Another legislative session may jeopardize Nevada’s bond rating

Erin Neff

Tuesday, Aug. 5, 2003 | 11:08 a.m.

Just weeks after the end of a lengthy second special session of the Legislature, some state officials refused to rule out the possibility of a third one to clarify some of Nevada's new tax laws.

The specter has the state treasurer worrying yet again that more legislative days could damage the state's bond rating and impact every major project currently planned.

The Nevada Tax Commission is charged with sorting out the tax plan that was approved last month after almost a full 30 days of a second special session.

But after the commission's first hearing on the matter, Barbara Smith Campbell, the commision's chairwoman, and Greg Zunino, a deputy state attorney general, stopped short of ruling out the possibility that additional legislative action could be needed to implement all the taxes adopted in the historic legislative stalemate that finally ended last month.

Gov. Kenny Guinn has indicated he is not considering a request for another special session, but his spokesman said it isn't completely out of the realm of possibilities in a year filled with legislative overtime.

"The governor is confident the Tax Commission can resolve the issue without a special session," Greg Bortolin said. "That doesn't mean we're ruling out a special session.

And that, state Treasurer Brian Krolicki said is, "the last thing anyone wants to talk about."

"But," Krolicki added, "if you can't regulate, you have to legislate it."

Krolicki has a vested interest in seeing the tax law enacted, the regulations sorted out and taxpayers notified. The state's ability to pay bills is his first concern, but confusion over taxes could also impact the state's bond rating, and as a result, Nevada's ability to borrow money for projects in the future.

"Anytime the Legislature is convening is an important time for the bond rating," Krolicki said.

And not necessarily a good one.

Three rating companies, Moody's Investment Services, Standard & Poor's and Fitches, are poised to make decisions on Nevada's bond rating. Nevada currently has a "AA" or better rating at all three companies -- something that is viewed as a "good" buy for investors looking at municipal bonds.

On June 19, the legislative tug-of-war over taxes prompted the state to suspend one $200 million bond sale designated for parks and cultural resources. That kept Nevada from taking advantage of record-low 2.7 percent interest rates for those bonds.

That sale is now scheduled for Sept. 3.

If lawmakers must convene to sort out regulations, Krolicki worries the state will be facing another round of uncertainty.

Krolicki, who is president of the National State Treasurers Association, says Nevada is not the only state with fiscal problems.

"There is a lot of company," he said, adding that other state woes actually help a state like Nevada appear normal on the national stage for bond ratings.

Deficit-plagued California's bond rating has reached near junk status.

Meanwhile, Nevada lawmakers and the governor's office are paying close attention to the tax commission's work to find out if lingering tax bill questions are answered.

Some of the pesky problems commissioners need to sort out include determining what constitutes a sole proprietor for tax purposes. Commissioners also need to determine which businesses, including gaming companies, were not intended to be taxed as financial institutions.

"We really want to hear from the public," Zunino said. "What we hear from the public may help in the decision-making process."

Carole Vilardo, president of the Nevada Taxpayers Association, said there were still so many questions to answer that she was concerned that regulators would not be able to sort it all out.

"I looked through the effective dates portion of the tax bill and it was maddening the list of numbers," Vilardo said. "You had to flip back and forth to the appropriate section to make sure it worked, and I found two mistakes."

Bob Shriver, executive director of the Nevada Commission on Economic Development, secretly hopes lawmakers do come back to the capital.

A business exemption for qualifying companies was eliminated, by all accounts, by accident in the tax bill that passed early July 22.

The 50 percent exemption to the former business license tax -- a $100 a year tax per employee -- was granted to companies that met certain revenue and average salary requirements.

Roughly 12 companies received the break in 2002, something Shriver says was designed to help diversify Nevada's economic base.

"All of a sudden it wasn't there," Shriver said. "Right now we can't do much about it, but if there has to be a special session, the idea would be that they reconsider it."

That attitude is not welcome news for lawmakers who spent 120 days grappling over taxes in the regular session and went into a 10-day special session that ended in failure.

The second special session began June 25 and seemed to be heading for disaster when the fiscal year ended June 30 at midnight and Guinn sued lawmakers for failing to resolve the state's budget.

The resulting court case led to a now infamous ruling by the Supreme Court on July 10 allowing the Legislature to pass taxes without the constitutionally mandated two-thirds requirement.

That opinion is still being battled in the courts.

The Associated Press

contributed to this report.