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August 5, 2003
Natrona County School District - Board Room
970 North Glenn Road
Casper, Wyoming
Senator Robert Peck, Cochairman;
Representative Roy Cohee, Cochairman;
Senators Jim Anderson, Dick Erb, Rae Lynn Job and Jayne Mockler;
Representatives Rodney "Pete" Anderson, Kurt Bucholz, Pat Childers, Lorna Johnson, Tom Lockhart, Saundra Meyer, Bill Thompson and Jane Wostenberg.
Legislative Service Office: Mark Quiner, Assistant Director and Mr. Steve Sommers, Budget and Fiscal Manager.
Please refer to Appendix 1 to review the Committee Sign-in Sheet for a list of other individuals who attended the meeting.
All meeting materials and handouts provided to the Committee by the Legislative Service Office (LSO), public officials, lobbyists, and the public are referenced in the Meeting Materials Index, attached to the minutes. These materials are on file at the LSO and are part of the official record of the meeting.
Chairman Peck called the meeting to order at 8:30 a.m. The order of the meeting generally followed the prepared agenda (see Appendix 2).
Mr. Michael Walden-Newman, Executive Director of the Wyoming Taxpayer's Association, introduced the Taxpayer Working Group stating they have been working on proposals for property tax relief. He introduced the following members: Brenda Arnold, Laramie County Assessor; Diane Sutton, Teton County Treasurer; Ed Schmidt, Director, Department of Revenue; Tom Sutterfield, Member of the State Board of Equalization; and the Committee was assisted by Justin Ballard and Dr. Wenlin Liu of the Department of Administration and Information, Economic Analysis Division. The working group has proposed regionalized property tax relief. The amount of the relief would be based upon regionalized economic conditions since the problems vary by locale. The group worked on changing the current statutes and not proposing a constitutional amendment. Mr. Walden-Newman provided extensive property tax information, including proposals for relief. The group's proposal is to amend the property tax relief program which is currently in statute to make it applicable to all communities based on a regionalized cost of living index (see Exhibits A-1 and A-2).
Members of the Committee explained each current program, including the veteran's exemption, the property tax deferral program, and the property tax relief program. Later that day, the Committee considered the proposals from the working group.
Senator Mockler moved a bill be drafted containing Option 1, which would provide regionalized relief based on the cost of living index by locale. The motion failed with a roll call vote of 6 ayes and 8 noes (see Exhibit A-3).
Representative Childers moved a bill be drafted which would include the real estate transfer tax in the deferral program with a ten (10) year residency requirement. The motion was divided to remove the real estate transfer tax from the motion and make the deferral program statewide. The divided amendment failed.
Representative Wostenberg indicated there was a group in Johnson County working on property tax relief and suggested the Committee may want to hear from them at the next Committee meeting. Chairman Peck asked the Johnson County Working Group be placed on the September agenda.
The Committee thanked the working group for all of its work and indicated the information generated was useful and would be of help in the future.
CAMA (Computer Assisted Math Appraisal) System
Mr. Ed Schmidt, Director of the Department of Revenue, provided an update on the CAMA System which will be implemented in the various counties for assistance in assessing property taxes. Mr. Wade Hall, Administrator of the Ad Valorem Division of the Department of Revenue, indicated Albany and Uinta Counties were selected as pilot counties to install the new CAMA System. Mr. Hall provided information on how the system works. The system will provide assistance and all three approaches to value (cost, sales and income). See Exhibit B-1.
Mr. Steve Sommers, Legislative Service Office, provided the Committee with information on the updated revenue figures. Mr. Sommers indicated the final 2003 Fiscal Year figures should be in around September of this year. Mr. Sommers indicated the general fund will be a little ahead of projections by $11 million. He does not have the final figures for the sales and use taxes and investment income as of yet. Investment income is down by 18 percent. Sales and use tax estimates will be off by approximately 2.6 percent due to a slow down in drilling activity. Severance taxes will be up approximately 25 percent due to the natural gas price increase. Mr. Sommers also indicated the federal government has given Wyoming $50 million. Governor Freudenthal is going to distribute $5 million of that money to local governments. Mr. Sommers indicated it looks like Fiscal Year 2003 will have an additional $200 million estimated to be available at the end of the biennium (See Exhibit C-1).
Mr. Schmidt explained the list of issues that were not resolved by the Select Committee on Mineral Valuations (see Exhibit D-1).
Mr. Schmidt also explained the issue of ad valorem tax payment to counties (see Exhibit D-2). Mr. Schmidt indicated the ad valorem tax payment to counties issue involves the gross product tax on minerals and would have to be disconnected from the traditional ad valorem tax on residential, industrial and commercial property as it would have to be reported and paid the same way that severance tax is paid, which is monthly. Since industry is currently filing estimated monthly severance tax returns, this change would only result in more changes and amendments to the gross products return and even less certainty. Mr. Schmidt did not recommend any action be taken on this issue at this time.
Mr. Schmidt explained the role of the Department of Revenue with the counties (see Exhibit D-3). He explained the working relationship between county officials and the Departments of Revenue and Audit has not always been as positive as it could be. Therefore, to counteract this, the Department of Revenue is forming an Intergovernmental Mineral Policy Advisory Committee (IMPAC). The purpose of this committee is to share with county governments the agencies' knowledge and experience regarding mineral taxation issues and to improve communication between the Departments of Revenue and Audit with the counties.
Counties Right to Appeal
Mr. Schmidt indicated this was not a Department of Revenue problem and will not take this issue up. He indicated it is up to the counties whether they want to work on their right to appeal as a result of the holding in the Sublette County v. Exxon Mobil case. Mr. Schmidt provided highlights from that case (See Exhibit D-4). In that case, the Wyoming Supreme Court held a county cannot appeal a valuation methodology implemented by the Department of Revenue.
Mr. Joe Evans, County Commissioners Association, stated the counties are not pursuing the county's right to appeal either.
Confidentiality Issues
Mr. Randy Bolles, Department of Revenue, explained the confidentiality issue (see Exhibit D-5). Mr. Bolles indicated at times the Department of Revenue needs to use information from one taxpayer for the purpose of valuing minerals of another taxpayer. For instance, when using the comparable sales valuation methodology, this is especially true in the case of nonarms length transactions. Mr. Bolles indicated the department has not had a problem looking at coal contracts even though the statutes provide for a summary of the contract to be disclosed.
State Treasurer's Office Update
Chairman Peck provided information on the State Treasurer's Office. He indicated Cynthia Lummis was unable to come to the meeting due to family conflicts. Chairman Peck related the Legislature directed $150 million be placed in the permanent mineral trust fund, which placed the balance over $2 billion. The largest contributor to the permanent mineral trust fund is from the oil industry with $617 million, natural gas has donated $462 million and coal has deposited $417 million. Chairman Peck indicated the Legislature should express its appreciation to the mineral industry for the large amounts contributed to the permanent mineral trust fund. Staff was then directed to draft a resolution thanking Governor Hathaway and the legislature at that time for creating the permanent mineral trust fund.
Mr. Bill Trevethan, Bentonite Performance Materials, testified regarding the add on factor in the valuation of bentonite (see Exhibit E-1). Mr. Trevethan indicated Bentonite Performance Materials employed 200 people in Wyoming located in rural areas of the state. If the add on factor for bentonite valuation increases dramatically there will be serious consideration by management on whether bentonite production in Wyoming is cost effective. Mr. Trevethan feels the valuation went up too much in 2002 which was due to an increase in the add on factor. He thinks the Legislature should consider placing a cap on the add on factor at approximately 50 percent.
Mr. Schmidt and Mr. Bolles provided information on how bentonite is valued for taxation purposes (see Exhibit E-2). Mr. Bolles indicated the calculation process for valuing bentonite is very complex.
Mr. Marion Loomis, Wyoming Mining Association, indicated he met with the bentonite producers and the Department of Revenue on simplifying the add on factor since it is so complex. He indicated people who proposed the factor initially in 1990 are now retired, but overall the factor seems to be working pretty well. If you look at simplifying the add on factor, you will have winners and losers and this bogs the process down.
Mr. Lyndon Bucher, American Colloid, testified on behalf of the Bentonite Producers Association. He indicated the association looked at the industry wide factor and that is how the 50 percent cap was derived.
Following discussion, Chairman Peck moved the Wyoming Mining Association and the Bentonite Producers Association revisit the add on factor and meet with the Department of Revenue and report back to the Committee at its November meeting. The motion passed.
Coal Transport Tax
Chairman Peck related the railroads challenged the coal transport tax and won in court. Now, the railroads do not have to pay the tax, only the truckers are still paying the coal transport tax (see Exhibit F-1).
Following discussion, Senator Mockler moved that a bill be drafted for Committee consideration repealing the law. The motion passed.
Mr. Dick Hartman, Union Pacific Railroad, indicated the federal court looked at both taxes, including the tax on railroads and the excise tax on the commercial transportation of coal. Both laws were held to be in violation of the federal Four R Act and the court ruled the state could not enforce the taxes.
Following discussion, Representative Anderson moved a bill be drafted repealing the tax on railroads. The motion passed.
Streamlined Sales Tax Update
Mr. Schmidt and Mr. Dan Noble, Department of Revenue, provided an update. Currently 17 states have passed conforming legislation for the streamlined sales tax project in accordance with the agreement. These states represent 20 percent of the United States population. Further issues still to be resolved include defining digital properties and bundling issues (see Exhibit G-1).
Other Business
Chairman Peck asked whether the Committee would like to reopen the netback natural gas valuation issues (since 2003 House Bill 88 was vetoed). Following discussion by the Committee, Representative Cohee moved that the Committee table the issue of natural gas valuation for this interim. The motion passed.
Adjournment
There being no further business, the meeting was adjourned at 5:30 p.m.
Respectfully submitted,
Senator Robert Peck, Representative Roy Cohee
Cochairman Cochairman