Las Vegas Sun

March 29, 2024

Officials spar over plan to eliminate franchise taxes

Source: Nevada Legislature

But representatives of local governments say whatever savings might arise out of such a move for consumers would be short-lived because the local governments would either have to make severe budget cuts or increase property taxes and other fees to make up for the lost revenue.

That's the heart of the debate over Senate Bill 277, which would eliminate the franchise taxes that utilities pay to local governments. Lawmakers and lobbyists argued the merits of the bill on Friday.

Local governments noted that about 14 percent of their total revenue comes from the franchise fees that they collect from cable, telephone, gas, electric and other utility companies. Local governments charge the fees in exchange for allowing the companies to run their lines and place their equipment in the public rights of way.

Henderson residents pay an average of $92 annually each, while people who live in Las Vegas pay an average of $75 a year each, while each North Las Vegas resident pays an average of $60 annually, officials said.

Nicholas Miller, an expert on public rights of way, said governments are working like businesses, charging rent for a commodity. Estimates on the value of public rights of way ranges from $1.1 trillion to $4.7 trillion, he said.

Nevada has spent an estimated $300 billion just building its public rights of way, he said.

Plus, the use of rights of way cuts down on the life of roads, causing more cost and hassle for taxpayers, he said.

Local governments argue that the taxes are basically rent because the companies are given access to public roads, alleys and other areas.

But if that's true, says Sen. Randolph Townsend, R-Reno, then governments are charging consumers rent on their own land.

No they're not, advocates of franchise fees say. The governments are charging the utilities. It is the utilities that are then turning around and charging consumers by passing along the cost.

Local governments said they already will get lower-than-expected budget growth because of property tax reform. Losing the franchise fees would be a major hit at this time. Las Vegas and Clark County each makes about $42 million a year on the taxes.

"Obviously if you lose 10 to 14 percent of your revenue, it's going to have an effect on services," said David Fraser, executive director of the Nevada League of Cities. "It would easily have twice the impact that the property tax cap had to local revenues."

"There's no way to take a cut like that without significantly damaging public safety and judicial functions," said Mike Alastuey, a lobbyist for Clark County.

But Townsend argues that taxpayers are getting little in return for the expensive fees, which total more than $141 million statewide.

Local government representatives said that's not true; taxpayers get $141 million in government services.

Marvin Leavitt, a representative of the Urban Consortium, said some people in Carson City have suggested that local governments are making so much on sales taxes right now that they should rely on that as their main source of revenue.

But he pointed out that sales taxes are very cyclical, especially in economic slumps such as the one after Sept. 11, 2001.

Townsend did say he would amend the bill to say local governments could put the franchise fees before voters.

"If you do take away a revenue stream, whether you like this one or not, there should be an option for local government to be able to get it back," he said.

The bill could make it out of Townsend's Commerce and Labor Committee soon, but he said his bill -- and others that deal with taxes and government revenue -- likely won't proceed until May, when the Legislature gets its regular forecast from the Nevada Economic Forum.

Some of those other fiscal and tax matters include:

Gov. Kenny Guinn's plan to rebate up to $300 for every vehicle registered. The idea is supported by a bill sponsored by Assemblywoman Sharron Angle, R-Reno.

Two bills would allow sales tax holidays, when consumers could purchase goods tax-free on designated days, probably near back-to-school time. Senate Bill 167, sponsored by Sen. Maggie Carlton, D-Las Vegas, and Assembly Bill 320, sponsored by Assembly Speaker Richard Perkins, D-Henderson, both deal with this issue.

Eliminating the premium tax on annuities, an idea pushed by Sen. Bob Beers, R-Las Vegas, in Senate Bill 176.

Eliminating the excise tax on bank branches imposed in the 2003 session. Senate Bill 352 is sponsored by the Senate Taxation Committee.

Repealing the governmental services tax, another bill sponsored by Angle.

Repealing the controversial business license fee imposed last session, another bill sponsored by Angle. Perkins already has said the Legislature has "moved on" from that debate.

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