MINUTES OF THE SENATE COMMITTEE ON TAXATION Sixty-eighth Session June 6, 1995 The Senate Committee on Taxation was called to order by Chairman Sue Lowden, at 1:30 p.m., on Tuesday, June 6, 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 Randolph J. Townsend Senator John B. (Jack) Regan Senator Ernest E. Adler GUEST LEGISLATORS PRESENT: Senator Ray Rawson, Clark County Senatorial District No. 6 STAFF MEMBERS PRESENT: Kathy Cole, Committee Secretary Kevin Welsh, Deputy Fiscal Analyst, Fiscal Analysis Division OTHERS PRESENT: Pat Coward, Lobbyist, Economic Development Authority of Western Nevada Jan Jones, Mayor, Las Vegas Fred Boyd, Chairman, Economic Development Authority of Western Nevada Robert Lewis, Nevada Development Authority Lynn Atchison, Past Chairman, Economic Development Authority of Western Nevada; Member of the Commission on Econcomic Development; Vice President of Marketing Communications for Washoe County Health Systems Ken Lynn, President, Economic Development Authority of Western Nevada Dennis Stein, President, Nevada Development Authority Bob Shriver, Past President, Nevada Economic Development Association Ray Bacon, Lobbyist, Nevada Manufacturers Association Gary Crews, Legislative Auditor, Legislative Counsel Bureau Steve Wood, Chief Deputy Legislative Auditor, Legislative Counsel Bureau Ray Sparks, Acting Deputy Director, Department of Motor Vehicles and Public Safety Daryl Capurro, Lobbyist, Nevada Franchised Auto Dealers Association Stan Warren, Lobbyist, Nevada Car Owners Association Sam McMullen, Concerned Citizen Mark Schofield, Clark County Assessor Dave Pursell, Chief, Division of Assessment Standards, Department of Taxation Barbara Byington, Douglas County Assessor Howard Barrett, Lobbyist, Nevada Taxpayers Association Kathy McClain, Clark County Manager's Office John Swenseid, Clark County Bond Counsel Chairman Lowden opened the hearing on Senate Bill (S.B.) 520. SENATE BILL 520: Provides abatement from certain sales and use taxes for eligible machinery and equipment used by certain businesses in Nevada. (BDR 32-1212) Pat Coward, Lobbyist, Economic Development Authority of Western Nevada, distributed a handout (Exhibit C. Original is on file in the Research Library.), and explained the people listed on the front page would present various sections of the report. Senator Townsend objected to subjecting the committee to six presenters. He said the committee has the document and one person to answer any questions the committee might have would be sufficient. Mr. Coward said there was one individual who would like to testify on behalf of the bill. The others would be amenable to not making presentations. Jan Jones, Mayor of Las Vegas, spoke in favor the bill. The opportunity for economic development provided for in the bill far exceeds any potential loss in revenue to Las Vegas. Economic diversification of the valley should be the number one priority. This legislation gives the valley one of the tools to provide the proper incentives to highly technological based manufacturing businesses to locate in the valley and begin to bring in higher-paying professional and technical jobs. She asked for the committee's favorable consideration of the bill. Senator Adler asked about the abatement time lines on page 2 of the exhibit. Mr. Coward stated once a company qualifies for a sales and use tax abatement it would have 2 years from the date of expansion or the establishment of a new business to take advantage of the abatement. The reason for the 2-year time line is because the building phase might take 18 months. The framers of the proposed legislation tried to narrow the time frame, rather than leave the abatement open- ended. Chairman Lowden decided the members of the audience who had come to present a portion of Exhibit C would be welcome to do so. Fred Boyd, Chairman, Economic Development Authority of Western Nevada (EDAWN), explained why a sales and use tax abatement is necessary to encourage economic diversification. Development authorities throughout the state find themselves competing with stringent opportunities from other nearby states. These states are competing very aggressively with Nevada, regardless of tax situations. The same companies are being targeted by Nevada and the nearby states because these companies are high-quality companies. The sales and use tax abatement is very narrow in its scope, and very directed toward those targeted companies which are paying very good wages and benefits and will be involved in the community and offer some potential for growth. EDAWN is also providing the proper environment for those high-quality companies which want to stay in Nevada and expand. When this kind of company looks at Nevada, it will often require capital equipment. The purchase or lease of equipment is negatively impacted by Nevada's 7 percent sales and use tax, Mr. Boyd explained. Nevada is one of only three states nationwide that has a sales and use tax, the only state in the West. For example, companies like Sony, which ended up in Oregon, or a company like Micron look at a $50 million capital equipment investment, or a $800 million capital investment, and when that company tags on the 7 percent sales and use tax to its costs, the company many times makes a decision to go elsewhere. The frustration caused by companies not coming in to Nevada because of the sales and use tax has made it important for EDAWN to move forward on the issue of sales and use tax abatement. It really boils down to a competitive posture for the State of Nevada as it pursues economic diversification. Robert Lewis, Nevada Development Authority, testified, in southern Nevada it is felt the issue of economic diversification is perhaps more critical than in any other area of the state because of its dependency on a single industry. Something must be done to level the playing field so Nevada is not in a worse position compared to some of the other states competing for new industries. High tech industries are most desirable, but they are also capital intensive. He encouraged the committee's support of the bill. Lynn Atchison, Past Chairman, EDAWN, Member of the Commission on Economic Development, and Vice President of Marketing Communications for Washoe Health System, told the committee she was present to share with committee members a few points on how the sales tax deferral has been used, and address issues of expansion, retention and attraction from a quality standpoint in the past. She wanted to stress the point that S.B. 520 is very targeted. It addresses the issues the Commission on Economic Development has been concerned about for a number of years. The sales tax deferral program has some very strict criteria. For the past 3 or 4 years, the members on the commission have worked diligently to set criterion guidelines which would give an incentive to the right companies to come to Nevada. The statewide hourly average wage was addressed. That wage is currently $11.77 per hour. The commission also looked at encouraging companies who pay health care benefits and take care of their employees from that standpoint to locate in Nevada. That is also a criterion to qualify. The other stipulation is the company must create ten primary jobs. There is similar criteria in the new legislation which already exists in the sales tax deferral program. The main accomplishment sought by this legislation is to create incentives for those companies Nevada wants. Ken Lynn, President, EDAWN, spoke briefly on some modeling EDAWN has done as part of the bill. In Exhibit C are numbers which basically show the state and local government will still receive sales tax, property tax and business tax revenues. These tax revenues far exceed the amount of tax which would be abated. In fact, based on EDAWN's calculations, about 17 percent of the revenues would be abated; the other 83 percent would be kept. If a company relocates to another state, Nevada gets no revenue. The average annual tax revenue lost by a company choosing another state is almost $300,000. Senator Regan asked if the abatement would be a benefit in attracting desirable new industry to redevelop the Nevada Test Site. Dennis Stein, President, Nevada Development Authority (NDA), said the answer to Senator Regan's question is a resounding yes. In fact, the high-tech, capital- intensive industries NDA is focusing on are the kinds of companies which the sales tax and use abatement program will affect the most. These companies are the high-paying, high-wage companies, which are also capital intensive, and the very companies southern Nevada is trying to attract. The high tech which goes along with the test site and the alternate uses being discussed will be directly affected by the proposed legislation. Mr. Stein pointed out several other things. The abatement is only for 5 percent, not the total sales tax. There is still 2 percent of the sales tax payable, which is greater than zero. If the company locates in another state, Nevada gets zero sales tax. One of the companies NDA is working with currently has pointed out that a company which has the alternative of bringing in new technology and new equipment into one of their many branches throughout the United States will almost invariably opt to equip the branch in the state where they will not have to pay a sales and use tax. Nevada would also suffer if the company has to pay a sales and use tax and therefore elected to equip a branch in a state without the tax with the new, high-tech equipment. The branch with the highest technology would pay the higher salaries. Why would Nevada want the old technology when they could have the highest technology, most productive and highest-paying company facility if there was a sales and use tax abatement program in effect? That is precisely why there is a need for this particular legislation. Bob Shriver, Past President of the Nevada Economic Development Association, speaking on behalf of the state development authorities, and most particularly the rural areas, told the committee they all support S.B. 520. There are definite instances on file where companies have chosen to locate in Arizona and Utah as a result of the increased cost of paying sales and use tax on capital equipment. He urged passage of the bill. Ray Bacon, Lobbyist, Nevada Manufacturers Association, stated his association supports the bill. He provided the committee with a handout, Exhibit D, explaining the need for S.B. 520. SENATOR REGAN MOVED TO DO PASS S.B. 520. SENATOR TOWNSEND AND SENATOR RHOADS SECONDED THE MOTION. Chairman Lowden requested before the vote, that if the committee passes the bill, Mr. Stein come back in 2 years and give the committee an update on all the companies which were attracted to Nevada because of this legislation. THE MOTION PASSED. (SENATOR O'CONNELL AND SENATOR AUGUSTINE WERE ABSENT FOR THE VOTE.) ***** The hearing on Assembly Bill (A.B.) 333 was opened. ASSEMBLY BILL 333: Revises provisions relating to privilege tax imposed on vehicles. (BDR 32-1300) Gary Crews, Legislative Auditor, Legislative Counsel Bureau, testified the bill was developed in response to problems identified in the bureau's audit of the Department of Motor Vehicles and Public Safety. These problems were brought to the attention of the audit subcommittee chaired by Assemblyman Dini. Mr. Dini asked that legislative auditors work with the department in developing legislation which would address the auditors' problems and concerns. Basically, the audit identified serious and long standing problems in the application of privilege taxes by the department. This bill defines new vehicles for the purpose of privilege taxes. Currently, there is no definition of what a new vehicle is. This will eliminate taxing vehicles as new for 2 years in a row. Steve Wood, Chief Deputy Legislative Auditor, Legislative Counsel Bureau, explaining the problems encountered by legislative auditors and the various provisions of the bill to correct the problems, read from prepared text. (See Exhibit E.) He then offered to answer any questions. Mr. Crews clarified the calculation of inappropriately charged privilege tax on new vehicles in 1992 was $2.6 million; the inappropriate charge is repeating itself each year as long as the current calculation formula is used. This makes the overcharge to Nevadans more than $10 million at this point in time. The sooner this is corrected, the sooner the appropriate privilege tax assessments will be instituted. Senator Rhoads questioned whether the loss to the state will be offset by changes in the areas where the department has been identified as undercharging the privilege tax. Mr. Crews said the net loss will be in the area of $1.6 million, as $1 million in undercharged calculations will be corrected, also. Ray Sparks, Acting Deputy Director, Department of Motor Vehicles and Public Safety, spoke in favor of the bill. There is an inequity in the system whereby a vehicle is treated as new for 2 years for purposes of assessing the vehicle privilege tax. The department had originally proposed a market value system to correct the problem in what was felt was a more comprehensive manner. That proposal was not accepted on the Assembly side. A.B. 333 reflects the preference of the Assembly, and the department is willing to support the bill. This bill by no means eliminates the inequities in the vehicle privilege tax system. There will be a number of situations whereby two people will have exactly the same year, make, and model vehicle and be paying different tax rates. The reason for that is the department will only be able to track vehicles which are sold new in Nevada, and only as long as that vehicle is owned by the same individual. The department's computer system is quite antiquated and, right now, when a change is made to a registration record, the history is lost. The department will not be able to tell, once there is a change made to the registration record, when the vehicle was sold new. The department will have to revert in those situations to the model year methodology of determining the age of the vehicle. Senator O'Connell asked why the department's computer system is antiquated, since every state agency seems to have been granted budgets which include updating its data base and computer equipment? Mr. Sparks stated fortunately the budgets have been closed with some funding for the department to address the problem with the outdated computer system. There is also a bill pending which would fund a business process reengineering study, which is really the beginning of that whole process so the department can identify the processes and develop the automation to support those processes. It is just a matter of time before the computer system is brought up to date. Some members of the committee are familiar with the auto brokering which occurs in Nevada, continued Mr. Sparks. The bill concerning auto brokering has been before the committee in previous sessions. The manner in which auto brokers operate is to register a vehicle in their name under a provision called the dealer special registration privilege. That allows them to register the vehicle paying only the $33 registration fee. They are exempt from the privilege tax. The vehicle so registered is quickly sold to a customer. However, that vehicle has been registered; now, there is basically a new vehicle for purposes of privilege tax assessment which may be taxed at a lower, used vehicle rate. This type of anomaly will occur. Senator O'Connell asked why are auto brokers allowed, if the vehicle is brand new, and brokers are not brand new car dealers, but used car dealers, to get a dealer's rate? Why are they exempt from paying the privilege tax? If they are going to turn around and sell the car as a used car, the state then does not get the benefit of the tax on a new car. Mr. Sparks replied the dealer special registration process is available to any vehicle dealer, as long as they are licensed. It makes no difference if they are new or used car dealers. He agreed the people operating as brokers buy a new vehicle and register it to themselves under the dealer's special registration, making it a used vehicle. They then can sell it to a retail customer without being franchised. The department has attempted on a couple of occasions, including some pending legislation, to repeal that dealer registration process, because the department feels there have been a number of abuses. These abuses are not necessarily directly related to the auto brokering operations, but situations where car dealers are registering their motor homes and luxury vehicles to themselves and avoiding paying the privilege tax. Daryl Capurro, Lobbyist, Nevada Franchised Auto Dealers Association, stated his association supports A.B. 333 in its first reprinted form as a method of solving a problem which has already been described. He indicated, with respect to this issue of the application of privilege tax, there is no system which is going to be totally and completely fair all the time. The marketplace approach, as originally proposed in the bill, would result in the different amounts of privilege tax due to the condition of the vehicle. If just a blue book or dealers association guide is used in determining value, the value used is the same for all of the same make, model and year, regardless of the condition of the vehicle. No system will be totally and completely fair in the application of the privilege tax, but the bill does solve a very glaring problem. Stan Warren, Lobbyist, Nevada Car Owners Association, explained the association is a collection of all of the car clubs in the State of Nevada. When A.B. 333 first came out, the idea of going to market value posed a brand new set of problems which go beyond the Kelly Blue Book. Working with the committee in the other house, a solution to the audit problem of the Department of Motor Vehicles and Public Safety was found and the association supports the bill in its present form. Sam McMullen, Concerned Citizen, reported he had quite a few calls on the bill from private collectors of cars. This resolves a lot of issues and the private collectors support the bill. Discussion regarding an amendment to disallow the exemption for auto brokers to register a new car without paying the privilege tax and then turning around and selling that new car as a used car took place. The auto brokers do not run a dealership and really should be paying a privilege tax. Mr. Capurro agreed with the sentiment of the committee, but said A.B. 333 is a very clean bill which he would hate to see cluttered up with amendments. He explained S.B. 49 covers that specific issue and is scheduled to be heard in the Senate Committee on Transportation. SENATE BILL 49: Repeals provision authorizing dealer of vehicles to register certain number of vehicles without payment of privilege tax. (BDR 43-900) Chairman Lowden asked Mr. Capurro if S.B. 49 covers this amendment issue and many other issues as well, or is it just this issue. Mr. Capurro explained previous testimony indicated there are some abuses unrelated to the broker issue wherein there are some high-priced vehicles carrying the special plate of the dealer. The plate looks like a regular kind of plate and is not identifiable like the dealer plate. There are motor homes, Ferraris, Mercedes, and some other very high-priced vehicles carrying that unidentifiable special plate. Nevada does not collect the privilege tax on those vehicles. The passage of S.B. 49 would resolve those issues in which there is a definite loss of privilege tax revenue to the state and it also resolves the other issue regarding brokers. Chairman Lowden determined to discuss the issue with the chairman of the Senate Committee on Transportation before a motion is made on the A.B. 333. Chairman Lowden opened the hearing on S.B. 519. SENATE BILL 519: Revises provisions governing taxation of property that is exempt from taxation when it is leased to entity which is not exempt from taxation. (BDR 32-1926) Mark Schofield, Clark County Assessor, offered to answer any questions the committee might have regarding the bill. Chairman Lowden stated the committee needs a fiscal note. She added that Senator Adler worries it might hit the school districts very hard. Senator Adler asked if the law was being fully implemented at this time. Mr. Schofield explained Clark County just discovered that McCarran International Airport in Las Vegas is in the process of buying several single family dwellings for the purpose of expansion. The law requires the assessor to assess those dwellings as if they were privately owned. In discovering this 2 months ago, it obviously has not been on the roll and various agencies who would enjoy this revenue do not currently enjoy the revenue that would have been generated by the taxes on those homes. All other property at McCarran that is leased to a profit making enterprise is being assessed. The assessed valuation on the leased property amounts to $15,379,340. The two primary agencies which benefit from the revenues generated from that assessed valuation are Clark County, the entity itself, and the Clark County School District. Mr. Schofield continued, saying an interesting feature as it relates to the revenue enjoyed by the school district is 50 cents of the 75 cent ad valorem rate is reimbursed to the district through the Distributive School Account. However, as indicated previously, the 44.35 cents that currently services the debt and the 25 cent operating cost would be a loss to the school district. That amounts to approximately $106,000. Senator Rhoads asked if the bill could be amended for $100,000 or less, or does Clark County want the bill. Mr. Schofield stated Clark County's and the Assessor's Association's position is that they would like to have the bill, but there are some amendments which basically craft the bill to address concerns of everyone in Nevada. Chairman Lowden asked Mr. Schofield if he was prepared to share the amendments with the committee. Mr. Schofield presented the committee with the proposed amendments. (See Exhibit F.) He said the assessment process as it relates to possessory interest is very complicated and an administrative nightmare. He cited a typically occurring situation. There is a gentlemen who leases the restaurant in the North Las Vegas terminal owned by McCarran International Airport. He leased the restaurant with the understanding there would be no encumbrances on the property. The problem is the majority of the equipment this gentleman uses is owned by the airport, but possessory interest makes the tax burden fall on the lessee. Consequently, as assessor, Mr. Schofield has to bill the enterprise for the property taxes because of the way the possessory interest laws are written. The gentleman called Mr. Schofield. He was very upset because he had to pay the property tax, especially because he was under the impression he would not be liable for any taxes. McCarran staff was unaware the gentlemen was going to have to pay the taxes. Subsequently, the assessor's office is in the middle. This is a constant occurrence with possessory interest assessments. As it relates to McCarran itself, continued Mr. Schofield, when he pointed out to involved parties that the Washoe County Airport Authority currently enjoys exempt status, Mr. Schofield suggested two problems could be solved, the administrative dilemma it creates for the assessor in keeping track of various equipment at Clark County airports, and it would achieve parity among all airports. From that point, it was decided language should be crafted which would affect all 17 counties. Senator Regan asked about the language of the restaurant lease. If a lessee is leased a fully equipped establishment for X amount of dollars, and then is asked to pay taxes on the equipment because the lessor did not bother to tell the lessee of the possessory interest tax obligation, or erred in not knowing the tax would be assessed, the lessee is getting the short end of the stick. A bill to correct this problem is badly needed. Mr. Schofield appreciated Senator Regan's concerns, but committee members would be surprised at how many government agencies are not aware of the possessory interest statutes and subsequently negotiate triple net leases, which cannot be legally done because of these statutes. In a side note, Mr. Schofield said he had spoken to Carole Vilardo, Lobbyist, Nevada Taxpayers Association. The Nevada Taxpayers Association is in support of the bill. Chairman Lowden said she appreciated the fact the bill addresses the problem from a statewide perspective, since Washoe County already enjoys exemption, but other county authorities throughout the state do not. The risk is that the exemption now enjoyed by the Washoe County Airport Authority will be eliminated. She was not sure the committee is prepared at this time to decide which way to go. She asked Mr. Schofield if he had any formal fiscal note to give the committee. Mr. Schofield stated he could memorialize for the committee the amount of the revenue loss. He wanted to make it very, very clear, if this bill does not pass, the revenue loss will be almost twice as much because of the need for him to go in and assess possessory taxes now that the assessor has discovered the McCarran International Airport is renting those homes it has purchased for expansion. Therefore, he is hesitant to prognosticate the amount of revenue which will be lost once he goes in and assesses those homes. He also understands several of the counties are not assessing possessory interest, anyway. Mr. Schofield has been told, although he has not confirmed the information, the only counties assessing possessory interest in this fashion are Elko and Clark Counties. There is some confusion as it relates to the wording of Nevada Revised Statutes (NRS) 361.157 and 361.159, which address personal property. There are also some conflicting legal opinions rendered by respective district attorneys in the various counties. Discussion ensued on the cost in lost revenue versus the administrative nightmare and inequities in the assessment process throughout the state. Mr. Schofield wanted to allay the committee members' concerns regarding loss of revenue in Clark County. The volume of new assessed valuation picked up almost each and every year more than makes up for the loss. In fact, if there was no clause in the NRS which prohibits local government agencies from reducing their tax rates from the prior year, there would be a reduction in tax rates in Clark County because of the increase in assessed valuation. Senator O'Connell asked to which chapter of NRS Mr. Schofield was referring. Mr. Schofield replied it is chapter 354 of NRS and promised to get a copy for Senator O'Connell. Dave Pursell, Chief, Division of Assessment Standards, Department of Taxation, said previous legislation which added confusion to NRS 361.157 came about because there was litigation involved at the Nevada Test Site, Fallon Naval Air Station and the Hawthorne Ammunition Depot. There was a difference of opinion on the exact definition of possessory interest. Possessory interest was discussed in a number of different terms. Leasehold interest, possessory interest, beneficial interest and beneficial use were to mean the same thing in relationship to the whole ownership in property being used by private contractors conducting a business for profit. Reference was made to NRS 361.227 because this is the statute which determines how property is valued in Nevada at the present time. The statute tells how to value vacant land, improvements, and improved land. With the passage of the changes to NRS 361.157 in the prior session, the Department of Taxation directed all the assessors who had this kind of real property which fit into NRS 361.157, to value the land and improvements for tax purposes. Mr. Schofield is correct. Some assessors are using this method of assessment and some are not. The department is now working on a fiscal note which will have input from each of the counties. Senator O'Connell asked what the Department of Taxation can do about the assessors who were notified of the need to assess possessory interest but are still not doing so. Mr. Pursell said when the ratio study is done, it will indicate whether the county assessor is valuing possessory interest. Those assessors not valuing the possessory interest will be given audit exceptions. Again, there have been some district attorneys who have advised assessors that they should not be valuing that type of property. The legal advice to the Department of Taxation is the opposite. Therefore, there is true inconsistency throughout the state. Barbara Byington, Douglas County Assessor, stated for the record Douglas County valued possessory interest last year, because the county had been written up the previous year in the ratio study by the Department of Taxation for failing to do so. Thus the Department of Taxation does have a way of getting assessors to value possesory interest. By doing this assessment, the county probably netted approximately $500 worth of taxes, which as Mr. Schofield stated, is not worth going out and picking it up. By the time the county portion is calculated, it will show the increase in revenue will not pay for the additional work such assessments cause. Howard Barrett, Lobbyist, Nevada Taxpayers Association, said the association supports the bill because of things Mr. Pursell has indicated. Some of the assessors are valuing possessory interest and some are not. To be equitable and fair, the bill needs the proposed amendment. Chairman Lowden stated the committee would wait to see the fiscal note before taking action. The hearing on S.B. 338 was opened by Chairman Lowden. SENATE BILL 338: Expands authorized uses of proceeds from supplemental vehicle privilege tax. (BDR 32-1888) Kathy McClain, Clark County Manager's Office, testified S.B. 338 is a request for permission for the county to pay moving expenses for residents who have been displaced for roadways in the Clark County beltway. She wanted to impress upon the committee the importance of the good neighbor policy in the bill, basically because the airport and all the incorporated cities in the state already have the authority to provide for paying moving expenses. The county would also like the committee to amend the language of the bill to include the willing buyer/willing seller program Clark County would like to initiate. John Swenseid, Clark County Bond Counsel, came forth to answer any questions the committee might have on the proposed amendment (Exhibit G). Mr. Swenseid gave the committee a written explanation of the proposed amendment. (See Exhibit H.) The amendment would allow Clark County to initiate a willing buyer/willing seller program which would allow the county to buy property adjacent to controlled access highways being constructed. The property could then be re- sold with an easement or proper disclosure so the party to whom property is being sold knows the property will have a highway right next to it. The explanation goes into more detail in explaining the proposed amendments. Senator O'Connell said her biggest concern about the amendment was that there was a bond issue voted on by the people and she is not sure the people perceived their tax dollars being spent as the amendment proposes when they passed the bond issue. Mr. Swenseid stated the question presented to the voters on the 1991 ballot did not go into detail at all. County personnel are of the opinion paying for the cost of moving people whose residences are taken in order to construct a road is a valid cost of the transportation improvement. However, the ballot question did not explicitly address this. SENATOR REGAN MOVED TO AMEND AND DO PASS S.B. 333. SENATOR TOWNSEND SECONDED THE MOTION. Senator Adler clarified the policy of the state Department of Transportation on this issue. The department usually reimburses moving expenses for residents displaced for the construction of roadways. If land is condemned by the state for a highway, the owner would receive reimbursement for moving expenses; if the land is condemned by the county, there would not be reimbursement for moving expenses. Senator Augustine said her understanding is that the amendment also includes not just those people in direct line of road construction being moved, but the wording of willing seller/willing buyer also includes people being moved who live off the main thoroughfare right of way as well. Mr. Swenseid replied the people who would be paid moving expenses would have to live adjacent to the throroughfare, not a block away. Senator Augustine stated the biggest problem she has with the bill is the voters turned this down and now county representatives are asking the Legislature to overturn a defeated issue. Kathy McClain denied the voters have voted to turn down what is being proposed. The bill is really just a clarification on two more things which can specifically be paid out of these funds. The district attorney is very conservative and he says since it is not exactly stated, it cannot be done. The problem in Clark County is the airport and incorporated cities are able to pay moving expenses. Mr. Swenseid interjected the airport does the willing buyer/willing seller, or something similar, now to take care of people who are impacted by the noise of the airport. The bill will really just interpret what transportation improvements were in question 10. The ballot question referred simply to transportation improvements. It did not say fences, moving, or identify those improvements in any way. Senator Augustine said the passage of the bill could also affect other projects which might involve a lot of people whose property may be adjacent. Specifically, now, only the interchange is involved, but in the future other projects could be affected. Chairman Lowden said she does not have a problem with the scope of the bill. She lives in the area where people are affected and it is very traumatic for people to live in an area all their lives and have to move to make room for a super highway. Senator Regan stated abatement is going to become a major problem with the beltway coming through, the interchange extension, etc. Putting in a willing buyer/willing seller will abate a number of large lawsuits which will be filed. Also, the counties, if they are not buying these properties, are spending a small fortune in courtesy walls just to keep the noise down. THE MOTION PASSED. (SENATOR AUGUSTINE VOTED NO.) ***** Chairman Lowden opened the hearing on S.B. 315. SENATE BILL 315: Provides for establishment of allodial title to residential property. (BDR 32-1751) While waiting for testifiers on the bill, Chairman Lowden asked Mr. McMullen if he wanted to update information on the Summerlin and Caughlin Ranch bill, S.B. 512, even though the bill is not on the agenda. SENATE BILL 512: Provides separate method of assessment for unit in common-interest community. (BDR 32-1549) Mr. McMullen gave the committee a copy of the proposed amendment to S.B. 512, Exhibit I, which is a product of a 2 1/2 hour meeting with Michael Pitlock, Department of Taxation. The most expedient way to handle this would be to have the bill drafter draw up an amendment to the bill, based on the handout, and then the amendment could be presented to the committee on Thursday for consideration. The theory of the amendment, Mr. McMullen went on to say, is instead of taxing the homeowners association and the individual units for the value, the opportunity for assessing the homeowners association for the common elements would be removed. However, that value would not be lost. It would be added on as increments, proportionately, on the ownership of each of the units. The individual property tax owner would pay for the value of the land under the house, the household improvements, the land in the common elements, and the improvements in the common elements. The amendment, according to the language drafted, also allows any physical or legal restrictions to be considered in the valuation. If the committee would authorize him to work with staff in drafting the amendment, it might be possible to have an official amendment to present to the committee on Thursday. Chairman Lowden explained to Senator Rawson, who had entered the meeting to testify on S.B. 315, that there is some consensus on S.B. 512. Language for an amendment is being drafted for consideration on Thursday. Since S.B. 512 was sponsored by Senator Rawson, she thought he would be interested. Senator Rawson, Clark County Senatorial District No. 6, testified that following the last hearing he met with representatives of the state treasurer and the county assessors. The information needed to put this bill together to assure equal taxation was ascertained. The assessors ran figures on the property end of their stewardship and the various amendments necessary were ironed out in a work session. He gave the committee copies of the proposed amendments and their rationale. (See Exhibit J.) Chairman Lowden asked if these amendments contained mutually accepted language to all parties involved. Senator Rawson said they did, but wanted any interested parties to come forward as he may have missed giving a copy of the amendments to some people. There was some concern voiced by title company representatives. Most of those concerns have been dealt with, but Senator Rawson will continue to work with them. As he understands the bill as it is now written, Senator Rawson explained a person would essentially have a title, which is called an allodial title, and it would offer them all the advantages of the homestead exemption. If someone wanted to lend them money on the property and place a lien on the property to secure the loan, or if because of some other reason they were to place a lien on the property, there would be a certain risk. It is now a title which has certain status, one of having all the homestead exemptions. This would mean a certain risk to anyone considering granting a loan on property with an allodial title. Senator Rawson went on to explain any time there is a transfer of title, the allodial trust fund would be surrendered, or it could be updated by the people receiving the title. For example, parents die and leave land to their children. The land would be reassessed at that point. If the children wanted to put in the additional money necessary to guarantee the tax rate, then the allodial title would continue. If the children did not want to do this, the trust fund would be surrendered to the legal owner at that point. Then the title would revert to a normal or standard title. In answer to Senator Regan's question as to why this problem is arising now, Senator Rawson thought there was a concern because it is a new term being used which creates immediate resistance. He will try to satisfy all concerns, and does not intend to push through this legislation. Added to the bill is a provision that every 10 years there will be a reassessment, whether the property went through a title change or not. The treasurer's office would have the obligation to actuarially determine the rate which would carry this land through a 10-year period. There is always a reassessment which can assure those projections are accurate. Chairman Lowden said the bill would be posted for the committee's work session on Saturday, prior to the floor session. She said it would be a good time to review the bill and the amendment because Senator Rawson would be available for any last minute questions. Senator Rawson was very amenable to this and agreed to have proposed amendments to the bill available in his office. Mr. Schofield said if there is not a provision for the reevaluation of the assessment, there will be a very serious constitutional problem as it relates to equity. There being no further business before the committee, the meeting was adjourned at 3:40 p.m. RESPECTFULLY SUBMITTED: ____________________________ Sandy Arraiz, Committee Secretary APPROVED BY: _____________________________ Senator Sue Lowden, Chairman DATE: ______________________ Senate Committee on Taxation June 6, 1995 Page