MINUTES OF THE SENATE COMMITTEE ON TAXATION Sixty-eighth Session April 20, 1995 The Senate Committee on Taxation was called to order by Chairman Sue Lowden, at 1:30 p.m., on Thursday, April 20, 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 Randolph J. Townsend Senator John B. (Jack) Regan COMMITTEE MEMBERS ABSENT: Senator Dean A. Rhoads (Excused) Senator Ernest E. Adler (Excused) STAFF MEMBERS PRESENT: Kevin Welsh, Research Analyst, Fiscal Analysis Division Kathy E. Cole, Committee Secretary OTHERS PRESENT: Sam McMullen, Lobbyist, Northern Gaming Industry Association Clay Holstine, City Manager, City of Reno Tom Herndon, Council Member, Ward 1, City of Reno Carole A. Vilardo, Lobbyist, Nevada Taxpayers Association William Osgood, Executive Director, Reno Downtown Renovation Association Roberta Ross, Owner/Operator, Ross Manor Apartments Lucille K. Lusk, Lobbyist, Nevada Concerned Citizens David Howard, Lobbyist, Vice President, Legislative Affairs, Greater Reno/Sparks Chamber of Commerce Frank Barker, Deputy Chief, Las Vegas Metropolitan Police Department Janice A. Wright, Deputy Executive Director, Department of Taxation William H. Cavaganaro, Lobbyist, Las Vegas Metropolitan Police Department Chairman Lowden opened the hearing on Senate Bill (S.B.) 144. SENATE BILL 144: Proposes to exempt expressly from certain taxes on retail sales gross receipts from sales to tangible personal property by certain organizations. (BDR 32-1325) Chairman Lowden discussed with the committee the proposed amendments from a memorandum dated April 10, 1995 (Exhibit C). SENATOR TOWNSEND MOVED TO AMEND AND DO PASS AS AMENDED S.B. 144. SENATOR AUGUSTINE SECONDED THE MOTION. THE MOTION CARRIED. (SENATORS RHOADS AND ADLER WERE ABSENT FOR THE VOTE.) ***** Chairman Lowden opened the hearing on Senate Bill (S.B.) 308. SENATE BILL 308: Provides exemption for tax levy of certain taxing districts in certain cities from statutory limit on total ad valorem tax levy. (BDR 32-732) Sam McMullen, Lobbyist, Northern Gaming Industry Association, said: We have representatives from the City of Reno and the [Reno] Downtown Renovation Association, and small business representatives...to make sure that there is a clear statement on the record that this is something that they desire, that they want, and that they are asking for you to pass with a full understanding that it, in fact, creates capacity for additional tax revenue for the future. Clay Holstine, City Manager, City of Reno, said, "This is a bill that is necessary for us to continue with our downtown redevelopment program that will [help] us meet the needs in terms of maintenance and police services without infringing on the school district and other taxing entities that need to go about their business also." Senator O'Connell asked, "As you know you are breaking new ground here by putting the word maintenance in. We have never done that before... Do you have any problem with putting a cap on this?" Mr. Holstine replied, "In terms of the total amount of the taxes that could be done by a cap? I think that is one potential approach... We have agreed to a cap within the police district as it is...but if there is a desire to have a cap above that in terms of the way the state law works...OK." Senator O'Connell said, "But this would allow you to go to the $5.00 cap... We have a real concern especially with the school district getting ready to [ask for another bond issue]. I think this collects 38 cents doesn't it?" Mr. Holstine responded, "It is at 32 cents." Senator O'Connell then stated, "Thirty-two cents and you have a school district that is looking for...is it 28 [cents]?" Mr. Holstine said, "The number that I had heard from them is 17 cents that they were looking for as [the] potential bond issue [rate]..." Senator O'Connell and Mr. Holstine continued to discuss the issue of putting a cap on the spending and what some of the potential problems other taxing entities might have due to the limited funding that would be under the cap. Senator O'Connell wanted to make it clear for the record, "So, it brings you right up to $3.64?" Mr. Holstine said, "[That is] correct." Tom Herndon, Council Member, Ward 1, City of Reno, said: I represent... the downtown properties [as well]... If any [owners] are dissenting I have to answer to [them] and so far I have heard from only two businesses. I am the liaison for the [Reno] Downtown Renovation Association and as such must deal with the business owners of downtown...(Exhibit D). Additionally, I represent the city council... The council voted 7-0 in support of the downtown district and 7-0 in support of this bill. I think it is important that you know that there is no dissention on this issue. Additionally, I ran on a platform in cleaning up downtown Reno and getting rid of `the thugs and the bums...' I think there is real sentiment to do just that. Senator O'Connell asked Mr. Holstine, "[In looking at] the outline that you have given us on the map (Exhibit E), are there any residential areas in there?" Mr. Holstine concurred that there are some properties in the district which are primarily residential in nature. Further, he said, they are mostly senior citizens living in the older neighborhoods who want and need to feel secure. He briefly referred to the seniors in the Tower's Apartments who live right along the river. According to these people, "Safety downtown is an absolute primary concern." Senator Lowden voiced her concerns that the affected public has not been given enough information to make an informed decision with regard to this issue. She said, "We have this list of the people who have signed their names to this petition. It just seems...they are the big guys (Exhibit D). ...We are concerned about all the other people who aren't on the petition... Part of why we asked you to come was to speak for those people who may not attend the meetings or whatever...it was to give us some assurance that there was more than just these people [on the petition] who want this." Mr. Herndon responded: This is my ward... I am betting my political career literally that what I am saying to you is supportive... If these people don't like it then they will surely let me know...in the next elections. As I stated, I have had only two people come to the council and say that they want to be excluded... At the council meeting their requests were heard and denied... Mr. Herndon was concerned that if this bill did not pass, Project Re-Start would not be able to tighten the ordinances that are in place, due to the lack of officers that could be hired to patrol the downtown area. As it stands they can hire only one squad of officers instead of the two which they hoped would work in that taxing district. Senator Augustine made the comment, " We had a bond issue for additional police in Clark County and it was turned down by the voters...I think it is interesting that you say you have so much support, when we had [the issue] on the ballot and nobody expected something like that to fail and it did." Mr. Herndon assured the senator that he did not know about Clark County's efforts; and, as far as he knew, the last issue that had been passed by the voters here was in 1988. Senator Augustine then asked Mr. Herndon to explain why they were not putting this measure on a ballot instead of asking the state to fund it. Mr. Herndon reiterated that "...if this measure was to be put on the ballot then everyone would have to pay. This way will help them to limit the taxing to just the affected district." Furthermore, he said, "...What we hear constantly is that the big casinos aren't paying their fair share. They have stepped up to the plate and have said, `We want to pay more, let us pay more,' and I think to not allow that, from my perspective, is political suicide." Senator O'Connell directed her question to Mr. Herndon by saying: You have just brought up a very good issue for or argument [for]...room taxes... I don't quite understand, especially since these are the people who are going to be affected...why wouldn't we be taking the same approach like we did with the Fremont Experience and allow the room tax to be implemented instead of...pushing so close to your cap...? [Which could then] preclude you from doing anything else that may come up, [such as] the school bond issue. Mr. Herndon said, "I think there are a lot of people who could speak more eloquently, and certainly more knowledgeably to that issue [than I]. I feel that there are a whole lot of people in Reno...[living in] hotels, motels, who are outside of this district that wouldn't benefit from this police service. We would be spreading it out...[too far]" Senator O'Connell restated that, "...In the Fremont Experience, it only affects the area such as the one you have drawn out here (Exhibit E)... It wouldn't be anyone outside the [taxing district] that would be paying for it." Sam McMullen asked to clarify this issue, "Basically, when we considered this, the theory of this district...the diversity of this district [it was] not just [with] the CEO (Corporate Executive Office) support. [We recognize that] there are other businesses in the downtown. It has retail. It has other public venues. Everybody benefits. So, what we tried to do was look for a mechanism that fairly apportioned that burden... That is, we super-loaded it on the frontal casinos..." Senator Regan said, "In reviewing my notes, the complaint we had or some of the objectives were regarding the statewide affect on redevelopment authorities [this] does not affect it. It is not germane to the seven existing [redevelopment districts]. ...I've got 2 1/2 pages of notes and all I am hearing is favorable. I have petitions from the joints in the downtown, all are saying I am willing to step up..." SENATOR REGAN MOVED TO DO PASS S. B. 308. SENATOR TOWNSEND SECONDED THE MOTION. Chairman Lowden asked those who were present to testify if they were in favor of this bill. She said: "Are you all in favor? OK. Who is not in favor? OK. I think we need to hear from them..." Carole A. Vilardo, Lobbyist, Nevada Taxpayers Association, said: [This]...is not an issue of providing police protection, section 1. That is fine. The issue is exceeding the cap and putting something outside the statutory cap. The committee has...not heard...the bill to raise the cap to $4 which would accommodate this [bill, S.B. 308]... The point is if the redevelopment area between police and maintenance in the next few years should...end up using a $1.36; then, they freeze out anybody from going to a bond issue because you have no maneuverability. We even hit the constitutional cap. I would rather see that the committee process the $4 combined cap for some maneuverability, or set some caps on this to accommodate the need for police, then, set a precedent for allowing a district to go outside the cap. There are at least four bills in this legislative session now in both houses that want to do this and once you set the precedent it is going to...be hard...to deny it to other areas who have the same types of needs for police protection... On the second part of the bill...[concerns] the cost of maintenance in the redevelopment district... The policy decision and the arguments for not including [normal] maintenance are the fact that if you are within these areas and you are improving the area there is a greater amount of revenue generated that can be used for those areas... So, I have two concerns with the bill. I have one overall concern of setting a precedent with going outside the $3.64 cap particularly if there is no secondary cap that you leave some maneuverability at the constitutional limit. And the second point is, the fact that maintenance is included in this district... Senator Townsend said: ...I agree with everything you are talking about there. Everything! I think it is great! I agree with your tax policy. We have never disagreed. We are a potent entity run by elected officials who have gone on record to say this is what we want...[is] to raise your taxes. We want the flexibility to meet your needs...and I don't want anybody to put the caps on... Ms. Vilardo responded by assuring the senator that there were other bills coming through the subcommittees that would provide greater flexibility. She continued her testimony by saying, "I don't have a problem with the police and I don't have a problem with people who want to tax themselves. That is not the issue we will be looking at. We will be looking at the mechanics for doing it... There is a bill in this Legislature that has not been heard or addressed that would raise the $3.64 cap to $4 that would give local governments greater flexibility, but still keep it under a cap..." Senator Townsend remarked, "...But you have to be under the assumption that that $4 cap would pass..." Ms. Vilardo said, "That we won't know until the bill is heard and we see what the provisions are under that bill." A discussion ensued between Senator Townsend and Ms. Vilardo with regard to taxing, public safety, removing the undesirables from downtown, and so forth. William Osgood, Executive Director, Reno Downtown Renovation Association, read his testimony from Exhibit F which states that there is a cap written into both the maintenance and the police district. He further informed the committee that if the taxpayers "within the district" do not like the function of the district, then they can "opt out" through a petition process. According to Mr. Osgood "...they will not sunset on the date but will, through attrition at the police department over a 2-year period, go away. So, there is plenty of protection for the taxpayers... We feel that this will be the fair and the right thing to do... We did not want this district to push up to the cap, that is why we supported this legislation..." Roberta Ross, Owner/Operator, Ross Manor Apartments, said, "I along with my aunt...own a 116 unit apartment building in downtown Reno, the Ross Manor... We are very much in favor of the exclusion of the police and maintenance tax district. We take care of our own property as much as we can and the policemen come and help us as much as they can..." Accordingly, she believes that the extra police officers would help the 240+ tenants in making them feel more secure. Ms. Ross then informed the committee that she has had the opportunity to talk with other small business owners and they agree that "policing and cleaning up the downtown is a huge issue for them..." Mr. Osgood asked to answer some of the questions that were raised earlier. He said, that he had the petitions circulated along with a letter informing each business approximately how much it would cost them for this service. He feels assured that everyone knows about the taxing district and for the most part supports it. Senator Augustine once again voiced her concern that while it is obvious that most people want the police protection that the taxing districts would provide. However, were they as willing to pay for the service that was the question. Lucille K. Lusk, Lobbyist, Nevada Concerned Citizens, said: I have been able to identify five bills that are calling for exemptions from the tax cap, including one that would allow the Legislature to levy taxes beyond the cap... Not all of these items are police [as] they include indigent care, public works, and so forth. The argument that has been made...is that no one entity should be able to drive up the tax rate so that others wouldn't have any place to move...[and therefore,] ask to be exempt from the tax... The voters rarely know what kind of action is being taken by local government and if you were to consider this at all...than a ballot question would be the only avenue to assure that people really intend to have this... Mr. McMullen asked to make one more comment by stating: "...There is only one way a district like this can get started and that is if the taxpayers themselves initiate it... It is a voluntarily imposed district...voluntarily triggered...and can't be initiated by...anybody, but the taxpayers." David Howard, Lobbyist, Vice President, Legislative Affairs, Greater Reno/Sparks Chamber of Commerce, explained to the committee that he called several of the small businesses that would be in the taxing district and asked two specific questions. One, were they aware of the taxing district and two what did they feel about it. He commented further, that he did not find any opposition. Mr. Howard concluded by saying: "For the record, [we in] the chamber of commerce are in support of this bill, this issue..." Senator O'Connell then asked Mr. Howard, "Would you have any objections if this fell under the cap?..." Mr. Howard responded: "I think that was the purpose of the bill..." Senator O'Connell declared, "This [bill] is outside the cap." Mr. Howard concurred that he would have some concerns, because it would "blow them out to the max [on the cap]!" Senator Lowden said, "We have a motion and we have a second but I have been asked by Senator Rhoads that in case of a close vote to wait until he gets back...So...we will wait [for] Senator Rhoads [to return] before we vote..." Chairman Lowden closed the hearing on S.B. 308 and opened the hearing on Senate Bill (S.B.) 336. SENATE BILL 336: Provides that proposal for imposition of ad valorem tax for additional officers may be submitted to voters of areas where metropolitan police department has been created. (BDR S-1980) Senator Lowden asked if there was anyone here to speak in favor of this bill. Frank Barker, Deputy Chief, Las Vegas Metropolitan Police Department (METRO), referred to this bill as a rewrite from a previous Legislative session in which the METRO requested that there be an increase in property taxes in order to hire additional police officers. He had been asked to provide the committee with information regarding the increased tax rate and the cap in Clark County, but was not able to provide them with this information. Janice A. Wright, Deputy Executive Director, Department of Taxation, looked through her tax records and concluded that "Las Vegas Metro has overlapping districts...when you add all those rates together, Clark County rate...you would be at $2.05 and when you get into the city with the overlaps, at Metro you are at $3.03. The highest in Las Vegas would be $3.24 right now...and that is based on fiscal 1995 rates." Senator O'Connell then asked Ms. Wright, "How many taxing districts do we currently have in Clark County?..." Ms. Wright answered "...There are about 30 entities that are special and about 25 regular ones...of the 30 some are not real taxing districts...and are for a special purpose..." Mr. Barker then stated, "That coincides with one of the things I found out about. In setting up the 911, 10 years ago did create our ability to go for bonding to the public...to hire more personnel through an initiative..." Mr. Barker continued his testimony with reference made to the reasons behind the need for additional taxes and the hiring of additional police officers. He referred to their goal of raising taxes a "maximum of 12 cents" that they would be asking for through a ballot initiative in 1996. Further, Mr. Barker made it clear that it would not push up to the statutory cap and it would not set up a new taxing district as it is a continuation of those districts. He explained that the districts started out in 1989 as a 3-year program to hire more police officers. At that time he said it was about a 4-cent increase in the first year and then, to 6 cents in the second year, and then to 8 cents. Senator Lowden asked Mr. Barker whether the Convention Authority in Las Vegas had ever been asked to provide the strip with more police officers. Mr. Barker responded by saying that no formal communications had ever taken place between the convention authority and METRO. Further, he said that they were funded by both the city of Las Vegas and Clark County. According to Mr. Barker, Clark County pays approximately 55 percent and the city pays the rest. Senator O'Connell asked Ms. Wright to inform the committee on how much 1 cent raises property taxes for Clark County and what would be the difference in assessed taxes from the city and from the county. Ms. Wright asked to have more time to figure this out. Senator O'Connell then asked Mr. Barker, "You are asking for a specific amount. Do you have any idea how much that rate is?" Mr. Barker apologized that he did not and based on the 1989 figures in which they collected 8 cents they were able to hire 200 policemen. Senator O'Connell responded, "But our population has changed dramatically since 1989..." Ms. Wright asked Senator O'Connell to tell her what she needed in the way of information from the Clark County property tax records. The senator said: "They are asking for 12 cents on a tax rate. They have two different tax rates. It appears that they have a rate from the city and a rate from the county, and I am asking how much are they expecting to raise based on that 12 cents?" A discussion ensued among the witnesses and the committee and it was decided by the chairman to take a 5-minute recess. Again Mr. Barker spoke to the committee, using the 12-cent example that he had that would raise approximately $17.25 million if applied fully and in today's market they could hire about 275 police officers. He further testified that these figures were rough numbers. Senator Lowden asked Ms. Wright to please give her the information as soon as possible. Ms. Wright then stated: "...I come up with $1,429,116...which reads pretty closely with 17 [cents]... What I will do...is double check that with the budgetary documents and then we will make sure that I am using the right assessment evaluation..." Senator O'Connell asked Mr. Barker or Mr. Cavaganaro who was also from METRO for an approximation of how much of their budget goes to payroll. She asked, "Does it exceed 87 percent?" William H. Cavaganaro, Lobbyist, Las Vegas Metropolitan Police Department, responded, "[It would] be between 70 and 80 percent...I am not exactly sure..." Senator O'Connell asked if they are under collective bargaining to which Mr. Cavaganaro concurred that they are. Chairman Lowden closed the hearing on S.B. 336 and adjourned the meeting at 3:08 p.m. RESPECTFULLY SUBMITTED: Kathy E. Cole, Committee Secretary APPROVED BY: Senator Sue Lowden, Chairman DATE: Senate Committee on Taxation April 20, 1995 Page Senate Committee on Taxation April 20, 1995 Page