MINUTES OF THE
SENATE Committee on Taxation
Seventy-second Session
May 6, 2003
The Senate Committee on Taxation was called to order by Chairman Mike McGinness, at 1:45 p.m., on Tuesday, May 6, 2003, in Room 2135 of the Legislative Building, Carson City, Nevada. The meeting was videoconferenced to the Grant Sawyer State Office Building, Room 4406, 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 Randolph J. Townsend
Senator Ann O'Connell
Senator Sandra J. Tiffany
Senator Joseph Neal
Senator Bob Coffin
GUEST LEGISLATORS PRESENT:
Assemblywoman Christina R. Giunchigliani, Assembly District No. 9
Assemblyman Lynn C. Hettrick, Assembly District No. 39
Assemblyman David E. Goldwater, Assembly District No. 10
Senator Barbara K. Cegavske, Clark County Senatorial District No. 8
STAFF MEMBERS PRESENT:
Rick Combs, Fiscal Analyst
Mavis Scarff, Committee Manager
Gale Maynard, Committee Secretary
OTHERS PRESENT:
Dan Musgrove, Lobbyist, Southern Nevada Regional Planning Coalition
Dino DiCianno, Deputy Executive Director, Department of Taxation
Stephanie D. Garcia-Vause, Lobbyist, Nevada League of Cities and Municipalities
Andrew Spalding, Las Vegas Helicopters
Chairman McGinness:
The Senate Committee on Taxation meeting is called to order. We will open the hearing on Assembly Bill (A.B.) 355.
ASSEMBLY BILL 355 (1st Reprint): Provides in certain larger counties for temporary exemption from personal property taxation for certain commercial helicopters and establishes temporary moratorium on construction or operation of new heliports. (BDR 44-877)
Assemblywoman Christina R. Giunchigliani, Assembly District No. 9:
This bill is a result of discussions that occurred after the task force we approved last session was appointed for Clark County due to the noise issue of helicopters. The task force has been meeting and this is one of their suggestions, therefore, I brought this bill forward.
We did not want to negatively impact the businesses because the neighborhoods wanted to be good partners. We felt the best approach was to allow for an incentive through a tax abatement at the local government level if it was determined a nonurban-preferred site or facility would less likely impact residential areas. The county airport is looking for a new site(s) to have the helipads located. In the meantime there is a moratorium placed within the bill so that no new helipads would be built.
Basically, the Assembly Committee on Government Affairs defined a board of county commissioners whose population was over 400,000 would designate a preferred airport or preferred facility for the takeoff and landing of commercial helicopters, and in consultation, look into the whole noise-abatement issue. We did not want to shift anything from one neighborhood to another. We wanted to try and deal with the quieter machines. You will also see that they will qualify for tax abatement as well if they purchase this newer technology.
The tax exemption has an expiration date, several members of the government affairs committee felt there needed to be a time period where the tax abatement or the tax break went away and I believe it expires in 2007. I believe the county has a clarification amendment we worked on. They were concerned about the definition and I have to admit the definition was rough language. It may or may not work but we do not want to defeat the purpose of limiting where the county could make a determination to locate.
I think also the City of Henderson will have some language we were working on earlier to make sure the local governments that are contained within a county would have some input as to where that preferred facility or site might be located.
Senator Neal:
I have noticed in section 6 of the bill it says this act expires on 2005. Does this put in the helicopter ports?
Assemblywoman Giunchigliani:
Yes. This is the moratorium language that no new helipads could be applied for while they were looking for a preferred site. I believe Ms. Garcia-Vause from Henderson has tried to work out if a local government and the county found something sooner than that, we did not want to prevent them from constructing the helipad, but not for individual’s special use permits to be coming in and overwhelming the local government. This gives them leverage with the language we have worked up to consider.
Senator Neal:
Is this based on some type of noise abatement?
Assemblywoman Giunchigliani:
The intent is to try and reduce the noise.
Chairman McGinness:
From those of us not from Clark County, has there been an explosion of commercial helicopters?
Assemblywoman Giunchigliani:
There are only 12 companies as of last count. Senator Coffin and I happen to live off of Charleston Boulevard where they cut across illegally as opposed to the Federal Aviation Administration (FAA) guidelines. I could show you routes where there are 67 to 97 flyovers in a day. Some of them are too low, but we cannot get at that part of it because you do not know which one you are calling.
Their flight path is supposed to be to the Grand Canyon, down Tropicana Avenue, and circling around. Then you have a private helipad located right on The Strip, so they are coming back and forth constantly over this and not sticking with the Charleston/Las Vegas Boulevard issue. It has been years and the number one thing I hear about, and unfortunately it has had an impact on the quality of life. I cannot sit on my back porch and have a conversation with someone. It is constant from spring until October, from 8 a.m. until 10 p.m. or 11 p.m. After October, it mellows out because the weather and tourism diminish.
The decision was not to penalize but rather to find an incentive to help these companies relocate to a low-impact area. This is why the task force made the recommendation to look at the tax-incentive issue. I know that one individual has made a commitment to purchase some quieter equipment and another is looking for another helipad and is working with the local government. A couple of them are being very good neighbors.
I would say that out of the 12 companies, as you deal on the taxation issues, the State only garners $212,000 and some odd cents in actual tax collection of revenue. It is not one of those businesses that is captured, because we know the gross is a lot more. Again, we wanted to establish, at least at the local government level, an incentive to participate if the county or local government came up with a different site.
Senator Coffin:
I want to thank you for introducing this bill. As you have pointed out to the committee, these flights are annoying. They do not follow the separation rules set by the FAA. They cheat and fly below the levels that are mandated, and you can see this easily when they pass by the Stratosphere Hotel Casino and Tower. It is an inconvenience for hundreds of thousands of people and all of these people were there before the helicopters decided to come in and make a few bucks, or maybe they did not realize they were going to become a public nuisance. I am sure in other cities they were considered nuisances and were dealt with accordingly. This is a nice proposal the Assemblywoman is proposing and I hope the amendment is a friendly one and the sponsor agrees. If this is not something the sponsor agrees to, I cannot support the amendment.
Assemblywoman Giunchigliani:
You are a cosponsor of this bill Senator Coffin, but when they did the first reprint, they did not pick up your name. If you do amend the bill, we will be happy to attach your name to the original legislation.
Senator O’Connell:
You did not say if you had any objections to the amendment.
Assemblywoman Giunchigliani:
I think the amendment is okay, but I will say that the City of Henderson came to me and they felt we needed some definition. I do not feel qualified enough to know how to get into this; therefore, we need to hear the language and hear their rationale in order to come to a resolution. I know Mr. Walker felt the language in the bill would only allow him to move to Sloan, and this is not the intent. They should be able to look at multiple sites to determine which is the best location.
Senator O’Connell:
Mr. Musgrove, you are talking about developing the guidelines for noise pursuant to section 2, subsection 4, paragraph (a). Can you give us an idea as to what would be involved with guidelines? Are they enforcement issues, or if these people are going to support this with dollars, can you give us any idea of how those dollars would be spent?
Dan Musgrove, Lobbyist, Southern Nevada Regional Planning Coalition:
I am not an expert, but the trouble is there have never been noise standards set for helicopters and this is going to be uncharted territory. The thing is defining what they call a stage 3, quiet helicopter and we would have to talk about the compliance, routes, monitoring the routes, and how it affects the community.
This is one of the reasons we did not want the definition specified in the first language because it will all relate more to whatever the noise study determines. Maybe the mileage would be less, depending on new technology or what kind of helicopters they are using and the flights they are using. We did not want any limitation. We wanted it based more on what the study determined. We estimate approximately $100,000 to complete this study.
The latter amendment talks about the time frame and giving us extra time to complete this study. We believe we will be fine with a cursory designation of a site by January 1, 2004, but the study will need 18 to 24 months to complete because there are so many variables involved, namely the actual type of equipment used, flight patterns, and location in respect to residents.
Senator O’Connell:
Is there a neighboring state that has these similar problems from whom we can acquire information?
Mr. Musgrove:
We do not know, but obviously we would look to other jurisdictions that have expertise in this area and use this as a guideline. It has been stated that Hawaii might be the only one who has done something like this and would draw on this and other examples. It is going to be contingent upon the uniqueness of the valley, the location, and other issues.
Chairman McGinness:
Your move in the amendment proposed by Clark County on lines 31 through 33 (Exhibit C), takes out the definition of “urban area” but is left in line 23. Is there an urban area definition somewhere in the Nevada Revised Statutes (NRS)? The legal department is going to have trouble if you start talking about an urban area, because they are going to want a definition.
Assemblywoman Giunchigliani:
I believe that is the reason that lines 31 through 33 came about because there was no definition of urban area, to my understanding.
Chairman McGinness:
But this definition causes some problems.
Assemblywoman Giunchigliani:
From what the county is saying, the issue is if they need time to do the noise study, but this urban area band is talking about the time period of where to designate. Is the concern of Randall Walker to deal with the study before a preferred area can be designated, or is it because he feels it is too restrictive on the preferred area?
Mr. Musgrove:
I believe it is because by specifying, we are worried that it may be too restrictive. I will attempt to get further clarification for you.
Assemblywoman Giunchigliani:
Maybe we should. I would be happy to work with you on this and I understand what Mr. Walker’s concern would be. I do not want to remove or have no definition if this is the case so they do not know where to relocate. We do not want them located in residential or urban areas.
Chairman McGinness:
The legal department will want a definition and we will obviously hold further discussion on this until you can get this worked out.
Senator Coffin:
There use to be a definition in the law. I remember taking an issue in the 1980s, not on helicopters, but on the use of the highways. There was a definition on urban area at that time and dealt with the motorcycle helmet issue. We were trying to find a compromise. Even Carson City had an urban area sign posted just north of Glen Eagles Restaurant and at that point you knew when you were in the urban area of this county. There may be something still lingering on the books. I just want to make sure that nothing comes in as a last minute stumbling block due to a legal issue that could gut this bill.
Assemblywoman Giunchigliani:
Mr. Musgrove and I will work with legal and whatever you advise to work out with the other local governments and I understand Senator Coffin’s concern. We think, inadvertently, that last session an amendment was placed on the task force bill for the helicopters that totally deleted the opportunity for us to have a task force. The county manager and county commission appointed a task force and adopted the law that was voided by the action that was done. Mr. Musgrove came to me with the language and we have been trying to work through this.
Chairman McGinness:
With the first reprint, does the fiscal note stay the same?
Assemblywoman Giunchigliani:
I think with the amendment Mr. Musgrove has, it would take care of the fiscal note. The intent was to have the operators assist with paying for the study and this would remove it.
Chairman McGinness:
The fiscal note is about $167,000 per year.
Dino DiCianno, Deputy Executive Director, Department of Taxation:
The fiscal note relates to the exemption associated with those particular helicopters. This information was based upon the best available information we had from the county assessor.
Chairman McGinness:
Therefore, the information in the first reprint would stay the same?
Mr. DiCianno:
That is something I would have to take a look at and cannot answer at the moment.
Senator Neal:
Let us talk about the exemptions. What exemptions are we talking about? Are they sales tax, use tax, or property taxes?
Mr. DiCianno:
It would be property taxes.
Senator Neal:
And is that chapter 371 of NRS?
Mr. DiCianno:
No, that would be chapter 361 of NRS.
Senator Neal:
What about NRS 371.020 in section 5, lines 31 through 35? What vehicles are those?
Mr. DiCianno:
It is something I would have to look into. It appears to be new language and I am not sure what it means.
Rick Combs, Deputy Fiscal Analyst:
If you would notice in line 31, page 3, basically, what is happening here is that they are deleting the old language and putting it in a new place. It looks like new language but it is really a repetition of the old language and they are using the definition in chapter 371 of NRS to apply that to this section as well. In addition to this definition in chapter 371 of NRS, they are adding commercial helicopters that meet the requirements of the bill. Therefore, the commercial helicopter exemption would only apply to chapter 361 of NRS and the property tax, not to chapter 371 of NRS.
Senator Neal:
Do we not pay any attention to this? What exactly does this mean?
Mr. Combs:
The reason NRS 371.020 is cited there is because prior to this bill, the definition would be the same for each chapter, but because of this bill, the definitions in the two chapters are going to be different. They are going to be excluding the commercial helicopters that comply with the provisions of this bill from the definition for the purposes for chapter 361 of NRS.
Senator Neal:
Give me an example of how much property taxes one new helicopter would yield in terms of exemptions?
Mr. DiCianno:
Based on my limited knowledge of helicopters, I would imagine these helicopters are not inexpensive. They can be hundreds of thousands of dollars and sometimes maybe millions of dollars and they are valued as personal property. This is what the exemption is speaking to, a personal property exemption.
Senator Neal:
I understand this, but for you to derive the amount of money you spoke of in terms of exemptions, you must have some way of determining what the exemption would be.
Mr. DiCianno:
That is correct. I am coming from our department’s fiscal note. I believe the information did come from the county assessor’s office.
Senator Neal:
This would not affect the State, but the county?
Mr. DiCianno:
Part of the property tax rate is a debt-service rate that goes to the State which is 15 cents, so there would be a small portion as shown on the fiscal note for fiscal year (FY) 2004 and would be around $9000. For the following biennium it would be approximately $18,000.
Senator Neal:
This is the impact to the State?
Mr. DiCianno:
That is correct.
Chairman McGinness:
Mr. Musgrove, it says in the amendment (Exhibit C) by inserting paragraph (f) in section 4, subsection 1, would there have to be a yearly determination or application to get this exemption? How did you envision this?
Mr. Musgrove:
If you look on page 3 of the bill beginning on line 18, it speaks of reapplying for the exemption and then providing proof. Therefore, each year they would have to come back and reestablish the exemption. I am sure that once the actual cost of the study has been paid for, there would be no further cost allocated regarding the initial study done to establish the location.
Chairman McGinness:
We are looking at this to sunset in 2007.
Senator Neal:
Apparently these helicopters have not been declared a nuisance or a health hazard in terms of the noise level. Is this correct?
Assemblywoman Giunchigliani:
That is correct.
Senator Neal:
My problem is If the helicopters were affecting you in a way that you were being disturbed, it seems to me that it would become a nuisance or a health hazard in terms of the noise level. Why would you have to give them a tax exemption to get rid of the nuisance?
Assemblywoman Giunchigliani:
I do not know if the legislation has the authority to declare it a nuisance. I believe the local governments could do that and I think it is a health and safety factor. They were diverted in the last month or two to fly over the residential area instead of along The Strip. The tourists are protected, but not the residents and the FAA did this.
Hawaii was successful in arguing both the noise and the safety issue, and they were able to divert and move them out. I think the county or the airport authority determines the routes, and presents it to the FAA. The FAA then makes a determination on whether or not these are safe routes for flights. If they agree, then this is the adopted route.
We have long argued, at least for those of us in the neighborhoods, that the county could request a change for routing. With this aside, no one has ever made a declarative statement and the task force has not issued its final recommendations yet. This may be something contained within their meetings and I have not been to the last few.
The task force wanted to take a more proactive approach in working with the businesses. We cannot mandate that they move, so this was an incentive to cause them to choose to move to a preferred location that had been declared by the local government as less impacting on the residential areas.
Senator Neal:
The FAA and the airport authority in adopting this plan of redirecting the routes from The Strip to over the residential areas, were they not saying then that if you should have a crash, the number of people involved in a residential area would be less than The Strip, so therefore, they could fly over the residential areas?
Assemblywoman Giunchigliani:
I have been trying to figure out what the rationale was for that. We were very concerned and upset that our safety was at risk.
Mr. Musgrove:
Remember, there are essentially two issues here, the flight pattern versus the location of their staging area from where they are taking off. This bill is aimed at taking a proactive step in finding a location that may give them cause to have different flight patterns. The other issue, based on the task force recommendations, is that the county would work with the FAA to work on those flight patterns as well.
Senator Neal:
Mr. Musgrove, how necessary are the helicopters to the economy of southern Nevada?
Mr. Musgrove:
I would have no knowledge of what they bring in. I am sure there are a lot of people in that industry who believe it is important to their livelihood, but I have no answer.
Chairman McGinness:
Going back to your proposed amendment, adding paragraph (f) to subsection 1 of section 4, it would be a fine line you walk on whether or not your study is so expensive that no one will apply for the exemptions. If they do not apply for the exemptions, they would not be required to pay for the cost of the study?
Mr. Musgrove:
That is correct. On our part there is some money up front in establishing this.
Chairman McGinness:
Do you have any idea or have you looked at how much this study might cost?
Mr. Musgrove:
We estimate our initial cost will be $100,000.
Senator Coffin:
There have been a lot of noise studies done down there, so how many do we have to replicate? Are you aware of the number of noise studies that have been done?
Mr. Musgrove:
No, Senator, I am not.
Senator Coffin:
The Stratosphere paid for quite a few studies.
Assemblywoman Giunchigliani:
They never released it publicly.
Senator Coffin:
I guess they released selected portions of the study and, of course, these studies were done when there was not that much helicopter travel. It is hard to tell if they are reliable studies. There may have been other studies done by different individuals, but in any event, you can tell without a study that it is a problem.
Assemblywoman Giunchigliani:
Mr. Zuend did an analysis for the total sales and use tax reported in FY2002, for the 12 operators the State department is aware of, and was reported at $184,911.86; the total business tax was $21,380.57. I would argue that they do not benefit the local governments and they are capturing tourists that are already here and the profitability goes to the owners of the company. It does not generate much money for both the state and local government.
Stephanie D. Garcia-Vause, Lobbyist, Nevada League of Cities and Municipalities:
We are here today primarily due to the amendments the county is proposing to the first reprint. The deletion on page 2, lines 31 through 33, changing the definition of urban area, we feel may have a negative impact in the county establishing the preferred facility without having the local government in whose jurisdiction the preferred location would reside, have any say in this.
There is a Proposed Amendment to A.B. 355 in front of you (Exhibit D). In section 3, we would like to clarify the intent. The proposed preferred location happens to be placed in another local jurisdiction outside of the unincorporated Clark County. We would like it clarified that the local governing body would be allowed to be party to that approval and also to the noise regulations that are discussed.
In section 6, we have a second proposed amendment and the intent as it reads now sounds as though there is a 2-year moratorium on permitting any new heliport facilities that would come under this preferred heliport or facility designation. We would like to clarify if it is identified as a preferred location, that it could receive a land-use permit within that 2 years because it would help solve the problem more quickly by allowing the land-use permit to go ahead and put the preferred facility in place. We have also been working with McCarran International Airport and the Clark County Department of Aviation to identify a preferred location that we think will help solve problems and not lead to creating problems by locating helicopters or an abundance of them at our Henderson Executive Airport. This is the intent of these amendments.
Senator Tiffany:
Do you know if they are trying to locate the helicopter port out of the Henderson Executive Airport?
Ms. Garcia-Vause:
The Henderson Executive Airport does currently have helicopter service where they do take off and land there and with identifying a potential preferred location. Our fear is this could be located without having our city council be a party to this decision. We would like to actually help locate this type of facility further east on our border where it would make more sense to have Grand Canyon operations not flying over current residential neighborhoods.
Senator Tiffany:
Therefore, the idea could be to put it at the Henderson Executive Airport.
Ms. Garcia-Vause:
This could happen, however, one of the reasons we would like the language in section 6, is to help encourage a new preferred location other than the Henderson Executive Airport.
Senator Tiffany:
I want to make sure the relocation is not a dumping technique by the county or the city. Does Henderson have a location in mind? If it does have one, what is that location?
Ms. Garcia-Vause:
One of the locations we feel would be appropriate is on the border between Henderson and Boulder City, and is in close proximity to Railroad Pass. The reason for this location is that the helicopters traveling to the Grand Canyon would not be traveling over residential neighborhoods.
Senator Tiffany:
The business might disagree because of taking people from The Strip all the way out to Railroad Pass, that is not convenient. Is there any input from the business owners on this?
Ms. Garcia-Vause:
Mr. Musgrove may be better to answer this question. I believe in the bill it mentions consulting with impacted parties.
Mr. Musgrove:
These are for new locations. We do not have any ability at the present time to impact the current locations. What we are doing is looking at a new site that would provide an incentive for those existing sites to have a reason to move to a facility that may not be as convenient location-wise for the market they are drawing from, but they would get the incentive.
Senator Tiffany:
How many people have applied for a new business license in the last year for this type of business?
Assemblywoman Giunchigliani:
There are two that I am aware of but they could go to individual jurisdictions. I can think of one in Clark County and one in the City of Las Vegas.
Senator Tiffany:
So Clark County does not have the complete oversight and this really could be the jurisdiction of the business license.
Assemblywoman Giunchigliani:
That is correct. This is the purpose for the moratorium language so we were not running around and compounding the problem by sitting new helipads in the middle of residential areas while trying to find better locations.
Senator Tiffany:
You grandfathered the existing operations and can those be sold with the same grandfather clause?
Assemblywoman Giunchigliani:
There is no anticipated grandfathering, there is one that is located on The Strip and my understanding is they are a special-use permit and I have never been able to get a copy they were originally given. They are protected somehow. We cannot make them move unless they renegotiate something with the City of Las Vegas. Other than that, there is a discrepancy between what control we have. I believe the FAA has told us we cannot tell them they have to move, therefore we determined to create an incentive.
In some of Mr. Maverick’s testimony, they recognize that if they move out they would be better neighbors and could do shuttle services, or limousine services, or whatever to get their businesses there. There are four on the task force and their input has been with the community group as well.
Senator O’Connell:
Since the FAA has the ability to require the noise abatement of neighbors associated with the airports, why do they not have any control over helicopters?
Assemblywoman Giunchigliani:
They do, but we define them differently and they have long argued, apparently, that they are not the same as a fixed wing. Therefore, there are different standards that apply. It has been one of those frustrating things in the last 4 years with which I have been dealing. Because everyone is finger-pointing, I cannot nail down what rights and authorities local governments have versus what the federal government has in this area. I believe the local governments could make a declaration back to Senator Neal’s comment that this is a hazard and is a noise abatement area and there is a safety issue. This is what Hawaii did and they were able to direct that all of them had to move out of a contained area. I still think this could happen here, we have just been trying to be a little friendlier with this piece of legislation.
Senator O’Connell:
In the district that I represent, the airport has actually purchased the neighborhoods and leveled them because of the possibility of being fined by the federal government for the noise impact on the residents and the fact that they have not allowed building in certain areas. I find this very interesting that the airports are not taking any kind of an active part in where these heliports can be located.
Assemblywoman Giunchigliani:
I have had neighbors who have had the FAA come to their houses and verify these helicopters were flying too low and seeing the violations, but no one will do anything. Not all of them are violating their routes. Last session, in your committee, we attempted to say they had to paint the lettering a certain size so that when you called to complain, you at least knew which ones were in violation, but we were fought on this. I think this is the first step and the noise abatement study could allow for a declaration of a safety issue as they did in Hawaii. I believe this would be the most appropriate way where we can work hand-in-glove with the local governments.
It is one of those frustrating things that everyone claims they cannot do anything but I think you can, you just have to choose how to approach it. This is just a different approach.
Mr. Musgrove:
We would have no problem to section 6, but the amendment to section 3, we believe the board of county commissioners would have zoning and planning authority over anything that we might choose within their incorporated city. They would obviously have a say. We do not feel the language is necessary in the bill.
Andrew Spalding, Las Vegas Helicopters:
There is a question about section 3 and the noise guidelines. Is it the intention that the noise guidelines apply only to those operators that are seeking the tax exemptions, or do they apply to all operators and therefore compliance is not voluntary? Are these meant to be voluntary guidelines that only need to be complied with by those seeking the exemptions?
Assemblywoman Giunchigliani:
My understanding from the language is that it would apply to all regardless of whether they chose to apply for the exemptions. I believe there are two operators, one looking to move and the other purchasing new equipment, and they have made the option to go whether they apply for the exemption or not. I would say we need their participation in determining a noise abatement plan and we would want all of their input.
Senator Coffin:
What is your client’s name again?
Mr. Spalding:
I represent Las Vegas Helicopters and Jerry Slessinger is the owner. I just want to clarify this piece of legislation. Is it my understanding that persons who do not want the exemptions or who are not interested in seeking exemptions would still be bound by the noise-reduction guidelines? Is this correct?
Assemblywoman Giunchigliani:
This is correct.
Chairman McGinness:
Is there anyone else to testify on A.B. 355? We will close the hearing. There has been reference to Assemblyman Hettrick’s tax plan and I thought we should find out what it is all about.
Assemblyman Lynn C. Hettrick, Assembly District No. 39:
I appreciate this opportunity to talk about the tax plan, but what I would like to do more is talk about the concept. I believe the concept is the important part of the plan and something that needs to be considered. I will address specific taxes that we included within a tax plan but not so much as a proponent of those, although I think the ones we included are probably the best choices but more to give you the idea of the concept. I will go quickly through this and tell you why we did what we did and why we believe it is valid.
The first thing we agreed to was to include the task force cigarette increase of 35 cents. We did that because we believed if you go any higher than that, you are apt to slightly reduce in the future actual taxes generated. We believe this tax will be relatively flat in terms of growth and it has no collection costs. Collection costs are one of the major issues we addressed in each of these taxes.
Chairman McGinness:
Assemblyman Hettrick, do you have a handout?
Assemblyman Hettrick:
No. I only have this one copy, but I can give you something after the meeting. The next issue was the task force alcohol-tax increase recommendation and that is the 89 percent. I think your committee passed 100 percent, in your first deliberation, but we believe this tax will grow slowly and has no added collection costs. We incorporated the secretary of state proposal of $2.5 million per year that was doubling of the security license fees. This, again, has no collection costs added, and it will grow slowly in our opinion. The task force adopted a streamlined proposal they estimate would take in about $20 million per year and we estimated $10.5 million in the first year and $11 million in the second. The idea being that we think it will grow less quickly than they believe it will be generated. It will take time to collect those taxes and we were very conservative. This one will grow with the economy, not rapidly, but at least with the economy and it has little increased collection costs.
In the plan we did, we included the Executive Budget business license fee which is the $100 per company, not per employee, and it will grow with the economy and has some increased collection costs, but is minor and would be collected at the secretary of state’s office.
We also incorporated the resident agent’s proposal. I understand the chairman of judiciary on the Assembly side indicated he did not believe they were going to hear that bill again and it was not passed. I believe this may be an issue that needs to be addressed. We believe this is a very effective tax because it generates some $40 million to $50 million per year with only slightly increased collection costs. They are doing those fees now and with the appropriate changes in the law that went with that proposal, making us more like Delaware, we believe that tax can grow significantly and it has no cost involved. We do not provide services or hardly any services for those companies and we believe this is a very important tax and it would grow at least as fast as with the Delaware changes.
I am emphasizing in each of these cases why we chose the tax. One of the issues was growth of the tax and the other was collection cost. We included compliance audit collections that have been going downward even though our actual collections of taxes have been going upward. In part that has been due to the taxpayers fairness bill that was passed and there were some things about random audits. We need to address some of those issues and I believe taxation is going to do this. But it would be with increased taxes and would have to be with increased audit revenue collections, so we incorporated some money, $3 million and $5 million in the 2-year biennium. There is only a slight increase in collection costs and we would get this whether we added more people to audit or not?
Assemblyman Hettrick:
The gaming tax increase, we propose to not do the flat 0.25 percent across the board for each of the brackets. We instead propose to raise each of the brackets 8 percent. That is not up to 8 percent, which is an 8 percent increase over what they are presently. If you added the 0.25 percent to the brackets the way it was proposed from the task force, 3 percent would go to 3.25 percent, 4 percent would go to 4.25 percent, and 6.25 percent to 6.5 percent. We propose instead to go from 3 percent to 3.24 percent, which is 8 percent, 4 percent to 4.32 another 8 percent, and 6.25 percent to 6.75 percent and is an 8 percent increase. That generates $46 million in the first year of the biennium and $47 million in the second year of the biennium, and is up about $23 million a year over the task force proposal. This was more a fairness issue in terms of making the tax equal for all brackets within the gaming industry.
One of the newer taxes, which was not chosen by the task force, was the real property transfer tax and we propose to raise that to 0.5 percent for the State of Nevada. We have done background studies on this tax and we are virtually the only state in the union that does not collect this tax at the State level. It is, however, collected presently at the county level. Clark County collects it at a rate of $1.25 per $500 on a sale, and every other county collects it at the rate of 60 cents. We would propose to raise that tax to a $1.25 for all the counties across the board. Clark County splits the extra 60 cents giving 30 cents to the county and the other 30 cents to the school district. We would propose to do that for the rest of the counties and school districts. This would be a significant increase for Washoe County in terms of their budget that is a concern for them and their school district right now. It would help the rest of the counties as well but because the number of sales are significantly lower, they would certainly be beneficial and would help offset any costs of collection.
Assemblyman Hettrick:
This tax is already collected in every county. There is no increased cost of collecting the real property transfer tax. There will be more disagreement as to whether or not people owe the tax or whether or not some of the exemptions apply to them. I think the counties will have additional time spent dealing with these issues and I think the extra 30 cents would help offset that.
Why did we pick this tax? You are all aware that Senator Raggio has proposed a tax trying to capture half of the property tax assessment into the future for the state government, because he feels the base for state government is not solid, and does not capture growth in terms of property value in the State of Nevada.
Property tax is based on assessed value, one third of real value, and it is based on a depreciated improvement on that property. Real property transfer tax is based on market value for both the property and for the improvement on that property. It is also driven by the need for growth, and real property transfer tax addresses that need. Real property transfer tax over the last decade is the fastest growing tax in the State of Nevada and grows on an average rate of well over 10 percent and in some years it has grown as much as 17 percent. It is one of the taxes that will keep up with our economy.
The taxes I spoke of previously will raise over $300 million per year. We live on a figure of $600 million-plus over the biennium simply because we had some people who would not agree so we struck a number in the middle. We purposely did not use property tax because we felt it was the most regressive of the taxes. It hits hardest on seniors, those with fixed incomes, and low‑income persons and as a percentage of income it is greater. We did not use the amusement tax because it seemed counterproductive.
Assemblyman Hettrick:
The final piece to this tax and the key to the concept of this proposal was we propose to use the sales tax on services called transaction tax. We did this in a rather unique way. Our proposal to fund the $636 million with the taxes I have already mentioned and budget at approximately that level and it could be changed. It is only a starting-point number.
We propose to start the transaction tax January 1, 2004, off budget. Why did we do this? When we talked to fiscal staff about putting it on budget, the idea was that no one would know what would be collected, therefore, how do you put this into the budget? The thought then was that we ought to use it to take care of the issues being generated in this session not being addressed by the other tax plans.
What are those issues? We are talking about funding maintenance on state buildings with bonding. If any other local government came in and told us they were going to do that, we would laugh at them. You should not bond for maintenance; it is poor policy. We have totally depleted the Fund to Stabilize the Operation of State Government, “Rainy Day Fund,” and if we had not had it, we would have been in serious trouble.
In the future, we are looking at the fact that the estate tax is going to go away. The estate tax is somewhere in the neighborhood of $92 million in the higher‑education budget and $94 million in the kindergarten through twelfth (K‑12) budget and it also funds the dental college. When you look at these things, you ask how are we going to fund those into the future?
If you implemented transaction taxes January 1, 2004, off budget, the intent would be that on March 31, 2004, either the taxation department or the board of examiners, or whomever you chose, would look at the tax generated and have the opinion that the collections are running high enough and need to change the sales tax rate on hard goods downward. Based on the fact this proposal stated raises 4.5 percent transaction tax and ultimately lowers sales tax to 4.5 percent to make the two equal.
Assemblyman Hettrick:
If you did what I just proposed starting on January 1, 2004, off budget, by the time you reached March 31, 2004, with the current tax base in transactions and sales tax on services, you would have generated significant money. At that point whomever the body was deciding to lower sales tax, told the retailers to lower their tax by June 1 or June 30, 2004, to the appropriate amount. By the time you got there, and allowing them time to change their programs and sales forms, you would have collected 3 additional months of tax on the services.
Our proposal was to take that 3 months of additional tax and use up to one‑third to fund maintenance on buildings without bonds. You would authorize the bonds but you would not sell the bonds if you generated revenue, but using this plan, you would obviously generate the revenue. We proposed to put another one‑third in the Rainy Day Fund, building what is common sense. The other one‑third would go into surplus, knowing that when we arrived at February 1, 2005, we are going to be short somewhere in the neighborhood of $180 million to $200 million in the estate tax and it will have to be made up somehow.
This concept I think is different than any other program being proposed. We are trying to come up with a way to fund the shortages that are going to occur. In my opinion, we are going to be back here if we do not choose taxes that will grow at least as fast as our economy or faster. If we only fund the actual budget, maintenance on buildings through bonding, and do not put any money into the Rainy Day Fund or surplus, we will have to raise taxes again in 2005. I do not believe we can stay ahead of the curve of what is happening here.
This base will ultimately grow. Sales tax on services grows faster than our economy. What is happening is that over the years we have watched sales tax become a bigger percentage of our total state budget. It has done this because gaming has been relatively flat in growth compared to sales taxes. But sales tax on services, the base of that alone has already doubled the amount of sales tax based on hard goods. The number is about $28 billion per year on hard goods and about $55 billion per year on services. A lot of this will be exempted, but the actual base is significant and it would make a huge difference.
If we do not grow the taxes faster than the economy, we are going to be back here. We are going to be doing this again. The last two taxes I have mentioned, I believe, are the only ones that grow with the economy.
Gross receipts tax has a chilling effect, certainly not a growing effect on the economy. If it has this effect, then it has the effect of reducing the growth of the other taxes being collected, because most of our taxes are based on the growth of our economy. If you pass taxes that have a chilling effect, then you compound your problem into the future. You have to choose taxes that grow and grow faster than the economy, and taxes that are driven by the economy. I believe sales tax on services and real property taxes are the two taxes that are economy driven. The other taxes are just part of what makes up an issue of spreading out the tax and adjusting some of the rates to make us more competitive with other states.
Senator Coffin:
All I know about what was said is what I read in the newspapers. Why do we not have a copy of your proposal?
Assemblyman Hettrick:
I will be happy to give you a copy of the entire handout I provided at the press conference and all the documentation and background information. I was asked to discuss more of the concept of the plan.
Senator Coffin:
I might have been able to follow better with some information in front of me. You have covered many different subjects quickly and I feel as if I am in the dark.
Assemblyman Hettrick:
I will see that you get a copy of everything that we have.
Senator Coffin:
I wish I had been notified earlier.
Senator Neal:
In listening to your proposal in terms of increasing the gaming tax, can you repeat those figures for me?
Assemblyman Hettrick:
The proposal on the gaming tax was rather than to do the quarter percent added across the board being proposed by the task force; again this would have changed the 3 percent bracket to 3.25 percent, the 4 percent bracket to 4.25 percent and the 6 percent bracket to 6.5 percent. If you do the math, from 3 percent to 3.25 percent is over an 8 percent increase on the 3 percent bracket. If you do a 0.25 percent on the 4 percent bracket, it is a little over 6 percent increase and if you do a 0.25 percent on the quarter percent bracket, it is about a 4 percent increase or a little less.
It seemed to us that fairness would say you would raise them all equally by staying at the same percentage. We chose the 8 percent increase. This changed the 3 percent to 3.24 percent more. We changed the 4 percent to 4.32 percent more and the 6.25 percent to 6.45 percent more.
Senator Neal:
When you say you tried to make the tax equal or that gaming is equal, to what is it equal?
Assemblyman Hettrick:
We tried to make it increase 8 percent equally in all brackets.
Senator Neal:
You are talking brackets in the gaming tax, rather than gaming being equal to other industries.
Assemblyman Hettrick:
This is correct.
Senator Neal:
This raises approximately how much?
Assemblyman Hettrick:
It will raise about $46 million per year. The bigger casinos got a 0.5 percent increase instead of 0.25 percent increase at 8 percent. The smaller casinos got a 0.24 percent increase, which is half as much, but they all got an 8 percent increase over what they pay now.
Senator Neal:
Have you seen the study that University of Nevada, Las Vegas (UNLV) did on gaming addiction?
Assemblyman Hettrick:
I have heard of the study but I have not seen it.
Senator Neal:
The study estimated between $300 million to $459 million per year cost to the State in gaming addiction. Your proposal would not come near in solving this particular problem.
Assemblyman Hettrick:
Senator Neal, I did not intend to address that problem, rather I intended to address a problem of raising revenues based upon the need in the State of Nevada and trying to keep fairness.
Senator Neal:
Addiction is a need when that cost is coming back to the State. Are you aware of what is happening in other areas relative to gaming, particularly Illinois? The Republican governor increased the taxes of over $250 million to 50 percent of that and the new governor who came in wanted to raise it another 20 percent, making it a 70 percent increase. There were shouts about this increase and the governor decided to take over the industry and hire managers.
The point is gaming creates problems for us and we are not taxing it in terms of problems it creates. There is a cost associated in bringing in tourists. They utilize the water, health care, and police protection at no cost, and we are not picking up the money to deal with this. Even if we bought your plan for gaming, we will be back next session trying to raise taxes because of the hidden costs that we try not to recognize and we should recognize it is eating away at our State.
Assemblyman Hettrick:
Senator Neal, I know your position well on the gaming taxes and your point has been well represented, but I am not trying to address those issues specifically. I will comment that I believe sales taxes on services will grow fast enough to stay ahead of the economy in the State of Nevada. As long as we do not spend every penny in advance and we have a little fiscal conservatism in terms of what we do in the future, I believe we can stay ahead of Nevada’s needs for taxes. Not necessarily addressing the specific issue you raise on gaming but addressing the needs of the State based on the Governor’s budget for taxes with the proposed tax we have included for sales tax on services and real property transfer tax.
Senator Coffin:
I have found, using my computer via Google, your tax plan proposal in a story dated March 27, 2003, in the Las Vegas Review-Journal (Exhibit E). How close is this proposal you are speaking of now opposed to the one in the newspaper article?
Assemblyman Hettrick:
I have not seen the specific article you refer, but I believe the plan is probably pretty close.
Senator Coffin:
It talks about some of the exemptions to your tax, but it also talks about a 70‑cent cigarette tax and this is the total, which is what we had adopted. The plan did have estimated revenues of about $600 million, so it really has not changed.
Assemblyman Hettrick:
There were 22 pages of the list of enhancements that we looked at in terms of what we would find and what we would suggest. I do not know if all of these enhancements are listed in that article, but I will provide you with a copy so you will have everything we do.
Senator Coffin:
The funding proposed on that date reduced kindergarten through twelfth grade public school funding by $77 million and the university funding by $68 million. It had proposed to eliminate the Nevada State College at Henderson, reduce welfare, and Family to Family Connection. It also had a lot of general reductions according to the article.
Assemblyman Hettrick:
According to the article, you are right, but according to the plan, no. The proposed plan did not cut anything out of welfare, education, or higher education. What it did was reduce the rate of increase in spending from the enhancements, but it did not cut anything. We fully funded in this plan the entire base budget all of the maintenance items included in the Governor’s budget. For example, University and Community College System of Nevada (UCCSN) while the university system and the article said we cut university funding, the fact is we put in the full $98 million maintenance increase and raised the formula of funding from 79 percent to 80.29 percent. We funded fully in education, the Governor’s budget, plus maintenance, plus the $34 million for the 2 percent pay raise. We did the signing bonuses of $25 per student per year for technology and books. We also did the certified pathologists and psychologists pay raises as well.
We did not cut any money from those budgets nor did we cut money from welfare other than the caseload growth that did not exist. We estimated caseload growth at 32,500 and relatively flat. They estimated it to go to 46,000 and today, I believe, the proposal we saw was about 32,000 in the human resources committee meeting we had this morning.
Senator Coffin:
You indicated the article was in error and what you have just stated is correct. Where is your list of exemptions?
Assemblyman Hettrick:
The exemption list, because it was not in bill form, is not complete. I can give you a general list of exemptions. We proposed to exempt personal services that cost $50 or less, annualize personal services such as lawn care and pool care that are $3000 or less, health care, day care, and residential garbage services. I will bring you the list.
Senator Coffin:
Why did you not bring the list today?
Assemblyman Hettrick:
I did not bring it because I was not planning to go through the entire plan on budget. I was planning to talk concept. It seems to me a bit fruitless to worry about the budget side, when in fact Senate Finance and Assembly Ways and Means committees are closing budgets that have no relationship to what we proposed on March 27, 2003. Therefore, it appeared to me that the appropriate thing to do was to discuss with you the concept of what we had proposed in this funding and what it would do for the future and doing away with bonding for maintenance, refunding the Rainy Day Fund, and providing a way to offset the loss in the estate tax that is going to occur. This is what I was trying to provide for this committee today.
Senator O’Connell:
At one time were you not talking about a base of $511 million?
Assemblyman Hettrick:
We had proposed $511 million in spending beyond the base budget. This again was a strike at a number that met with some middle-of-the-road acceptance within the members of our caucus. As it has already been mentioned, we funded $511 million in our proposal. We provided taxes at $636 million. I believe, realizing there were other programs such as Nevada State College at Henderson and others, we felt would be funded within the budget here, but we were trying to make a comment or a statement of what could be done, if it had to be done, and then leave room for decisions from this body. Obviously we were not going to make all the decisions in that proposal.
Senator Tiffany:
I always hear about broad-based business tax. It looks like you have hit the entire basis except what would be called a broad-based business tax, unless you look at the services. Looking at your list, how would you say this meets a need of what the mantra is about broad-based business tax?
Assemblyman Hettrick:
We had testimony in regard to the task force proposal on broad-based business taxes and the gross-receipts tax the other day in Assembly Taxation. I made the comment to Mr. Hobbs that by the time you exempt 60 percent to 65 percent of all businesses at $450,000, I do not believe this tax is a broad-based business tax.
Broad-based business taxes are the definition you choose to apply. If you tax services, in fact, and you exempt personal residential services, but you do not exempt business on sales tax on services, I would make that list very small. You would see that businesses indeed would pay many of these taxes. In my opinion you can say you are taxing a business, but in reality, consumers ultimately pay all taxes. When you buy a product from anyone, you pay all of their costs and a profit. We can argue that we might narrow their profit for a while, but sooner or later, they are going to have to maintain their profit margin, and the consumer is going to pay. Either that, or they can cut costs by doing away with health insurance, then the employees’ pay, or they can do away with employees. There is no way you can operate a business without generating a profit. It becomes a matter of definition in my opinion. I believe they all are broad-based business taxes and consumers ultimately pay them all.
Senator Tiffany:
We have been getting a lot of e-mails on the real estate transfer and this is a narrow and single market and it is one of the things we discussed not doing. To me the real estate transfer tax is the cornerstone and can generate enough money to meet your $600 million, depending on what you do with the exemptions. Can you explain why you have narrowed it down to this one market?
Assemblyman Hettrick:
I have had meetings with the real estate agents and their representatives and they argue that 0.05 percent added to real property transfer tax would negatively impact first-time buyers in particular. A half of a percent in real property transfer tax is $500 on the sale of a $100,000 home or $1000 on a $200,000 home. You want to remember that a real property transfer is generally done between a willing seller and a willing buyer at a negotiated price and you can finance in a mortgage the cost involved in the sale. You are looking at costs that can be negotiated between the parties and effectively eliminated by how it is priced. In addition, we did some research and property in the State of Nevada, on average, appreciated at a rate of 3.6 percent annually.
It is argued if the average home owner owns a home 7 to 10 years and you add a half of a percent one time for that period, that this is somehow more negative than 10 years at 3.6 percent inflation compounded which would be 40 percent overall. When you say 0.05 percent one time, compared to 40 percent compounded over 10 years, real property transfer tax does not have the negative impact that is spoken about. Again, it is appropriate to tax part of what is driving our need for revenue, and that is growth. Growth drives the need for homes and real property transfer. In addition, whether we like it or not, if you do not pick taxes that will grow at least as fast as the economy, and this one grows faster than our economy, you are going to be back here doing this again. I think it can be avoided, if you pick the right taxes.
Senator Tiffany:
We are not closing the budgets at $636 million. We are closing at $1 billion right now. What are we going to do between gaps?
Assemblyman Hettrick:
If you want to sit down and do the calculation, it depends on how much exemption you are willing to give on the sales tax on services. It is a $55 billion base, annually. If you raise 4.5 percent of $55 billion, and in our proposal we say lower sales tax by 2 percent on $26 billion, you will create a significant amount of revenue greater than you are generating today. Therefore, you will fund into the future. Our proposal was to take that extra money, do the maintenance without bonding, refund the rainy day plan, and have a surplus to replace the estate tax into the future. In other words, not spend every penny. This is what we were saying, do something realistic with the money for protecting our future instead of being back here in 2005 and doing this again. You can fund the budget based on these numbers, depending on how big the exemptions are you want to give on sales tax on services.
Senator O’Connell:
Are you telling this committee that you have included the enhancements of the Governor’s budget and the budgets you are closing?
Assemblyman Hettrick:
If you are referring to the meeting of Assembly Ways and Means that took place today, then many of them have enhancements in them.
Senator O’Connell:
With the enhancements, how much of an increase are we talking about?
Assemblyman Hettrick:
We are not running on totals, Senator O’Connell. I do not know that, and I am only on the subcommittee, and we have not had the full reports coming back to the committee. I do not have knowledge of what is happening in the other subcommittees. I can tell you that in many budgets, we are saving money, but in many budgets we are adding enhancements.
Senator O’Connell:
When you say you are saving money in many budgets, is it enough to be significant?
Assemblyman Hettrick:
It is all relative. It is not a lot of savings; it certainly is not $400 million out of the total budget proposed by the Governor.
Senator O’Connell:
Would it at least be $1 million in savings?
Assemblyman Hettrick:
Yes. There is well more than $1 million, but not hundreds of millions.
Senator O’Connell:
So we are looking at increasing the budget significantly from our current total of just maintaining the current level of spending.
Assemblyman Hettrick:
Yes. I do not believe there is any question. My biggest fear now is seeing budget proposals coming out somewhere near $900 million or more added to the existing budget and I am not sure there are votes for $900 million in new revenue. I think if that happens, we are going to be in a special session.
Senator Coffin:
I have had the March 27, 2003, story printed for the committee so that we can perhaps look at this in a little more detail. It would be important to go over the exemptions, because at that time, the reduction in sales tax and sales tax on services was proposed to be about 4.5 percent. Have you changed that number?
Assemblyman Hettrick:
No. The 4.5 percent would be the sales tax on services and we would lower sales tax to 4.5 percent as the revenue generated and justified doing so.
Senator Coffin:
What would be the timetable for lowering the state sales tax?
Assemblyman Hettrick:
Yes. It will be lowered by 2 percent.
Senator Coffin:
How long would it take to do that?
Assemblyman Hettrick:
We left it because of the issue of not knowing what it would generate because we did not have exact figures at the time we did this. I think Mr. Aguero, the Governor’s tax analyst, since then has come closer to those exact figures, but we have not been able to run those figures specifically.
Senator Coffin:
Wait a minute; I am talking about 2 percent sales tax.
Assemblyman Hettrick:
We know what the 2 percent sales tax is, but we do not know what the sales tax on service would generate to offset it.
Senator Coffin:
No. This was put in with a vote of the people, along with the concomitant exemptions that were in there. Would we have to go through a 2- or 3-year period before we could make an adjustment downward?
Assemblyman Hettrick:
No. We would be offsetting the tax that we can adjust and I believe it is the Distributive School Account (DSA) we are allowed to adjust. We would just offset that with the revenue generated by sales tax on services.
Senator Coffin:
Then, actually, we would not touch the 2 percent sales tax. I think I hear you saying that we would not touch the State’s 2 percent. Would it not be more flexible to touch the sales tax if you are going to reduce? According to Senator Care and Senator Amodei, it appeared that they decided to change the Local School Support Tax (LSST), maybe something relating to local government because they were the most easily adjustable because they were legislatively created.
Assemblyman Hettrick:
The intent is that you would reduce ultimately 2 percent on the sales tax side. The rate would drop to 4.5 percent. The money that would have been generated by that rate would be offset by the revenue generated from the sales tax on services and would be replaced to the tax receiving entity from the sales tax on service and they would not see any difference. It would be calculated from the actual sales tax and replaced at the same rate as if they had stayed at the 2 percent generated from sales tax. This simply would be offset from the sales tax on services that will grow faster and has a bigger base.
Senator Coffin:
Can we touch that constitutional 2 percent by a statutory act?
Assemblyman Hettrick:
You are not changing the revenue it generates, you are just offsetting.
Senator Coffin:
Are you suggesting the removal of it? I did not know we could do that.
Assemblyman Hettrick:
We have the opinion that you can do that.
Senator Coffin:
At this point, it becomes critical to know what your exemptions are, because if we are $400 million short, then we need to know what they are, as you said we should know. Either that, or raise the rate to 5.5 percent?
Assemblyman Hettrick:
No. I think with a $30-billion base and we reduced it with exemptions from $55 billion to $30 billion, pick a number, and times 4.5 percent would generate $1.3 billion by itself.
Senator Coffin:
I did not understand.
Assemblyman Hettrick:
If you reduced the sales tax on services base from $55 billion, which is what it is today, to $30 billion with exemptions, and multiplied it by 4.5 percent, because 10 percent would be $3 billion, so 4.5 percent would be $1.35 billion. It raises a huge amount of money, then you would offset the 2 percent you would lose on $26 billion which is $520 million, you would be down to $800 million, and we propose to offset 25 percent of the governmental services tax at the same time, which is $55 million-plus, we believe because this would put real money back in the pocket of Nevada citizens. What you would be doing is dropping 2 percent on the purchase of automobiles, diapers, Enfamil and those kinds of things and they would save 25 percent of their vehicle registration fees every year. I do not think any of us hear any greater complaint than the cost of registering cars in Nevada. We have proposed to offset that cost as well.
Senator O’Connell:
Then the Governor’s base number of $704 million and your base number is $511 million and the difference between that is the way you are funding programs?
Assemblyman Hettrick:
If you studied the proposal we made, part of the savings listed within our package is for the State not to fund the Temporary Assistance to Needy Families (TANF) growth and at the time it was enough to save about $28 million over the biennium.
We propose the State not fund the extra 1.5 percent for the retirement plan. It took 1.5 percent or approximately $26 million over the biennium to fund the retirement plan and makes it fully fund by the year 2022. It has been extended in the past and it can be extended again. You do not have to fund this to be fully funded by 2022, which would save $26 million now.
We proposed to take out the $40 million the Governor saved with his class-size reduction flexibility proposal, and saved $40 million over the biennium in teacher salaries. You went from 1 to 16 students in kindergarten to third grade, and you went to 1 to 22 through kindergarten to fifth grade and it saved about $40 million. If you did those three figures I just gave you, it comes to about $80-plus million, let us say $84 million. If you subtract that from $704 million you will end up with $620 million. We provided taxes within the base of this plan at $636 million and without cutting service or a penny to anyone. All we did was take the actual caseload growth and not fund the retirement now and save the money the Governor saved with his proposal.
You can get there with the hard money we provided in the base plan, however, if you do that you are not recognizing, in my opinion, the Rainy Day Fund problem, the maintenance bonding problem, or the fact that we are going to run out of $92 million in two different budgets plus the dental school. This is money we are going to run out of come 2005. We have tried to address these issues, otherwise we are going to be back here doing this again.
Senator Coffin:
My district is a little older and $100,000 would not be too far off from an average cost of homes. How much is it going to cost at closing to one of my constituents who wants to sell?
Assemblyman Hettrick:
It will cost them $500 on a $100,000 home.
Senator Coffin:
What are they currently paying?
Assemblyman Hettrick:
They are paying half of that amount, $250 and we would add $500.
Senator Coffin:
So, that part of the closing cost would triple?
Assemblyman Hettrick:
Again, you do this once very 10 years and if you are a senior and not moving out of your home, you will never pay the tax. If you are a low-income person and you buy a lower-cost home, you will pay significantly less. It is negotiated between the buyer and the seller.
Senator Coffin:
And in a district with homes amounting to $500,000?
Assemblyman Hettrick:
It would be $2500.
Chairman McGinness:
John Sullivan of Sundance Helicopters submitted written testimony (Exhibit F) in favor of A.B 355 with some questions to the incentives. The meeting is adjourned at 3:19 p.m.
RESPECTFULLY SUBMITTED:
Gale Maynard,
Committee Secretary
APPROVED BY:
Senator Mike McGinness, Chairman
DATE: