"Draft Only – Approval Pending"

M I N U T E S

JOINT REVENUE INTERIM COMMITTEE

Oil & Gas Conservation Commission                                                                  October 29 and 30, 2001

Casper, Wyoming

PRESENT:            Representative Pat Nagel, Cochairman;

Senator Robert Peck, Cochairman;

Senators Irene Devin, Dick Erb, Rae Lynn Job and Jayne Mockler;

Representatives Rodney "Pete" Anderson, Chris Boswell, Roy Cohee, Nick Deegan, Roger Huckfeldt, Phil Nicholas, Doug Osborn and Jane Wostenberg.

Legislative Service Office:  Mark Quiner, Assistant Director; David Nelson, Senior Research Associate; Steve Sommers, Budget Fiscal Manager and Mary Byrnes, Fiscal Analyst.

Others:  See Attachment A.

ABSENT:             Senator Irene Devin (October 30 only) and Representatives Phil Nicholas and Doug Osborn (October 30 only).

*  *  *  *  *

Monday

October 29, 2001

Cochairman Peck called the meeting to order at 9:00 a.m.   The order of the meeting generally followed the prepared agenda (see Attachment A).

Senator Mockler moved that the minutes from the August 20 and 21 meeting of the Committee be approved.  The motion passed.

Telecommunication services-taxation, 02LSO-0212.W1

Ms. Johnnie Burton, Director of the Department of Revenue, explained the purpose of the bill was to comply with the federal telecommunications sourcing act (See Exhibit A-1).  She indicated that there is currently a problem with taxing calls based on where the call originates.  It is hard to tax the source of a call when the phone moves around the country.  Congress passed a law in conjunction with the telecommunications industry.  The rule is applicable to all states, and allows the states to pinpoint the origin of the telecommunications services for taxation purposes.  The primary place of use for the phone is the place in which the tax may be applied.

Ms. Liz Zerga representing Western Wireless Company (Cellular One) provided the Committee with testimony about the federal law and the need for the state to pass a statute to comply with the federal law.  She indicated the federal law provides a uniform method of taxing telecommunications services.

Ms. Zerga provided the Committee with a copy of an industry draft bill which would propose a chapter in the statutes to cover the taxation and all fees that wireless telecommunication service providers must pay (See Exhibit A-2 and A-3). 

Ms. Deborah Hinckley of Qwest urged the Committee to consider the industry's consolidation bill draft.

Senator Mockler moved that on page 1 line 17 before "mobile" insert "intrastate".  The motion passed.

Senator Mockler moved to make the effective date August 1, 2002 or upon completion of federal regulations and law.  The motion was withdrawn.

After discussion Senator Mockler moved that the bill (02LSO-0212.W1) as amended be sponsored as a House Bill.  The motion passed with a roll call vote of 9 ayes, 3 noes (See Exhibit A-4).

Ms. Zerga and the telecommunications industry representatives were urged to refine their draft bill and bring it forward for possible consideration by the Legislature.  Industry representatives present indicated they will so proceed.

CAMA System.

Johnnie Burton provided the Committee with information regarding the need to update the CAMA system.  CAMA stands for computer aided mass appraisal system.  She indicated that the system has been in place since 1987.  Since the system is so old it has become a problem to find consultants and technicians who are able to fix the systems.  The Department hired a consultant who reported back that the CAMA system is obsolete and since it cannot be repaired the Department is in grave danger of the whole system crashing and breaking down.  The consultant recommended that the Department purchase a new mass appraisal system which would cost around $5,000,000.00.  The Department would like the Revenue Committee's support to do this.  Ms. Burton also provided a letter from the Wyoming County Assessor's Association (See Exhibit B-1).  The letter supports the Department's efforts to purchase a new appraisal system. 

After discussion Cochairman Peck indicated the Committee would support the Department's attempt to upgrade the CAMA system to a single statewide assessment appraisal system.

Homestead Exemption.

Ms. Burton indicated that she had obtained an opinion from the Attorney General's Office indicating that a homestead exemption could be modified so that it didn't apply to everyone.  The Attorney General said the homestead exemption could be limited to those only over 65 and could be granted to certain means tested people who met certain income requirements. 

The Attorney General further opined that the state could require the counties to bear a portion of the burden of funding the homestead exemption.  After discussion Representative Nagel moved that the Committee request a bill be drafted on the homestead exemption for people 65 and over that would be means tested with an 80/20 cost burden sharing with the counties where the state reimburses counties 80%.  The motion passed.

Senator Job moved to amend the motion to prohibit the state county split.  The motion failed.

Streamlined Sales Tax Project Update.

Ms. Burton provided the Committee with an update on the Streamlined Sales Tax Project.  Currently 18 states have passed a law to participate in the simplification agreement between the states.  The National Governors Association and the National Conference of State Legislatures are working with the 18 states on administration and governing of the project.  Ms. Burton indicated that Cochairmen Peck and Nagel along with Representative Hines will accompany her to the next meeting on the Streamlined Sales Tax Project in Salt Lake City November 28 and 29, 2001.

Oil Field Services-Taxation, 02LSO-0213.W1.

Ms. Burton explained the bill which attempts to eliminate some of the confusion in the oil field over which services are taxable and which services are not (See Exhibit C-1).  Essentially services are not taxed in Wyoming except there is an exemption for certain services performed in the oil field.  The purpose of the bill is to clarify that any services rendered within a 250-foot radius of the well bore would be taxed up until the well is completed and production casing is set.  Following the setting of production casing no services would be taxed under the excise tax law.

Mr. Bob Ugland, Director of the Petroleum Association of Wyoming, complimented the Department on its work in addressing this difficult issue.  The association is close to agreeing with the Department except they would like to see the line drawn to allow taxing of all services up until the well is actually in production.  Following the production point no services would be taxed.

Following discussion Representative Osborn moved that the Committee sponsor the bill as a Senate File.  Senator Devin moved to amend to make the bill a House Bill.  The amendment to the motion passed.  The original amended motion passed with a roll call of vote of 12 ayes and 2 absent (See Exhibit C-2).

Special Districts-Reporting, 02LSO-0102.W3.

Mr. Mike Geesey, Director, and Ms. Pam Robinson and Jim Mitchell, all of the Department of Audit explained the bill (See Exhibit D-1).  The bill imposes reporting requirements upon special districts.  Mr. Mitchell proposed several amendments to the bill (See Exhibits D-2, D-3, D-4 and D-5).  Primarily the amendments address dissolution of a special district for failure to comply with the reporting requirements of the law.

Mr. Tom Satterfield, Fremont County Commissioner, and Julie Freese, Fremont County Clerk, testified they did not find much wrong with the bill.  Ms. Freese explained how she sends out notices to special districts. 

Mr. Joe Evans of the Wyoming County Commissioners Association indicated that the county commissioners have no problem with the concept of the bill.  They like the idea of dissolving a special district and making it mandatory since it's not always easy for county commissioners to optionally dissolve a special district.  Mr. Evans indicated they are concerned about the reporting requirements for small special districts. 

Mr. Michael Walden-Newman of the Wyoming Taxpayers Association testified in favor of the bill.  He indicated that the legislature must decide difficult issues regarding state revenue needs and to know the whole story they must understand the reporting of the fiscal picture from special districts.

After discussion Representative Anderson moved that the Committee adopt amendments No. 1, 2 and 3.  The motion passed.

Representative Nagel moved that on page 5 line 46 delete "county commissioners" insert "department of audit".    The motion passed.

Representative Osborn moved to change the word "shall" to "may" in the amendment No. 2.  The motion failed.

Representative Cohee moved that the county commissioners file a public notice in a local newspaper that the special district is in danger of being dissolved.  The cost of advertising could be charged to the special district.  The motion passed.

Senator Mockler moved that on page 5 line 44 after "county treasurer" insert "and county clerk"; same amendment on page 6 line 13.  The motion passed.

Following discussion Representative Deegan moved that the Committee sponsor the bill as a Senate File. The motion passed with a roll call vote of 13 ayes (See Exhibit D-6).

Sales and Use Tax Distribution, 02LSO-0098.W1.

Johnnie Burton explained the current distribution of sales and use taxes between the state and local governments (See Exhibit E-1).  Ms. Burton also explained the bill which would change the sales tax percentage retained by the state from 72% to the 66%.  This would reduce the amount that is deposited into the general fund (See Exhibit E-2).

Steve Sommers of LSO indicated the bill would reduce the amount received by the general fund by $25,000,000.00 per year.

Mr. George Parks of the Wyoming Association of Municipalities, and Trudy McCracken, President of WAM, indicated that this has been a good year for local governments.  The state treasurer distributed almost $40,000,000.00 to cities and towns from mineral severance taxes.  They indicated that this is the best year in history.  He indicated that this is one time money and that most municipalities will use the money for capital needs.  They also received a municipal rainy day account distribution.  Energy costs are being reduced so this is helping municipal budgets.  However the terrorist attacks has caused more emphasis on public safety and there will be increased costs in that area.

Mr. Joe Evans of the Wyoming County Commissioners Association indicated that the counties generally support the bill.  The counties really need help with additional funding.

Mr. Paul Bertoglio, Mayor of the City of Casper, and Tom Forslund also of the City of Casper indicated that de-earmarking has been hard on cities.  Mr. Forslund indicated that the sales tax is the largest source of revenue received by the city of Casper.  It is still 17% below what the city used to receive in the 1980's.  The city recently had to increase police officer's salaries by 13% to keep them at market level.  It is hard to retain people without good pay he indicated.

Ms. Lynne Whalen, Casper Councilwoman, indicated that local governments understand the problems with funding state government.  Local governments face the same issues as the state.  It is expensive to keep up streets and gutters.  If cities do not maintain their services it is hard to attract new businesses and attract new people to their communities.  She indicated that investing in local governments is important.

Mayor Bill Eichler of the City of Riverton and Duane Hudson also of the City of Riverton indicated that state money accounts for 72% of their budget.  The state controls the biggest share of that budget and they support the bill.

Mayor Joe Shumway of Laramie indicated that Wyoming is exporting its youth and importing the elderly.  If we export our workers and import nonworkers than the economy suffers.  He indicated we need to get a formula that works for everyone.

Mr. Jim Wysocki of the City of Powell indicated it costs around $80,000.00 to rebuild a block of streets.  Maintenance of streets is expensive and the health insurance is also increasing in costs.

Mr. Mike Varney, Mayor of the City of Torrington, indicated Torrington has problems similar to other cities.  They recently lost 5 people from the police Department who went to other towns.  The City of Torrington is currently experiencing a severe water quality problem with nitrates.  He indicated the Wyoming Water Development Commission has been very generous in trying to help the city but if the city cannot solve its water problem it will not grow.  He indicated that the city only grew by 125 people in the last 10 years.  He indicated the town of Torrington competes with cities and towns in western Nebraska and enrollment in the Torrington schools is declining.

After discussion Representative Deegan moved that the percentage be adjusted from 66% to 65% with the remaining 35% going to local governments.  The motion failed.

Senator Devin moved that the bill be amended so that 69% goes to the state and 31% goes to local governments.  The motion passed.

Following discussion the Committee voted to introduce the bill as a House Bill with a roll call vote of 10 ayes and 3 noes (See Exhibit E-3).

Sales and Use Tax Distribution-2, 02LSO-0142.W1.

Johnnie Burton explained the bill which would decrease the amount the state general fund receives from sales and use tax distribution as well as redistribute 1% back to counties (See Exhibit F-1). 

Following discussion the Committee asked that the bill be redrafted with the new percentage of 69% to the general fund and 31% to local governments and to distribute the local government's share of the 1% by total population of the county.  Further the bill should have an appropriation of $50,000.00 to the Department of Revenue for software changes.

Other Bills.

Following discussion of other revenue measures before the Committee, Senator Mockler moved that the Committee lay aside all of the remaining revenue bills and keep the bills on the table since the Committee does not know how much revenue will be needed for the state for the upcoming biennium.  The motion passed.

There being no further business Cochairman Peck adjourned the meeting at approximately 4:40 p.m.

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Tuesday

October 30, 2001

Cochairman Nagel called the meeting to order at approximately 8:30 a.m.

Inheritance Taxes.

Senator Bill Hawks introduced Mr. Chuck Harkins a Casper CPA who provided testimony to the Committee on state inheritance taxes (See Exhibit G-1 and G-2).  Mr. Harkins indicated that due to the changes of inheritance tax in the federal law the state could potentially lose its share of inheritance taxes.  Currently Wyoming law provides that the state inheritance tax will be the maximum credit allowed for state taxes by the federal government.  Congress has amended the federal inheritance tax law to phase the federal law out over a period of years.  Under such federal law, Wyoming's share of inheritance taxes would be reduced eventually to zero. 

Following discussion the Committee requested that a bill be drafted to amend Wyoming's law to indicate that the inheritance tax in Wyoming is the same as it was on January 1, 2001.

State Finances.

Mr. Steve Sommers gave a CREG report overview (See Exhibit H-1).  Mr. Sommers indicated that the state revenue picture is positive for the next biennium due to an increase in sales tax and an increase in coal prices and coal bed methane production.  Mr. Sommers indicated that the state will have around $93,000,000.00 more than projected after the biennium.  He indicated the governor's budget request will be around $1.6 billion and there should be almost enough money to fund the total request (See Exhibit H-1).

School Finance-Foundation Program-Local Resources, 02LSO-0127.W3.

Note – a transcript was taken of school finance information and is available from the Legislative Service Office.

Nr. Dave Nelson of LSO explained the bill as well as an enumeration of the local district revenues available (See Exhibits J-1 and J-2).

Mary Byrnes of the Legislative Service Office also provided the Committee with information regarding different school foundation program account funding distribution timeline (See Exhibits J-3 and J-4).

At the conclusion of the discussion Senator Mockler moved that option C from Mary Byrnes Exhibit J-3 be incorporated into the bill draft.  The motion passed.

Following discussion the Committee voted to sponsor the bill as a Senate File as amended with a roll call vote of 8 ayes and 2 noes (See Exhibit J-5).

Capital Construction Needs-Funding.

Ms. Cynthia Lummis, State Treasurer and Mr. Keith Curry of Public Financial Management of New Port, California gave a presentation to the Committee on potential revenue methods for capital construction (See Exhibit K-1). 

Note – a transcript was taken of this discussion and is available from the Legislative Service Office.

Mr. Delbert Eitel, Chairman of the Transportation Commission of Wyoming, indicated that he was supportive of the objective to change the statute to allow the use of Garvee bonds for financing highway projects.  However, he warned that to use Garvee bonds also involves federal oversight and restrictions.

Miscellaneous

Following discussion the Committee requested a bill draft to increase the sales and use tax by 1 cent statewide with no distribution to local governments.  The proceeds thereof to be deposited into the school foundation account.

Adjournment

The Cochairmen announced the next meeting will be held January 16 but also reserve January 17 in case the Committee needs a second day.

There being no further business Cochairman Nagel adjourned the meeting at 3:10 p.m.

Respectfully submitted,

Senator Robert A. Peck

Cochairman