MINUTES OF THE meeting

of the

ASSEMBLY Committee on Taxation

 

Seventy-Second Session

March 18, 2003

 

 

The Committee on Taxationwas called to order at 1:43 p.m., on Tuesday, March 18, 2003.  Chairman David Parks presided in Room 3142 of the Legislative Building, Carson City, Nevada, and, via simultaneous videoconference, in Room 4401 of the Grant Sawyer State Office Building, Las Vegas, Nevada.  Exhibit A is the Agenda.  Exhibit B is the Guest List.  All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

 

 

COMMITTEE MEMBERS PRESENT:

 

Mr. David Parks, Chairman

Mr. David Goldwater, Vice Chairman

Mr. Bernie Anderson

Mr. Morse Arberry Jr.

Mrs. Dawn Gibbons

Mr. Tom Grady

Mr. Josh Griffin

Mr. Lynn Hettrick

Mr. John Marvel

Ms. Kathy McClain

Mr. Harry Mortenson

Ms. Peggy Pierce

 

COMMITTEE MEMBERS ABSENT:

 

None

 

GUEST LEGISLATORS PRESENT:

 

None

 

STAFF MEMBERS PRESENT:

 

Ted Zuend, Fiscal Analyst

Mary Garcia, Committee Secretary

June Rigsby, Committee Secretary

 

OTHERS PRESENT:

 

Howard Liggett, Executive Director, National Tax Lien Association

Barbara Reed, Clerk-Treasurer, Douglas County, representing Nevada County Treasurers; Legislative Committee member, County Fiscal Officers Association

Al Kramer, Carson City Treasurer

Laura Fitzpatrick, Clark County Treasurer

Gaylyn Spriggs, representing Nevada Taxpayers Association

Larry Spitler, Associate State Director, American Association of Retired Persons, Nevada

Dan Musgrove, Director, Intergovernmental Relations, Office of the County Manager, Clark County

Kimberly McDonald, M.P.A., Special Projects Analyst, City of North Las Vegas

Terri Barber, Chief Legislative Advocate, City of Henderson

David Howard, representing City of Reno

Thelma Clark, Nevada Silver Haired Legislature  

 

 

Chairman Parks:

Good Afternoon, I would like to call the Committee on Taxation to order.  [Attendance was taken.]  This afternoon we have two bills scheduled.  I want to welcome those in attendance at the Sawyer Building in Las Vegas to this afternoon’s hearing.  Our first bill is Assembly Bill 200.

 

Assembly Bill 200:  Provides for sale of tax lien against parcels of real property. (BDR 32-204)

 

Assemblyman Hettrick, good afternoon.

 

Assemblyman Lynn Hettrick, District No. 39 (Douglas County and portions of Carson City and Washoe County):

[Introduced himself.]  Assembly Bill 200, with the amendments I have passed to you (Exhibit C), is an enabling bill that allows counties, at the county treasurer’s discretion, the option to sell delinquent tax payments in a tax lien sale.  The idea is that many of the counties have an opportunity to generate significant cash flow from this without losing any revenue whatsoever.  That is the intent of the bill.  I would like to give the Committee a basic description of how the system works today and how the tax lien sale is different. 

 

[Assemblyman Hettrick, continued.]  Under the current procedure regarding delinquent property taxes in the state of Nevada, it is typically about 3 years before action is taken against a party whose tax is delinquent.  At that time, they are served notice, told that the property will be sold at auction, and then given the opportunity to come in and pay the taxes, penalties, interest, and any costs.  Ninety-seven percent of all people who are involved in that situation do that.  Only about 3 percent of all properties that go delinquent on any tax rolls nationally ever go to actual sale.  I want to make sure we all know that, ultimately, the taxes do get paid. 

 

During that time, interest, penalties, and costs accrue, but schools, counties, the state, and any other political subdivisions do not get the use of the revenue until enforceable action is taken to require the taxes are paid.  That money is just out there for what can be up to three years. 

 

Twenty-eight states presently allow the sale of tax liens, which enhances the cash flow of the schools, the counties, the state, and so on.  The lien is sold to an investor who, for a guaranteed interest rate secured by a lien on the property, pays the taxes, penalties, interest, and costs included in the delinquent property tax bill.  The county will get the money, as will the schools and the state upon the sale of the tax lien.  They are current, just as if the property owner paid the taxes, but the interest, the penalties, and the costs are included. 

 

Some people say, “Investing in tax liens is just a scheme for investors.  Hettrick is a Republican businessman who wants to make some wealthy scheme for investors to get rich on these deals.”  The fact is that investing in tax liens is risky business:  there are, or can be, liens of higher priority, such as federal liens; property owners can file bankruptcy; property could be contaminated or have problems that you would have to take care of if you became the owner; or it may turn out that if the property does go to sale and you try to collect on your lien, it may not sell for enough to satisfy the lien.  Tax lien investing is not without risk. 

 

The purchaser of the tax lien is responsible for his or her own due diligence.  The county does not guarantee anything; it just puts the tax bill up as a lien sale if it chooses to do so under the provisions of this bill.  The county is not liable to ensure the purchaser that the lien is collectible. 

 

With the proposed amendments, A.B. 200 is a viable tool to enhance cash flow.  A county has many options in the bill.  I want to give you a simplified example of how it would work.  After one year of delinquency on a parcel, the county would assess interest, penalties, and costs, just as they do now.  They would then have a choice.  They could decide to sell that particular delinquent tax bill with the interest, penalties, and costs at a tax lien sale, or they could decide not to.  They could decide to hold that one back.  It is totally their choice.  They do not have to hold a tax lien sale at all under the provisions of A.B. 200, as amended. 

 

[Assemblyman Hettrick, continued.]  If they decide to sell a tax lien, an investor would buy the lien on the delinquent parcel for the amount of the taxes, interest, penalties, and costs.  The taxing entities would have full benefit of that money for the 2 years they normally would not have collected the delinquent tax money, assuming it went to the full term of the procedure as it exists. 

 

If the parcel remains delinquent at the end of the second year, the county would again assess all interest, penalties, and costs.  They could then decide to sell that lien again or not to sell that lien again, under the provisions of A.B. 200.  They have a total option left open to them as to whether or not to do it.  If they decide to sell the lien for a second time, the existing lien holder would have the option to purchase the second one.  If that person chooses not to purchase under the terms of the amendment you have, a new lien would be sold.  The purchaser of the first lien would be redeemed. 

 

This would eliminate the amount of paperwork the counties have to do to keep track of this.  There would always be only one lien holder so the counties would not have to keep track of two, and there would be no worry about priority.  A county would have the benefit of the revenue collected on the second lien sale for at least a full year before there would normally be enforceable collection done at the county level. 

 

If the property tax on the parcel remains delinquent at the end of the third year, the lien holder may commence an action, essentially foreclosure, to collect on the lien.  That is exactly what the county would do.  We have not changed anything; we have just allowed the lien holder to commence the action.  This is the same exact time frame and procedure used by the county now to collect delinquent taxes. 

 

In the existing procedure, counties go as long as three years without collecting the revenue.  Under this procedure, they would collect two-thirds of the revenue, which is all they would have gotten anyway, before it went to a sale.  They have the money in their hands, guaranteed by investors who assumed the risk.  If it is not collectable, it is the investors who lose the money, not the county.  The county gets paid.

 

The bill is enabling.  It allows the treasurer to choose which delinquent parcels to sell, and it transfers all equity remaining at foreclosure back to the delinquent taxpayer.  If we had a parcel that was worth $100,000, with a $50,000 mortgage, delinquent on $2,000 in unpaid taxes, we go the term, up to 3 years; we sell, just as the county would sell.  The investor gets back his $2,000‑$3,000 in taxes that he paid to the county, the mortgage holder gets his $50,000 back, and the owners of the property get their net equity.  That is exactly what they get today; there is no change.  If there is net equity, they get it.  If there were no net equity, it would be the same as it is today; they would get nothing.  The taxes get paid because the tax lien has priority.  We have not changed anything about how this works.

 

[Assemblyman Hettrick, continued.]  The biggest single difference in this, and you will hear some complaint about it, is that by selling the tax lien, you are charging additional interest to the taxpayer.  That is true.  All the taxpayer has to do to avoid the extra interest is pay the taxes.  In the meantime, is it fair that some people actually use this, not paying taxes, as a borrowing mechanism?  I think not.  I think it is a fairness issue.  I think we have some counties who would say, I think justifiably, “We know this person who is an older person or someone with a problem, and we want to set up a payment system for them.”  I have no problem with that.  They have the choice, under A.B. 200, of doing that.  They do not have to sell a tax lien on that piece of property.  That is the way this is set up.  It is totally the choice of the counties, at their option, and the treasurers get to choose.

 

I put a set of the suggested amendments on each of your desks.  What I would like to do is go through the bill, section by section, very quickly and tell you what it would do as amended.  To my right is Howard Liggett.  Mr. Liggett is the Executive Director of the National Tax Lien Association, which is a national organization that represents people who do buy this type of lien nationally.  After I do a very quick run-through of these sections, I would like him to address some of your questions and tell you how the system works in 28 other states.

 

If I may, Mr. Chairman, I will start with Section 2, which simply defines a tax lien.  Section 3, subsection 1, says a county may, in lieu of other remedies, sell a tax lien.  Subsection 2 says political subdivisions cannot buy tax liens, so you cannot sell it to a governmental agency.  Section 4 says that before a county can sell tax liens, the county commissioners must establish the procedures.  I would suggest that some of the information Mr. Liggett will give may be very interesting and helpful for the counties, because he has seen how this has worked in other states, and I think he has some great ideas on how to make it effective, simple, and cost-effective at the same time.

 

[Assemblyman Hettrick, continued.]  Section 5 says a treasurer may sell a lien if the necessary criteria are met.  It specifies the method of payment.  It allows the county to use existing collection procedure if a lien does not sell, so they have total choice and can use their existing procedures. 

 

Section 6 specifies the information that must be included on a certificate:  the interest rate that accrues and the parcel description.  Subsection 4 says the certificate may be transferred to any person other than a political subdivision.  Subsection 5 allows the purchaser to perfect a security interest; that means that you could go down and record it with the county clerk or whomever to record your security interest. 

 

Section 7 details the information for each lien sold, which must be kept by the county treasurer.  Section 8 explains how a lost certificate would be replaced.  Section 9, amended, says that if a parcel with a sold tax lien is delinquent for a second year, the county treasurer shall collect the taxes using the existing procedures or notify the existing lien holder, who would be allowed to purchase the new lien.  If the existing lien holder does not buy, then the treasurer may sell a new certificate, and the original certificate would be redeemed by the new buyer.  Again, there would be only one certificate to keep a record of. 

 

Section 10 details who may redeem a certificate and what must be included in the payment.  It requires the treasurer to issue a redemption certificate and specifies what that certificate must include.  I think Mr. Liggett will suggest some things that will save the county treasurers paperwork, time, and effort, and simplify the procedure.  Section 11 requires the county treasurer to notify the lien holder that a lien has been redeemed and to pay the lien holder upon presentation of the certificate of purchase. 

 

Section 12, amended, allows the lien holder to commence an action for the collection of the amount due on the certificate.  Since, in this bill, we have done away with the ability to request a tax deed, which would have been a direct deed that would have wiped out everybody without the provisions of giving equity back to the original owner, you do not need Section 13 at all.  It is deleted. 

 

Section 17 is cleanup language.  Subsection 2 indicates that a certificate of purchase would be prima facie evidence in a court of law to prove the claim for the taxes.  It would amount to the evidence you would need to commence an action to collect.  Section 18 limits an action to the persons who are delinquent and/or the owners of the parcel, so you cannot go around and sue anyone else, nor can you go back and say, “The county did not tell me.”  The action is limited to the delinquent person or the owner of the parcel.  

 

[Assemblyman Hettrick, continued.]  In all sections beyond that, most of it is cleanup language, but there are multiple appearances of the wording, “if the board of county commissioners so directs.”  We would like to strike that language at each appearance, because the amendment changes this over to the discretion of the county treasurer to decide to proceed with the sale and to run the sale.  Then it would need to be numbered appropriately.

 

Let me address very quickly why we want to change it to the treasurer.  The treasurer now controls the taxes, collects the taxes, and runs the tax sales anyway.  All we want from the board of county commissioners, in Section 4, is for them to set the interest rate and the rules so there can be no conflict of interest for the treasurer and so no one can say anything was inappropriate or wrong. 

 

That said, Mr. Chairman, and with your permission, I will turn it over to Mr. Liggett and let him go through a part of this.  It may satisfy some of the questions that members of the Committee might have.  Then we would both be ready for questions.

 

Chairman Parks:

Thank you.  Before Mr. Liggett commences, are there any specific questions for Mr. Hettrick?  Yes, Mr. Marvel.

 

Assemblyman Marvel:

Thank you, Mr. Chair.  Have you done any research on how much money might be in this so-called suspense account?

 

Assemblyman Hettrick:

I have not had any specific research done, but it is a large amount of money.  It depends on which county you choose.  I would imagine in Clark County it amounts to millions. 

 

Assemblyman Marvel:

Have you done anything in Douglas at all?  [Mr. Hettrick indicated that he had not.]

 

Assemblywoman Pierce:

What was that percentage that you gave earlier of the number of parcels that actually go to auction?

Assemblyman Hettrick:

The number nationally, and I believe it is pretty close to that in Nevada, is 3 percent that ultimately do not pay.  Obviously then, 97 percent do pay before it goes to auction.

 

Howard Liggett, Executive Director, National Tax Lien Association:

[Introduced himself.]  I have been the Executive Director since 1999.  As Assemblyman Hettrick pointed out, I have traveled here from Florida.  I was a tax collector in Florida for some 20 years, so I have a unique perspective.  I can look at both sides of this issue and look at the importance of the tax lien industry, as we call it now. 

 

American capitalism became involved with the purchase of tax liens, which had been around in the United States for 180 years.  In the state of Florida, they were provided for in the 1885 constitution, so we have had them there for 128 years.  They are nothing new, but tax liens and tax lien sales occur right now in 28 states and 2,500 different jurisdictions.  Those jurisdictions would be counties, townships, and municipalities.  Neighboring states, Arizona and Colorado, have had them for a number of years. 

 

My purpose in being here today is obviously to offer testimony in favor of tax lien sales and A.B. 200 specifically, but more than that, to describe tax liens as they are viewed now by the industry and by the members of the National Tax Lien Association (NTLA) as an asset-backed security.  The NTLA is a 501(c)(6) nonprofit business league.  We are a trade association admittedly representing the very special interests of this industry. 

 

In the United States right now, the number of receivables due to unpaid ad valorem real estate taxes hovers between $4 billion and $5 billion per year.  I cannot think of any state where counties are not facing a revenue shortfall.  The replacement of that revenue is absolutely critical to funding infrastructure needs like public education, public health, fire services, police protection, and all those things we sometimes take for granted as citizens in our communities.  This $5 billion per year has to be made up somewhere.  Tax collectors, county treasurers, and auditors around the country conduct these sales.  The members of the NTLA probably ring familiar with some of them.  They include companies like Wachovia, General Motors Acceptance Corporation (GMAC), many private placement funds, Plymouth Financial Group, and TransAm Financial Group with holdings around the country. 

 

This is probably a good opportunity to give the current industry definition of tax liens:  moderate-risk, low- to moderate-yield, extremely well collateralized, asset-backed securities.  The “well collateralized” comes from the fact that we know that tax liens around the country have a lien-to-value ratio of under 10 percent, typically, between 3 and 7 percent of the underlying value of the property.  That makes it a very conservative instrument for investment not only by companies and corporations, but also by local investors. 

 

[Howard Liggett, continued.]  I can tell you from my personal experience as a tax collector in Florida, if Nevada goes to a tax lien sale system, you will see local investors look at these as an investment alternative every bit as much as out‑of‑state investors.  I think it makes eminent good sense if you are facing any sort of shortfall, because it provides you with an immediate injection of revenue.  The industry itself is still young but past its infancy.  In the mid‑1990’s, companies like Wachovia and GMAC started looking at these. 

 

Let me give you an example of what happened in Florida.  Florida is considered to have probably 20 percent of the U.S. marketplace for tax liens as an investment alternative.  In 1999, the state of Florida faced $800 million in revenue shortfall due to unpaid ad valorem taxes.  Probably 60–70 percent of that $800 million figure was purchased by companies, many of whom are members of NTLA.  Not every institutional investor in the United States is a member, but most are. 

 

These companies are in the business of turning an illiquid liability into a liquid asset for communities.  What you are offering is this investment.  What these companies are providing is the cash that you need.  Florida is an example of what can happen to your communities.  It is all for the better.  In Florida, you bid interest rates to successfully acquire a tax lien.  It begins at 18 percent and is awarded downward to the individual willing to accept the lowest interest rate.  For probably 20 years before the arrival of companies like Wachovia and GMAC, there was no competitive bidding.  Delinquent property owners were facing the state’s maximum interest rate of 18 percent.  This was done and carried out by local investors. 

 

If there are concerns about out-of-state investors, I hope I can allay some of those concerns.  What happened was, when the large companies came in, there was free, open market competition.  We saw interest rates plummet, but they were still fair returns on the investment, and you saw property owners facing the lowest interest rates in the history of Florida.  We think tax liens are extremely good policy for local government, and we think it is simply a way to fund the shortfalls.  Also, there has to be a way to recoup those funds. 

 

NTLA would like to address provisions in A.B. 200 that the Association thought might be of help to the county treasurers.  At this point, though, I would be glad to entertain any questions.

 

Assemblyman Mortenson:

I think I know the answer to this, but GMAC is not going to enter into an activity unless it makes money.  If it makes money, then that is money that the state would have made if GMAC had not been there.  Maybe it is the interest rate.

 

Howard Liggett:

The money that the investors will pay to the counties goes directly to the counties.  As a matter of fact, the slogan of the NTLA is “Investing in America’s Communities.”  These monies go directly to the county treasurer’s office.  I am sure they will be disbursed to the public education system, police, fire, and any other levying districts that you have. 

 

Assemblyman Mortenson:

They get there faster, but they would get there eventually anyway if the county did not go into this program.

 

Assemblyman Hettrick:

The way the bill is structured, the counties get the same interest, the same penalties, and the same costs that they would get anyway.  They get them in advance.  So, no, they do not lose any money whatsoever.  The interest rate is charged in addition to those costs, so the taxpayer who is delinquent would pay the interest, penalties, and costs.  The counties lose nothing on this, not a penny.

 

Assemblyman Mortenson:

Is there anything prohibiting the state doing exactly what GMAC is going to do?  Is there some law that they cannot follow the exact same procedure?

 

Assemblyman Hettrick:

The state could buy these?

 

Assemblyman Mortenson:

No, that they cannot follow the exact same procedure, levy the same fines and interest?  Is there some prohibition against that?

 

Assemblyman Hettrick:

The state allows, through current statute, for the counties to collect 10 percent interest plus penalties plus costs, which they do, but it takes them up to 3 years to get that through the action of an enforceable collection procedure.  This process merely allows an investor to buy the lien as much as two years earlier than the delinquent tax would normally go to a collection procedure, and pay the county all of those costs in advance for the privilege of collecting 10 percent interest, assuming that is what the county might set, over a period of as much as 2 years.  The state does already set the interest, penalties, and costs that are established by the treasurer when they work these.

 

Assemblyman Mortenson:

I have understood all of that, but what I do not understand is, if there is money to be made in this, why does the state not make that same money?  Are you saying that the only advantage is that they get their money faster? 

 

Assemblyman Hettrick:

The counties get the money faster.  For the state to make the money, the state would have to buy the tax lien and charge the property owner who is delinquent the 10 percent interest.  I do not think the state wants to invest its money in tax liens, because we would have to raise taxes for the state to be able to come up with the cash flow, or bond it, or do something to come up with the cash to buy the liens.  You would take state money and put into the county treasury, which would send one-third of it back to the state. 

 

Assemblyman Mortenson:

I guess what I am saying is, why does the county not follow the same procedure that GMAC would do and get exactly the same benefits that they would derive?

 

Assemblyman Hettrick:

The county does do that, because they charge the interest, they charge the penalties and the costs, but they cannot collect for 3 years.  This lets them get the money immediately, within one year if they want to.

 

Assemblyman Mortenson:

So what you are saying is that the advantage to the county is that they get the money faster.  [Assemblyman Hettrick said that was correct.]  There are two black boxes here.  One, we do not pass the bill; one, we do pass the bill.  If we pass the bill, someone is making money out of this.  [Assemblyman Hettrick verified that.]  Why not let the government entities make that same money instead of this corporation?  That is what I do not understand.

 

Assemblyman Hettrick:

Let me try one more time, and then maybe Mr. Liggett can do it better than I can do it.  The only way you get to make money off of this as an investor is to buy the tax lien, to pay the county the taxes, interest, penalties, and all of their costs.  For that purchase, you get to make 10 percent interest until you get the purchase certificate redeemed by the delinquent party.  For the state or the county to make the same money, they would have to buy the tax lien.  I do not think the county or the state would buy its own tax lien.  [Assemblyman Mortenson expressed a desire to confer privately with Assemblyman Hettrick.]

 

Howard Liggett:

One thing I will say is that, in every state where there are liens, the interest is dictated by the state.  It is always simple interest.  The benefit to the counties is that the income stream, the cash flow, is immediate.  The timeframe is considerably shortened. 

 

For doing that, these companies are assuming a great deal of risk, depending upon the size of the indebtedness, or receivables, that they are purchasing.  As pointed out in Assemblyman Hettrick’s introduction, any number of things could happen.  Bankruptcies could occur by the owners of these properties after the purchase of the tax lien.  Properties could be declared as brownfield properties, with all the ensuing liabilities attached to brownfield properties.  The payment redemption may simply not be forthcoming.  So, there is very often an enormous risk for the investors, depending upon the volume that they buy in any jurisdiction.  I hope that helps.

 

Assemblyman Marvel:

Nevada is 3 years.  Are other states 3 years, or does every state differ on when they can clean up a tax lien?

 

Howard Liggett:

They do vary.  For example, Florida has a 2-year window; 2 years from the date of issuance of the tax lien is the first window of opportunity that the tax lien investor has to apply for a non-judicial tax deed foreclosure on that property.  Some states are 3 years.  I have never seen any beyond the 3-year window.  For our industry, we like to look at states that have a 2-year window just because it shortens the cycle and lessens the opportunity for some of the negative risk we just spoke about, including filing a bankruptcy.

 

Assemblyman Marvel:

I understand what is happening.  The private investors are cleaning up the tax lien and putting money back in the county or local government’s coffers.  There is no question about it.  Does this expedite some of the delinquencies being paid up?

 

Howard Liggett:

Having been a tax collector, I empathize with the county treasurers in Nevada.  I understand their reluctance to get into this, because I truly have been there.  It is the least favorite portion of their ministerial function as revenue collectors.  We find that when you have these tax lien sales, whether they are purchased by local investors or especially out-of-state investors, typically the redemption rate does increase.  The correlation between lien purchase and the delinquency removal from the record books is there. 

 

The truth is the Nevada system, as Assemblyman Hettrick has pointed out to me, is a good system, because it utilizes the county treasurer as the bridge between the investors and the delinquent property owners.  The sale is conducted by the county treasurer.  The redemptions by the property owners are made through the treasurer, so he really serves as a conduit between the investors and the property owners.  That is a healthy way to do it.

 

Assemblyman Marvel:

If these delinquencies are cured, then the investor gets his money back anyway, does he not?  [Mr. Liggett confirmed that.]  In the meantime, the county has been benefiting from the investor’s money.  [Mr. Liggett verified that, also.]  Then, of course, if it is not cured by the end of 3 years in Nevada then the investor takes title.  Is that right or not?

 

Assemblyman Hettrick:

No.  In Florida, as Mr. Liggett just said, they actually can go to action to take a tax deed.  They grant a deed, which titles the property over to the investor.  What we have proposed here in A.B. 200 with the amendments is not to allow a tax deed.  The property would go to foreclosure just as it does today under the existing rules for the counties.  The delinquent property owner would get any net equity that came out of the sale, if any.  No, it does not go to a tax deed, per se.

 

Assemblyman Marvel:

If it goes on auction, why couldn’t you bid on it?

 

Assemblyman Hettrick:

You could, and at that point you would assume that it would bid high enough that, if the property indeed has value, and the investor did their due diligence…

 

Assemblyman Marvel:

If I were going to buy a deed, I would be sure I did the due diligence.

 

Assemblyman Hettrick:

Yes, you would, because if you found out that the value of the property was $10,000 and the mortgage on the property was $20,000 and the tax bill due was $2,000, you would be pretty slow to buy a tax lien on it.

 

Assemblyman Marvel:

I think I have noticed some officials in Nevada who have gotten pretty wealthy with [Inaudible; laughter.]

 

Assemblywoman Gibbons:

The only concern that came to mind was foreign investors.  I would worry that some foreign investors have so much money that they could…  Yes, that may be one thing we want to consider.

 

Assemblyman Hettrick:

If you want me to make a comment for the record, Mr. Chairman, I would have no problem at all with limiting the purchase of tax liens to citizens of the United States.  That would not bother me. 

 

Assemblywoman McClain:

Somewhere in here I missed something.  Why in the world would you buy these tax liens?  It sounds like there is very little profit in this investment.  How do you actually make money?  Assuming it is going to get paid off in the end, you are not going to end up with the property, but the majority…

 

Howard Liggett:

[Interrupting Assemblywoman McClain]  If I may respond to that, it is all about making money and profit.  It honestly is.  The receivables industry has been doing this for some time now.  When credit card companies simply cannot collect what is due them, they will offer for sale, often at a negotiated discount, those receivables to companies who will take up the gauntlet, so to speak, on collecting those. 

 

[Howard Liggett, continued.]  The idea of tax lien sales goes back 180 years in this country.  It was always the domain of local investors.  You will see that here in Nevada if A.B. 200 passes, and we certainly hope it does.  The profit motive is certainly there.  It is a fair return, but it is volume based.  That is where the money is made, because it is volume based. 

 

To give you an example, the city of Los Angeles just sold $125 million in delinquent property taxes for that city and county there to one of the National Tax Lien Association members.  It was on their books, and they were not collecting it.  I do not know what the company paid the city of Los Angeles for that $125 million.  I can assure you it was something less than $125 million, but if they got $100 million, it was $100 million they did not have before that will go directly to fund public schools, public safety, and public health.  It is volume-based, yes, ma’am.

 

Assemblywoman McClain:

So what the local governments are doing, then, is trading the interest and penalties that they would get at the end for cash flow up front.  Are you not buying it any cheaper than what they can sell it for?

 

Assemblyman Hettrick:

No.  The way the bill is amended, Ms. McClain, the county gets 100 percent of the interest they charge right now, 100 percent of the penalties they charge right now, and 100 percent of the costs they charge right now.  They get that as much as 2 years in advance of when they would have gotten it.  For that, the investor gets 10 percent interest on the money for investing it in the county’s tax lien and then takes on the risk of whether or not it is ever collectable. 

 

In today’s interest market, if you are getting 5 percent interest and you could get ten, you might be interested in doing a little due diligence and buying a tax lien.  If the interest rates in the state of Nevada on an ongoing basis were 10 percent and the interest they offered here were 10 percent, a lot of people might not want to buy tax liens.  It might be just as cheap to put it in the bank or just as good to buy a bond or something like that where there is a lot less risk, but there are a lot of investors who like these because they are securitized, as Mr. Liggett said, by significant multiples of the actual liability.  You have a good chance of getting your money back, and that is the intent.

 

Howard Liggett:

Assemblywoman McClain, you asked about interest rates and how money is made in the tax lien market.  I will tell you that I have here, for example, the interest rates that are currently in play in other states.  These are maximums; realize that these are competitive sales, very often auctions, where interest rates are bid in a downward fashion.  Maximum interest rates are currently in the state of Illinois, 30 percent; Texas, 25 percent; Iowa and Maryland, 24 percent; Florida, Mississippi, New Jersey, and Ohio, 18 percent; Arizona, 16 percent; Michigan is no longer in the tax lien sale business; Colorado and Nebraska, 14 percent; Alabama, South Carolina, West Virginia, 12 percent.  These are the incentives that are in play, but I must caution that the chances of getting any tax lien in any of those states at that maximum are practically nonexistent. 

 

This bill, A.B. 200, is extremely well constructed.  You have concerns.  Some have not even been stated, but I know they are out there.  They always are, and they should be.  For example, we have to think about the poorest of the poor.  We have to think about those that, for one reason or another, simply are not going to be able to pay their tax bill.  I can tell you how they do that in other states.  In Florida there is not only a property tax exemption where properties under $25,000 pay no taxes anyway, but also a portion of statute that forbids the issuance of a tax lien of $100 or less, thereby guaranteeing you are not going to have that as a problem.  You are in the formative stages right now where any of that can be addressed. 

 

One thing that does not go away is the shortfall, the revenue that counties need to operate on.  I am sure you will have local investors throughout the state, but we have companies out there that are willing to inject that cash to invest in these instruments for a fair return.

 

Assemblyman Grady:

My first comment would be, “the higher the risk, the higher the interest.”  Secondly, Lynn, you may have touched on it, and I might have missed it.  At the third year, when we are ready to go to the tax sale, it is still the county that conducts the sale.  Currently they advertise it and have the sale on the courthouse steps.  This would be the same way.  It would not be the individual filing a foreclosure; the county would conduct it.

 

Assemblyman Hettrick:

The intent would be that the county could conduct the sale exactly as they do now, if they choose to do so.  However, the certificate of purchase is evidence in a court of law to commence action.  The amendment says that it has to be in the same timeframe as the county does it now, so you could commence action as an individual investor if you chose to.  I doubt very many would, because it would mean filing in a court of law and so on.  I think they would want to work with the county and go through the regular sale.  State law is that you can begin the sale or enforceable collection at the end of the third year.

 

Chairman Parks:

Thank you.  I have a couple questions.  Presuming I had a parcel of land that was sold on a tax lien and I wanted to recover that, would I then purchase it back from whoever purchased that tax lien?

 

Assemblyman Hettrick:

The way it is written in the bill, a tax lien is sold on the parcel with delinquent property tax.  The purchaser holds the certificate of purchase.  The property owner decides to redeem that by paying the taxes.  The property owner goes in to the county treasurer, pays the taxes, and receives a certificate of redemption that says he has paid the entire bill.  All the interest, everything that was due, has been paid.  The lien holder, the purchaser of the certificate, would then be notified.  A.B. 200 says that the purchaser of the certificate would have to present the certificate at the treasurer’s office to receive payment. 

 

[Chairman Parks asked about a reconveyance.]  You never conveyed the property; all you did was create a lien.  The property was never conveyed, title never changed hands, and you did not have to file anything if you did not want to as far as recording it goes.  You could record, but it would be a matter of record in the county treasurer’s office.  You can protect the security interest if you want to.

 

Howard Liggett:

In the 28 states where we see the tax lien sales of one description or another in play, we think the most successful for the citizenry, the local government official, and the investor is like that being described in A.B. 200, where you have a county official that really serves as a “middleperson” if you will.  For example, if you buy what they call a “tax execution” in the state of Georgia, they abdicate their total responsibility as revenue officials, and then you, the investor, become the tax collector.  It can be a very uncomfortable situation for both the investor and the property owner.  As a result, local investors heavily invest there because of the interest rates, but corporate investments there are not nearly what you see in some of the other states where you actually have a conduit with a local constitutional officer.

 

Chairman Parks:

Thank you very much.  I know we have a number of individuals who want to speak on the bill.  The first person we have listed to speak is Barbara Reed, Douglas County.

 

Barbara Reed, Clerk-Treasurer, Douglas County, and Legislative Committee member, County Fiscal Officers Association:        

[Introduced herself.]  With me is Al Kramer, the Carson City Treasurer.  I find myself in a very awkward position today.  Some of the treasurers are remaining neutral on this issue; most of those I have spoken to are opposed.  First, I wish to put on record how much respect I have for Assemblyman Hettrick.  Rarely have I found myself on the opposite side of the fence from Lynn, so this is a rather odd position for me to be in.  I wish to thank him on behalf of all the county treasurers for his willingness to work with us on the amendments that he has submitted to you today. 

 

We do have some questions and some information that we would like to present to the Committee.  First of all, we do have a question.  Who does this bill benefit?  It certainly does not benefit the taxpayer, and ultimately those are the individuals that are going to be paying this bill.  We also do not believe that it benefits the counties to that great an extent.  In Douglas County, our collection rate is greater than 99 percent.  I believe the collection throughout all of the state is greater than 96 percent. 

 

[Barbara Reed, continued.]  Our goal as county treasurers is not to sell anyone’s property.  We work with the taxpayer and we do our best to set up payment plans for those that have hardships, those that are seniors or single moms or whatever.  We believe that there is a great deal of economic hardship right now for our senior citizens.  They have had decreases in Social Security benefits; medical costs have increased.  This distresses us probably more than anything, that we are adding another layer of expense to these homes, and this may result in a senior citizen or a single parent being put out on the street.  Granted, most of these individuals do pay; probably 99 percent of them end up paying their taxes.  However, we have not had this additional interest rate applied to any of the tax bills in the past, so we do not know what impact that would have in the future. 

 

We believe that tremendous pressure would be placed on the county by investors to sell tax liens.  It would be very hard for us to decide which property we would sell and which property we would not sell.  We are also concerned that because we have selected some properties not to put up for sale, would we end up in court?  We have to put all of them up for sale to avoid litigation problems.  Those are questions that none of us can answer at this point. 

 

The impact on the counties would be tremendous.  In Douglas County alone I have estimated that we would lose $40,000 per year in interest revenue, and I believe it would cost us $10,000 to administer this program.  That does not include any of the one-time start-up costs that we would have.  None of us, I believe, currently has a system that would allow us to do the double tracking that we would have to do.  Our books would show that they are paid in full, but we would somehow have to track them over here showing that they are not paid in full, and that they have a tax lien on them.  That process would continue throughout the 3-year cycle if, in fact, that property went the 3-year cycle.  We would have some initial software costs to establish the program in addition to an ongoing cost every year. 

 

We do have some questions about when property goes into bankruptcy.  We know that this is an investor’s risk, but our concerns with how long some of these bankruptcies go on are whether this would complicate the process.  Would this create any additional litigation or problems for the county?  A question came up about foreclosures.  Do the investors have the right to go in and do a foreclosure on the property before it runs its full cycle, or does it truly come back to the county so that we do handle the delinquent sale? 

 

We would also like to submit two additional amendments to you today.  I have talked to Assemblyman Hettrick about these.  He says he does not have any disagreement with them, but I will let him speak for himself in case he has changed his mind.  On Section 5, we would like to see the words “after the first Monday in June” deleted.  There are a couple reasons for that.  If a treasurer wished to hold the sale later in the summer or in the fall, we would not want investors to come to us and start pressuring us and saying it is the first Monday in June.  Also, the last installment comes due in March, and there may be a treasurer who would like to start the process with noticing before the first Monday in June.  The second one is just a note for clean up.  In all sections of the bill, where it says “amount of taxes,” we would like to be certain that it always includes “taxes, penalty, interest, and cost.” 

 

[Barbara Reed, continued.]  An additional question we have is, what if neither the lien holder nor anyone else wishes to buy the second year?  I guess the lien just stays on the property and runs the process.  We really do not know what happens if it occurs that no one wishes to buy the lien in the second or third year. 

 

We ask for clarification on one more point.  Is the intent of this legislation to sell tax liens on parcels that are delinquent in taxes for a full year, or any amount of delinquent tax during the year?  For example, can they just be delinquent one installment or are they delinquent for the full year? 

 

Another point for clarification is the cost incurred throughout the steps.  We truly are going to have additional costs to the counties for recording the liens, collecting the tax amount, and passing through to the taxpayer.  Are those costs going to be passed on to any of the taxpayers, or are these truly absorbed by the counties? 

 

One other concern we have is that the treasurers now have the authority to waive penalties and interest on hardship cases.  We have criteria that we have set up throughout the state so that it is consistent with all the county treasurers.  This would no longer allow us to work with those taxpayers to waive the penalties, the interest, or the costs in those circumstances.  We would also request that, if this bill does proceed, we actually do have a prescribed tax lien form, so we do not have 17 different forms throughout the state. 

 

We would also like to make a suggestion.  If this does pass, we believe it is important that the verbiage be added to the tax bills that are mailed out to notify the taxpayers up front that we now have tax liens available in the state, and if they do not pay their property taxes, they may go to a tax lien sale. 

 

I think those are all the concerns and questions I received from the treasurers.  If you have any questions, I would be happy to answer them.  Maybe Al wishes to address any additional points.

 

Chairman Parks:

Thank you, Ms. Reed.  We do have one question from Mr. Marvel.

 

Assemblyman Marvel:

Barbara, how much do you waive a year? 

 

Barbara Reed:

I cannot tell you the total dollar amount.  We do not waive a lot of them, but if we have a senior citizen who has lost a spouse and is just trying to get his or her life back together, or someone has had a medical occurrence in the family, we have a set, established procedure.  I could not tell you exactly what that total dollar amount is annually.

 

Assemblyman Marvel:

Is it waived permanently, or just for a period of time?

 

Barbara Reed:

No, it is waived permanently.

 

Assemblyman Marvel:

When is a property delinquent under the current policy?

 

Barbara Reed:

The current policy is a 10-day grace period for each quarterly tax installment.  After that 10 days, it becomes delinquent.

 

Assemblyman Marvel:

Really, at the end of the fourth quarter, if they still have not paid, are they not delinquent?

 

Barbara Reed:

They are delinquent at the end of the fourth quarter if they have not paid.

 

Assemblyman Marvel:

Then how do you show it on your books?

 

Barbara Reed:

It just shows that they have not paid.  When we roll out the new tax bills that go out in July, those tax bills are flagged, so we know that they are delinquent.  Usually at that point probably 50 percent of the parcels that were delinquent do get paid, at least in Douglas County.  Some of them are delinquent because of new construction costs, or because there was a close of escrow and the new owner thought that the property taxes had been paid through escrow.  There are a variety of reasons.

 

Assemblyman Marvel:

The question I asked Assemblyman Hettrick earlier was, “How much do you feel is delinquent in Douglas County?”

 

Barbara Reed:

We probably have an average of $400,000 that rolls from year to year.  It drops after that first tax bill installment is paid.

 

Assemblyman Marvel:

That is pretty significant for your county treasurer, is it not?

 

Barbara Reed:

The $400,000 does not come back to the county treasurer.  It is disbursed monthly to all entities.  However, we would lose the $40,000 investment that we have.

 

Assemblyman Marvel:

If they do not pay, you lose the whole thing.

 

Barbara Reed:

Well, no, they ultimately pay.  Our collection is over 99 percent annually on taxes, with the new plus the old.

 

Assemblyman Marvel:

Yes, but while this is in delinquency, you are losing money.

 

Al Kramer, Carson City Treasurer:

[Introduced himself.]  May I speak to this?  That portion of our portfolio that you might say is invested in delinquent taxes is paying us a 10-percent return, which far exceeds what we can earn any place else.  In Carson City, for example, in ten years we have not sold a piece of property at auction.  People pay their taxes.  It just comes back to us. 

 

On another subject, very quickly, if I can cover it.  In all fairness, where this comes into play is that the county General Fund gets the interest from delinquent taxes, but if you have a large amount of delinquent money, there can be a cash flow problem.  The school district is dependent on the funds coming in on a regular basis.  If you are not collecting it, they are not getting it. 

 

Assemblyman Marvel:

Then the Direct School Account (DSA) kicks in.

 

Al Kramer:

It does.  The only benefit I can see to this is that it does get the money to the school district faster.  When this tax lien is purchased, the money is distributed to all the parties, and that is probably the biggest advantage.  I have not really heard that said, so I just thought I would state what that advantage is for the record.

 

Assemblyman Marvel:

I guess what bothers me is that if this property is delinquent, we have the guaranteed school support for the DSA.  We depend a lot on that local support through $0.75 on property tax.  If that property tax is not coming in, then we have to come in from the other level to pick up what is not being paid.

 

Al Kramer:

Sir, it comes in, and when the property tax is eventually paid, you get all of your back revenue at that time.  It is an ebb and flow, and it equals out, sir.

 

Assemblyman Marvel:

And the state is picking up the guarantee.  [Mr. Kramer agreed.]

 

Assemblyman Grady:

Ms. Reed, I have a question.  Using simple numbers, if you have a $100 delinquency and there is $10 for advertising and there is $10 in back interest on it and you decide to sell that, you get, immediately, $120, just as if the person had come in and paid that.  Where would the county lose the money?

 

Barbara Reed:

The county loses the money because it is a 10 percent interest.  If we were a 1‑year cycle state instead of a 3-year cycle state, then that would be correct, we would have all of it.  Since we are a 3-year cycle state, we are then collecting interest on the second and third year that the money remains delinquent.  We would no longer have that if it were sold.  Does that make sense?

 

Assemblyman Grady:

You would no longer have that if they came in and paid the taxes, either.  You are not in the business to earn interest.  You are in the business to collect taxes.

 

Barbara Reed:

I cannot argue with that.  The way it works currently, that is what we have is $40,000 per year that we estimate from those delinquent taxes. 

 

Chairman Parks:

Thank you for your testimony.  Mr. Kramer, did you have anything further you wished to share with us?

 

Al Kramer:

I have just one item.  I have spoken to the low delinquency rate that Carson City has.  Again, we have less than 1 percent.  When you say you have a collection rate of more than 99 percent, that means that this year there is less than 1 percent delinquent and next there may be some of those same ones who are delinquent again, and the next year maybe some of those same ones again.  Whereas at the end of this year I will probably have 1,100 parcels that are delinquent in taxes, and next year maybe 500 of those are repeat, and the next year, but when the third year comes around I am down to 25, and all of those will have paid by the time the auction takes place.  That more than 99 percent is a rolling number with different people.  Each year you collect some of the delinquencies from last year, and some of the new ones from this year are delinquent.  I suspect the 99 percent number is not 99 percent of the people pay their taxes and the other 1 percent of them go to auction.  Those are delayed a year from doing that. 

 

Mr. Marvel, in Carson City this last year we have waived some for hardship as well, and sometimes for personal circumstances.  You might remember the woman and her foreign exchange student and daughter that were killed in Yosemite.  That family was a property owner in Carson City, and they just blew off paying their taxes that January.  They asked for relief from the penalty for that, and we granted that relief.  It is those personal tragedies, death in the family or incapacitation of one of the property owners, that do this.  If I had to guess what we had waived in taxes for this last year, I would say the amount is less than $300.  I hope that puts it in perspective for a $22 million tax collection.

 

Assemblyman Marvel:

What is going to happen now with K-Mart going into bankruptcy?  How much of a hit are you going to take there?

 

Al Kramer:

Presuming that while the building is empty and there is no other sales tax in there, we think it is going to be hit somewhere in the range of $500,000 to $600,000 per year in sales tax revenue to Carson City, with somewhat the same to the state. 

 

Assemblyman Marvel:

Would you like to bid on that?

 

Al Kramer:

That is not one we can sell, sir.  There is nothing to sell.

 

Chairman Parks:

Mr. Kramer, could you give us a profile of the numbers?  By and large, are these primarily out-of-state property owners?  Are they senior citizens on limited income?  Could you characterize that in any way?

 

Al Kramer:

Sir, I can.  I will say we started with 32 this year.  While it is not required by statute, Carson City is a small county, so I can do this.  I contact each person on this list who comes up and make a personal approach, so that they know this is what is happening.  A couple of them come to mind.  One was an 80‑year-old Native American widow who had her house free and clear and who, at the last hour, got a loan from a friend and paid her taxes.  We did not have any choice; we would have had to go that way, although she was working with the tribal people.

 

There was a duplex in town.  The owner was local.  There had been some confusion on who was supposed to pay over the time, whether it was his manager or himself.  It went until the last minute, and finally he realized what was happening and came up with the money for it. 

 

One was a woman in California who had a house in town that was being rented, so there was an out-of-state owner.  It varies.  I would say some of them are truly hardship cases.  Certainly the widow I worked with was truly a hardship case.  Some of them are people who are dealing with long-term, chronic medical problems, cancer and the like, and they have not had an income in a while. 

 

One of them this year was a condominium that had been borrowed against to the maximum, and they did not feel that there was any equity in it, but, at the last minute, the bank paid the taxes on it.  Rarely is there a piece of property with a mortgage against it that goes this far, because the mortgage holder or the note holder will come and pay the taxes. 

 

In Carson City in ten years we have had one parcel that was not a house.  It was a piece of property that was created when the surveyors went out and found out that the property description was wrong all around it.  There was a piece in the middle that was an orphan 5 feet wide and 35 feet long, and it got sold at auction.  Property is simply too expensive.  If you own it free and clear, it would sell for too much for someone not to pay the taxes on it.  They always sell.  Does that answer your question, sir?

 

Chairman Parks:

Yes, I think it does.  Thank you very much.  Mr. Marvel has another question.

 

Assemblyman Marvel:

Maybe you can answer this.  How often do your properties go 3 years before they are paid off?

 

Al Kramer:

I probably average about 30 a year that I go through the process on.  We start in June by asking a board to proceed on these.  Then we do the title search, the 90-day letter to all the people mentioned in the title search.  After that we typically would advertise in January for a sale in February.  Before that advertisement date in January, all of them have paid each year that I have been treasurer, with the exception of that one created piece. 

 

The process usually starts on around 30 parcels each year.  It goes from the first year with 1,100–1,200 parcels, then to 500 parcels, to 150–200 parcels, to 30 parcels.  [Assemblyman Marvel asked how much money was involved.]  On those 30 parcels, there is maybe $40,000. 

 

Chairman Parks:

Thank you, Mr. Kramer.  I would like, at this time, to go to Las Vegas.  We have Laura Fitzpatrick who has signed in.

 

Laura Fitzpatrick, Clark County Treasurer:

[Introduced herself.]  Thank you, Mr. Chair and other members of the Committee, for letting me speak today.  I am here to discuss the concerns that I have shared with my fellow county treasurers, both there in Carson City and around the state.  I have studied it thoroughly and, I believe, objectively, and I am concerned that it represents bad public policy.  Some of my comments may be redundant, a reiteration of what my colleagues Barb and Al have said, but I would like to go over some points.  Under current law, if a taxpayer is delinquent at the end of the first year, interest kicks in at 10 percent per annum on taxes only.  There are provisions in current law to work with taxpayers in hardship situations, a waiver of all or just part of penalty and interest, and also partial payments, which would ultimately reduce the amount of accruing interest. 

 

[Laura Fitzpatrick, continued.]  In A.B. 200, as I understand it, even with amendments, investor interest would be based on the total amount of the certificate, taxes, penalty, interest, and costs, causing the taxpayers, when they come in to redeem, to have to pay more than they would currently have to pay.  County treasurers, as Barb had mentioned, could not waive the penalty and interest if the certificate was sold.  I am not sure that certificate holders would be inclined to waive penalty and interest, either. 

 

Examples of whom I believe the bill would hurt are low-income seniors, those with dementia, financial emergencies, high medical costs, temporary job situations, and those in the military.  The events of September 11, 2001, and the current situation we are about to embark on are going to have some economic impacts on people.  We have yet to hear from the taxpayers how they may be affected by that.  I would like to read today just a small handful of letters that we get from taxpayers in economic hardship situations, if I may. 

 

I am sorry that I missed my payment.  My only excuse is that I am in quite a lousy position, having lost my husband after 50 years.  We always did everything together.  I miss that.  I paid the taxes, then put it back into the file instead of mailing it.  If you could check our records, you will see this has never happened before.  Never.  I’m on a very tight, fixed budget, and if you would reconsider the penalty, I would be most grateful. 

 

Another individual writes:

 

 

My wife was fighting cancer for years.  The high medical costs used up all of our savings.  Since we were on a fixed income, it did not cover all of our medical expenses.  I had to take out a mortgage on our house, but at the end it was a hopeless battle.  My wife died May 11.  Now I am trying to meet my obligations by selling all of our valuables. 

 

Another one:

 

I need help.  I live on a fixed income, widow’s Social Security.  I am too ill to work.  I am trying to get financial help on these bills.  When I get help, I will send you more money.  Please do not charge me the late charges.  Have a heart for a hurting elderly who is needing to keep her home.  Thank you.

 

Dear Ms. Fitzpatrick:

My wife and I are 76 years old, retired, handicapped, and live on Social Security.  We have owned five homes including this one in our lifetime.  We have never been late or delinquent in mortgage or tax payments.  Upon changing banks to lower our mortgage interest rate, we were told that your department would be notified about the change. 

 

[Laura Fitzpatrick, continued.]  We were not notified of those changes.  They were expecting to get a bill from us.  They did not get it, so they went delinquent. 

 

My concern in all of these scenarios is that the taxpayers may come to us after we have sold the certificate.  We have no way of knowing in advance, especially in a county where you have 500,000 property owners.  Al, I sometimes envy you having the opportunity to talk individually with taxpayers.  Our concern is that we would already have sold the certificate, and it would be too late for us to work with these taxpayers.  Another concern I have is that in November the voters passed, by 60 percent, ballot Question 8, which dealt with giving more consideration to those who have economic hardship.  It seemed that the public was saying we should be giving more consideration to people in trouble and not less. 

 

I have some additional thoughts before I close.  While the bill does not mandate a sale, as has been said earlier, we feel there would be pressure from potential investors to have certificate sales and pressure to set the interest rate high.  Taxpayers would be charged differently depending on whether a certificate was sold or not.  In investments, reward usually follows risk, and there was some earlier discussion on this.  Even the gentleman from the trade association indicated that the industry considers these to have low to moderate risk.  Investors would get their money back plus high interest, or they would get the property.  The bill would require the treasurer’s office to hire additional staff to handle the clerical and record keeping tasks associated with being a clearinghouse for private investors. 

 

I believe that built into current law is the premise that it should be difficult for someone to lose his or her property.  If taxpayers are delinquent on taxes due to circumstances beyond their control, statute provides a mechanism for relief, which is the penalty and interest waiver.  A.B. 200 appears to run counter to this premise.  Assemblyman Hettrick, I know that you have worked with three of my colleagues.  Al Kramer, Barb Reed, and Bill Berrum [Washoe County Treasurer] have discussed this bill with you, and I know they have the utmost respect for you.  Having utmost respect for my colleagues, I will share that respect for you.  I look forward to meeting you one of these days, but I respectfully remain concerned about the consequences, albeit unintended, of A.B. 200.  Thank you very much.

 

Chairman Parks:

Thank you, Ms. Fitzpatrick.  I believe we have a question from Mr. Anderson.

 

Assemblyman Anderson:

Thank you, Mr. Chair.  Ms. Fitzpatrick, we heard from Douglas County and Carson City that they had over 95 percent, 99, I think it was, or 97.  About what percentage delinquent rate do you have in Clark County? 

 

Laura Fitzpatrick:

Our collection rate in year 1 is a little over 98.5 percent.  Toward the end of year 2, we are well into the 99 percent.  By the end of year 3, we are 99.8 percent.  We have an excellent collection rate.  [Assemblyman Anderson commended her.]

 

Chairman Parks:

I have one question.  Can you tell me approximately what those delinquent tax dollars add up to on an annual basis?

 

Laura Fitzpatrick:

Yes, sir.  Clark County is a large county.  We have over a half million parcels.  Our levy last year was well over $1 billion.  At the end of the fiscal year 2002, there were approximately 8,800 parcels that were delinquent after the first Monday in June.  That represented around $10 million in delinquent taxes, not, I understand, an insignificant amount.  However, within 6 months after June 30, we had collected on over two-thirds of those properties. 

 

Going back to an earlier issue that Barb and Al pointed out, Clark County would lose about half a million a year of the 10 percent interest income they would have received in years subsequent to year 1.  We would also incur the additional cost for the staff required for this clearinghouse function.  As Barb mentioned earlier, we would also have to set up a bookkeeping mechanism to keep track of all of these liens.  As Barb said, if somebody purchases a certificate, we would be made whole, but then the taxpayer would have to come in and redeem.  We would have to keep a separate set of books.  That would involve some significant and very costly programming, but I have not costed that out.  My office has just gone through a massive system conversion on its tax collection system.

 

Chairman Parks:

Thank you for your testimony.  Back up in Carson City, I notice several people checked off whether they were for, against, or neutral, but did not indicate a desire to speak.  Is there anyone else here who would like to speak on A.B. 200?

 

Gaylyn Spriggs, representing Nevada Taxpayers Association:

[Introduced herself.]  We believe that the policy of the state of Nevada has always been that you have that 3-year cycle.  It is something that helps the taxpayers.  To add a burden to the taxpayers and add interest probably is not the best thing to do, in our opinion.  We are testifying in opposition to the bill.  Thank you.

 

Assemblyman Marvel:

Gaylyn, have you had an opportunity to look the amendments over?

 

Gaylyn Spriggs:

I just received them when I came in today, and I listened to the testimony, but our opposition was based on the fact that you would be adding interest that the delinquent taxpayer would have to pay.  I do not think that issue has been addressed, so I do not think our opposition was taken care of with the amendments.

 

Chairman Parks:

Thank you.  We will return to Las Vegas.  We had two other individuals who had signed up, so we will give them an opportunity at this time.

 

Larry Spitler, Associate State Director, American Association of Retired Persons, Nevada (AARP):

[Introduced himself.]  We have the opportunity to zip off a quick e-mail to A.B. 200’s sponsor.  It came to our attention rather late.  We have not had the benefit of having the amendments down here, so I have not looked at those.  It would seem to me, though, that we should proceed very cautiously.  The system in place seems to be working throughout the state. 

 

AARP would be very concerned if the individuals most apt to lose their property were, in fact, seniors who fell into hard times because of illness, the death of a spouse, or, as we all know, we sometimes get a little more forgetful about things as we age.  We are particularly pleased, in today’s environment, with the law that allows county treasurers to work with individuals.  I was pleased today to hear that they have been very successful in most of those instances in collecting what was due the state. 

 

We are not testifying for or against A.B. 200 at this time.  We would like to say that we want to take an opportunity to look at the amendment and then to look more closely, particularly at the larger counties, to see if this has a disproportionate impact on seniors or people and their homes as opposed to commercial properties.  Thank you.

 

Chairman Parks:

Are there any questions for Mr. Spitler?  Thank you very much.  We also had Thelma Clark signed in.  Good afternoon, Ms. Clark.

 

Thelma Clark, Nevada Silver Haired Legislature:

Good afternoon.  I did not want to testify, but I would like to see the amendments.  I think someone should have faxed them down here to us.

 

Chairman Parks:

I have been notified that it has been faxed down, and somebody in the support office should be able to provide copies to members in attendance.  Thank you very much for appearing.  What we will do at this point is ask the sponsor of the bill to return to the witness table to offer any further comments or remarks.

 

Assemblyman Hettrick:

I do appreciate the concerns that the treasurers have, but you heard testimony from Mr. Liggett that what happens when you sell a tax lien is people tend to come in and pay the lien off even sooner.  It is 10 percent simple interest on a pro rated basis.  Two-thirds of them are collected within 3, 4, or 5 months.  It is a tiny amount of money, and actually encourages them to come in and pay the taxes. 

 

If a taxpayer has gone delinquent for four quarters and has not written that letter to the treasurer, it makes you wonder what happened, but if, sometime within the four quarters, they wrote that letter and Ms. Fitzpatrick or any treasurer decided they wanted to offer some kind of relief to those folks, they would not have to sell that lien.  They do not have to sell it as a lien at all.  That is what A.B. 200 says.  They can choose which parcels to sell or not sell. 

 

If there is $10 million delinquent in Clark County; Mr. Berrum told me he thought it was probably several million or more than a million in Washoe County; in the rest of the state, it is a significant amount of money.  The counties collect the interest, and the school districts and the state do not share in the interest.  Mr. Grady made a very good point.  If they had not collected the taxes, they would not have gotten the interest.  Is the idea to collect interest on the tax bills, or is the idea to collect the tax bills?  I believe the intent of the law is that people are supposed to pay their taxes.  That is why it is delinquent 10 days later on every bill.  That is the intent of the law.  Everybody else had to pay. 

 

[Assemblyman Hettrick, continued.]  I have to tell you that when I hear someone say, “Well, we’re going to have trouble now with the economy, and maybe with the war these people may not be able to pay their taxes,” it sounds to me like we should all make the excuse, “The war is trouble, and I’m sorry, but my income may go down.  I’ve decided I’m not going to pay my taxes, and now you should waive the penalties and interest for me.”  You know, this is not about hurting anybody; this about putting the money into the county, the school district, and the state where the money belongs.  Everyone pays taxes equally.  All this says is to put an investor in between and get the political subdivisions their money. 

 

Nothing prohibits the taxpayer from doing anything these people have talked about.  They can send a letter saying, “I have a hardship case.  Would you please consider giving me a waiver?” or whatever.  If they have not gone a full year till they can sell the first lien, the county treasurers can decide to do that.  If it is after a full year, and they have not written that letter, then the county treasurers still have the option to decide whether or not to sell the lien.  This is only enabling.  That is all this is, and it is only the policy that is in place for every one of the people in this state who pay their taxes on time. 

 

I think it is good cash flow for counties that are strapped.  We are hearing all about how the school district in Clark County is having to cut budgets, cut out music and sports and all kinds of things.  What would $3.5 million collected right now for the county school district do for Clark County?  It would certainly help.  That is what A.B. 200 is about.  Thank you, Mr. Chairman.

 

Assemblyman Goldwater:

There is nothing that governs the conduct of collection in this bill.

 

Assemblyman Hettrick:

If you are looking at my amendments, about two-thirds of the way down the page, page 6, Section 12, says, “2 years after it is sold, the holder of the certificate may,” and the proposed amendment says, “the same time granted to the county to collect the tax as set forth in NRS 361 inclusive may commence an action for the collection of the taxes, penalties, interest, and cost pursuant to NRS 361.645,” which is the county procedure to collect the tax.  So, it is the county procedure that would be used to collect the tax, which is foreclosure by a sale on the courthouse steps, if it goes that far.  You have heard the testimony from the treasurers that 99.9 percent pay.

 

Assemblyman Goldwater:

I guess my concern and question is the conduct before that, the conduct that so often we hear about problems with.  I know when our lenders, second-tier lenders, and then the government get involved, we get into unusual spots. 

 

Assemblyman Hettrick:

In fact, Mr. Goldwater, the testimony from Mr. Liggett earlier was that by keeping this through the county treasurer, who would collect the taxes anyway, there is no personal contact between the certificate purchaser and the delinquent property tax payer at all.

 

Assemblyman Goldwater:

That would be in the law?

 

Assemblyman Hettrick:

They have nothing to gain.  They cannot collect it.  The tax has to be paid to the treasurer, so there is no reason they would ever have to contact them.  If you want to add something that says the purchaser of the certificate cannot contact the delinquent taxpayer, that would be fine with me, because they would not do it anyway.  The taxes have to be paid to the treasurer.  They say, “We have the extra collection cost.”  They collect the taxes anyway when they are delinquent.  There is no extra collection cost in doing that.  There is extra bookkeeping cost.  I did talk to Assemblyman Beers about that.  He assured me that a Microsoft Access database program, which costs about $200, would keep a complete data file on all of these.

 

Chairman Parks:

Thank you very much.  We will go ahead and close the hearing on A.B. 200 and open A.B. 270.  Good afternoon, Mr. Goldwater.

 

 

 

Assembly Bill 270:  Revises provisions relating to community redevelopment. (BDR 22-384)

 

 

Assemblyman Goldwater, Clark County Assembly District No. 10:

Good afternoon, Mr. Chairman.  [Introduced himself.]  I present to you today Assembly Bill 270.  You can read the title.  I do not have an army of people to support this because I think this is something we, as legislators, should consider very carefully.  [Read from prepared notes, Exhibit D.]  Our tax dollars, every one of them, are precious.  They come from the hard work and toil of our citizens.  It is our responsibility to make sure that each dollar is spent for maximum public benefit, or that dollar should remain with the taxpayer.  Property tax is the most sacred tax dollar, because it is paid directly by Nevadans, Nevadans who own property and have a vested stake in this state. 

 

[Assemblyman Goldwater, continued.]  As you know, most of the property tax is dedicated to specific beneficial use under the management of the state’s local governments and their agencies.  The taxes used to support redevelopment are an example of how policy makers can creatively reallocate tax resources to maximize benefit and minimize burden.  Rather than raising taxes to dedicate resources towards blighted and needy urban areas, redevelopment uses tax increment financing.  Increment financing assumes a base year, and any increment over that base year is dedicated towards redevelopment.  It is important to note that this tax dollar is not a new tax dollar.  This is a dollar that we, as policy makers, have said should go to redevelopment, not to the customary entities that use property tax and not back to the taxpayer. 

 

This Committee knows I have been a critic of tax rebates, deferrals, and abatements.  I believe that we should not use tax dollars as a bribe to businesses or anybody else to come to Nevada.  We should fortify our physical and social infrastructure to make sure businesses want to come to Nevada.  Good schools, a good university system, sound and humane social programs, and responsible government should be enough to attract any industry to this state. 

 

However, there is a very competitive environment between states to attract industries, and Nevada should have every tool available to be competitive.  That is why we created the State Commission on Economic Development.  They review requests that businesses make and do everything they can to recruit businesses to move here. 

 

If you recall, when we started the Commission on Economic Development, the tax abatement program was somewhat arbitrary.  We said, “This business sounds good, that business sounds pretty good,” and, I know Mr. Grady can attest to this fact as well, we got ourselves in a pickle a few times where we attracted businesses that we did not necessarily want, low wage payers without health care benefits that would, for example, locate in a rural community, bring over large families and large quantities of senior citizens, not pay any taxes, and end up being a burden. 

 

The state recommended that we set up a list of criteria.  I would like to read it to you.  Before the state awards sales and use tax or business tax or property or renewable energy tax abatements, here are some of the criteria that should be considered:

• Provide medical insurance plan for all employees, including an option for dependant health insurance coverage.
• Register and obtain all licenses and permits required by the state, city, and county in which the business operates.
• Meet or exceed the state hourly wage, currently $15.48.
• Create a proposed number of full-time jobs and continue the employment of Nevada residents.
• Make the capital investment required for the type of business or expansion, based on city or county population, and commit to maintaining a business in Nevada for at least 5 years.

That is how the state demands that we use tax dollars if we are going to give them back. 

 

[Assemblyman Goldwater, continued.]  Over the interim, there appeared a case in the city of Las Vegas that piqued my interest.  The city was proposing to rebate property taxes to a Furniture Mart that was, hopefully, to be located in Las Vegas.  I said, “How can the city rebate property taxes?  It seems odd to me, because if we have to rebate taxes, there is a list of criteria.”  I did some research with the help of Ted Zuend.  I found out that they were not exactly rebating taxes.  What they did was collect the tax increment financing and planned to write a check in lieu of the taxes, or some sort of equal amount. 

 

Then I said to myself, “That seems strange, that they would be able to use the tax increment in that way.  What criteria does the redevelopment agency or the local government have when they use these redevelopment dollars?”  I researched the statute further, and found out the only criteria they need to have to use redevelopment dollars is that it goes toward redevelopment. 

 

What then, you ask, does redevelopment mean?  It means almost anything they say it means.  It means it is capital; it goes into a building.  We dedicate 18 percent of it, I think, to affordable housing, which is good.  There are beneficial uses. 

 

The purpose of A.B. 270 is not to criticize redevelopment.  The purpose of A.B. 270 is to enhance redevelopment.  With the help of those same folks at the city, we added that the agency and the public body must, in reaching its determination that buildings and facilities or structures or other improvement are of benefit to the redevelopment area or intermediate neighborhood, at least consider whether the buildings or facilities are likely to encourage the creation of new business on the appropriate development, create jobs, increase local revenue, increase levels of human activity, possess attributes that are unique, require for the construction, that list of criteria that you see there.  I did not go as far as we do in state law when we rebate taxes, which is to require a specific annual wage or to say that they must provide health care, because even this project in Las Vegas is going forward. 

 

[Assemblyman Goldwater, continued.]  There is no guarantee Furniture Mart will be providing health care for their employees.  There is no guarantee that those will be high-wage-earning jobs, but at least if we are going to give this increment financing, which would have gone to the agencies or the political subdivisions they are intended to go to or back to the taxpayer, to redevelopment instead, we will know, if we pass this bill, that the governing body has looked at some criteria to make sure our tax dollars, which truly are precious, are used toward what we really want. 

 

I will summarize by saying that nothing in this bill intended to take anything away from the affordable housing provisions of redevelopment.  If something in this criteria precluded affordable housing, and I would need Ted’s help or Legal’s help to determine that, we would want to fix this bill so it did not do that.  But anything any member of this Committee can do to strengthen the criteria, to make sure that our local governments are using redevelopment for what we intend redevelopment to be, I think only enhances and strengthens this bill.  That is A.B. 270.

 

Chairman Parks:

Thank you, Mr. Goldwater.  I believe we have several questions. 

 

Assemblyman Marvel:

David, I am a little bit confused here.  What do you mean by attributes that are unique?

 

Assemblyman Goldwater:

I pulled these criteria from different states and different redevelopment agencies that require this level of scrutiny.  I think if we are going to use redevelopment money, it should be for something that would not have gone there otherwise.  That is one of my criticisms of the tax abatement and deferral.  Sometimes we give it away when they are coming here anyway.  If we are going to use redevelopment money, let us do something that is unique, that would not be there otherwise.

 

Assemblyman Marvel:

Could you give an example of what might be unique? 

 

Assemblyman Goldwater:

I am not creative enough to tell you what is unique.  Mr. Grady has a great example.  San Diego, for example, created that “Gas Lamp District.”  That is certainly unique.  That was an excellent use of redevelopment money.  I do not think the Gas Lamp District would have popped up on its own. 

 

Assemblyman Marvel:

Is that a redevelopment area?  [Assemblyman Goldwater answered in the affirmative.]

 

Chairman Parks:

Is that the Horton Center?

 

Assemblyman Goldwater:

It is near Horton Center, but it is kind of downtown, right off the water.

 

Assemblyman Anderson:

I am not a big fan of redevelopment districts, especially now that they have become permanent rather than having a lifespan; they exist forever.  Currently, the city of Sparks has the oldest redevelopment district in the state, which has gone through several different developments and done some unique things over time.  Part of the dollars, however, occasionally are sent back to upgrade buildings like schools that are affected in that area and do not promote, in and of themselves, any economic activity.  Do you see that this would prevent redevelopment agencies from replacing the basketball floor at the high school gymnasium or those kinds of things, or not?

 

Assemblyman Goldwater:

I would say if we are using redevelopment money to replace gym floors and fix up old schools, something is wrong in the process.  We should not be using that money anyway.  I feel, as a kindred spirit with you, that these, over time, have not become redevelopment districts; they have become “re-re-re-re-re-re-re-re-redevelopment” districts.  They never have a sunset.  They let bonds for 30 years on these areas sometimes.

 

Assemblyman Anderson:

I guess I am supportive.  I have no problem with your addition of some criteria, since they [redevelopment areas] can now renew themselves indefinitely, and so have gained a life of their own.  I do have a question about whether it is good tax policy to divert dollars from an existing program only to see it mismanaged.  They seem to spend the money in some very unusual ways, such as basketball courts, to soothe the public conscience.  Is that the kind of thing you were concerned about?

 

Assemblyman Goldwater:

You make my point exactly.  If they are fixing up old schools with redevelopment money, they are using the money incorrectly in my view.

 

Assemblyman Griffin:

You made some comparisons to state economic development.  Are all those criteria in statute, or are those just [matters of] policy?

 

Assemblyman Goldwater:

Either it is specifically in statute, or we have made them pass a regulation.  The Tax Commission put that out.

 

Assemblyman Griffin:

These bullet points merely set up guidelines.  It says these are the questions the legislative body must ask.  I read it that there is no obligation to meet all of those because, obviously, there are some areas where not all those things are possible, but maybe six or seven are or something like that.  Do I understand that right?

 

Assemblyman Goldwater:

I think the use of the conjunction “and” after number 6 rather than “or” says that they must meet all those.  I was reading them, and I am trying to figure out what might want to exist under the auspices of the redevelopment that might meet a few and not others.

 

Assemblyman Griffin:

If I can ask that question then, I guess it depends on what geographic area you are talking about.  You referenced the Furniture Mart.  I do not know all the mapping of that, if it is within a redevelopment district, or how many residents are currently within that redevelopment district.  The Furniture Mart would presumably create jobs for the people within the city, but I do not know if it would necessarily be within the district.  That might not be what this is saying.  I am not sure if it does or does not.

 

Assemblyman Goldwater:

That is what it is saying.  If you are going to use tax increment financing, we want to say it is going to create jobs in that area.  This is property tax that if not used for redevelopment would have gone to benefit the person who paid it, which is a resident right in that area.  Otherwise, he could have kept the money.

 

Assemblyman Hettrick:

Mr. Goldwater, in looking at A.B. 270, I do not really have a problem with the bill.  I think the intent is good.  It appears to me, however, that everything we really need here is well laid out in lines 26–35, which is subsection 7 as it is written in the bill.  Exactly what it says there is everything that is required by all the language above. 

 

[Assemblyman Hettrick, continued.]  Mr. Marvel asked about the caveat “possess attributes that are unique.”  In some cases, as you well know, a redevelopment district might be unique, such as the Gas Light District in San Diego.  In other cases, it might be ho-hum, but it is redevelopment that needs to be done in that area because it is blighted or whatever, which is a part of the desire of the redevelopment law.  I feel that everything above subsection 7 is implied as being inclusive in subsection 7, because you have asked for demonstrated social or financial benefit to the community that would be similar for a set of buildings, structures, or improvements not paid for by the agencies.  What you have said is you have to tell us that we are better off paying for it than we would be if we did not.  All of the criteria above apply. 

 

I would say specifically that number 6 bothers me a little bit.  I do not know who is going to go back and require installation in the future, perhaps after the original construction operation of these properties, to make sure they have qualified and trained labor.  Then it becomes a matter of opinion as to whether they are qualified or trained properly.  I think that becomes a question.  I like the bill, but I prefer the bill with inclusive lines 26–35 as the added language. 

 

Assemblyman Goldwater:

I appreciate that, Mr. Hettrick.  I will tell you the only reason to enumerate those things above is simply to give people, including taxpayers in those areas, recourse to say, “Did you determine these things?”  Subsection 7(a), (b) and (c) is very subjective.  It should be more objective than subjective, just so they will be able to say, “Did you find this and did you find that?”  I considered, for example, requiring the average wage and requiring health benefits.  We do that at the state level, and it is tempting to say they should do it at the local level.  However, I think you want to give the local governments a little bit more flexibility.

 

Chairman Parks:

Thank you.  I know we have a couple more people who want to speak on this bill.  We also have a few members that are due in the Committee on Elections, Procedures, and Ethics in a few minutes; they will be departing. 

 

Dan Musgrove, Director, Intergovernmental Relations, Office of the County Manager, Clark County:

[Introduced himself.]  To be honest, I am in a bit of a quandary because, in listening to the testimony at first from Assemblyman Goldwater, I felt very confident that he had addressed most of my concerns.  However, in a couple of the questions, I think those concerns have returned, especially based on Assemblyman Griffin’s questions regarding the all-inclusiveness of that list.  Take, for example, affordable housing, which I talked to him about earlier today.  I am not sure that every one of those criteria could be met in terms of giving an incentive for someone to come into a redevelopment area or a blighted area to perhaps do affordable housing, or at least to put together something that maybe houses the workers that are going to work in the downtown. 

 

[Dan Musgrove, continued.]  I take downtown Las Vegas for example, since they have an existing redevelopment area.  I think that is a good example to use, although Clark County is looking at perhaps doing a commercial center.  We are looking at perhaps going into the redevelopment business in terms of trying to do something in the commercial center area.  I am not sure that some of these provisions might not keep folks from coming in to the area.  It might invite challenges as to whether they met every one of these criteria.  Our only concern is that it not act as a disincentive to folks doing some of those loss-leader kinds of things.  You do not make a lot of money on affordable housing or housing for seniors or something like that.  Maybe you just make the rent.  I think giving them incentives to come in and produce those kinds of buildings and things is an admirable part of redevelopment. 

 

Some of the language about greater financial benefits evaluated is vague.  What if different methods of financial benefit were used by someone, let’s say, who wanted to oppose our use of these funds?  What are the criteria? 

 

That is all I have.  We just wanted to put those on the record and at least have the Committee consider those in processing this bill.  We appreciate what Mr. Goldwater is doing.  I think, all in all, it gives some comfort to the citizens who are using those precious dollars, but we do not want it to act as a disincentive for some truly admirable projects. 

 

Kimberly McDonald, Special Projects Analyst and Lobbyist, City of North Las Vegas, Nevada:

We want to stand in support of this bill, A.B. 270.  We do support the intent of what Mr. Goldwater is trying to achieve.  We definitely appreciate the clarifications that you made regarding the criteria, but I do echo the sentiments of Mr. Musgrove regarding achieving all of the criteria.  Maybe one or four or so [would be enough].  That is our concern at this time, but we do support the bill.  Thank you. [Introduced herself.]

Terri Barber, Chief Legislative Advocate, Henderson, City of Nevada:

[Introduced herself.]  We, too, support Mr. Goldwater’s bill.  On behalf of the cities of Henderson and North Las Vegas, we would like to offer an amendment (Exhibit E) to number 2, Section A.  We would ask that there be a number 8 that would be included.  Another criterion that would be considered in making a determination on the appropriateness of a redevelopment project would be to contribute to the “elimination of blight.” 

 

Assemblyman Goldwater:

I would consider that a friendly amendment.

 

Chairman Parks:

Thank you very much.  I believe we have several other interested individuals.

 

Mary Lau, Executive Director, Retail Association:

[Introduced herself.]  Actually, we are speaking in support of A.B. 270.  First, let me go back to the specific Furniture Mart.  We had several of our members express extreme concern about what was going on with that situation.  We were not able to adequately address our members’ concerns in that particular situation.  We find the labyrinth of city government a little bit confusing and difficult for us as we are getting more and more into those areas.  We also have several members that do get involved in redevelopment situations where there is something unique. 

 

One example, which can perhaps explain attributes that are unique, is a Target store in Minneapolis.  This store is unlike most retail stores, which are spread out in a large footprint.  This particular store is done in a multi-level format in a downtown area that had previously been blighted, and it was a special, very unique design.  It was a product of redevelopment agreements between the city of Minneapolis and the store.  They worked together very, very closely to get this signature store going.  That would sort of be an example of uniqueness.  I will leave it up to the cities and this body and the local governments what various parts of this bill they are comfortable with or not. 

 

It is very interesting that, in redevelopment and in economic development, retail is not a segment that is sought after.  What I mean is that we are not solicited to come to the state.  We are not visited or invited by the development authorities or other entities because, while retailers will respond to growth, they do not drive growth.  I used to be a member of Economic Development of Western Nevada as representing our Association.  We no longer do that, strictly because it is not, more or less, a solicited type of function.  Retailers recognize a thriving, healthy community and go there.  To my considerable disdain, we do not have a Nordstrom in Reno, nor will we have one for a considerable length of time, because it does not warrant that based on our growth up here.  So, I will continue to fly to Las Vegas to shop when I can. 

 

[Mary Lau, continued.]  My board looked at the criteria that are set out here and does not feel they are unreasonable.  We feel that economic development and redevelopment dollars are very, very important, because our cities cannot be left in a situation where they are going into blight.  They cannot be turned into ugly pieces of property that nobody wants or wants to visit.  The proper expenditure of that money is very important to the local governments.  It should not be an unnecessary economic advantage to people.  It should be a reasonable economic approach. 

 

David Howard, representing the City of Reno, Nevada:

[Introduced himself.]  Our council has not taken a formal position on A.B. 270, but sitting here, signed in as a neutral, and listening to some of the commentary, I thought it was necessary to say a few things.  Having been a former city councilman for Reno and actually having participated in the first redevelopment project for the City of Reno, I have a couple concerns about the bill.  I would like to say, starting out, that anything you can do to help redevelopment, you should.  It is a tough business. 

 

There has been mention of San Diego.  There is also Santa Clara County.  A lot of these successful redevelopment districts in the country are many years older than those that you have in Nevada.  Reno’s is just 20 years old.  It was created in 1981 and was put into business in 1983.  The length and life of redevelopment agencies in Nevada is prescribed by you, the Legislature.  The city of Reno was in this body last session extending the life of that first 20 years.  It is up to you how long they live. 

 

Mr. Griffin asked the question about conditions in the statute.  I worked on that bill for the State Economic Development a couple years ago, with the Chamber of Commerce.  Those specifics Mr. Goldwater read into the record are in the statute.  Those are required.  The first company to take advantage of that was Goodyear in Reno.  They followed all of those criteria, they got a certain rebate, and then they left in 5 years. 

 

Here are a couple considerations about A.B. 270.  My concern, as was mentioned earlier, is that if the legislative body that is listening to a proposal on redevelopment has to use the criteria that you have put here, Mr. Goldwater, and makes a checklist, and each one of them has to be in there before it can say nay or yea, it will make it very difficult, because, as I said, redevelopment is a very difficult process.  I have no problem with people considering those criteria, and I think that is what your bill says, “the legislative body shall consider.”  However, it has been implied in the discussion here this afternoon that all of these criteria have to be met before a process could go forward.  If that is so, I have a concern with it.  If it is not, I do not. 

 

[David Howard, continued.]  Mr. Hettrick brought up the wording in line 25 about “qualified and trained.”  It is a little ambiguous, and it is certainly arbitrary.  I am not sure we could meet that. 

 

One of the things I have most difficulty with is line 29 on page 2, “the opinions of persons who reside in the redevelopment area or immediate neighborhood in which the redevelopment area is located.”  I do not know how many public hearings you have sat through at local government level, but you will never get the people to agree on any one subject or any one proposal.  Remember the wall, Bernie, in Sparks?  Remember that one? 

 

Another difficulty I have, too, is if you are going to hold the redevelopment board to these criteria, how are you going to get those people into the hearing for their opinion?  Then, after they give you their opinion, what value will it have?  If you say to consider them, that is fine.  All redevelopment developments are required to be held by the open meeting law.  By the open meeting law you will have an open meeting, and they will be there to express their opinion, but what if no one shows up?  This happens.  It does not happen too often, but it does happen.  What if no one is there to give an opinion?  Does that project then go by the boards? 

 

What I am concerned about is if these are mandatory, each and every one, 1–7 plus.  I do agree with 8, which was suggested as an amendment.  However, that is found in the redevelopment law already.  The primary reason for redevelopment is blight in a community.  Those are my concerns, but like I said, I commend the bill, because anything you can do to help redevelopment, you should do.  It is a very tough assignment for cities in the state of Nevada. 

 

Assemblyman Goldwater:

Your board has not taken a position on this?  [Mr. Howard concurred.]  The bill says, “the legislative body shall consider,” not “it must” do these things.  It “shall consider” these things.  Which one of those things do you think a local board should not consider? 

 

David Howard:

None of them.  I think they are all okay.  But…

Assemblyman Goldwater:

Then what is the problem?

 

David Howard:

In earlier testimony, when you were asked if you had to have each and every one, you made the comment that line 25, “and demonstrate,” meant that all of these had to be [Assemblyman Goldwater interjected the word “considered.”] considered.  Okay, I am fine.  I just wanted that on the record, because it sounded, where I was sitting, like this was going to be a checklist.

 

Assemblyman Goldwater:

It should be a checklist, and that is my point.

 

David Howard:

Okay, consider.

 

Assemblyman Goldwater:

That is what the bill says.

 

David Howard:

Yes, sir, I agree.

 

Assemblyman Mortenson:

If you have “shall consider” in there, does this make the bill irrelevant?  I mean if a development agency considers them all and decides on a project for which none are relevant, can they do that under this bill?

 

Assemblyman Goldwater:

Yes, they can.  They do it all the time, and that is the problem we are trying to solve with this bill.  The current use of this money is redevelopment, ill defined in law.  No consideration is made.  We are just trying to narrow the definition of what redevelopment is and have local governments take into account a few items.

 

Chairman Parks:

[To David Howard.]  Thank you for your testimony.  Are there any other questions relative to Assembly Bill 270?  I know that when I saw the issue regarding the Furniture Mart and what the plan was for the Las Vegas Redevelopment Authority, the first thought that went through my mind was, “They didn’t have the authority to do that.”  I certainly welcome this bill and hope that we can get some clarification on that.  We will go ahead and close the hearing on A.B. 270.  I do not believe there are any further items to come
before the Committee, so we stand adjourned.  [At 3:49 p.m.]  Thank you very much.

 

[Ted Zuend, Fiscal Analyst, distributed a Bill Explanation on A.B. 200 (Exhibit F) to Committee members.]

 

 

 

 

 

 

 

 

RESPECTFULLY SUBMITTED:

 

 

 

                                                           

Mary Garcia

Committee Secretary

 

 

APPROVED BY:

 

 

 

                                                                                         

Assemblyman David Parks, Chairman

 

 

DATE: