MINUTES OF THE meeting
of the
ASSEMBLY Committee on Taxation
Seventy-Second Session
April 15, 2003
The Committee on Taxationwas called to order at 2:03 p.m., on Tuesday, April 15, 2003. Chairman David Parks presided in Room 3142 of the Legislative Building, Carson City, 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
June Rigsby, Committee Secretary
OTHERS PRESENT:
Ruben Murillo, Clark County Education Association
Stan Olsen, Lieutenant, Las Vegas Metropolitan Police Department
Mick Gillins, Secretary/Treasurer, Nevada Conference of Police and Sheriffs
Janelle Kraft, Budget Director, Las Vegas Metropolitan Police Department
Dan Musgrove, Director, Office of the County Manager, Clark County
Patrick Smith, Legislative Advocate, Office of Administrative Services, City of Las Vegas
Jim Wadhams, representing the Nevada Hospital Association
Chuck Chinnock, Executive Director, Nevada Department of Taxation
Hal Keaton, County Commissioner, Lincoln County
Doug Carriger, County Manager, Lincoln County
Bob Campbell, The Campbell Company and Duke Energy
Richard Hyde, Regional Director, Duke Energy
Bob Moroney, Manager, Property Tax Division, Duke Energy
Tony Sanchez, representing Reliant Energy
Thelma Clark, representing the American Association of Retired Persons
Chairman Parks called the meeting to order at 2:03 p.m. He announced that Assemblyman Grady was delayed in the Transportation Committee meeting, and Assemblyman Anderson was in a meeting with the Senate Majority Leader’s Office. Chairman Parks declared a quorum was present. He announced that a request for a presentation had been received from Ruben Murillo, and Mr. Murillo was invited to the witness table.
Ruben Murillo introduced himself as a Special Education teacher in Clark County, the Vice President of the Clark County Education Association, and Nevada’s representative to the National Education Association (NEA) Board of Directors. Mr. Murillo presented a large document (Exhibit C) that contained more than 4,000 signatures on a petition. The signatures had been collected during the Clark County School District’s Regional meeting held last month. A budget had been proposed that contained cuts.
Mr. Murillo read from the letter attached to the petition and stated,
We, the undersigned teachers, support staff, parents, and students have a vested interest in the public education system in Clark County and Nevada. We want you to take the leadership necessary to do what is right for public education. Now is the time for a legislative solution to this crisis. Ranking 46th in the nation in the per pupil expenditure is not acceptable. Our children deserve better than below average funding. Act now in order to stabilize Nevada’s tax base and increase revenues to fund K-12 education.
Concluding, Mr. Murillo asked that, when the time came for all of the pieces of the taxation puzzle to come together, the completed puzzle should be fair, equitable, and broad-based.
Assemblyman Griffin asked the witness if the petition signatures were available in categories by Assembly districts. Mr. Murillo replied that one could be provided if necessary.
Chairman Parks remarked that the cover letter indicated Nevada ranked 46th in the nation for per pupil expenditure. He asked Mr. Murillo if he knew Nevada’s rank for per capita income statistics. Mr. Murillo recalled that it was 15th or 20th. Chairman Parks concurred and stated he had heard similar numbers, including 10th. Nevada was one of the wealthier states; however, it ranked at the bottom for per-pupil spending on education.
Chairman Parks opened the hearing on S.B. 334.
Senate Bill 334: Authorizes metropolitan police committees on fiscal affairs to submit to voters question of imposition of additional ad valorem tax for support of metropolitan police department. (BDR 22-895)
Lieutenant Stan Olsen, representing the Las Vegas Metropolitan Police Department (LVMPD), commenced testimony in favor of S.B. 334. He gratefully acknowledged the bill sponsorship by Senator Warren Hardy, Clark County District No. 12. Lt. Olsen explained the intent of the legislation. Currently, when the LVMPD needed to approach the voters for approval of more personnel, the process had multiple steps. Legislative approval was first required, followed by approval from Fiscal Affairs, the Las Vegas City Council, the Clark County Commission, Debt Management, and, finally, the voters.
Continuing, Lt. Olsen described the intent of S.B. 334 was to eliminate the legislative level of approval. It would still be necessary to gain approval from two elected bodies, Debt Management and Fiscal Affairs, before approaching the voters. Lt. Olsen called the Committee’s attention to a document (Exhibit D) that contained statistics on the ratio of police officers to population in the Las Vegas area. The national average ratio of police officers was 2.5 to 2.6 per thousand of population. The chart revealed that Las Vegas ratios were between 1.70 and 1.74 per thousand of population. Lt. Olsen emphasized that the population figures did not include the presence of tourists, estimated at approximately 35 million visitors per year. The Las Vegas population figures reflected the permanent residents and were based upon telephone hook-ups.
Lt. Olsen explained that in January of 2002, there was an “authorized strength” of 1,169 officers, or 1.72 officers per 1,000 residents. By July 2002 the number of officers was 2,050, but the ratio was 1.74 per 1,000 residents. In January and March of 2003, the ratio was 1.70; however, the LVMPD was losing ground because the population continued to mushroom. Lt. Olsen reiterated the intent was to remove the legislative layer for approval, because it added two years to the process. With that delay, it rippled to a full five-year delay before new officers were put on the street.
Mick Gillins, representing the Las Vegas Police Protective Association (LVPPA), commenced testimony in support of S.B. 334. His organization represented the rank-and-file officers of the Las Vegas Metropolitan Police Department. Mr. Gillins described officer safety as one of the most prominent issues. As the ratio numbers declined, police officers lacked backup support, especially in potentially violent situations. The population continued to grow at a tremendous rate in the Las Vegas valley, and he expressed his hope that S.B. 334 would expedite a solution to the problem of officer safety.
Assemblyman Mortenson asked if there had been a comparison of Las Vegas population and police ratios with other cities. Lt. Olsen replied in the affirmative and stated the national average was 2.5 to 2.6 police officers per 1,000 residents. Las Vegas currently had a ratio of 1.7.
Assemblyman Marvel asked for an estimate of “time saved” following passage of the bill. Lt. Olsen replied it would save two years in the process of requesting new officers.
Chairman Parks requested clarification if the ratio of officers referred to sworn personnel. Lt. Olsen replied in the affirmative.
Assemblywoman Pierce requested a restatement of the national and Clark County ratios. Lt. Olsen reiterated the ratios, and he reminded the Committee that none of the figures took into account the tourist count, estimated at 35 million people per year.
Assemblywoman McClain asked for clarification of Section 4, subsection 3, line 28, on page 2 of the bill. She asked for interpretation of the language, “incurrence of related costs for employment of additional police officers.”
Lt. Olsen stated the additional costs would include equipment such as guns, uniforms, handcuffs, vests, vehicles, helmets, and radios. What each officer in uniform wore cost an additional $1,400, he noted. Lt. Olsen confirmed he was referring to new police officers. As far as equipment costs for existing police officers, he explained that each officer was supplied basic equipment, clothing, and supplies at the time of hire. As the supplies declined and the clothing became worn out, the officer shared expenses with the department. A firearm, for example, was issued under a voucher program, a one-time event intended to last for the officer’s entire police career. That amount was a maximum of $500.
Chairman Parks asked, if the number of police officers were increased to the national average of 2.5, how many additional officers would be hired? Lt. Olsen replied he did not have that figure; however, in their latest budget there was a request for 389 police officers. That would not elevate Metro to the national average of 2.5, but would merely bring them closer to a ratio of 2.0. Lt. Olsen stated that request was denied. He added that a full staff would require the addition of 800 to 900 officers.
Assemblywoman McClain asked how many tourists were actually in Las Vegas at any one point in time. Yearly tourist numbers were readily available; however, daily figures were not known. Lt. Olsen stated he would divide the 36 million tourists by 365 days to determine an estimate of daily visitors. Assemblyman Mortenson clarified by stating the average visitor count added approximately ten percent to the weekday population.
Chairman Parks addressed the audience in Las Vegas and called for testimony.
Janelle Kraft, Budget Director, Las Vegas Metropolitan Police Department, made a brief statement in support of S.B. 334. Chairman Parks commented that her presence in Carson City was missed.
Seeing no additional witnesses in Las Vegas, Chairman Parks invited testimony from Carole Vilardo, representing the Nevada Taxpayers Association. Noting her absence, Chairman Parks commented she had marked her support of S.B. 334 on the guest sign in sheet.
Dan Musgrove, representing the Office of the Clark County Manager, commenced testimony in support of S.B. 334. His office was one of two governmental entities that were responsible for the funding of the Las Vegas Metropolitan Police Department. Given the uncertain economic times, Mr. Musgrove stated that, for the first time, Clark County had been faced with having to pare its budget. While public safety was of paramount importance to the citizens of Clark County, the funding was not available to meet their needs. Mr. Musgrove believed it was essential for them to approach the public with the request to fund an increase in the number of officers. He voiced his strong support for S.B. 334.
Patrick Smith, representing the city of Las Vegas, echoed the comments of his Clark County colleagues in support of S.B. 334.
Seeing no additional witnesses, Chairman Parks closed the hearing on S.B. 334 and opened the hearing on S.B. 353. He asked if Senator Rawson was present in the room.
Senate Bill 353: Clarifies requirements for determining whether charitable organization qualifies for exemption from taxes on retail sales. (BDR 32-593)
Jim Wadhams, representing the Nevada Hospital Association, explained that Senator Rawson had been requested to introduce the bill; however, the Senator was unavailable. Mr. Wadhams stated the bill did not request a new exemption. In 1995, the Legislature had debated the issue and had identified the need for hospitals and health care facilities to continue to be covered under existing exemptions. The facilities had been exempt since the 1955 Sales and Use Tax Act. In the review process conducted by the Tax Commission of the Nevada Department of Taxation, questions arose regarding the exact interpretation of the language. The Tax Department, in concert with the Hospital Association, agreed that clarification required legislative enactment and that the tax status would not change unless the Legislature changed its thinking. The Tax Commission and the Hospital Association had decided to halt further review of health care facilities until they could come back to the Legislature and ask for clarification.
Concluding, Mr. Wadhams said that S.B. 353 restated the long-standing tax exemption of health care facilities, and added that it was not an expansion or a new exemption. He voiced optimism that representatives of the Nevada Department of Taxation would corroborate his testimony.
Assemblyman Marvel commented that on the Floor of the Senate there had been a negative vote, and he asked the witness for the reason. In response, Mr. Wadhams explained he did not know the reason, and that he had not been aware of that situation. He viewed the proposal as non-controversial; however, he had heard there were several negative votes that had surprised him. He reiterated that S.B. 353 was merely a restatement of existing law.
Chuck Chinnock, Executive Director, Nevada Department of Taxation, echoed Mr. Wadhams’ testimony. Mr. Chinnock voiced support of S.B. 353 and action that would clarify legislative intent. It would help the processing of exemptions and also help the Nevada Tax Commission in its duties, he added.
Seeing no additional witnesses, Chairman Parks closed the hearing on S.B. 353 and opened the hearing on S.B. 475.
Senate Bill 475: Revises manner of assessing value of certain electric light and power companies. (BDR 32-1242)
Hal Keaton, County Commissioner, Lincoln County, made a brief statement in support of S.B. 475 and introduced the Lincoln County Manager, Doug Carriger.
Doug Carriger, Lincoln County Manager, commented that in his county there was a ratio of police to population of 2.5, which put them at the national average for that statistic. However, he added, his police staff covered 10,600 square miles so it could take almost two hours for a police officer to respond to an area with a problem.
Assemblyman Hettrick asked who was the half in the statistic of 2.5 per 1,000. Mr. Carriger stated the number was derived by dividing “4,000 by 10, something on that order.”
Continuing, Mr. Carriger emphasized the rural areas were unique, and costs to provide services were also unique, because there was no economy of scale, as was evident in urban areas. He stated that S.B. 475 had passed unanimously out of the Senate Taxation Committee, and had passed unanimously on the Senate Floor.
Mr. Carriger called the Committee’s attention to a handout (Exhibit E) that contained background information pertinent to the proposal. On page 13 was a conceptual rendering of the Toquop Energy Project Air-Cooled Power Plant planned for a site in Lincoln County. On the following page was a map pinpointing the geographic site in Lincoln County. The location was unique in that the Kern County gas line and the Navajo Electric Transmission lines traversed the area. It would provide Lincoln County a good opportunity to diversify its economic base and would benefit Nevada as a whole.
Continuing, Mr. Carriger stated the rural areas of Nevada had traditionally depended upon mining and agriculture, and those had been on the decline. The ability to use public lands had declined due to the federal management policy. As such, economic growth opportunities were not plentiful. The median family income in Lincoln County was 71 percent of the state average, making it dramatically lower than the surrounding counties.
Mr. Carriger described Lincoln County as a “sales tax importer,” and their goal was to reverse that. A power plant would move the county in that direction, and would serve as the starting point for future economic prosperity. The intent of S.B. 475 was to enable Lincoln County to retain the value of the power plant within the county. Mr. Carriger clarified that the benefit was not to the county government since there was a limitation on the amount of revenue that could be earned from that project. There was a 6 percent cap on revenue of the previous year’s valuations, with an estimated amount of $180,000 each year in the county revenue. The real benefit would be their ability to significantly lower the property taxes for Lincoln County residents and businesses. By lowering the rate 90 cents to $1 per $100 of valuation, it would allow the residents of Lincoln County to retain more of that median salary of 71 percent. He cited the example of Pioche, Nevada, that had no grocery store.
In conclusion, Mr. Carriger urged the Committee to pass S.B. 475 so that Lincoln County could become more economically independent through economic growth.
Assemblyman Mortenson asked if Pioche still had two bars open for business. Mr. Carriger replied that one of the two had closed.
Assemblyman Grady asked how much of Lincoln County was federally owned. Mr. Carriger stated 98.2 percent of the county land was controlled by the federal government; however, the federal Congressional delegation supported Lincoln County through the identification of lands that might be eligible for disbursement to private ownership. Additionally, Mr. Carriger explained that agreement had been reached with the Southern Nevada Water Authority for water-rights applications. Specifically, Lincoln County had agreed not to protest 100,000 acre-feet of water rights applications for moving water to Clark County. He viewed it as a positive step in establishing a good working relationship between the two counties. Lincoln County also gained water rights applications through that agreement he noted, so water would be available to use for properties in Lincoln County sold by the federal government into private ownership.
Assemblyman Anderson asked the witness for the locations of grocery stores in Lincoln County. Mr. Carriger clarified there were grocery stores in Panaca, Caliente, and Alamo. The grocery store in Pioche had closed approximately six months ago, and the residents shopped in Utah.
Assemblywoman Pierce requested clarification on the proposed power plant and asked if it was air-cooled or water-cooled. Mr. Carriger remarked it was a good question. Alternatives had been presented in the Environmental Impact Statement (EIS), and the conclusion was that a water-cooled plant would have no negative impact. The water source would be the Tule Desert, approximately 14 miles from the proposed power plant. The water source was from a deep aquifer, of good quality, and flowed in a southerly gradient. That water source was not being utilized, according to Mr. Carriger.
Continuing, Mr. Carriger explained the Toquop Plant had a two-year construction timeline and an expected 40-year plant life. After the 40 years, those water rights would revert to Lincoln County to be put to other beneficial uses. Whether or not the plant would be a wet or dry plant would depend upon an economic decision made by the developer of the power plant. Passage of S.B. 475 would make it more economically feasible for it to be a dry plant. Assemblywoman Pierce requested clarification of that statement. Mr. Carriger replied, “Because their property taxes would be lower.”
Chairman Parks remarked that S.B. 475 contained language stating, “After July 1, 2003, in counties with a population of less than 100,000 residents, the current method of centrally assessed valuation would change for the newer facilities, thereby generating a larger amount of ad valorem revenue for these counties.” Mr. Carriger agreed with the summary statement. He called attention to the figures in his handout (Exhibit E) and explained that 91 percent of the value would go to Clark County, according to current law, and 9 percent would be retained within the county.
Bob Campbell, representing Duke Energy, introduced Richard Hyde and Bob Moroney and voiced support for S.B. 475. His group was presenting an amendment (Exhibit F) that would clarify current state practices and statutes where there appeared to be some confusion regarding independent power plants. Mr. Campbell remarked he had met with the Clark County Assessor and obtained the Assessor’s agreement with the amendment. Meetings with Lincoln County and the Nevada Department of Taxation had been conducted.
Richard Hyde, Regional Director of State Government Affairs, Duke Energy, commenced testimony in support of S.B. 475. His company had a facility under construction in Clark County near the Apex industrial site. The project was in a state of deferment and was approximately 50 percent completed.
The reason for the amendments, according to Mr. Hyde, was to clarify the existing law, specifically to allow local assessment of independent power plants in Nevada. Although the current law stated such, Mr. Hyde voiced concern over ambiguity in the law. Duke’s power plant did not have ownership of the transmission lines serving the plant. Under current law, if the company is “an electric light and power company and you have property of an interstate or intercounty nature, then you are centrally assessed.” Mr. Hyde emphasized that Duke’s Nevada project had no facilities that crossed a state or county line and, therefore, Duke should be locally assessed. Although the current law contained that intent, in practice, there was confusion. The amendment to S.B. 475 would clarify the law.
Concluding, Mr. Hyde stated that independent power producers (IPPs) were considered a new industry. When the property tax laws were written, plants such as Duke’s IPP had not been envisioned. Although Duke was building a generating facility, it did not consider itself a “utility” in the same tradition as Nevada Power or Sierra Pacific Power Companies. Duke owned no transmission or distribution lines in Nevada. As such, the generating plant was similar to a manufacturing facility that exported its product, according to Mr. Hyde.
Assemblyman Marvel asked the witness, “Who would wheel the power from your generation plant?” Mr. Hyde explained the power was transmitted primarily through the Nevada Power/Sierra Pacific Power existing transmission system. He described the primary users of the electricity as customers in Nevada. Assemblyman Marvel asked if Nevada Power would buy all of the generated power. Mr. Hyde stated, “It could.” There was not a definitive agreement for purchase of the power. In terms of alternative markets, Mr. Hyde replied, “Anybody who will buy our power.”
Assemblyman Marvel reiterated his question regarding the movement of the power to the market. Mr. Hyde explained the power was moved to the existing transmission system, which would be Nevada Power’s lines. Duke Energy had no plans to build its own transmission lines.
Assemblyman Mortenson requested clarification of the witness’s comment, “deferring construction of the Apex plant.” He asked why Duke would work on a second plant when it had deferred the first one. Mr. Hyde clarified that Duke was not working on a second plant. Assemblyman Mortenson replied, “You are going to have it just in case?” Mr. Hyde agreed.
Bob Moroney, Manager, Property Tax Division, Duke Energy, offered to respond to technical questions from the Committee. Chairman Parks asked the witness if the proposed amendment was discussed with Lincoln County officials, the original requestors of S.B. 475.
Mr. Campbell replied in the affirmative and added there appeared to be agreement on the part of Lincoln County; however, he preferred that County officials speak for themselves. Chairman Parks commented he saw “two thumbs up from the second row” in the audience.
Tony Sanchez, representing Reliant Energy, stated his client’s view and situation were very similar to Duke Energy’s. Reliant had two power plants, the El Dorado plant operating near Boulder City in Clark County, a facility that was locally assessed, and the Big Horn Plant being constructed in Primm, Nevada, expected to be online at the end of the year. Mr. Sanchez voiced support for the amendment to S.B. 475 and agreed that it clarified language in NRS 361 regarding local assessment processes.
Chairman Parks called for testimony from the Las Vegas audience.
Thelma Clark, representing the American Association of Retired Persons (AARP), explained she had attended most of the Public Utility Commission (PUC) meetings. Ms. Clark requested a copy of the proposed amendment to S.B. 475. Chairman Parks agreed to her request and stated the language was rather simple. He called her attention to page 2, line 45, and the addition, “Holds an exempt wholesale generator certificate from the Federal Energy Regulatory Commission (FERC).”
Continuing, Ms. Clark voiced concern with the amendment and stated it should be reviewed by the state’s Consumer Advocate. Chairman Parks assured Ms. Clark that final action would not be taken until it was thoroughly reviewed. Ms. Clark asked if there was a representative from the PUC present in the hearing. Chairman Parks replied he did not see anyone from the PUC.
Chuck Chinnock, Executive Director, Nevada Department of Taxation, offered to clarify and stated the amendment to S.B. 475 was specific as to the type of energy company. A fiscal note had been submitted by the Taxation Department that revealed three specific companies would qualify under the status of “centrally assessed properties.” Some companies with transmission and distribution systems would be centrally assessed properties. The Lincoln County property, with no transmission or distribution infrastructure, would be valued by the local county assessor. Mr. Chinnock believed that would be true with or without the amendment.
Continuing, Mr. Chinnock stated the Lincoln County area plant would not be governed by the PUC, and it would not have any transmission or distribution lines. The assumption was that the power would be moved from the plant to the lines within the county borders. Concluding, Mr. Chinnock stated, with or without the amendment, the Lincoln County power project would be locally assessed. If another power company were to come into the area that had other facilities in the state of Nevada, then the Department of Taxation would be positioned to do a central assessment on that new company.
Seeing no additional witnesses, Chairman Parks closed the hearing on S.B. 475. He announced that the amendment would be carefully reviewed.
Assemblyman Hettrick asked if a motion would be accepted on the two bills discussed earlier in the meeting. Chairman Parks agreed.
Chairman Parks called for a motion on S.B. 334.
ASSEMBLYMAN HETTRICK MOVED TO DO PASS S.B. 334.
ASSEMBLYMAN GRIFFIN SECONDED THE MOTION.
THE MOTION CARRIED.
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Chairman Parks called for a motion on S.B. 353.
ASSEMBLYMAN MARVEL MOVED TO DO PASS S.B. 353.
ASSEMBLYMAN GRADY SECONDED THE MOTION.
THE MOTION CARRIED. ASSEMBLYWOMAN PIERCE VOTED NO.
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Bill explanation documents were provided by Ted Zuend, Fiscal Analyst, for S.B. 334 (Exhibit G), S.B. 353 (Exhibit H), and S.B. 475 (Exhibit I).
Chairman Parks adjourned the meeting at 2:55 p.m.
RESPECTFULLY SUBMITTED:
June Rigsby
Committee Secretary
APPROVED BY:
Assemblyman David Parks, Chairman
DATE: