that the tax was raised, how long did it take us to recoup from that?" Mr. Watson said the tax was raised in 1988, and pointed out that 1989 showed an increase from 143,257,000 to 147,367,000 in the number of packages sold. Mr. Raifaisen said he wanted to respond to Senator Adler's question regarding Indian smoke shops. He stated the prices do go up to the Indian smoke shops as they do to any other retailer in the state. Chairman Lowden asked Mr. Whittemore if he wanted the committee to allow his client to come forth and speak to the committee. Mr. Whittemore said only if the committee desires further information. Mr. Watson said there are 26 other states with similar laws and he thinks the committee needs to understand that the cigarette industry is a unique industry, and the functions under which they operate do not allow for the application of a conventional theory of business. He concluded there must be a need for this type of legislation or 26 states would not have it. * * * * * SENATOR O'CONNELL MOVED TO INDEFINITELY POSTPONE S.B. 115. THE MOTION DIED DUE TO THE LACK OF A SECOND. * * * * * Chairman Lowden said since there was no second the committee will hold the bill for hearing on another day. She closed the hearing on S.B. 115 and opened the hearing on Senate Bill (S.B.) 104. SENATE BILL 104: Deletes provisions of charter of City of North Las Vegas establishing rate at which tax may be levied within municipal library district. (BDR S-345) Chairman Lowden said there is a proposed amendment to the bill (Exhibit J). Warren Hardy, Lobbyist, North Las Vegas, said the 1993 Legislature passed legislation which enabled the city of North Las Vegas to create a library district. He said the city of North Las Vegas did so. He said that piece of legislation tied the tax rate for the North Las Vegas Library District to the tax rate of the consolidated library district of Las Vegas and Clark County. He said they have discovered they need the ability to go back in and provide additional bonding for the unique needs of the city of North Las Vegas, and therefore request the change. He explained the original bill did not meet their intent, so they requested the amendment. He stated their only intent is to put the North Las Vegas Library District on an equal footing with the other library districts within the state; to give them the same bonding capacity and authority to operate as the other library districts within the state. Senator O'Connell asked Mr. Hardy if the bill provides either a minimum or maximum as far as the levy is concerned. She asked further if it requires a vote of the people. Mr. Hardy said it is their intent for it to go to a vote of the people. He said as he understands it this legislation will be governed by Nevada Revised Statutes, Chapter 354, so the tax rate will go up based on that formula as it does for all governing bodies, except the school districts. Chairman Lowden referred Senator O'Connell to page 2 of the amendment. She said it does say that it would go to a vote of the people, and this would occur at the next municipal election. Chairman Lowden asked if the next municipal election would be held in June. Mr. Hardy said he is not sure if it would be on a primary election ballot or a general election ballot, but said it will be in June if this bill passes by then. Senator O'Connell requested that Mr. Hardy find out what the levy is. Mr. Hardy stated he thinks the current rate is 5.28 percent. Janice Wright, Deputy Executive Director, Department of Taxation, stated the current levy for the North Las Vegas Library District is 5.82 cents. She said the consolidated Las Vegas, Clark County Library has an additional 7 cents which has been approved by the voters for bonded indebtedness. She explained the discussion came up as to whether or not this library district would be entitled to that 7 cents. She commented she thinks that is what precipitated the language in the bill. She said she has not seen a copy of the amendment. She said the concern of the Department of Taxation is when this legislation is enacted, whether it is the Legislature's intent to leave the 5.82 cents as the normal operating rate, and then subject the operating rate to the provisions of NRS 354 which would mean that it would rise 6 percent each year, or are they saying that anything the library district does outside for bonded indebtedness is going to be included and the whole amount is going to be exempt from the provisions of the 6 percent increase. She said the Department of Taxation does not understand their obligation under this bill with the language presently stated. She explained the North Las Vegas Library District is currently operating outside the purview of NRS Chapter 354. She stated the North Las Vegas Library District is not subject to any of the provisions thereof and there is no restriction on the amount of the levy, other than the restriction that was placed there when they were tied to the consolidated library district rate. She said the Department of Taxation is unclear as to what would happen if the Legislature removes that restriction. She said the Department of Taxation needs to know where the rate would go. She stated the Department of Taxation is not in opposition to the bill, but is asking for clarification. Mr. Hardy said he is not sure of the answer to Ms. Wright's question. He stated, "I think the intent though is a base that they would like that to be the tax rate for the purpose of this bill." Senator O'Connell said she thinks the committee needs to hear from the county commission as to what the tax levy does to their tax rate, if they want it outside of the tax rate. She stated she thinks the committee is looking at a whole different policy issue here. Mr. Hardy said he can get additional clarification for the committee on that issue. He said the North Las Vegas Library District's intent was to put the North Las Vegas Library District on an equal playing field consistent with other library districts throughout the state. He said whatever language is necessary to accomplish that is their desire. He explained they are not asking for any special consideration. Senator O'Connell asked Mr. Hardy if the public would understand that the tax rate would go up. She said since it is currently at 5.82 and, if they are going to be on an equal footing with Clark County, it will go up. Mr. Hardy said he has not seen the language for the bond question, but has been involved in discussions indicating that disclosure will be part of the bond question and the public will be able to clearly understand that is the case. He added the mayor in North Las Vegas is very concerned about those types of things. Chairman Lowden asked Mr. Hardy if he would provide the committee with a copy of the bond question. She asked Senator O'Connell if she would like to have a member of the county commission speak to the committee on this issue. Senator O'Connell said she would at least like to have a letter from the mayor on this issue. Chairman Lowden closed the hearing on S.B. 104. She stated there are three bill draft requests (BDRs) before the committee. She said the first is BDR 57-1804. BILL DRAFT REQUEST 57-1804: Repeal prepayment of insurance premium tax. * * * * * SENATOR RHOADS MOVED FOR COMMITTEE INTRODUCTION OF BDR 57-1804. SENATOR O'CONNELL SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR TOWNSEND WAS ABSENT FOR THE VOTE.) * * * * * BILL DRAFT REQUEST 32-507: Imposes fee for issuance and renewal of certificates of compliance for out-of-state liquor suppliers. Ms. Wright stated the Department of Taxation has four changes in legislation. She said BDR 32-507 is the one it believes is substantive. She said it requests something that is currently being asked of out-of-state liquor suppliers in other states. She stated the Department of Taxation believes that it will be able to present information as to the cost incurred by the department for issuance and renewal of certificates of compliance for out-of-state liquor suppliers on an annual basis. She said the Department of Taxation would like to have the opportunity to present that testimony to the committee. * * * * * SENATOR O'CONNELL MOVED FOR COMMITTEE INTRODUCTION OF BDR 32-507. SENATOR RHOADS SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR TOWNSEND WAS ABSENT FOR THE VOTE.) * * * * * Chairman Lowden said she received a letter from the Las Vegas Metropolitan Police Department asking for a bill draft request that would enable them to put another bond issue on the ballot next November. * * * * * SENATOR REGAN MOVED TO REQUEST A BILL DRAFT ENABLING THE LAS VEGAS METROPOLITAN POLICE DEPARTMENT TO PUT A BOND ISSUE ON THE BALLOT NEXT NOVEMBER. SENATOR O'CONNELL SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR TOWNSEND WAS ABSENT FOR THE VOTE.) * * * * * Senator Adler stated there has been a different tax interpretation that has to do with taxation of airport property, or lessee's property. He said the property was thought to be exempt in the past, but the current interpretation is that it is not. He said the leases that the cities have entered into with certain people at airports were premised upon the property being tax exempt. He stated with the current interpretation, the lessees are not able to afford the leases because the tax was not factored in. He said there is one request from Lyon County repealing that section from Nevada Revised Statutes (NRS) 361.157. He asserted there is another, more detailed, request from the Carson City Airport Authority which deals with specifics. He stated Clark and Washoe counties are currently exempt from that tax. He said the committee actually has requests for two bill drafts, because each county is doing it in a different fashion. Chairman Lowden asked if the committee should look at this as a bigger policy issue than just piecemealing it from county to county. Senator Adler said he thinks the Lyon County request would take care of the problem statewide. He said because Carson City has a separate airport authority they have problems with their individual act which they would have to straighten out in order to... Kevin Welsh, Member, Carson City Airport Authority, said their bill draft request was made and approved by the Carson City Supervisors. He said later they came up with a second bill draft request which Senator Adler pointed out. He said they do not feel they needed to have supervisor approval for the second one and that is why they left them separate. Senator O'Connell asked if the committee could find out why the Legislature is treating all of the entities differently. Senator Adler said if the committee does what Mr Welsh just suggested, it would treat all the entities the same. * * * * * SENATOR O'CONNELL MOVED FOR A BILL DRAFT REQUEST DEALING WITH EQUITY IN AIRPORT TAXES. SENATOR RHOADS SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR TOWNSEND WAS ABSENT FOR THE VOTE.) * * * * * Senator Regan asked the chairman, in the interest of expediting the North Las Vegas spring elections, to recommend that S.B. 104 come back in first reprints to include the amendments. He asked since there was no objection to the bill or the amendments if the committee can submit this bill back to have the first printing come out amended so the committee can get this thing moving. Senator Regan then asked Senator O'Connell if she would modify her amendment. Senator O'Connell asked Chairman Lowden if she had an opportunity to make sure that the amendment..."I think that we first need to make sure that Ms. Wright has some information before we know that the language..." Marvin A. Leavitt, Lobbyist, Las Vegas, said in order to satisfy the requirements of the Department of Taxation the bill must state that, for operating purposes, the tax levy subsequent to the current one would follow the formula in NRS 354, using the levy for the current year as the base. Senator O'Connell asked for verification of the 5.82 figure. Mr. Leavitt answered in the affirmative. He said the Department of Taxation actually uses the amount of the levy rather than the rate. He pointed out that subsequent to this year the North Las Vegas Library District would be treated the same as any other local government that receives ad valorem taxes. He stated it would be up to the Department of Taxation as to how....the levy for this year would be the base once the tie-in to the Clark County Library District is removed. Senator O'Connell asked for verification that this is outside of the NRS 354. Mr. Leavitt said no. Senator O'Connell asked Mr. Leavitt if it is within NRS 354, where that brings North Las Vegas? Mr. Leavitt said, "North Las Vegas will simply be in the position that this rate right here would simply be computed as we go along in the future. It can vary based on the rate in [NRS]354, just let me back up...the rate in [NRS]354 is the one that we applied that has the 6 percent and is based on the current value of the property on the preceding year's roll and so it will just flow the same as any other local government for the future." Senator O'Connell asked if Mr. Leavitt was not having any problem with the values increasing, the assessed value is increasing and there is no problem there. Mr. Leavitt said it is not the rate that is guaranteed, it is just a matter of money, the same as everyone else. Vice Chairman Augustine stated, "Mr. Leavitt, it says in the title of the bill though, in the amendment, that it eliminates the established rate." She said she knows Mr. Leavitt represents the city of Las Vegas, and said she thinks Senator O'Connell had a question regarding the county. She asked if there was anyone in the audience from the county. Mr. Leavitt said the bill is designed to tie in with the Clark County Library District. He said they set their rates initially to correspond with the Clark County Library District. He said rather than use the formula to compute what their taxes would be, their rate every year, once the Clark County Library computes what their rate would be, North Las Vegas would just "piggyback" on that rate. He said what this bill would do is eliminate that tie-in and their rate would then be computed for the future just like any other government in the state. Mr. Hardy said the elimination being spoken of is the tie to the Clark County Las Vegas Library District. * * * * * SENATOR ADLER MOVED TO AMEND AND DO PASS S.B. 104. SENATOR REGAN SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR TOWNSEND WAS ABSENT FOR THE VOTE.) * * * * * There being no further business before the committee, Chairman Lowden adjourned the meeting. RESPECTFULLY SUBMITTED: Linda Chapman, Committee Secretary APPROVED BY: Senator Sue Lowden, Chairman DATE: Senate Committee on Taxation March 14, 1995 Page