MINUTES OF THE
SENATE Committee on Taxation
Seventy-second Session
April 1, 2003
The Senate Committee on Taxation was called to order by Chairman Mike McGinness, at 1:39 p.m., on Tuesday, April 1, 2003, in Room 2135 of the Legislative Building, Carson City, Nevada. The meeting was videoconferenced to the Grant Sawyer State Office Building, Room 4412, 555 East Washington Avenue, Las Vegas, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.
COMMITTEE MEMBERS PRESENT:
Senator Mike McGinness, Chairman
Senator Dean A. Rhoads, Vice Chairman
Senator Bob Coffin
Senator Joseph Neal
Senator Ann O'Connell
Senator Sandra Tiffany
Senator Randolph J. Townsend
GUEST LEGISLATORS PRESENT:
Assemblyman David Parks, Assembly District No. 41
Senator Alice Constandina (Dina) Titus, Clark County Senatorial District No. 7
Senator William J. Raggio, Washoe County Senatorial District No. 3
STAFF MEMBERS PRESENT:
Rick Combs, Fiscal Analyst
Ted Zuend, Deputy Fiscal Analyst
Gary L. Ghiggeri, Senate Fiscal Analyst
Mavis Scarff, Committee Manager
Gale Maynard, Committee Secretary
OTHERS PRESENT:
Doug Carriger, County Manager, Lincoln County
Timothy U. Perkins, Board of Commissioners, Lincoln County
Charles Chinnock, Executive Director, Department of Taxation
Stan Olsen, Lieutenant, Lobbyist, Las Vegas Metropolitan Police Department
Jannelle Kraft, Las Vegas Metropolitan Police Department
Carole A. Vilardo, Lobbyist, Nevada Taxpayers Association
Michael Gillins, Lobbyist, Las Vegas Police Protective Association
Mark Schofield, Assessor, Clark County
Bill Berrum, Treasurer, Washoe County
Janine Hansen, Lobbyist, Nevada Eagle Forum
Charles W. (Chuck) Fulkerson, Executive Director, Office of Veterans’ Service
Ron Gutzman, Department of Nevada, The American Legion
Marvin A. Leavitt, C.P.A., Lobbyist, Urban Consortium
Michael R. Alastuey, Lobbyist, Clark County
Oscar B. Goodman, Mayor, City of Las Vegas
David Aiazzi, Vice Mayor, City Council, City of Reno
Michael L. Montandon, Lobbyist, Mayor, City of North Las Vegas
Tony Armstrong, Mayor, City of Sparks
James B. Gibson, Mayor, City of Henderson
Chip Maxfield, Board of Commissioners, Clark County
Mary Kincaid-Chauncey, Board of Commissioners, Clark County
Myrna T. Williams, Board of Commissioners, Clark County
Katy Singlaub, Manager, County Managers Office, Washoe County
Jim Shaw, Vice Chairman, Board of Commissioners, Washoe County
Bill Young, Sheriff, Clark County
Stephanie “Lynn” Lawton, Board of Commissioners, Esmeralda County
Earl A. Green, Fire Chief, Clark County
Donald Kwalick, M.D., Chief Health Officer, Health District, Clark County
Robert S. Hadfield, Lobbyist, Executive Director, Nevada Association of Counties
Lynette Boggs McDonald, City Council, Las Vegas, and President, Nevada League of Cities and Municipalities
Duncan R. McCoy, Director, Boulder City Library District
Daniel L. Walters, Executive Director, Clark County Library District
Anita Laruy, Administrator, Library, City of North Las Vegas
Joan Kerschner, Director, Henderson Public Library District
Pat (Patricio) Zamora, Lobbyist, Clark County School District
We will open this hearing with Senate Bill (S.B.) 475.
SENATE BILL 475: Revises manner of assessing value of certain electric light and power companies. (BDR 32-1242)
Doug Carriger, County Manager, Lincoln County:
I will make this presentation short on S.B. 475. The reason for requesting this bill is to expand and diversify our local economy. Our county is one of the weakest rural counties in Nevada. Our median family income in Lincoln County is well below the average on a per capita basis. It is about 72 percent of the State average and provides significant challenges in keeping our local stores open. Lincoln County is an importer of sales tax revenue and we receive about 10 times as much than is generated by the county, therefore, other counties in the State are subsidizing us. We would like to correct this by growing our local economy. About 98 percent of our county is federally managed lands and over the past several years we have had restrictions on the uses we can make of the land due to changes in federal land management policies. Consequently, our tax base is very narrow. Our current tax rate in the county and the City of Caliente is near the maximum, just 25 cents below the State maximum.
Our strategy for growing our economy for the future is to move away from the traditional agriculture and mining. We may have one active mine in the county. This industry has pretty much left us. We are focusing on and encouraging new basic economic activities in addition to power generation facilities. In addition to these power facilities, we are trying to grow two industrial parks in our county, one in Caliente and one in Alamo. The Toquop Energy Project would provide the basis for growing our future economy and the environmental impact statements have been prepared for this project. The plant will have a value of $695 million.
Chairman McGinness:
Mr. Carriger, can you back up a little bit and give the committee some background on what is proposed for Lincoln County as far as these plants and then speak on how it would impact your economy.
Mr. Carriger:
On the very last page of my handout, “Testimony of Lincoln County, Nevada” (Exhibit C), there is a map that shows you where this proposed power plant is located. It is in the very southeast corner of the county and is very close to Mesquite. What this does not show is an area of critical environmental importance for tortoises is to the east and south of the plant and in fact is the only section available in Lincoln County not within a tortoise area. It runs along the power lines and the natural gas pipeline running to Kern County, California. It is a great remote site and an excellent location.
It has plans to be an 1100-megawatt plant and is a fairly substantial plant and would be water-cooled. We would bring the water from the Tule Desert about 18 miles away. We have received about 2100 acre-feet and have been approved by the State engineer with another 7000 acre-feet pending approval of this proposed plant. This is where the plant will be located and it could be a significant contributor not only to Lincoln County but the State of Nevada as a whole. If we locate this plant, we will be growing the overall State economy and tax base.
Chairman McGinness:
What is the time frame on this? Do you have all of the permits? How many more obstacles do you have to jump over?
Mr. Carriger:
The final environmental impact statement has been approved by the Bureau of Land Management, the State director and is now back in Washington, D.C., for review and approval. The permitting process for the Federal Energy Regulation Commission is also going forward and the permitting with the State utilities is in process. We are close and have been working actively on this for almost 3 years along with marketing the plant site to another provider. The original provider is close to bankruptcy but we are responding to a request for proposals from a public utility not located within the State of Nevada and we are currently competing with them for this site.
Senator O’Connell:
We are going to be hearing a bill tomorrow in government affairs committee. The bill we are going to hear is connected with this project?
Mr. Carriger:
I would say yes it is. In this project Lincoln County and a private entity are partners in the water rights serving this proposed plant.
Senator O’Connell:
There is a fiscal note with this on the impact. Can you share information with us on this fiscal note?
Chairman McGinness:
Mr. Combs has just finished the fiscal note and there will be copies passed around shortly.
Senator O’Connell:
Okay, thank you. I wanted to be sure there was a connection made so there will be an understanding of the bill being presented tomorrow.
Mr. Carriger:
It will certainly be helpful and Commissioner Perkins will be here to speak on the bill. This outline gives you an idea of where the plan is and how we plan to operate it. What we have found in developing a plant site like this is there are current tax regulations within the State of Nevada that remove the benefit of the property tax revenue from the county. When properties are assessed, the funds are distributed on a line-mile basis, and roughly 170 miles of the line basis for this plant would be located within Clark County and about 17 miles within Lincoln County. This is just the way the tax code works.
In current legislation the Valmy plant located in the Humboldt County area was exempted from being centrally assessed back in 1983 through specific legislation and the revenue from that plant is divided amongst Elko, Humboldt, and Lander Counties on the line-mileage basis and facilities basis owned by that utility within those counties. What we are asking for is not new ground in the State of Nevada, but has been done previously to provide economic development within rural Counties.
Another interesting thing being discussed is the water going to this plant will be on a 42-year lease and at the end of that time, it would revert back to Lincoln County solely to be put to other uses after the plant’s worth has expired. What this allows Lincoln County to do is to put water resources we have in the county not currently being used constructively, and be placed in a more useful role for this 40-plus years. We feel it is important to use our resources to the maximum, at this time, for our economic benefit.
We are limited by the 6 percent increase in ad valorem taxes. If we kept the revenue from this plant in Lincoln County, the net effect would be to reduce the property taxes in the county to less than $1 per $100 from the current $2.71. This is significant to us, because our current property owners, who are not wealthy, would enjoy a reduction in their property taxes of over $1.5 million per year. The money saved on taxes could be spent by the residents to buy goods and services within our county. This may allow us to have a market. There is no place to buy groceries in Pioche since the market closed and within the county we only have three other very limited groceries stores. People drive to St. George and Cedar City, Utah, so the revenue they spend leaves the State of Nevada. We feel by having more dollars to spend we will be able to attract retailers who will allow our economy to grow. The reduction in property tax will also assist us in our competition for locating a plant. If we can offer a lower tax rate, it makes us more competitive in the power market today.
On page 11 in the handout (Exhibit C) there are a number of other power plant projects in rural counties that could benefit from this legislation and would also make them more competitive in locating and getting the plants on-line and assisting in the development in other rural counties suffering from an economic downturn. We have eight other plants currently planned within the State for both renewable and nonrenewable sources.
Senator Townsend:
Just a couple of questions, and the one thing I did not hear was the size of this proposed plant. How many megawatts will it produce?
Mr. Carriger:
It is 1100 megawatts.
Senator Townsend:
And they are going to value this at $695 million?
Mr. Carriger:
This is the stated construction cost in the environmental impact study.
Senator Townsend:
That is a good price for what you are proposing to build and a 30 percent reduction from what we have seen.
Mr. Carriger:
Currently, equipment costs are down in this market as well as the demand for turbines.
Senator Townsend:
The demand for turbines had gone up, causing a 3- or 4-year wait. I am not familiar with this map relative to the project known as Coyote Springs. Is it visible on this area?
Timothy U. Perkins, Board of Commissioners, Lincoln County:
Coyote Springs is almost due west of this site. It actually sits along Highway 93 and from this site it would be about 40 miles, maybe more.
Senator Townsend:
Are they discussing with you their power needs based on the size of the project?
Mr. Carriger:
Basically, they are thinking about using some creative on-site generation to satisfy their needs. I forgot the terms used.
Senator Townsend:
Cogeneration?
Mr. Carriger:
Yes and other things like that to meet their needs. Other than that, they would be coming off the Lincoln County Power District that will serve that district.
Senator Townsend:
You discussed one of the potential builders of this plant was in financial difficulty so you are discussing other options.
Mr. Carriger:
The original company that approached us to build the plant was called Cogentrics and formed a subsidiary in Toquop Energy, Incorporated, and through the energy markets, their credit ratings dropped, they sold off projects and quit working on projects. When this happened, our water cooperator purchased the project from Toquop Energy and is working with the county to market with other constructors.
Senator Townsend:
The county would not be in the marketing business? Eleven hundred megawatts is a lot of power and the county would leave that up to the builder?
Mr. Carriger:
Yes, sir. The county will not be involved in the operation or sales of the electricity from the plant.
Senator Townsend:
I am sure Clark County would be interested in using a few of those megawatts, especially during their summer peaks.
Senator Neal:
What is the county’s relationship to this project in terms of ownership?
Mr. Carriger:
The county will have no ownership in this project, however, it will be leasing the water to the plant for a period of 42 years. At the end of those years the water will revert to Lincoln County.
Senator Neal:
What are you getting in return for the lease of the water?
Mr. Carriger:
We have a partner, Vidler Water Company, who helped to develop the water and has expended $2.5 million in drilling wells to make sure the water is there. After the cost of developing the water, 50 percent of the proceeds remaining will go to Vidler Water Company and 50 percent will go to Lincoln County.
Senator Neal:
How would you protect yourselves from high increases in power rates in the future within Lincoln County on this particular project?
Mr. Carriger:
On this particular project, we have not made any provisions to protect the people from any increase in power rates. Currently, our power comes from Hoover Dam and as the county grows we will have the position of purchasing power on the open market. However, that is some years down the road. Currently, it would be cumbersome to make those arrangements based on a potential future demand for communities that do not exist today.
Senator Neal:
What is the name of your power co-op out there?
Mr. Carriger:
We have a chapter 318 of Nevada Revised Statutes (NRS) district called the Lincoln County Power District that serves the bulk of the county. We do have another one called the Alamo Power District that serves a very small area.
Senator Neal:
Are you protected from any inordinate increases?
Mr. Carriger:
Up to a limit.
Senator Neal:
You were not affected in 2000 and 2001 with any increases, were you?
Mr. Carriger:
No, in fact, I think we benefited from that by selling excess power we had.
Senator Neal:
You are in a position to create this plant and I have noticed your vision seems to extend upward towards White Pine County and other counties that might be able to develop off of your particular vision in terms of what you are attempting to do right now. When do you expect this to come on-line?
Mr. Carriger:
I could not give you a date. As I said before, the original developer pulled out and we are presently marketing the site. We have responded to one request for proposals, but generally it will be about 30 months after someone decided to move in on the site. The construction time would be between 2 and 2½ years.
Senator Neal:
Tell me if I understood. Did you not say that you wanted to reduce the taxes from $2.74 to $1, and the money would go back into the pocket of your taxpayers, and in turn they would be able to spend money in Lincoln County rather than going outside the State and other places?
Mr. Carriger:
It could be an outcome. Current law would require us to drop the property tax because we could only increase 6 percent. We would wind up reducing the ad valorem property tax within the county to roughly a dollar or maybe a little bit less. The net effect is we will provide more money for the people currently living and paying taxes in Lincoln County. They still might spend it somewhere else, but if there were more economic activity in sales and purchases within the county, this could create a greater demand for retail locations.
Senator Neal:
Will any of this reduction go toward the creation of the power plant and in what way?
Mr. Carriger:
It would drop the power plant’s property tax also. Let us say currently they pay about $6 million a year in property taxes, those taxes would be reduced to about $4 million on the plant. It makes us more competitive in acquiring the plant. If we were on the open market and were competing with sites in Utah or Arizona on this request for proposals we are looking at now, it makes us more competitive. It also makes the other smaller counties currently looking to develop energy projects more competitive and it grows the economic pie in Nevada. We do not have the project now, so we are not giving anything away.
Senator Neal:
So this is used as an enticement to get a company to come in and it puts you on a better footing in terms of competing to get the project.
Mr. Carriger:
Yes. When we do this it decreases the amount of taxes from other areas in Nevada who are floating our county.
Senator Neal:
Did I understand you to say that from your research you had seen where this was done at the Valmy Power Plant?
Mr. Carriger:
There are two sections in the Nevada Revised Statutes and I forgot which NRS it is that allows those counties to retain 85 percent of the value and 15 percent goes to the centrally assessed.
Senator Rhoads:
I am wondering if Mr. Combs could go through this fiscal note.
Rick Combs, Fiscal Analyst:
If you would turn to the second page (Exhibit D), what they have done was to determine how many potential projects there were in the counties under 100,000 in population and they found three, Lincoln County, White Pine County and Nye County. They had indicated the estimated taxes before this provision would have gone into effect and in the estimated tax situation, if this bill goes into effect. They also show you the difference of increase in revenue for the Lincoln County project, the White Pine County project, and the Nye County project.
It shows in parenthesis the reductions the other counties would experience through the enactment of the bill. Mr. Chinnock, correct me if I am wrong but this is not a reduction in their current revenues, but a reduction in the revenue they would have received had the bill not gone into effect.
Charles Chinnock, Executive Director, Department of Taxation:
This is exactly the basis for it and we presented two scenarios also. We looked at what the definition of facility was because it was not clearly defined but we believed it to be a generation facility. With Lincoln County, they have transmission lines that go out of State, and the first scenario considered this to be part of the facility and the second scenario did not. This was the difference.
Senator Rhoads:
In the last column, under total estimated tax difference, the only county on the positive side is Lincoln County at $3 million and then Clark County will drop almost $3 million. I see all the other counties will drop also, is this correct?
Mr. Chinnock:
Yes, just as Mr. Combs explained, the negative numbers showed what the distribution would be had this law not gone into effect and we would value it on a centrally assessed basis and allocate by line miles. If you follow the statute, then all you need is to look at the numbers not in parenthesis.
Senator Rhoads:
The last column reads total estimated tax difference. Is this as if the bill had passed?
Mr. Chinnock:
Yes.
Senator Neal:
At the present time, is it zero?
Mr. Chinnock:
Yes. We did show a zero fiscal impact for that reason, because this is something for the future.
Senator Neal:
So we cannot miss what we do not have?
Mr. Chinnock:
Yes.
Chairman McGinness:
This is money we might lose if the plant gets built. If there is no one else to testify, we will close the hearing on S.B. 475 and open 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)
Stan Olsen, Lieutenant, Lobbyist, Las Vegas Metropolitan Police Department:
Senate Bill 334 will give us the ability to adequately address some serious shortfalls we have in the Las Vegas Metropolitan Police Department (Metro), as you can see by the handout (Exhibit E).
Senator Neal:
What you are creating here is a taxing district, is it not?
Lt. Olsen:
I need someone more knowledgeable on taxes.
Senator O’Connell:
It had to be in 1987, when we created this taxing district for you and at that time it did come through this committee. We created this to allow the metropolitan police department to increase officers they needed badly at that time and we specifically said they needed to go back to the voters each time to add new officers. But there is a taxing district for them. This bill did not create it and is only talking about the present taxing they have.
Senator Rhoads:
This bill protects Clark County only, does it not?
Lt. Olsen:
Yes.
Jannelle Kraft, Las Vegas Metropolitan Police Department:
I am here for technical support and to answer any questions the committee may have.
Senator Neal:
Is there any particular reason why we did not allow them to go the county commissioners?
Senator O’Connell:
I believe we did not do this because the city council pays half of the bill.
Carole A. Vilardo, Lobbyist, Nevada Taxpayers Association:
Both in 1987 and 1995 we have had a taxing district created. With both of those times, they were rate specific. It was 8 cents the first time and 20 cents the second time. Where this bill differs is the taxing district is there, but what they have done this time is not put a rate in but changed the approval procedure. You will be going to the county, the city, and the debt management commission. Under the old provisions they would have to go to the debt management commission but they would not have to go to the county and city; the fiscal affairs committee would have taken care of that.
Senator Neal:
They are getting away from the State to direct this activity?
Ms. Vilardo:
Yes. What they are doing is asking for a blanket authority but also putting in some oversight at a local level by going to the county commission and the city council. This way they can make the determination as needed and do not have to come back to the Legislature and ask for authority to raise revenue.
Senator Neal:
Do you know of any other time in history where a police department would have this type of authority to go before a body with support of statute for increases in pay, for salaries, buildings, and equipment rather than the authorities within the local jurisdictions to act on this?
Ms. Vilardo:
The only district that comes to mind having this authority would be a library district, which has the ability to go directly to the county commission and city council in Clark County and then to the debt management commission.
Senator Neal:
If we pass this bill will the police department have to get approval of the local government, county commission, and debt management?
Ms. Vilardo:
Yes, they would; this is what the bill requires. I did work with the metropolitan police department on the bill. They wanted to know what our position would be and to come up with something that would accommodate our concerns.
Senator Neal:
Do you feel this is adequate oversight for this process?
Ms. Vilardo:
I believe it is. You not only have the two local governments who will analyze the rates for how this is shared, but the third element is the debt management commission. This commission has to ensure the rate being approved does not negatively impact any of the other jurisdictions. There is a great deal of projection with this.
Senator Neal:
You have three entities the metropolitan police department would have to go before. If one of those entities disapproves, are they able to go forward?
Ms. Vilardo:
Not as the bill is written. They would have to have the approval of all three entities. There would have to be some agreement as to what the proper rate would be and when they would do it. Our committee does support the bill.
Michael Gillins, Lobbyist, Las Vegas Police Protective Association:
We support this bill and one of our concerns is the safety issues with regard to what our members go through on a daily basis. Currently, the national average is 2.5 officers per 1000 persons; the metropolitan police department is working with 1.7 officers per 1000. We have officers responding to hazardous and sometimes violent situations, unassisted, which puts them at risk. In the interest of public safety, and the officers who are working every day, we need to speed the process to ensure we have proper staffing. This bill addresses those issues.
Senator Neal:
Who appoints those individuals in fiscal affairs?
Lt. Olsen:
Fiscal affairs is made up of five members. Two members are city council members, two are county commission members, and the last is a person from the community who usually has served as chairman of that committee.
Senator Neal:
Who appoints the persons in the debt management commission?
Lt. Olsen:
I do not know.
Ms. Vilardo:
Statute requires in Clark County there be 11 members of the debt management commission. The members consists of two from the city of Las Vegas, two from Clark County, one from Mesquite, one from North Las Vegas, one from Boulder City, and there are two public members who are appointed and operate on a majority vote. I hope that adds up to nine. These public members are appointed every 2 years and the elected officials are appointed by their respective jurisdictions every year and there is an annual meeting in July.
Senator Neal:
Does your organization endorse candidates in political races?
Mr.Gillins:
Yes we do.
Chairman McGinness:
If there is no one else to testify, we will close the hearing on S.B. 334 and open the hearing on S.B. 440.
SENATE BILL 440: Provides for postponement of payment of property taxes in cases of severe economic hardship under certain circumstances. (BDR 32‑658)
Senator O’Connell:
In regard to Question 8 of the 2002 General Election, this bill gives flexibility to the assessors on looking at any problem that might be raised. There is an amendment to this bill Mark Schofield will further elaborate on.
Mark Schofield, Assessor, Clark County:
There were four separate amendments (Exhibit F).
Senator O’Connell:
Carole Vilardo, Mark Schofield, and I have had several meetings in trying to define this so it could not be taken advantage of.
Mr. Schofield:
I received an E-mail from Mr. Berrum and read some of his remarks and it suggests the local county treasurers administer this particular program and this would be the appropriate office for this program to be administered through. I am unaware of any other testimony he may provide.
We are pleased to turn the administration of this program over to the treasurers with the purpose of it residing with or administered by the assessors, to take the burden off of the treasurers. If they would like to administrate, we have no problem at all.
Senator O’Connell:
However you would like to proceed with the bill, the genesis of the bill came from a constitutional change that was voted on this last interim period by the public. It was to try to set up some kind of a mechanism for a person who was in a dire financial situation to not lose that individual’s home. It did pass by a strong vote by the people Statewide. If the question passed, then the burden came back to the Legislature to establish how it would be administered.
The bill before you, S.B. 440, is our first attempt at trying to do that. With the input of the assessors, Ms. Vilardo, and I, the language is before you and had to be introduced right away at the last minute and we were unable to make the changes you now see proposed by Mr. Schofield. Whatever the Washoe County treasurer has to suggest would certainly be welcomed by the others and me.
Senator Townsend:
With regard to the change on section 14, page 4 of the bill, is the highlighted area to be removed?
Senator O’Connell:
No, that highlighted area was added.
Senator Townsend:
Then how did we choose the rate of 6 percent? Usually something like this might be tied to a U.S. Treasury Bill so that it would go up or down so that people are not disadvantaged and the State is not subsidizing whether it goes up or down.
Mr. Schofield:
I am not certain where the 6 percent factor came in for interest. It was not something we suggested, but we certainly support it.
Mr. Chinnock:
As far as refund provisions, they are 6 percent and stated throughout the tax statutes.
Bill Berrum, Treasurer, Washoe County:
I sent an E-mail to a few treasurers and have gotten a lot of responses back (Exhibit G). I feel if we could have a brief work session with some of the assessors and treasurers, we can simplify this process and have the assessors address the issues of the people having financial difficulties. They already administer the senior tax rebate program and the criteria could be blended so both of these can be accomplished. The assessor does not get into the tax‑collecting business, rather, he gets into a business of establishing the tax role, letting the treasurer collect it, by having an established cap for a brief period of time, until the property changes hands.
This deals with the elderly on fixed incomes and people who are on disability who could qualify if they meet the qualifications. People who have short-term, one‑time catastrophic problems are dealing with the treasurers now and we do not need any more legislation for this. It is to keep people from getting taxed out of their homes. Even if taxes only go up $100 or $150 per year, with someone on a fixed income it becomes a burden to them. We can simplify this bill by eliminating a great portion of the bill that gets very complicated. Another drawback is the hiring of someone to administer the details as it is laid out, and we believe it can be administrated without having to add too many staff.
Senator O’Connell:
I would be glad to work with Mr. Berrum and anyone else to simplify the bill and the procedure. Our main concern is that it is narrow enough as not to be taken advantage of and fair to the person experiencing the difficulty.
Chairman McGinness:
Senator O’Connell, since this was a bill you helped to shepherd, I will give you and Mr. Berrum a few days to coordinate with anyone who has some concerns so we can hear this.
Mr. Schofield:
I believe we need direction from the overall committee as it relates to what your idea is in expanding to encompass a large group of people. Mr. Berrum is suggesting a large expansion of this benefit to be available to many people and it must be narrowly tailored so no one can take advantage of this program.
Chairman McGinness:
This bill was a concern to several people during the last election and it was felt some people would take advantage of this avenue. I agree with Senator O’Connell’s concerns that this bill be crafted to assist those who need it. There is a need and if you can work some of Mr. Berrum’s ideas in, this would be great.
Senator Neal:
Mr. Schofield, if a person does not pay the property taxes, how long would it take the State to acquire the property?
Mr. Schofield:
After the first year, they file a trustee certificate with the local recorder’s office and upon the third year of delinquency, the property is turned over to county ownership and then the treasurer makes an election as to when they will sell the property at auction for collection of those taxes. There are substantial penalties and interest involved when you get to this point.
Senator Neal:
What is the length in time this bill would require a person to postpone this procedure?
Mr. Schofield:
We have dovetailed the time frame of the delinquency. The maximum amount of time they could take advantage of the postponement before taxes are collected would be 3 years.
Senator Neal:
According to the amendment, 30 days after failure to pay the taxes, can you acquire the property?
Mr. Schofield:
This is correct. If you do not pay within 10 days, there is a 6 percent penalty as indicated in section 14. If they do not pay, the way the amendment is written, within that 10-day time frame, there is an additional 7 percent added. In 30 days if they do not pay, then the application for postponement is totally void and all penalties and interest will be reinstated on the property and the county will assume ownership. For example, if a taxpayer came in and was in a serious and severe economic situation and got the maximum amount of time, the taxpayer would have 3 years to pay off the taxes to the county treasurer. The taxpayer could not reapply and would have to pay those taxes within 3 years, or sell the property.
Chairman McGinness:
Mr. Schofield, you mentioned on section 9, changing the assessed value to $175,000 rather than the $500,000. What was the reasoning on this?
Mr. Schofield:
There was a great deal of discussion as to what would be the cutoff point or the value of the property that would be placed into the bill and would make you eligible and what would be the ceiling. We came up with $500,000 and in Clark County it is not typical for even young people to acquire homes that are $500,000 on in value. However, if we went any higher there could be problems with abuse and it would send the wrong message.
Mr. Berrum:
As a response to the question from Senator Neal, the treasurers’ role in this situation is we do have the authority to adjust or waive the penalties of interest. We have found over the years that this is very helpful in helping people to pay. When people are just barely scraping up the money to pay the taxes due to extenuating circumstances that have placed them in a hardship situation, we have been able to help them out. The important part is for those people who qualify to receive a temporary cap and be tightly controlled. We will work on the qualifications and I am looking at senior citizens or disabled people on a fixed income. Where you need some discretion for the best interest of the taxpayer is dealing with true one-time hardships on a case-by-case basis. It is hard to legislate and put everyone into one box; every case is different. I think with my proposal we can simplify it and make the criteria everyone is comfortable with for those who qualify. For those who do not qualify, the treasurers are working with other types of hardships and working with people to stay in their homes.
Mr. Schofield:
If Mr. Berrum is talking about capping the increases in assessed evaluation, I am concerned this might lead to constitutional issues with capping the assessments on these properties. We need to stick with postponement or deferment. One more issue for consideration, there are jurisdictions in the country that do hold payments in abeyance for economic hardship for as long as the owner lives in the home. The taxes are not collected until the owner passes away and the home is sold. If this is an area you wish to look into, we would be pleased to craft some language along those lines. However, this discussion did take place and the local governments may have some serious issues from a fiscal point of view relating to this.
Janine Hansen, Lobbyist, Nevada Eagle Forum:
I support the concept and the bill as a part of the work we do every election period for our Nevada families. We did endorse the ballot issue and tried to cover all the questions to give people help and advice. We continue to endorse this and are pleased to hear the discussions and concerns about the possible abuse that can arise from this and we believe you are taking appropriate measures. We do not think anyone should lose his or her home due to economic hardships.
Chairman McGinness:
If there is no one else to speak on S.B. 440, we will close the hearing on this bill. We will open the hearing on S.B. 472.
SENATE BILL 472: Establishes method for determining total percentage of permanent service-related disability for purposes of calculating disabled veteran’s exemption from property tax. (BDR 32-523)
Charles W. (Chuck) Fulkerson, Executive Director, Office of Veterans’ Service:
I am in favor of S.B. 472. The U.S. Department of Veterans Affairs, while awarding service-connected disability ratings in excess of 60 percent, also awards an unemployable rating of 100 percent. Many times there is confusion as to which level should be used to determine the tax exemption. This bill directs the highest percentage awarded by the U.S. Department of Veterans Affairs should be used. What impact does this have? The veteran population in Nevada is 241,612. Of this number, 22,976, or 9.5 percent, receive veterans administration compensation. Of this number, only 3776 veterans are awarded disability ratings of 60 percent or more. Therefore, out of the more than 241,000 veterans, there are less than 4000 that would be getting this additional tax exemption.
In support of the veterans who live in Nevada, federal funds in the amount of $453 million are expended in Nevada annually. Of this amount, over $216 million is for disability payments made directly to the individual veteran to be used as disposable income. Using a multiplier of 4, this is almost $1 billion that is pumped into the Nevada economy through the veterans. I believe the veterans are paying their way.
Senator Rhoads:
Would it be federal money? Is there any State money involved in this?
Mr. Fulkerson:
No. There would be no State money involved, sir.
Senator Rhoads:
Can you discuss the fiscal impact this would have and do other states have the same language where you are taking the greatest estimate? Do you know?
Mr. Fulkerson:
I do not have this information.
Mr. Chinnock:
I do not have the fiscal impact because the numbers we originally ran did not consider these factors. It would be hard to define. Looking at the worst case of almost 4000, it would be an increase in the amount of the exemption. I am not sure what the number would be for the increase.
Senator Rhoads:
Maybe you can get these numbers to us within the next few days.
Mr. Chinnock:
Yes, I will do that.
Senator Neal:
As I understand this bill, it is supposed to be establishing a method to determine the total percentage of permanent service disability. I thought this was determined when you left service, as to your total disability.
Mr. Fulkerson:
This is not true. Korean war veterans are coming down with increasingly higher numbers of extreme arthritic problems in the extremities, the feet and the hands, due to the cold weather they were in during the war. When they got out of the service, at age 21, they did not have these problems and they are only being discovered now.
In the Persian Gulf War, which occurred 10 years ago, a lot of those service people got out and came home. Nothing happened for 2 or 3 years, and then they started to react to vaccines and other exposures. I suggest the current war we are in now is going to present the same problems and maybe higher numbers.
Ron Gutzman, Department of Nevada, The American Legion:
We have nothing to add to this debate and I think Mr. Fulkerson has spoken well and we are here in strong support of this bill.
Chairman McGinness:
If there is no one else to testify, we will close the hearing on S.B. 472, and open the hearing on S.B. 468.
SENATE BILL 468: Revises limitation on total ad valorem tax levy. (BDR 32‑625)
Marvin A. Leavitt, C.P.A., Lobbyist, Urban Consortium:
This bill is coming to you as a result of a recommendation of the Legislative Committee for Local Government Taxes and Finance. It essentially does a couple of things. You have already seen this provision because the same provision is in the Governor’s tax bill as well as the taskforce’s bill. The bill divides the cap, which is now $3.64, between the separate cap for local government and another cap, which is the remaining difference between the local government cap, the $5 for the State, and the operating rates for schools.
The $3.14 is the reduction of the $3.64, by $0.50, and is essentially computed as follows. It was originally determined back in 1979 to be a $0.50 school levy. Since that time, the State has increased the school levy by $0.25 and has adopted a $0.15 levy on behalf of the State. If we took the $3.64 and subtracted it from this, the $0.50 was in existence for schools at the time this structure came into place. Speaking on a practical basis, what this would mean for local governments is this would give local governments an additional $0.40 over and above what they currently have and essentially would provide protection for local governments. If the Legislature determined to increase the rate for either the State or the schools for operating purposes, this will not have any effect on the local government limitations.
If you decided to implement an additional $0.15 for the State without changing the limit, those local governments who are at the $3.64 or very close to it would have to reduce their own rates. This would eliminate the tie-in. For the practical effect of this, we probably will not see any effect in Clark County because we are not close to the rate. We would see effects in some rural counties and we are close enough to the rate in Washoe County to where there could be some adjustment upwards in taxes. We have a situation with local governments where there is a separate cap. It is the 6 percent cap that was referred to earlier by the speakers from Lincoln County and is a separate cap on the limitation the local governments can levy for property taxes; therefore, that cap would remain in place. If you changed the allowed total limit to what is in this bill, it would change the levy of taxes at the moment. In the future, it would allow some changes and increases and see some entities move forward with bond issues and present them to the voters. We are not able to present them at this time, because we are too close to the maximum rate.
Senator Rhoads:
In a lot of rural counties who are near their cap and did nothing and this bill passed, would that automatically increase their taxes?
Mr. Leavitt:
It would not automatically increase them but what it would do is to allow them an additional $0.40 cap to pass bonds and other things. If they were at their limit on the second cap, it would not have any effect at all. If they were not at the 6 percent limit on the second cap, but if they were restricted from going up to the total of their current cap, they could make up the difference. They would still have the 6 percent limit and this would still be in effect. We have a number of rural counties that are at the $3.64.
Chairman McGinness:
If there are no further questions or no further testimony on S.B. 468, we will close the hearing. Senate Bill 308 and Senate Bill 314 have been scheduled for 6 p.m. and there are people from Clark County who will be testifying on these bills. On S.B. 334, there seemed to be no opposition to authorize support of the metropolitan police department.
SENATOR TOWNSEND MOVED TO DO PASS S.B. 334.
SENATOR O’CONNELL SECONDED MOTION.
THE MOTION CARRIED UNANIMOUSLY.
*****
Chairman McGinness:
Senate Bill 475 revises the value of certain electric light and power companies. Is the committee ready to take action on S.B. 475?
SENATOR NEAL MOVED TO DO PASS S.B. 475.
SENATOR TOWNSEND SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
*****
This finishes our agenda and we will recess until 6 p.m.
Chairman McGinness:
The committee of Senate taxation is reconvened. We are going to take S.B. 314.
SENATE BILL 314: Requires Department of Taxation to collect and report data concerning electronic commerce that is conducted in this state. (BDR 32‑6)
Senator William J. Raggio, Washoe County Senatorial District No. 3:
Chairman and members of the Senate taxation committee, S.B. 314 has been introduced in an attempt to collect information. We are hearing a lot about e‑commerce and noticed recently the State of California enacted some legislation that seeks to impose a sales and use tax on interstate e-commerce. Please see testimony given in length (Exhibit H). There is a fiscal note for this bill (Exhibit I).
Senator Neal:
Since we are asking the tax department to estimate the cost of these electronic e-commerce businesses operating in this State, is the fiscal note to get the bill back to finance committee?
Senator Raggio:
The fiscal note just came in today. I very much support this concept because I feel we need at some point to develop this kind of information for our State and the sooner the better.
Chairman McGinness:
Are there any other questions? Is there anyone to testify on S.B. 314?
Mr. Chinnock:
We support this bill and we think it is smart with the fact we are looking at the streamlined sales tax program. We did attach a fiscal note to this bill in order to get complete and accurate information. The fiscal note was based on the fact we would be reviewing literature and we would also be developing a database and doing surveys as well as statistical sampling. This is based on two methods: one, we could outsource the consultants to do this or also outsource through a department of the University of Nevada system. We already use them for our demographics and it is from where the fiscal note came.
Senator Neal:
How long would it take for you to count the number of e-commerce retailers that are domiciled in the State?
Mr. Chinnock:
It probably will not be a difficult task, but to look at the rest of the e-commerce retailers doing business in the State would be more difficult as well as to develop the database and statistics for them.
Senator Neal:
What would be the difficulty in collecting the retail sales of these retailers?
Mr. Chinnock:
They currently are not reporting to us, therefore it would take some work and some projections.
Senator Neal:
This bill says you estimate the number of electronic commerce transactions, the number of electronic commerce transactions conducted outside of the State and the total value of electronic commerce transactions conducted by retailers operating within the State, and estimate the amount of revenue.
It seems to me someone is going to be sitting at a desk until you get to the data that the bill calls for, which is the supplemental data. Then you go to the census report, small businesses, and the commerce department to get that. Your fiscal note indicates it is going to cost $158,000 for fiscal year (FY) 2003 through FY2004, $158,000 for FY2004 through FY2005, and $316,000 for future biennia. I was wondering why would it cost that much when it seems you can assign a person to make a telephone call to get the data?
Mr. Chinnock:
The expertise we would be relying on would be demographers or economists which we do not have working with us in the department.
Senator Neal:
Are you saying to the committee you will have to hire these particular people to do the work?
Mr. Chinnock:
We would be looking to do this either through an outside consulting firm or doing it through the university system.
Chairman McGinness:
Is there anyone else to testify on S.B. 314? If there are no further testimonies or questions, we will open the hearing on S.B. 308.
SENATE BILL 308: Revises manner in which revenue from property taxes is distributed. (BDR 32-704)
Senator Raggio:
I want to thank the fiscal staff for their assistance in putting together some information on this bill. There has been so much misinformation and apprehension about this proposal that I am very pleased to have had assistance in putting this together so we can get a clearer picture of what we are talking about. Please see written testimony given in length (Exhibit J).
There are several charts I will pass out to the committee and also there is an article I found “Inside Gaming: Analysts growing grim on gaming” (Exhibit K) in the Las Vegas Review-Journal. The point is made that in the foreseeable months with the war imminent and other economic concerns, it could be very serious in the amount of revenue flowing into gaming and from gaming for State purposes.
Senator O’Connell:
Would you remind the committee what we have given to the workers on the state cost-of-living allowance and on their step increases?
Senator Raggio:
I do not have the list. I think it was 2 percent and it was done about 2 years ago. There is nothing plugged in for this year. Maybe Gary Ghiggeri can answer this question.
Gary L. Ghiggeri, Senate Fiscal Analyst:
I believe it was 4 percent last session plus a step at the top.
Senator O’Connell:
When you say 4 percent and a step at the top, is that about 4.5 percent?
Mr. Ghiggeri:
Yes.
Senator Raggio:
I might also indicate that I sit on the government affairs committee and all of the counties have endorsed some very reasonable but expensive salary increases for county officials, and they have indicated they have the ability to make these payments. I am not against the cities and the counties; we all represent those constituents as well. We also need to be aware of what the differential is and what some of the concerns have been and where our money is needed.
You have in front of you a slide packet (Exhibit L), and the first slide shows that since the tax shift in 1981 through 2001, the State and university employment growth was 17 percent less than the population growth; this is for State workers and university. During that same period, local government and kindergarten through twelfth grade (K through 12) were 5.2 percent less than population growth. The State workers and university payroll growth was 9.1 percent less than the combined effects of population growth and inflation. Local government and K through 12 payroll growth was 16.7 percent greater than the combined effects of population growth and inflation during the same period. This is payroll and is a startling figure. It is a 25 percent differential.
Between 1991 and 2001, State worker and university worker growth was 19.2 percent less than the population growth. For local government and K through 12 employment, growth was 4.2 percent greater than the population growth, again a 23 percent differential. State and university payroll growth was 7.6 percent less than the combined effects of population and inflation and for local government and K through 12, payroll growth was 10 percent greater than the combined effects of population growth.
The next slide is “Comparison of State and Local Employment, Payroll and Average Wage Growth (1981 through 2001)” (Exhibit L). You can see how the population in comparison to employment has varied from State and local.
You have on the next slide, the total number of State government and university employees versus total local government and K through 12 employees. You can see the distinction in the amount of growth of employment.
The next chart illustrates the need that has become the State’s concern with the General Fund expenditures for human resources programs. It shows the recommended appropriations for FY2004 through FY2005. In Clark County the expenditures grow to a little over $430 million, in Washoe County it is $130 million, and the balance of the State is under $100 million.
The growth in General Fund expenditures for human resources programs in Clark County will grow to over $110 million, in Washoe County to over $30 million, and the balance of the State is shown at a little over $20 million.
The pie chart shows the recommended appropriations for General Fund expenditures for human resource programs. Clark County will receive 67 percent, Washoe County 20 percent, and the balance of the State is 13 percent.
There is another graph, State and local new property tax revenues under S.B. 308. This shows the revenues that would flow to the State and local governments. The chart, “Potential Effect of S.B. 308 on State and Local Revenues,” assumes a 2.6 percent annual inflation rate and that all new revenues would be attributable only to growth and assessed value. In this projection we have taken from FY2004 through FY2013 and have applied the factor of 7.5 percent as property tax revenue growth.
Ted Zuend, Deputy Fiscal Analyst:
I was just at the Clark County Web site and they have their factors for the next fiscal year and it was up only about 8.5 percent. The numbers in the Executive Budget appear to be too high because they are at 10.1 percent. So I knocked the Statewide growth predicated on the Clark County growth to 7.5 percent and without any further information for the following year, I used 7.5 percent again.
Senator Raggio:
That is a very conservative estimate of the growth and assessed value. Continuing with the chart, you can see for FY2004, using a 7.5 percent factor, the unreserved property tax revenue would grow to $943 million. In FY2005, using the same factor of 7.5 percent it would grow to $1.13 billion. If you apply S.B. 308, the State’s share, which will be realized in FY2005, would be $45 million. The local new revenue would be $25 million at that point and the estimated local unreserved revenue would be $968 million. As you look down for each year on this chart with the conservative growth factors utilized, it will show you the estimated State revenue from this source and how it would grow.
Taking this information, if you would go back to the graph for new property tax revenues under S.B. 308, the blue line would be the State revenue and the first year is higher due to the roll up from FY2003. Thereafter, the State’s share in new revenue from this source would be about $28 million and you would see the blue line consistent across the chart and is the new money flowing to the State each year. The local revenue would continue to grow in accordance with the red line. I have been trying to illustrate by graph, when you make all the adjustments for inflation and deleting all the other deleteable factors it is much less than half of those kinds of revenues.
The next sheet shows you the simulated effect of S.B. 308 on each county and we used FY2002 as a base. Mr. Zuend may be able to explain this chart better than I can.
Mr. Zuend:
This chart simply puts into place S.B. 308 for FY2003 and using FY2002 as a base. These are red book numbers and it simply estimates them. The assessed value is fluid over the year, but the way S.B. 308 is structured, it would be balancing against red book numbers each year. For each county, it shows the change in assessed valuation, net of 22.8 percent inflation adjustment. It also shows the amount of unreserved revenue. Again, unreserved is the amount that would be applicable to the share, or share revenue.
The tax rate in the middle of the table is in effect a derived tax rate because it was done at the county level and simply takes the taxes divided by the assessed valuation. The next column is base numbers. You also have the percent increase of all unreserved revenues for each of the counties. This is not a definitive table because it uses a countywide base rather than as an individual county, but it should be very close in most cases.
You see the State’s share of the new revenue in Carson City, for example, is $178,000. The locals would retain approximately $542,000. The highest percentages would be Storey County because they had such a huge growth in assessed valuation that year and they would have to share $700,000 in additional revenue. About $260,000 would have to be shared with the State because they had an assessed value increase of about 27 to 28 percent of the net proceeds that year.
Some counties have actually declined and there would be no share there and you will see some cases where the county did not meet the 2.8 percent growth. The 2.8 percent was used because it was the actual 3-year moving average of the inflation rate ending 2002 compared to 2001.
You notice the local increase overall in revenues will be 7.9 percent and of course there is no State increase.
Senator Raggio:
As you can see, this chart gives you what would have happened this year if the bill had been in effect.
The next sheet shows for example in Washoe County all of the various taxing entities and how this would apply. The net result and the State’s share, if it had been used in Washoe County, would have been $1.153 million and the local share, known as the new unreserved revenues, would have been over $12.5 million. This is an example of when you apply the rate, the local government rate applies to the whole money without taking any of these other exclusions.
The next sheet is a little clearer without all the detail of the previous sheet and shows you exactly what I just said. It is the estimated effect of S.B. 308 on Washoe County for FY2003. Had this bill been in effect for this year, this would be the effect for Washoe County.
There is another slide and so many people think this is the main source of revenue for local governments, and as I had indicated earlier, the intent was when we did the tax shift, the local governments would not be primarily reliant on real property tax, but as I had indicated, on sales tax, as well as the State being primarily reliable only on gaming tax and sales tax. I have neglected to mention that early in this decision-making process, the State was allotted and took 5 percent for debt service. This figure grew over the years and for the last 12 years or so, we have capped it at $0.15 and that is the only amount the State realized from real property tax at this time.
The next slide shows property tax revenues as a percent of total general government spending and total General Fund spending for FY2003. In the case of Washoe County, the property tax revenue is 30.7 percent of the general government spending and 41 percent of General Fund spending. In Clark County the figure for property tax revenue is 16.8 percent of the general government spending and 30.7 percent of the general fund spending. A lot of people believe this is the major portion of the county funding and I want to make clear the actual amount.
This pretty much illustrates what we are talking about and without taking any more time, I believe it can be readily seen the results are not as drastic as the local governments would have you believe and I hope some of this has helped in understanding exactly what the impact of this bill would be. As I have stated before, in this sense, it is not a tax increase although it will mean local governments, whether it is for general operation or for future bonding, will have a smaller pot of money to utilize for those purposes. It also means that local governments will have to tighten their belts as the State has been forced to do. Revenues have not been keeping up with the growth in this State and the new growth is not bringing in the kinds of revenues we had anticipated. I believe the responsibility the State has assumed should be part of the process and the State should begin to share in the benefits that flow from new growth instead of inheriting all the problems that new growth brings. I just used the Department of Human Resources as my example, but I could have easily used any other department.
In your packet is information grouped together (Exhibit M) that will show you all of the programs of the Department of Human Resources, Division of Mental Health and Developmental Services, Temporary Aid to Needy Families, Medicaid, Aging Services Division, Division of Child and Family Services, and the Health Division. It illustrates the growth and from where these problems are emanating and where they have to be addressed as the State’s responsibility. This packet is very informative. I want to thank you for your time.
Senator Neal:
I have noticed in your remarks, you implied that gaming should not pay any additional money.
Senator Raggio:
I do not know where you got that.
Senator Neal:
In your remarks you spoke of gaming paying a lot and we cannot continue to depend on gaming, and from those remarks I discern this was an animal that could not be touched in this particular scenario and given the fact that we have not increased this particular area since 1987. Those increases can only be done by the State when we talk about gross gain and revenue. Over the years we have not allowed the gaming industry to keep up in terms of its gross gain and revenue as far as growth was concerned.
The other argument would be that for each 8000 employees employed by gaming, it is a cost to the State of about $4.3 million according to the Governor’s study done in 1998. When we look at this and the number of tourists being brought in, there is also a cost that local governments would have to pick up in terms of these increase in their revenue because the State has not taken care of its duty to increase the gross gaming tax.
My point is when we look at the figures, no; let me ask you this. When we look at the school distributive fund, and those areas in which the State has to put into those particular categories, are you saying the cities, in terms of the amount of money they take for growth and add to their budget for other things such as salary increases, that a portion of the money should be coming to the State? Is this your argument?
Senator Raggio:
Yes. I think the State should share in the revenue that flows from the growth and assessed valuation. As the State grows, this is the best measure of what is occurring in the State and that is the growth and assessed valuation. In fact, assessed valuation has grown faster, percentage-wise, than the actual growth in population and the State should begin to share in some of this, and this is my statement.
In reference to your statement, I believe you misunderstood what I had said. I am not suggesting that gaming tax increases are not something that should be considered. I believe they should be considered this session along with the other items. This is not a tax plan. As I have expressed, this is a component of what I believe should be in any tax plan that we enact this session and if we do not, I believe we are not being realistic in serving the public nor are we making the best and effective use of the taxes we presently have. I did not say I do not support some kind of a tax increase on gaming. I was merely making the point that gaming taxes and sales taxes do not have the steady growth or stability that you get from ad valorem tax on growth and assessed value. Furthermore, making a point that the State’s responsibilities have been growing in greater proportion than the growth in population, the growth in revenue from these sources, they are cyclical, and they do go down when we have a problem as we did after September 11, 2001.
We are sitting here gambling that we are going to have enough money to get through fiscal year 2003. We may or may not do some bridge funding to get through this session, but we are hoping we can get through it. A lot of us think this war is going to be short-lived, and it may not be and it may have a serious economic impact upon the State and the revenues that we get from this being a tourism-based State.
Senator Neal:
I served on the budget committee for a year or two and I learned some things about how we do the budget. One of the things I learned is when we put the budget together, we take into account the salaries, benefits, adjustments, and other expenses, then we come up with total budget requirements. When we go back and look at the 2001 and 2003 budget, we see certain things happening and the process continues into 2002 and 2005 as to how the budget is put together. Would you say that a lot of the property tax money goes into the budget?
Senator Raggio:
No, that is not true. The only property tax that goes into the State General Fund is $0.15 out of whatever the tax rate happens to be at the maximum of $3.64. Fifteen cents is all the State realizes at this time from real property tax and that is earmarked for debt service and capital improvements. We have not increased the $0.15 for at least 12 years and during the last several sessions we have had to act imprudently in utilizing this money, not only to service debts for capital improvements, but we have had to use this money to fund things like maintenance. I believe this is tragic to think the State’s funds are that limited and we are using this kind of money to service bonds to do maintenance and deferred maintenance.
Senator Neal:
Let me just give you an example of what I have come to understand about the budget. We put together salaries, benefits, and other adjustments and we come up with the total budget requirements. Then do we subtract what we call the 50 cents you mentioned?
Senator Raggio:
It is 15 cents.
Senator Neal:
What about the 50 cents for property school tax?
Senator Raggio:
No. No. The 75 cents that goes to the tax rate imposed in the counties for schools is excluded from this calculation. It is not going to be received in any form in any share by the State. The school tax is out of the equation as well as the tax rate for existing bonds or any long-term contracts.
Senator Neal:
You are saying we do not use the 50-cent school property tax to formulate the budget?
Senator Raggio:
No. When we do the Distributive School Account (DSA), all of this is taken into consideration as a source for funding of the K through 12 programs. Under the Nevada plan, this is part of it. Not all of it is in the DSA, only a portion of it is in the DSA. If there is not enough collected by the local school districts either through property tax, sales tax, or any of the other components, the State has to make up the difference. We guarantee this and have to make it up from the General Fund, none of which is received from property tax. There is a portion of the 75 cents outside the DSA and not all of the 75 cents is in the DSA.
Senator Neal:
This is never included in the budget?
Senator Raggio:
No. It is never included.
Mr. Leavitt:
This is a group organized by the cities of Henderson, Reno, North Las Vegas, Sparks, and Las Vegas. We have today the mayors of those cities who, collectively, represent 1.1 million people in the State of Nevada.
This is a bad bill and I would like to tell you why. When you go beyond the formulas, and look at what is really happening, we see some strange things. Local governments are essentially organized by authority of the Legislature and provide services within their local jurisdictions. They tax the people who live within those jurisdictions and receive additional money as levied by you and control the money that is spent within those jurisdictions. When looking at this bill, what we have happening is we have local governments levying local government boards and property taxes on behalf of the State. Looking at the chart Senator Raggio had up earlier (Exhibit L), the blue line represented new money every year, but the actual levy of those taxes is done by the local governing boards and the benefit from those taxes comes to the State. In other words, they are charging money for which they have no control of the expenditure side and will possibly be spent in jurisdictions all over the State, having nothing to do with the jurisdictional boundaries for which that tax has been levied.
When you figure the State would get the money but has no responsibility to the taxes, they would have spending responsibilities and will determine the cost levels on the money raised by the charge of the taxes by the local governments.
It does not make sense. You have the local governments taking the responsibility for charging the money and you avoid anything to do with the two-thirds rule and you essentially have revenue without responsibility. You do not have to go to the voters and say their taxes have been increased but what you have done is to have the local governments do it.
We normally think when a government levies taxes, it is done on an equal basis throughout the jurisdiction. When we levy a property tax of 15 cents for the State, we know that everyone in the State has a responsibility to pay and it is equal throughout the State and the same goes for a city tax. The State constitution calls it uniform and equal. In this situation, for this bill, we have taxpayers in some counties who will pay nothing for the operation of the State and we have taxpayers in other counties who will pay a substantial amount, and over time could approach 50 percent of their total revenues from property tax going into the State General Fund. If this is not unconstitutional, it should be.
Mr. Leavitt:
It seems to me if the State feels the need for additional property taxes to add stability to the budget, it can be achieved by a levy of property tax on behalf of the State for all residents of the State. It would be a simpler bill with a couple of lines of print. It would be a direct levy that would benefit the people of the State and you would have equalized the levy throughout the State.
We will not have people in Clark County paying the majority of the money other than what is assessed by their own value. The other thing about this bill is that the higher the tax rate you pay, the more you pay to the State. Think about it. You are paying based on this increase in assessed valuation over a base and the higher the tax rate, when applied to this differential, the more you pay. If you pay $2.50 as a rate with the same growth, you are going to pay less to the State than if you paid $3.50. It does not make sense if this were the case. By the time you get overlapping jurisdictions and you are computing this for every local government, you are essentially computing this growth several times to come up with the total rate.
On the debt issues, the bill provides the debt issued prior to June 30, 2003, is exempt from this provision and the debt issued after that time is not exempt. Think about what this means. Local governments want to issue bonds and they want to go to the people to get approval. Let us assume there is a local government project that is going to cost 15 cents to fund the bonds; they go to the voters and ask for the 15 cents. Often bonds are structured so they can be paid into the future of new revenues and a moderating tax rate over time. Think about what happens. You tell the voters there is a 15-cent charge to repay the bonds but there is a portion we have to levy over and above this to get enough money to give the State its portion.
Whenever you go to the voters for a bond issue, you have to ask more than you otherwise would simply because the State is taking money off the top for all bonds issued after June 30, 2003. The same thing would apply to overrides. If you had a bill like you had today from Metro, S.B. 334, asking to go to the voters, when they go to the voters, they have to let them know that a portion of the money will go to hire new police officers but a substantial portion will go to the State General Fund. Do you think the people will approve those things? I would be surprised if bonds were approved taking this approach.
We also have redevelopment. The redevelopment agencies get what is called increment, which is the revenue above a certain base level, and most of them are in trouble now. Of this growth in property tax increment on an annual basis over and above where it is now, you are essentially cutting this in half. For all practical purposes, redevelopment agencies are going to be eliminated. By the time you take half their revenue growth away from them for the future, you have essentially eliminated these agencies.
There is a letter from John Swendseid who serves as bond counsel for redevelopment agencies and I would like to enter this into the record (Exhibit N).
Mr. Leavitt:
Senator Raggio made a comment and he is correct when he said that the State only gets 15 cents of the ad valorem revenue going into the State General Fund. What is not being said, however, is the levy for schools, the 25 cents in the formula and the 50 cents outside the formula, has an effect on the State General Fund exactly the same as if it came directly into the General Fund. There is no difference in the total effect and the benefit to be derived from those taxes benefit the State General Fund exactly as if you had levied them directly and put them into the General Fund.
I have given you a chart (Exhibit O) representing Washoe County and Clark County. If you look at page 1, “FY03 Property Tax Rates,” and compare this with the amount of revenue going to the State and the schools, you will notice Clark County gets 52 percent and the State get 48 percent. As I mentioned before, you have the 15 cents levied by the State, you have the 25 cents as part of the formula and you have 50 cents outside the formula, but both of them have exactly the same effect as if they were in the State General Fund for a total of 90-cent ad valorem taxes that benefit the State every year for operating purposes as shown by the chart. Washoe County has a slightly higher rate, but in Clark County it is almost divided equally.
For all practical purposes the State is getting the benefit of growth and assessed value of 50 percent of the total assessed value growth in the State and you are doing it either directly or through the schools which you have a responsibility for funding. We have heard the statement that the assessed valuation is growing rapidly where local governments could actually shave a portion of this off every year and you will still have enough money to provide for your operations.
The next chart on page 2, “Per Capita Assessed Value,” compares over time and adjusts for the Consumer Price Index (CPI) to see where we are compared to growth in population and changes in price levels. There are some interesting things happening around the State. In this chart there are some communities who have a growth in assessed value per capita and these are the rapidly growing communities. We also see communities going through cycles. In recent years, several bills have been approved to allocate more of the joint revenues to growth, recognizing that additional money is required to fund government services in areas that are growing more rapidly.
There is a benefit from a community growing rapidly, but as they go through a cycle as with Reno, we can see that over time Reno actually lost assessed valuation per capita. By the time you take the life of a community and average this out you are even when we compare assessed valuation with consumer price index growth.
Mr. Leavitt:
Senator Raggio spoke of the property taxes not making up for majority of revenues for local governments, and he is right. In the cities I represent, essentially we have about 20 percent of the revenue to local government made up from property tax. You could say when you take 20 percent off the top you are not hurting your revenue because it takes a small portion of your budget.
Look at the chart on page 4, showing the General Fund revenues for these cities. Notice where the majority of the revenue comes from. It comes from the consolidated tax and the major revenue of a consolidated tax is sales tax. Sales tax is the major revenue source for local governments and it is also the major source for the State. When you talk about State instability as a result of revenue coming from certain sources, local government has that same effect. If you think of the State benefiting from property taxes equal to local government, and you think of the sales tax being the major revenue for both the State and local governments, what is the difference? Both are subject to the cyclical things happening around us and both have the same kind of budget problems when we are faced with recession.
Other statements going around essentially say that since the State has to fund education, the local governments ought to be willing, for the benefit of the people, to chip in a part of their revenues to help the State out in their desire to adequately fund education. There is a graph on page 6, “General Fund Expenditures” that shows this. You will notice 61 percent of the local expenditures in these groups of cities go to fund public safety.
It is my belief State and local governments are equally important. For the citizens in the State of Nevada to have a reasonable lifestyle, you have to have a guarantee of a reasonable education, but what good is this if you do not feel safe in your environment. If public safety makes up 61 percent of total revenues and you reduce our ability to grow in the future, how can you, over time, avoid doing something you would not otherwise do to the whole public safety function? We have seen, and I have illustrated this on page 5, “Urban Per Capita Consolidated Taxes,” as to what has happened to consolidate taxes over the last 5 years. See how it has gone down? The local governments fund their employees at a higher level than is paid by the State. The laws passed by the Legislature relating to local government employees are different than the laws passed relating to the State employees. I am not suggesting there is a problem, just that they are different. There is collective bargaining and arbitrators who base their conclusions on other salaries to set salaries in many local governments. The effect of this, if you look at local governments, standing alone not with the K through 12 numbers and looking at the chart on page 7, “Employees Per Capita,” you will notice the employees per thousand residents has gone down consistently over the last 10 years. For whatever reason, we have been unable to keep up with this growth.
Mr. Leavitt:
Let us look at what the effect of all this is. We know all the numbers for the last 10 years, but what if this bill had been enacted 10 years ago? If you look at page 8, “Urban Property Tax Distribution,” the dark line indicates our growth in revenue over these last 10 years. The lighter line indicates what our revenues would have looked like, using actual numbers and situations, if we had enacted this bill 10 years ago. I have done this chart for all of the cities.
If you turn to page 10, you can see what would happen in Henderson. In the Henderson situation, if this had been enacted 10 years ago, 43 percent of what their current General Fund revenue is for operating purposes, property taxes would be going to the State. If you look on page 12 at North Las Vegas, the situation is very similar.
Page 11 has the city of Las Vegas and although it has had a large growth percentage-wise, it has not grown as fast as North Las Vegas or Henderson, and you notice the effect is not as great. Even though the dollars might be greater, the percentage effect is not.
If you go to page 13, the city of Reno, you will notice the effect is less than the cities in Clark County, but you will also notice there is still a considerable effect and a loss of revenue over what they otherwise would have, and if accumulated over time, they become substantial amounts.
The final graph illustrates the same thing for the city of Sparks. On the right of each one of these sheets are projections for the future and we assume they are going to grow the same percentage they have over the last 5 years. You and I know projections are guesses as to what might actually happen. I believe it is much more informative to look at what would have happened had we implemented this bill 10 years ago. When you talk about tax policy for the State, when you speak about having the idea you are going to do this by having local governing boards levying property taxes on behalf of the State, when you have these boards going to their electives and asking to add more money onto bond issues because the State is now taking a portion of it, when you have the metropolitan police going to their voters and having to add more money for more officers because the State is getting a portion, I cannot imagine this as being good tax policy.
Michael R. Alastuey, Lobbyist, Clark County:
I am here in opposition to S.B. 308. I have a handout that I will be referring to during my testimony (Exhibit P). Senate Bill 308 would take revenue from those communities who generate it and need to retain it to protect and serve their citizens, and instead divert it to other uses for which the taxpayer made no such decision. In addition to the enormous fiscal note in circulation with this bill, among Clark County governments alone, we believe the impact is going to exceed $50 million in the first year of implementation, $90 million in the second year, and $130 million in the third. These numbers do differ from the analysis presented by fiscal staff earlier, but we submit that their reading of the bill is wrong.
With all this said, I believe this is a bad bill and a bill that cannot be fixed. It is founded on a number of misconceptions. The first is that the State does not benefit from the growth and property tax revenue. This is not true.
Pages A-1 through A-7 (Exhibit P), show the first step as to how the State funds public schools using the current biennium FY2002 and FY2003. Note these numbers are not rounded and are stated to the individual dollar because these are the individual dollars in the same worksheets that go into writing the bills you voted on for the last 10 sessions.
First of all you calculate to the dollar the virtual exact amount of salary and benefits required for the school districts to operate within the assumptions plus salary parameters you dictate. You add to this the other expenses along with the adjustments, and the total budget requirements equal $1.8 billion for FY2002 and $2 billion for FY2003.
From this amount is subtracted the $0.50 school property tax at $268 million and $293 million, then deducted are other school resources at $258 million and $272 million, respectively, reflecting primarily the remaining sources of General Fund income to school districts including the government services tax, investment earnings on portfolio holdings, small residuals in federal impact aid, and so on. Remember you have already deducted over a quarter billion dollars from the $0.50 school tax from State responsibility. This subtotal, $1.343 billion and $1.44 billion is then divided by 344,000 and 360,000 school children enrolled in the 2 years of this biennium. The cost after division for each student is $3897 and $3991 and I will trace this into the bill you passed.
Mr. Alastuey:
After special programs, in terms of class-size reduction, special education, and other allocations, are then deducted the proceeds of the 25-cent school tax and remaining taxes including the local school support tax, the dedicated slot tax, mineral land leases, and so on. I would point to the 25 cents on school tax as being separately done at a different stage in the calculation than the 50 cents for one historic reason. After the 1981 tax shift, there was only 50 cents in tax authority allowed to the school districts. This was off budget and outside the formula and not in the budget or General Fund, or even recognized in the calculation in any form. In 1983, as part of the resolution to the State’s then fiscal crisis, the upcoming Governor Bryan recommended the 25-cent school tax was put in the Distributive School Account in effect moderating or reducing the amount of General Fund that would otherwise be needed to balance the budget and in effect utilized this as a State revenue.
For further discussion you will have to add the proceeds of the 25 cents and the 50 cents even though they are taking different stages in the calculation and the capture in terms of the numbers being a little different. It is approaching $500 million per year in the current biennium and it is something that nobody mentions. I believe Mr. Leavitt has looked at this and the other local fiscal officers with whom we have done a number of analyses over the last biennium have looked at it, and I think we are all in agreement this is a correct analysis.
Further, there is $496 million in General Fund and $543 million in General Fund required. I believe most everyone voted on S.B. No. 585 of the 71st Session and in section 1, $3897 per student and in section 2, $3991 per student and on page A-3 in section 4, are the same General Fund appropriations that are calculated here. Not only are these revenues real to the State, they are in effect codified in the amounts of General Fund support you pass every 2 years.
Chairman McGinness:
Is it possible, Mr. Alastuey, that you can finish your testimony later? There are some mayors who need to testify. For the record, Senator Coffin is excused for the remainder of this meeting; he has family issues.
Oscar B. Goodman, Mayor, City of Las Vegas:
I have been charged with being the mayor of Las Vegas and my city council representing 514,000 citizens to make sure we protect the health, safety, and the general welfare of those people. What I have heard today, and before coming here, is S.B. 308 in effect suggests the robbing of Peter to pay Paul. Las Vegas is being challenged. We are all facing the war, 48 out of the 50 states have gambling, the Indian reservations are giving us all the competition we can handle, and the only chance Las Vegas, which is the heart and soul of the valley and the core of the apple, has to survive is if we remain healthy and if we gleam and glitter as we have done in years past. To suggest that money is to be taken away from us, money we need to perform vital services, bodes failure, and the effect of this would be felt not only in southern Nevada, but throughout the State.
The sheriff of the city of Las Vegas has made a request he believes is necessary in order to provide public safety for our citizens. He has 1.7 officers per thousand citizens. The national average is 1.9 per thousand citizens, and money is needed for 9‑1-1 emergency services. We need him to make sure our streets are safe, and for officers to have a presence, which is not only a reality for safety but also provides a perception of safety in order for our downtown area to grow. This bill would in effect preclude us from giving the services and relief for which the sheriff is asking for. His budget has been reduced by $20 million without the ramifications of S.B. 308; this is how tight it is in southern Nevada.
My particular concern is with the aspects of redevelopment.
If we did not have our redevelopment in downtown Las Vegas, particularly in the
last 4 years, very little would be done which generates a prospect of success.
Because of our redevelopment funds, we were able to get the Pauls Building, or
our center city building, and is the first class A office building to have ever
been built downtown in 29 years. We have been able to entice the Chelsy
properties,
which will be building 130 premium discount stores on the old Union Pacific
site. This is going to bring down at the end of the first year of operation in
August, 2004, some 8 to 10 million people to an area where there are
presently none.
Oscar B. Goodman, Mayor, City of Las Vegas:
We have been able to diversify our economy overnight by enticing World Furniture Mart to come in with 200 furniture businesses from all over the world, basically replacing the existing furniture industry, and it will be located in southern Nevada. Because of our redevelopment financing, we have been able to entice the Internal Revenue Service and get them in the heart of our city and we will collect taxes from them. The future of our well-being in southern Nevada with an academic medical center can only be accomplished if in fact we are able to use our redevelopment, tax-increment financing.
This bill would kill these plans. In addition, the city has been frugal and wise in the way we have managed our affairs. We have had a hiring freeze for the past 2 years. We are asking 90 percent of our employees to do 100 percent of the work. We have not taken any increases in salaries for elected officials. We do not take automobile allowances. We are as lean and as tough as we can be because we understand the times are tough, and we have to lead by example.
We ask that you consider our ability to make sure we are able to provide the services you have charged us with providing. We are fulfilling our responsibility to you because you have charged us with it. In addition, we have done things we have not been expected to do. Since 1997 we have spent $8.5 million to take care of the homeless population although it was not our responsibility, but we stepped up because they were in our city. If we had not done this, there is no telling what would have happened to these people in our community.
Being as prudent and as frugal as we have been, the bottom line is when we submit our tentative budget, which will be done in the next several weeks, we are going to have an $8 million deficit. We are asking you to reject this concept which will put us in a position to be in harm’s way and will have a devastating effect on our community.
David Aiazzi, Vice Mayor, City Council, City of Reno:
I represent 185,000 people and will make my comments brief. I am trying to get a handle on what this bill means and it seems the State is trying to set up a redevelopment agency. The best way for me to understand this bill is that it is going to be set up where we are going to cap the taxes and take a percentage over that cap.
My response to some of the testimony heard earlier and the statistics seems that the rationale behind some of this is the hiring of local governments over State employees. I believe what is missing from those statistics are how many of those hires were done at the bequest of the people in voter overrides. When we asked the voters to go forward to build a new fire station or include new fire department personnel, police department personnel, or for new parks, they voted for these people and we want to make sure this continues. We want to give them the option so they can vote and have the personnel go along with the things they vote for. In Reno, almost 45 percent of the voters have approved bill overrides. We have taken a lot of interest in asking them what they would like for us to do with the money.
I believe the City of Reno is the closest to the cap of any entity in the State. There is only 5 cents left. One of our concerns is if this passes, and in the future more and more of the increment goes to the State, there will be nothing left for Reno to even ask the voters to go forward with on some of the bills.
Senator Neal:
How often is property assessed in the City of Reno?
Mr. Aiazzi:
The county assesses the properties once a year.
Senator Neal:
The reason the question was asked is because I happened to be here in 1981 when we dealt with the tax shift and when we came back and tried to correct that you were assessing property every 5 years.
Mr. Aiazzi:
It is done once a year as a total assessment. Every 5 years, the assessor actually goes out and makes a physical assessment of 20 percent of the property. The other 80 percent is done on a formula every year. Therefore, every 5 years there is a more thorough assessment.
Senator Neal:
I hate to say it, but this bill would benefit you using this type of formula.
Michael L. Montandon, Lobbyist, Mayor, City of North Las Vegas:
I oppose this bill on behalf of the 140,000 citizens I represent in the City of North Las Vegas. You have heard a lot of technical data but I want to make two specific points in reference to my City of North Las Vegas.
We are growing very rapidly and grow by an average of 1000 people per month. The growth does not come smoothly. In two areas, our assessed valuation tends to grow in spurts and waves. As we have huge waves of residential growth, referred to as rooftops, they do not bring in the government revenue necessary to provide services to all the people who live in those rooftops. There are catch-up periods where the Wal-Marts, Albertsons Foods, and Smith’s Foods realize there are not enough rooftops and we get another wave of commercial development and they offset that and allow us to play catch-up.
As I was listening to the testimony, a couple of examples came to mind. With an influx of 1000 people per month, we need approximately 2 police officers and 1 fireman for those numbers. We should be hiring these numbers every month. As you can imagine, we are not. At present, we have one fire station under construction, one fire station being considered for construction, and one on the drawing board and all three have been funded through development agreements and developers are building the fire station. It then becomes our responsibility to man these fire stations. We are counting on the revenue from growth to be able to man both the fire and police stations. We cannot man these stations in numbers equal to our growth in population. We cannot afford to lose the top of that revenue.
Our situation in North Las Vegas is not unlike that of other cities. I heard the fiscal analyst Mr. Zuend refer to Storey County having grown 27 percent in assessed valuation in 1 year. My guess is they did not grow 27 percent every year, and what has happened is that year after year they are growing at a rate that under S.B. 308, they probably would not have been affected. When they get a new power center or Wal-Mart that has caused them to grow that percentage, there is the State waiting to take their share from the growth. This is an exaggerated version of what would happen to all of us in southern Nevada and high-growth areas every year.
Tony Armstrong, Mayor, City of Sparks:
I represent a city of approximately 75,000 people and I would like to say this is a tough committee to be on and I appreciate each and every one of you for being here. I would like to hit on a few points and talk about public safety. Currently, the city of Sparks has approximately 550 employees and public safety is a number one priority with the city council. Looking at the national average, we are currently understaffed by 13 police officers and 18 firefighters. We have a fire station and do not have the $900,000 it is going to take to put those firefighters in that fire station.
Our budget is $43 million and we have cut our budget by approximately $3 million this year. Although it has been tough, I believe we have done a good job with 550 employees. We have a backlog of $43 million in city street repairs and it growing at 3 percent per year. I can tell you the City of Reno has four times as much of a backlog in repairs.
We have issues with downtown redevelopment and I believe this was mentioned, that currently, there are two bills the school district has. One bill is for the Truckee Meadows Water Authority. Since Reno, Sparks, and Washoe County bought it and took it off the tax rolls they are losing money and want that money back. We have a redevelopment bill that the school district is looking at and it is taking about 75 cents for schools and if this passes, our redevelopment project will die. I am not a fiscal analyst, but I can tell you we have dollars we have to pay every month or year in terms of bond issues; we have to pay those monies back. How this came about is we have had a reduction in tax revenues from John Ascuaga’s Nugget, as an example, and the Silver Club, because gaming revenues have been down, and property taxes have been down due to depreciation.
We have lost in the last year and a half, approximately $1.2 million just to our redevelopment agency. This means we have $1.2 million less to work with for our projects in the redevelopment agency and this is why they are looking at a 2.5-cent, self-imposed room tax for our redevelopment. What we want to do is return to the 2000 values we can use in order to move forward with our redevelopment project. If the room tax goes through, the 2.5 cents will bring us about $800,000 in revenue we have lost and give us an opportunity to move forward with our redevelopment project.
Senator O’Connell:
You had mentioned the water district and the amount taken off of your tax rolls. Would you share with us the amount taken.
Mayor Armstrong:
I had heard it to be somewhere around $800,000 to $1,000,000 per year lost tax revenue to the school district.
James B. Gibson, Mayor, City of Henderson:
You have heard talk about redevelopment and public safety and other things and we are affected no differently in the City of Henderson. In terms of scale, our problems are different than in the City of Las Vegas. We have committed tax increment to financing projects in our downtown area. We are convinced that because our commitment, as negotiated with developers, relies upon the forecast of incremental growth that we will impair existing contracts if we do anything like what has been proposed in this bill. We have had difficulty with ballot questions in Henderson. Although there have been a number of ballot questions in respect to the financing of schools, they have failed on a countywide basis. There has never been a time when the City of Henderson failed to adopt them and has succeeded in our community. We have never had a public safety bond issue or an override question fail in this city until 2 years ago and we tried to do it twice and were beaten back both times. We are convinced there will never be another successful public safety ballot question if this legislation is adopted.
We approved an aggressive park development program in 1997 and it was the largest we have ever adopted and it has been required of us to do this. We have had to do this because of the growth and it was the only way we could bring the parks into the city and into the neighborhoods in a way that would meet the expectations of our citizens in respect to the quality of their lives. In order for us to go forward and continue to do anything similar to what we have done in the past, we are going to have to have the support of the voters and they are not going to support proposals that fund other things in addition to what they consider to be the things that directly benefit them in our community in this way. The gap is larger for our faster-growing communities. This is established by the data you have in front of you (Exhibit P). We are not in a position to slow growth and none of us are to say we are going to start handling these applications more slowly. We are governed by State law and we do not have the ability to create new hoops and slow this entire process, and because of so many other statutory obligations we face, and because of some success we have had, we are moving development through the process at a very rapid pace.
Mayor Gibson:
We have been blessed with growth, but by going forward you can also see that we will be cursed by it and not be able to do much about it. The gap we would have experienced, as Mr. Leavitt indicated, was 43.3 percent if this bill had been enacted 10 years ago. Going forward we will be impacted over the next 10 years at nearly 40 percent. We have a city today that approaches 225,000 people and it is not likely we are going to slow appreciably in the way we are growing and this suggests to us that the gap will grow larger. We could not do without these funds. We have looked at the question of wages because we are growing and it has been required of us to grow government some.
If you look at the trend, we are growing some in terms of numbers, but in terms of the per-capita analysis, we have fewer people working for the city today than we had before. I believe the number is 6.1 employees for every 1000 people who live in our city. We took 120 of the most highly compensated people and we drew the line at $100,000 and we discovered there are 20 who are executives, department heads, and others; the rest of the people are governed by collective bargaining agreements.
We have investigators in the police department who are investigating serious crimes and spending overtime to do this, we are obligated by contract to pay for that and they are making this kind of money. We had a senior maintenance operator, and when we had a massive failure with one of our water systems, enough overtime was logged to push the worker over $100,000 that year and there is nothing we can do about those contracts. We are obligated by law to sit down in good faith to reach an agreement with the labor organizations that represent the people who work in our city. The fact is this is a major and a fundamental difference between the way the city does business and the way the State has chosen to do business.
We are concerned about the capacities of our cities to survive in an environment where there will be a pyramid effect on the tax obligation to the people who live in our communities. The assessed valuation is calculated and the funds or revenue will be diverted according to the formula in S.B. 308 for the library district. For the City of Henderson’s own revenue for the other overlapping taxes we will be hit multiple times if this bill becomes law.
We understand the challenges faced by the State and it is good to know there is consensus brewing in respect to the gap in resources available to go forward. Just as we have had to go to the people and determine their willingness to pay, the State Legislature has the responsibility to fund whatever the gap is so the revenues meet the expectations and expenditures. We are not in a position to solve this problem. As the tide goes down, all boats go down, and we are hoping we do not have a situation in this State where the cities that are healthy become impaired, similar to the way the State has become impaired. We are asking that you consider this data and evidence as important because we represent the same people the State represents and the quality of life, which is primarily a function of the things they see us doing every day, is at risk. The perception, once the quality of life deteriorates, will register itself in all of the things and functions that government performs and all the comings and goings our residents are involved in.
Senator Neal:
I am concerned about the tax increment districts in terms of being in violation of the contracts governing those districts. Are your tax increment districts imposed throughout the jurisdiction of Henderson?
Mayor Gibson:
No. We have specific districts adopted by statute and we have to follow those provisions. There are definitions and procedures that have to be followed and we have done this in our city and in all of the cities, according to law.
Senator Neal:
Therefore, the tax increment districts will not affect a certain portion of the taxes.
Mayor Gibson:
This is correct.
Mr. Alastuey:
To resume my testimony from a few moments ago, I was going through our proof that the State does have available about $.5 billion per year in property taxes through the back door of the State distributive school fund. To continue with pages A-4 and A-5 (Exhibit P), you will see that on page A-5, as a result of the deduction of property taxes and the school funding formula, the State contributes about 33 percent of its State General Fund to K through 12 education. If you look on pages A-6 and A-7, on page A-7, you will see that during the 1987 and 1989 biennium, the State contributed about 38 percent of its General Fund budget to K through 12 educations. This means the use of the 75-cent property tax in combination with the 1991 sales tax increase in local school support, in effect makes these school formula revenues operate exactly like State revenues.
I would like to also point out that these calculations and this method of doing business has also assisted the State in funding both Medicaid and prisons in the overall General Fund scheme.
Page B-1 shows a little different way how the State is a major participant and partner in property taxation. This is for a tax bill in an unincorporated Clark County vote, those being one of the unincorporated urban towns. You will see that those levies, and this is a breakdown of all the levies for various purposes, under the governance of the State constitute about 95 cents or around one-third of the voters in unincorporated Clark County. We also share the metropolitan manpower levy with the city of Las Vegas that has spoken for one‑third of that tax rate and the Clark County commission holds governance under State capping requirements of one-third. We think this is a balanced relationship and not reflective at all of any circumstance where anyone would describe that the State does not enjoy substantial benefits and participation in property taxation.
On page C-1 is an excerpt from Governing Magazine-Sourcebook 2001 and is a periodical publication showing a lot of statistics of interest from around the country on State and local government. The State of Nevada, just with the 15 cents and not taking into account the 75 cents or any other residual, shows a paltry participation in property tax. If you look at the second column, you will see that the State of Nevada actually participates to a greater percentage than the national average.
Mr. Alastuey:
Finally, on page D-1 is a bar chart which shows Clark County and other counties Statewide and how the effect of the State and schools hold sway of about half of the property taxation in Clark County. There is another misconception we think needs to be dispelled and that is the 1981 tax shift somehow transferred property taxes or property tax authority from State to local government or somehow the State suffered a consequence more adverse than local government. In reality, the shift in taxation from property to sales took place in two stages.
In 1979, the State, of its own accord, divested itself of property tax to the tune of 25 cents from its General Fund, 11 cents from Medicaid, and there was a dollar involved that was an excuse in giving back to the taxpayers and the school tax, and the State took a major part in substituting sales and gaming taxes, which we have all learned since, are more volatile than property taxes. Therefore, the State did a form of tax shift for its own account in 1979.
In 1981, the State did the same thing but in a different way using a different mechanism for local government with the tax shift. In effect, the maximum rate went from the statutory $3.64 but the practical rate went down into the low $2 range with the advent of the supplemental city/county relief tax. The shift took place in two stages and at no time was any property taxing authority transferred from State to local government. We would also point out that in 1983, following the disaster of the tax shift, the State stepped in and through the school fund, not the General Fund, restored the same 25 cents to its own account it conceded in 1979. Therefore, the 25 cents did come back to the State in some form.
There is a misconception that local government revenues, especially in the more populous and faster-growing counties, are increasing faster than necessary to provide basic services. On page E-1, you will see that over the last decade in Clark County, with summing both tax rates and revenues having to do with town governance and countywide governance, the real per capita revenues at $821 are dead flat. Some may ask, how could this be? What is it that generates revenue? It is the number of people and the price of goods. If all you are doing is capturing the number of people and the price of goods, both in property and sales taxes, you are staying even. There is really no net gain and this is the phenomenon in Clark County. You have heard testimony from mayors in their individual circumstances and you will hear further testimony to the extend that this is not a net gainer for local government, or any mischief that will be performed upon local government revenues in terms of diverting them to the State would take these functions and every function on a real per capita basis and plunge it immediately. I would submit to you, even though this bill’s effective date is not until the second year of the biennium in terms of the actual diversion of revenue, that local jurisdictions would today have to start cutting in order to prepare for the major cuts that would have to take place in the second year of your fiscal biennium.
Mr. Alastuey:
How does local government meet these challenges in view of flat revenue? Typically, the option is to go to the people. This has succeeded on some occasions and it has failed on others, but local governments consult their population in terms of property tax policy and sometimes sales tax policy as well. This is an option we elect and I do not know if this is an option that may be open to you, but it is certainly one we would bring to your attention.
One of the difficult things about S.B. 308 is how it takes dollars the voters have already directed in terms of their overrides, or the voters have already directed in terms of their authority delegated to their local elected officials, to specific service purposes in specific jurisdictions for specific reasons. Everywhere you live, you live in a composite of overlapping jurisdictions. We all live in a county. Some of us live in the city. Some of us live in a water basin. Some of us have other taxing authorities for fire, mosquito abatement, cable television, and so on. Every piece of this mosaic has its own property tax rate and over time this is the composite of decisions that have been made by individual voters for specific services.
Now comes S.B. 308 and in effect punctures a hole in the bottom of each of those revenue buckets and diverts dollars for purposes not elected by the voters, either through their elected representatives or exercised at the voting booth. This we believe is part of the difficulty in dealing with S.B. 308 and the reason why we heavily recommend against its passage. Voters would no longer get what they pay for. They know what they are getting locally. They can complain about it, they can add taxes, and they can do anti-tax reductions, but it is for what they pay. With this bill, they would no longer be getting what they paid for; they would be getting something else.
Mr. Alastuey:
The bill also contradicts several principles of good tax policy. As members of taxation, you have heard a number of analyses having to do with what sorts of features we want and what are the features of the tax policy. Several of the policies you have heard are equity, economic, neutrality, and transparency.
On equity, under this bill, identically valued properties or communities would give more or less to the State under S.B. 308 depending upon their tax rate. If you have a $2.50 rate, you give 40 percent less than someone with a $3.50 rate, so communities at a higher rate could give more. This makes some rural communities especially susceptible if you are already at the cap and your assessed valuation per capita is low. You could have a mine reopen and even though net proceeds from mines are exempted in the bill, the residual or collateral value that builds in the community and grows outside the mines and when this assessed valuation is gone, you are still at the cap and now you have a problem. Just at the time when communities need property tax wealth in order to grow is the exact time they would lose it. It would be economically disruptive and would severely affect economic choices at the site and in the communities.
Any time you have a situation with flat per capita revenue, and you puncture that and take out some of the revenue, this means the decision to develop no longer pencils out for the developer or the local government. The last time we looked, there was over $700 million a year flowing through to the State’s benefit of the Distributive School Account and over $500 million a year, almost $600 million in sales tax to the State General Fund. This is $1.2 billion to $1.3 billion. The construction industry, from lumberyards to concrete, contributes between 10 percent and 15 percent in any given year direct benefit in the sales tax revenue.
A bill such as S.B. 308, which completely inverts the economic incentives for construction and development, would have dire effects, not only on the State General Fund, but effects on sales tax. You really have to examine the economics of this bill.
The bill has other problems and it conceals the likelihood of future tax increases, as pointed out earlier. Local government would actually be levying money to the State’s benefit and in effect additional levies would go to the State. Hence, the levy for which the purpose was made would not be fully funded. This is an issue we believe cannot be fixed in the bill.
Throughout Nevada’s historic road, local government has been a partner with the State, each bearing a share of its responsibility fairly and equitably and each sharing in the benefit of property tax proceeds. You have seen the analysis showing that the State, voters, local government, and unincorporated Clark County have each about one-third jurisdiction, one-third sway over the property taxes, and you have seen the analysis that at least in southern Nevada, it is roughly half local government and half the State and schools. These are balances that should not be disrupted.
Mr. Alastuey:
There was discussion earlier about contributions local governments make or should make. These are particular to Clark County and some in fact are unique to Clark County. It is a sheet called “Unfunded State Transferred Activity.” We have calculated that Clark County, in effect, suffers roughly $65 million per year in unfunded mandates, and over $70 million per year as anticipated in unfunded mandates in the next 2 years of the biennial budget for which you now have under consideration in your other committees.
Some of these are unique to Clark County. For example, Clark County virtually bears the entire intergovernmental transfer for both the disproportionate share hospitals and upper payment limit assistance to public hospitals. Clark County bears a tremendous burden in terms of the cost incurred, but is never reimbursed by the State for juvenile camp and care facilities. There are road maintenance costs that are incurred that are never reimbursed and you may be familiar with the county long-term care match, where we chip in the State match when the State will not for certain long-term care nursing and facilities.
Let me clarify for the record that bargaining has been discussed previously and we want to make sure the numbers are clear. It is true our State employees got 4 percent and 4 percent the last 2 years and the recent offer now in the stages of approval in Clark County is 2 3/4 percent and 2 3/4 percent, 3 percent and 3 percent. Those colors are not quite what the State employees received for the last couple of years, and we realize there are many challenges you have in front of you, salaries versus State employees. This is not a situation where the local government employer, quote, “gives” anything. This is not a program or a responsibility that you have given to local government where the employer has the final say. The local government cannot unilaterally decide what to do as you can for State employees.
Chip Maxfield, Board of Commissioners, Clark County:
With respect to the mayors and others who have testified, Clark County has the same impacts, the same concerns with similar growth issues, the same fiscal concerns and we are here in opposition to S.B. 308; see “Chip’s SB 308 Testimony” (Exhibit Q).
Mary Kincaid-Chauncey, Board of Commissioners, Clark County:
We do not want to minimize the State’s responsibilities in education, mental health, and their need to raise funds for those, but the county also has responsibilities for fire, health care, juvenile services, courts, and many other things. We have to provide these services to the fastest-growing community in the United States and unfortunately, growth costs money. Whether it is 10, 20, or 50 percent, any of those funds that are diverted to pay for the growth of this county is going to hurt our citizens and minimize the services we can provide.
This is a costly proposal and makes for very bad public policy. The Governor’s Task Force on Tax Policy in Nevada said they would be against any approach that would shift as opposed to solving the problem. They further recognized that county and local governments have already absorbed an array of unfunded mandates over the years and are not in a position to absorb more.
Unfunded mandates and money held back by the State for the provision of services is expected to cost Clark County $75 million next fiscal year. This amount includes providing juvenile detention, district attorney family support, maintenance to State roads, health care reimbursements, and more. Many assume this taking of growth money would only affect the larger growing counties, but it would hurt the smaller counties as well. Any time a local government experiences an increase in assessed value, the State would take that revenue. As small counties attempt to bring in new growth in the way of big‑box businesses, their assessed valuation could dramatically increase but the shift of increment to the State would serve as a disincentive as they would lose the benefit of the growth money but still be saddled with the increasing demand on county services. The effect on Clark County is no different and we ask that you not approve this bill, as it would have a devastating effect on the services we can provide to our citizens.
Myrna T. Williams, Board of Commissioners, Clark County:
I agree with what has been said thus far. There are a few things I want to add. As a past president and member of the executive board, I can tell you we all oppose this bill and with good reason.
I do not think people understand that counties have to provide the regional services for all those cities that are included in the county. Granted, some counties do not have cities but Washoe County has cities and Clark County has five cities and we have to extend services of a regional nature such as health care, courts, social services, and juvenile services to all those cities. This is the responsibility of the county. I think our caseloads in those areas are double the caseloads than in any other area in the State. We have to oppose this bill and hope you will see the fact this is ill-conceived.
The other point I want to address since Senator Raggio mentioned it is the pay raises for elected officials in Clark County. Elected officials have not received a pay raise in over 10 years and we do not get per diem allowances. There may be 12 or 15 elected officials as compared to 10,000 employees, therefore, I would like for you to think about this and the fairness of it especially in the larger counties and more populous counties like Clark County where there seems to be a question of whether we have 70 or 75 percent of the population. The figures I saw showed 75 percent and you can imagine that being an elected official in Clark County could never be a part-time job, although it is designated as one. Iwould urge all of you for the benefit and welfare of every citizen in this State to listen to all of the counties and all of the cities and vote down this bill.
Senator O’Connell:
I do have to defend Senator Raggio and correct something that was misleading. He is the one on government affairs who fought to try and get you the raises.
Katy Singlaub, Manager, County Manager’s Office, Washoe County:
I would like to make a few brief comments quantifying the impact on Nevada’s second largest county in reference to S.B. 308 (Exhibit R).
I want to put on record that property taxes account for about one-third of our revenues, sales taxes are about one-third and grants and fees for services are another third.
I also want to address the wage structure since it is important to Senator Raggio, and based on the State’s published report on July 1, 2002, the annual wage in Washoe County is only 2.6 percent higher than that of the State. I also want it noted that according to testimony provided by the State Division of Child and Family Services, in testifying on child welfare integration, the portion of funding attributed to higher wages in Washoe County is only $300,000 on an $8 million program share.
Senator Townsend:
Do you have another prepared text or did you read from (Exhibit R).
Ms. Singlaub:
I did read from this prepared text, however, I did add a couple of clarifying comments based on the wage-structure information that was provided and wanted to add some clarifications.
Senator Townsend:
It says, “This Legislation would mean a revenue cut $24.9 million to $32.7 million in the next biennium.” How come what we show here says $1.1 million in the first year of the biennium?
Ms. Singlaub:
Part of the difficulty with preparing fiscal notes for this bill is we have not had clarity and consistency about what is included and what is not. The fiscal notes we have provided have been based on our finance director, who is here if you have any questions, and in conjunction with analyses from Clark County and other counties and support from the Nevada Association of Counties.
Senator Townsend:
Let us leave Clark County out of this and perhaps you could get your person to look at what our staff has prepared, because the difference between $1.1 million and $32 million is enough to say either we are not looking at the bill the same or the same formula is not being used.
Senator Raggio:
Many of these fiscal notes you are hearing about were prepared before anybody understood the elements in this bill. Our fiscal staff has looked at the bill and, I have to emphasize, the only portion of the new revenue we are looking at takes nothing away from the existing revenues that the counties and local governments are now getting. To determine the pot of money that the State’s share would come from means that you first have to take away the inflation factor, the tax rates for schools, and the existing rate for debt service. I believe you will find that in most of these charts and graphs, and we will have our fiscal staff look at it again, they have taken 50 percent of all new revenue, and this is how they compiled these numbers. I just wanted the record to be straight so we know we are all talking about the same thing.
Ms. Singlaub:
We did deduct those things the bill asked for and we will be happy to work with the fiscal staff to bring the numbers together.
Jim Shaw, Vice Chairman, Board of Commissioners, Washoe County:
I represent 365,000 people living in Washoe County. I want to make two points as they pertain to my county. For the local governments we have only 6 cents left in the overlapping tax cap. We have no relief or opportunity for offsetting the revenue loss by raising taxes. Losing any growth in assessed value will mean cuts in services like public safety and health.
Secondly, in Washoe County we have had a policy in place for 6 years that our budget growth does not exceed growth in the consumer price index and population. I truly believe we have done our part to serve the citizens in our county effectively. Our board recognizes our State needs new revenues and we unanimously passed an action a couple of weeks ago acknowledging the State’s need for a broader tax base. Please do not ask me or us to impose taxes to meet the State’s needs.
Senator Townsend:
I assume your area of representation includes a great deal of the Sparks area. There is another bill here that came up as a result of one of these discussions and has to do with additional room tax. I think we will be hearing this bill in the next few weeks. In proposing this, which directly deals with the fiscal impact of this bill, was there much debate with the mayor, city council and with yourself, with the impact of the opening of Thunder Valley Casino on potential room nights, particularly starting in the fall when the weather turns bad and we have a slower time period in the north? Was there any discussion?
Mr. Shaw:
I was not involved in those discussions relating to the room tax in Sparks. I know it was discussed when I was on the city council at one time, but the mayor and the council had no interest in it at that time, so I am not sure what their present position is.
Bill Young, Sheriff, Clark County:
I have heard a lot of people talk about public safety and their concern for public safety on both sides of this issue and I would like to give an indication of what I represent as the elected sheriff of Clark County. I have a population of 1.5 million people representing almost 75 percent of the State’s population. Seventy percent of officers employed in the State of Nevada work for my department.
With the respect I have for Senator Raggio, I am still concerned about the impact of this legislation. The growth we have experienced in southern Nevada has certainly translated to more people and in turn translates to more crime. We struggle everyday at the metropolitan police department to keep Las Vegas a safe community, and very importantly, the safest tourist destination in America.
We know that 5000 to 6000 people a month move to our community, and have for the last several years, and its growth rate continues to this day. It means more roads, more cars, more accidents and calls for services at our 9-1-1 center, and ultimately more crime. This growth has impacted our ability to keep Las Vegas safe and has stretched our law enforcement capabilities.
Let me take a moment to explain where we are. I heard Mayor Goodman speak earlier of our ratio of officers per thousand citizens and that is the standard of my industry and on what we base our staffing ratio and police agencies. He misspoke when he said that the national average is 1.9 officers per 1000 citizens. The correct figure is 2.5 officers per 1000 citizens. This is if you took every police department in America. What is very startling to me is in major metropolitan areas of 1 million or more people, of which Las Vegas is one, the national average of police officers per 1000 citizens is 4.6 officers.
Let me tell you about Las Vegas and the Las Vegas Metropolitan Police Department today. We have a ratio of 1.71 officers per 1000 citizens in my jurisdiction and are trending backwards. This is a huge concern to me. I spent the earlier part of today at budget hearings with Clark County commissioners and it is apparent to me in speaking with both them and the city leaders there is serious doubt in our ability to provide any additional police officers in this upcoming fiscal year. We project that at the end of this fiscal year 2004, our ratio of officers will be down to 1.66 officers per 1000 citizens. This is unacceptable from a police perspective and it is even more so when that figure does not include the 33 million visitors we are asked to protect each year in southern Nevada.
The growth of other communities in southern Nevada also impacts Metro and we are the only agency in southern Nevada with police helicopters. We have one of the only crime laboratories and we provide services to other police jurisdictions. The requests for these services have also increased, but a loss of funding will seriously impact our ability to meet those needs. Today, if the City of Las Vegas and Clark County are unable to adequately provide the necessary staff of 2 officers per 1000 citizens, and that is the bare minimum, I find it a difficult pill to swallow that we would be asked to give up future growth revenue in the fastest-growing community in America. I also find it difficult to accept that any attempt to get additional police officers by a valid initiative would be virtually impossible due to the overload required by the shift to the State General Fund.
As the sheriff of Clark County I am responsible for this community and its safety and I understand what it takes to keep it safe. I also understand the State of Nevada is in a serious financial situation and something must be done to address these issues. I will say if S.B. 308 passes, my agency and I will continue to do our level best to keep Clark County safe. It is my opinion that if it passes in its current form it is going to make my job more difficult.
Stephanie “Lynn” Lawton, Board of Commissioners, Esmeralda County:
I have come here tonight to talk about S.B. 308. We are in concurrence with the rest of the counties and opposed to it. We are the smallest county and have 1071 people and we feel this would hurt our growth potential and also our public safety.
Earl A. Green, Fire Chief, Clark County:
I am here to talk about the projected impact this bill would have on the operations of the Clark County Fire Department (Exhibit S).
Donald Kwalick, M.D., Chief Health Officer, Health District, Clark County:
The health district has four major sources of funding. The first, health aid to counties, has been completely eliminated in this budget. In response to this loss of flexible funding we have implemented as many cost-saving and cost-cutting measures as possible. We are operating on the tightest budget in the history of the health district and one-sixth of our positions are currently frozen.
The second source of funding is from the federal level. These monies are distributed to fund specific programs with no flexibility to shift these resources to any other areas of need.
The third source is from fees for services. We have been systematically reviewing and increasing fees appropriately.
Our fourth and most important source comes from the distribution of Clark County tax revenue. This amounts to approximately one-third of our funding. From what I understand, S.B. 308 will take Clark County growth revenue and divert it to the rest of Nevada. This action could necessitate decreases to the health district budget from the Clark County consolidated tax fund.
Any cuts in this source of revenue would be severe and impact the public health of southern Nevada. This is at a time when the county health department is being called on to prepare for the threat of bio-terrorism as well as ongoing threats opposed by new and emerging diseases and antibiotic-resistant infections. In addition to these responsibilities, we are taking on an expanded role at the local level in emergency response and preparedness in conjunction with our public safety partners, police, fire, and the Federal Bureau of Investigation.
Some Nevadans are paying more for services than ever before. I respectfully urge you to come up with a long-term solution for our State’s fiscal crisis that will actually solve the problem and help to improve our dismal health status.
Robert S. Hadfield, Lobbyist, Executive Director, Nevada Association of Counties:
Cash A. Minor, CPA, Comptroller/Financial Officer, Elko County, and Mr. Perkins, Commissioner of Lincoln County had to leave. Mr. Minor provided a written letter pertaining to S.B. 308 (Exhibit T).
We have provided the committee with a report, “The Fiscal and Economic Trends in Nevada Counties” (Exhibit U. Original is on file in the Research Library.). I would like to refer to two pages I think will deal with the issues that Elko County wished to address.
If you turn to page 1, table A, you will get a glimpse of what is happening to Nevada’s counties where some things are going up, some things are remaining the same, and some things are going down. This shows the mix of different conditions ongoing in our counties that make it difficult to craft any plan that might affect anyone equally. This table also shows the maximum overlapping tax rate in those entities.
You have heard from the experts what this bill will do but I would like to focus on something the chairman of the Clark County board mentioned. We have been focusing on entities that do not have the money to meet the needs of growth, and I certainly concur with what has been said. The graph shows a lot of entities limping along and some are not even limping, they are wondering what is going to happen to them next year.
What this measure, S.B. 308, does to those entities is that it mortgages their future. If you are limping along, you have cut back everything you can and chances are you are not taking care of buildings and you are building an obligation to replace aged and worn facilities. The only way to continue upkeep is through bond issues and you wait until you have assessed valuation to pay for it.
Most of these entities are already at the $3.64 tax rate, so what do you do when a community has limited dollars and limited ability to generate dollars? If they have any room to tax and you put up a bond issue, you are robbing them of needed money to replace aging infrastructure. If you are an entity who is really struggling and do not have a redevelopment agency, you are diverting all of your resources to promote your community for economic development. If this community is lucky to bring in one big business, they need every penny the tax rate will generate and if you are a water district you need the money to pay for the water infrastructure. Once again, when they get to a position where they can take care of themselves, they will be deprived of the money needed to continue rebuilding the communities and provide quality services to those new residents they are hoping to attract.
I wanted to add this emphasis to the testimony because this bill really does mortgage the future of this type of community as well as the larger communities.
Lynette Boggs McDonald, City Council, Las Vegas, and President, Nevada League of Cities and Municipalities:
As the Nevada league of cities, we represent 24 member cities, towns, and improvement districts of diverse membership. With the City of Las Vegas it is not unusual to have 24,000 permits pulled in a year. With a city such as Wells, it is not unusual to have one permit pulled in 24 months. As an entire membership, we are very concerned about this impact of S.B. 308 as it currently stands, not only to the larger municipalities, but also to the rural members of our organization.
As stated by the other testifiers, it is not unusual for a city, especially in the rural areas, to have a flat growth and then by one project see a spiking of assessed valuation which can create devastation or a disincentive to want to create new growth in your community. Another point is a lot of the rural communities are at the State cap, and we are very concerned about the impacts and perceived disparity that would occur if they would be frozen at the levels they are currently. Whenever we see a decline in sales tax, the only option they would have is to severely cut their services.
A lot has been said about the salaries of local governments and I can tell you that throughout our memberships, most of those salaries that are quote, unquote, “higher” salaries are attributed to those public safety functions, namely the firefighters, police department, and the public works department from the various municipalities. I can tell you from the experience of the City of Las Vegas, we have increasingly seen the fact-finding be the resolution to these collective bargaining agreements.
Last year we were bargaining with the second largest entity, Las Vegas fire and rescue, and one of the items on the table was to eliminate longevity pay. This was the position of the city. We were trying to control the escalating growth through the years as employees progressed through the organization and after a year we could not come to a meeting of the minds. We were, by statute, forced to go to a third-party arbiter and we were mandated to have longevity pay for new employees who are joining the fire department.
We are currently negotiating with the largest bargaining unit of the City of Las Vegas with their city employees. Again this period has progressed past 12 months and we are now faced again with a situation where a third-party arbiter will mandate to us what those benefit packages will be. I just want it on record that there is no misperception we are soft in a negotiation because getting to a fact-finding should tell you we could not come to a meeting of the minds with many of these elements of the negotiation process.
Senator Neal:
Mr. Hadfield, the other day we had the Dillon’s Rule, S.B. 295, in government affairs committee, and looked at this in relationship to S.B. 308 and how much pressure it puts on you not to be able to have your counties do their job.
SENATE BILL 295: Abolished Dillon’s Rule concerning statutory interpretation of powers of local government. (BDR 0-591)
Mr. Hadfield:
It is all about flexibility and about being able to manage the affairs that happen in your community in a timely manner. It has been stated here tonight and should be restated that we operate under the rules set by the Legislature. We have only those powers you grant us and we operate under all the tax caps. We have a secondary tax cap that some communities could not raise their taxes even though they are not at the $3.64. We are a very centralized revenue system in the State of Nevada and although we have very limited flexibility in how we can enforce the powers you have given us, it does create disparities throughout the State and it does create a problem in us being able to address things in a timely manner.
Sometimes we have to come to the Legislature and get permission to do something that a city already has the authority to do. It is something we believe we are going to have to grow into with your trust, but clearly the Legislature has decided, up to this point, to specifically tell us what we can do.
Duncan R. McCoy, Director, Boulder City Library District:
You have my prepared testimony (Exhibit V).
Daniel L. Walters, Executive Director, Clark County Library District:
I do want to point out a couple of impacts on the library district as a special purpose district. The Las Vegas county library district is the largest public library in the State of Nevada. We have a $38 million budget with 500 employees and it is the largest library in terms of people served in the southwest. Last year we checked out over 7 million items to our residents and our growth rate in library checkouts alone, projected for the last 3 years to close at this fiscal year, is between 60 and 65 percent. When the library district was formed 15 years ago, it represented a population of a little over 400,000 and is now projected close to 1.4 million.
We have been granted a levy by the State for 71.5 cents and this has been levied from the onset of the district’s creation. The increase in ad valorem has been sufficient to keep track of growth but forecasts have proven that the district will not be able to meet the explosive growth of Clark County in the future without increases in our operating levy. In this regard the district received approval through public hearings held before the Las Vegas City Council and Clark County Board of Commissioners and the debt management commission to place this matter before the voters June 2003.
I want to footnote some of the comments that have been provided by other testifiers on the impact of this proposed legislation on voters who will consider a local improvement. On a $50.6 million bond issue that is currently slated to go before the voters, it will increase the cost to local taxpayers in our district by almost 54 percent or $12.2 million in additional costs for revenue that will go elsewhere despite the fact that the voters will be considering it for a bond issue. This is for an issue that has been developed according to current statute created by the Legislature, but because of this proposed impact of legislation it will include additional costs.
Secondly, the matter before the voters is a two-part issue to include a special elective tax to provide for the operations of the libraries. Nothing is more frustrating than for our public to build new fire stations, libraries, or police substations and not have the staff and the materials to operate them. With the implementation of this bill horrific circumstances will come to pass. We will have the authority to build the new libraries if the voters are kind enough to support the issue, we will have the obligation to paying an additional 54 percent in costs because of this new legislation, but because of the impact of this new legislation on the special elective override levy, the library district will not be able to operate because the State will now create the funding that had been developed in order to minimize tax increases entirely and exclusively for running those new libraries.
Anita Laruy, Administrator, Library, City of North Las Vegas:
I agree with everything said with opposition to S.B. 308, however, I would like to call to your attention to the fact our library district is solely supported by property tax. We do not share in the consolidated tax, as do other library districts, therefore, passage of this bill would inhibit our district from operating our facilities at current levels or opening new ones in the future. I have submitted further written testimony and charts attached explaining the effects of this bill (Exhibit W).
Joan Kerschner, Director, Henderson Public Library District:
We are a library district with a fairly low tax rate and are the lowest one in Clark County. We are a good example of why growth does not pay for growth because we have the second lowest number of books per capita and we have half the amount of square footage to serve our population recommended by national guidelines.
I have provided written testimony along with three charts to show how our service requests are exceeding our growth rate and funding (Exhibit X).
Pat (Patricio) Zamora, Lobbyist, Clark County School District:
The Clark County School District is currently in the midst of a multi-year, voter‑approved bond authorization that will issue $2.2 billion worth of bonds July 2003 through June 30, 2008. The bonds would be completely retired by June 15, 2028. Over this span of time, the diversion of a portion of the increment that was figured into the financing model would reduce the bonding capacity of the school district by about $160 million. This is the equivalent of ten new elementary schools. I have submitted further written testimony and charts (Exhibit Y).
Senator O’Connell:
This is more of a comment. I would like to talk to you about this and have an accounting of the bonding money you currently have.
Ms. Vilardo:
I wish I could support the bill. It would be nice to think we could do something to minimize the other tax impacts that this committee is dealing with and it might eliminate some of those taxes from being considered. I think there is a major policy issue that this committee has dealt with since the 1997 Legislative Session, and that is redistribution. I think the committee will remember that you are still working on ironing out the kinks in the redistribution on fuel tax formulas for local governments. These are cases where we are working within the revenues that come into a county and just reallocating it within the county rather than reallocating from one area of the State to another. You have heard many things tonight I do not believe at face value you would consider. Because it looks logical, the reality is it is not that simple and I think this is a poor vehicle. We have the local distribution formula that has another modification this year and you dealt with a modification last session. It was first applied in 1997 and when applied then, it took 2 years before you allowed implementation so everyone would have time to see what the problems were and you have had problems with the subsequent two sessions. I think the devil is in the details and there is a lot of devil in this bill.
Chairman McGinness:
I want to thank everyone for being here. This meeting is adjourned at 9:35 p.m.
See additional written testimony (Exhibit Z).
RESPECTFULLY SUBMITTED:
Gale Maynard,
Committee Secretary
APPROVED BY:
Senator Mike McGinness, Chairman
DATE: