Legislative committee proposes new gas tax formula

A new formula for dividing gas taxes would shift any new cash away from rural areas to the counties with the most people.

The formula presented Thursday to the legislative committee studying distribution of tax revenues puts much more emphasis on population in deciding which counties get how much of the state's 3.6 cents per gallon tax on gas.

However, Las Vegas Finance Director Marvin Leavitt, who headed the team which developed the proposed formula, said it protects small counties by guaranteeing they won't get less money than they now receive.

The formula will be included in a bill to be considered by the Legislature in 2001.

The current formula gives equal weight to road miles in the county, the county's land area, miles traveled each year and population.

The new formula, said Leavitt, would put two-thirds of the emphasis on population and one-third on road miles maintained by the county.

Assemblyman Roy Neighbors, D-Tonopah, said the new formula will hurt rural areas.

"Now, not only are you going to be poor but you're going to have darned poor roads," he said.

But Leavitt said large-county representatives have complained for years that the existing formula isn't fair.

"No tax is fair," responded Neighbors, arguing the $170 million generated by mining taxes each year goes mostly to Nevada's larger counties.

"It's an irony that we could have a $150 million surplus but White Pine County is having trouble raising $700,000 to make their budget," Neighbors said.

Leavitt said it was the technical committee's decision, after nearly five years of studying the issue, that the state may have to help rural counties in other ways, "but the road tax should be based on relative need."

At stake is some $38 million a year in gas tax money the state distributes among the counties.

Leavitt said the committee voted to make sure no small county ever gets less money.

"This money makes up a major portion of the public works budgets of some of these counties, so the fear was if you don't put a real 'hold-harmless' in the formula, we would cause them serious trouble," he said.

Under the formula, rural counties would give up land area as a factor and lose the right to count state highways within their borders as part of the formula.

Large counties, however, would continue to count road miles as opposed to "lane miles," which would count an eight-lane freeway as four times the length of a two-lane road.

The effect of the new formula is that the 11 rural counties will continue to get at least the same amount of money while any new cash as the tax revenues grow will go mostly to the populous counties.

Carson City is among the counties to benefit from the new formula. It is projected to get $597,000 in 2002, if nothing changes. Under the new formula, Carson City would receive $636,000.

Washoe County would remain at about $4.5 million under the new formula. Clark County, which gets $16 million under the old formula, would get $16.5 million with the new.

The committee also agreed to begin a thorough study of whether some of Nevada's small counties can survive financially in the future, in part because of problems such as those raised by the gas tax issue.

"We need to do a fairly extensive study into the fiscal health of our local governments in this state," Leavitt said. "We need to see if we can make these entities viable for the long term."

Several counties, the committee was told, are suffering declining populations, losing businesses and watching their tax base decrease.

Ten of Nevada's 17 counties showed a decline in total taxable sales during July - the most recent month numbers were available. And the mining industry, key to a number of those counties' economic success, is in a serious slump.

Bob Hadfield of the Nevada Association of Counties said the group is "very concerned we have local governments out there under financial stress not of their own making."

Along with that study, the committee decided to support building a database of local government financial information to be used for helping counties spot and head off fiscal problems.

"We need to provide an early warning system for these local governments," Leavitt said. "Some of these local governments barely know there's a problem before it's upon them."

Taxation Director Dave Pursell said legislative fiscal staff suggested putting that responsibility in his department to develop a database and begin providing small, local governments more help with their financial affairs.