Joint Revenue Committee Minutes

Committee Meeting Information

November 18-19, 2009

Capitol Building, Room 302

Cheyenne, Wyoming

Committee Members Present

Senator John Schiffer, Co-chair

Representative Rodney "Pete" Anderson, Co-chair

Senator Cale Case

Senator Marty Martin

Senator Drew Perkins

Representative Amy Edmonds

Representative Ken Esquibel

Representative Patrick Goggles

Representative Mike Madden

Representative Owen Petersen

Representative Mark Semlek

Representative Sue Wallis

Committee Members Not Present

Senator Grant Larson

Representative David Miller

Other Legislators Present

Senator Jim Anderson, Senator Rick Hunnicut, Senator Tony Ross

Representative Edward Buchanan, Representative Colin Simpson

Legislative Service Office Staff

Mark Quiner, Assistant Director

Dean Temte, Senior Legislative Analyst

Matt Sackett, Research

Josh Anderson, Staff Attorney

Others Present at Meeting

Please refer to Appendix 1 to review the Committee Sign-in Sheet
for a list of other individuals who attended the meeting.

Executive Summary

The Committee met for two days in Cheyenne. The Committee received information on the updated CREG estimate and received a report from the Wind Energy Task Force. The Committee considered a large number of bills and voted to sponsor the following:

· 10LSO-137.W1 Tax increment financing

· 10LSO-157.W1 Statement of consideration

· 10LSO-173.W1 Property tax-review of assessment

· 10LSO-195.W1 Taxation of specified digital products

The Committee also received reports from the Department of Revenue and received public comment.

Call To Order (November 18, 2009)

Co-Chair Anderson called the meeting to order at 8:30 am. The following sections summarize the Committee proceedings by topic. Please refer to Appendix 2 to review the Committee Meeting Agenda.

Consensus Revenue Estimating Group (CREG) Report

Mr. Dean Temte provided an update on the CREG report. He noted that oil and gas employment is a driver and that because there was a drop in employees the forecast has decreased. He noted that there was a modest increase in severance tax forecast and a modest decrease in other general fund revenues. Mr. Temte noted that the Governor's budget reductions had a large effect on the forecast.

Mr. Temte noted that there would be an impact on the school foundation account profile and noted that the transfer to the school capital construction account was increased due to budget reductions and increased revenues.

Wind Energy Task Force Report

Senator Anderson provided a copy of the Wind Energy Task Force report to the Committee (see Appendix 3 for a copy of the handout). He stated that the Task Force found that there is a substantial benefit in the development of wind and that there is an increasing demand for green energy. He noted that wind energy is an attractive alternative energy to supplement Wyoming's other energy resources. He noted that Wyoming has some of the best wind resources in the country but that it was important to recognize that the lower air densities at higher elevations impacts capacity. Senator Anderson stated that transmission is a major issue and that some of the other issues are sage grouse, zoning issues and regulatory certainty.

Senator Anderson noted that as to a tax on wind energy, the tax should not defeat competitiveness in the national market but the industry should bear a reasonable tax burden. He stated that finding that balance is difficult and that while there is some advantage to being in Wyoming because of the better winds, those benefits are limited somewhat due to the elevation and the transmission distance to market. He noted that the Task Force made no specific recommendations on taxation but that any tax should be designed to encourage development of employment and ancillary businesses and maintain some competitive advantage. Senator Anderson provided handouts to the Committee of information considered by the Task Force on taxation of wind energy (see Appendix 4 for a copy of the handouts).

Co-chair Schiffer provided a bill draft to the Committee on electrical generation tax, 10LSO-0126.W4 (see Appendix 5 for a copy of the bill draft). He stated that the taxation of electricity would be structured like a severance tax at a rate of 5% which is similar to the severance tax rate on minerals. He noted that under the proposal there would be a tax credit if taxes were also paid on a natural resource such as coal or natural gas. Senator Schiffer noted that personal consumption is exempt and that a portion of the revenue would be used to mitigate endangered species concerns.

In response to a question, Mr. Dan Noble of the Department of Revenue noted that there would be net revenue of approximately $74 million, not taking into account an exemption for the federal government.

Mr. Matt Grant of Rocky Mountain Power stated that there would be a negative impact on consumers. Mr. Norman Ross of Pacificorp stated that they are a rate regulated utility and that a tax will adversely affect the electric customers. Mr. Ross provided a handout to the Committee (see Appendix 6 for a copy of the handout). He stated that competitive rates are important and that each of the bills are of great importance to the customers. He urged the Committee to leave all existing exemptions and not include additional taxes.

Mr. Tony Gelliardi representing independent business stated that if there is a change in tax policy it hits small business and stated that they cannot afford any more hits.

Mr. Joe Evans of the Wyoming County Commissioners Association stated that they support this bill and noted that counties are dealing with the impacts and providing the services for wind farms.

Ms. Cheryl Riley of the Wyoming Power Producers stated that wind energy is a fledgling industry and that it was time to study the issue. She stated that they would oppose the bills that are presented but would like to work with the Committee to address this issue further.

Mr. John Aubrecht of Wasatch Wind offered a written statement for the record (see Appendix 7 for a copy of the handout). He stated that Wasatch wind was not opposed to a generation tax but the cumulative effects of all taxes might make it unprofitable to develop wind in Wyoming and suggested a comprehensive tax study and urged the Committee to table the current bills.

Ms. Sarah Gorin of the Equality State Policy Center provided a handout to the Committee (see Appendix 8 for a copy of the handout). She stated that it is hard to do accurate comparisons of the tax burden from state to state. She noted that if taxation has a slight dampening effect it may not be a bad thing. She stated that the impacts to the consumer will be small and that her organization supports the bill.

Mr. Bob Tarantola of Black Hills Corporation stated that his organization is very concerned about the bill and that even though there is a credit it is not good policy because a future legislature could easily alter that credit.

Mr. Larry Wolfe of Duke Energy stated that they are the largest active developer of wind energy. He noted that the Wind Energy Task Force did not consider any of the bills being considered by the Committee. He noted that there are lots of ideas that his company has not even had time to consider. He stated that it was not an accident that the tax force had no position on taxation and stated that the Committee did not have enough time today to fully analyze this issue.

Mr. Scott Zimmerman of Interwest Energy Alliance stated that taxation needs further research. He stated that they went through 3 weeks of information in 3 days on the task force. He noted that the county most impacted by a tower may not be the county with the tower and suggested the consideration of a formula to provide funds to the county that has the impact, not necessarily the county with the tower.

Senator Case moved that the Committee pass the bill. The motion was seconded.

After additional discussion, the motion failed by roll call vote. See the vote form attached to the copy of the bill draft.

The Committee also considered bill draft 10LSO-0062.W2, Electricity production-taxation (see Appendix 9 for a copy of the bill). The Committee failed to pass the bill by a roll call vote (see the vote form attached to the bill draft).

General Discussion of Revenues and Exemptions

10LSO-0094.W1 Statewide mill levy

Co-chair Schiffer provided a copy of a bill draft for a statewide mill levy 10LSO-0094.W1 (see Appendix 10 for a copy of the bill). He noted that the State can impose a levy of any amount up to 4 mills. Mr. Temte provided a handout to the Committee on the estimated revenue from the bill (see Appendix 11 for a copy of the handout).

Co-chair Schiffer moved the bill. The motion was seconded and failed by voice vote.

10LSO-0089.W1 Property tax exemptions-repeal

Representative Madden provided a copy of a bill draft to the Committee on property tax exemptions-repeal, 10LSO-0089.W1 (see Appendix 12 for a copy of the handout). He noted that the bill involved three main exemptions, underground mining equipment, fire protection and pollution control. Mr. Marv Applequist of the Department of Revenue stated that the department does not have a lot of numbers available because there is no requirement to report on exempt property. He noted that the purpose of the exemption on fire equipment is that for some companies, all of their property is in a fire district but the fire department is not able to go there and so they have to have their own fire equipment.

Ms. Gorin stated that there is a trade off, but suggested that companies should not receive an exemption beyond the amount paid in the mill levy.

Mr. Norm Ross of Pacificorp stated that pollution control is vital to retain and noted that there are only certain industries that it is imposed on. He noted that there is no economic benefit to the company and that in most other states it is reduced or exempt.

Ms. Brenda Arnold, Laramie County Assessor noted that pollution control is not specific to refineries and that any business can apply for the pollution control exemption.

Mr. Marion Loomis of the Wyoming Mining Associated noted that underground mining equipment has never been subject to tax since statehood and that it would have impacts on mining companies, particularly in trona mines. He stated that there is a need for the pollution control exemption to encourage additional controls.

Mr. Bruce Hinchey of the Petroleum Association of Wyoming noted that the costs of pollution control cannot be passed on and would be born by the oil and gas operator.

Mr. Tarantola stated that pollution control is a significant cost and that while the companies are happy to comply with the standards they are costly.

Co-chair Schiffer moved the bill. The motion was seconded and failed by voice vote.

10LSO-0090.W1 Property tax exemptions-reporting

Senator Case provided a copy of a bill draft to the Committee on property tax exemptions-reporting 10LSO-0090.W1 (see Appendix 13 for a copy of the bill). He noted that it was not a bill to repeal exemptions but because use changes over time the bill would require a report as to how certain property qualifies for the exemption and what the property is being used for.

Senator Martin moved that the Committee pass the bill. The motion was seconded.

Co-chair Schiffer moved to amend the bill to give the duties to the county assessors instead of the department. The motion was seconded and passed by voice vote.

Representative Semlek moved to amend the bill that if a property was deemed eligible for an exemption and there was no change in ownership or use, the property owner would not be required to report in the following years unless a change in use or ownership was deemed to have occurred. The motion was seconded and failed by voice vote.

After additional discussion, the motion to pass the bill failed by voice vote.

10LSO-0093.W3 Fuel tax increase

Representative Madden provided a handout to the Committee on a bill draft for a fuel tax increase 10LSO-0093.W3 (see Appendix 14 for a copy of the handout). Mr. Temte provided a handout to the Committee on revenue which would be generated from the bill (see Appendix 15 for a copy of the handout). Representative Madden noted that the total increase would be 10 cents and would generate approximately $71 million in fiscal year 2013. He noted that there would likely be only a partial shift to the consumer because historically a fuel tax has not resulted in a penny for penny increase in fuel prices because of competitive pricing. He noted that because of the pricing and because a large portion of fuel is sold to out of state customers it would be an efficient tax.

Mr. Brent Taylor of the Wyoming Trucking Association stated that his organization has historically supported a fuel tax increase and would likely be in support of this bill.

Ms. Erin Taylor of the Wyoming Taxpayers Association stated that they do support the bill and that it meets the cornerstones of taxation. She stated that she was not commenting on the amount of the increase but in support of the concept of an increase to the fuel tax.

Mr. Evans stated that the county commissioners association supports the bill. He stated that they are looking at a decrease in revenue for local government and also lower sales tax and property tax in county governments.

A representative of the Wyoming Farm Bureau stated that the Farm Bureau is against the bill and that if there is an increase in fuel costs the agriculture producers would not have the ability to pass that along to the consumers. He stated that it would be an increase in the cost of production with little benefit.

Representative Madden moved to pass the bill. The motion was seconded and failed by voice vote.

10LSO-0091.W1 Tax exemption-vented gas

Co-chair Schiffer provided a bill draft to the Committee to remove the tax exemption for vented gas 10LSO-0091.W1 (see Appendix 16 for a copy of the bill). He noted that the bill eliminated the exemption for vented or flared gas. He stated that natural gas is a resource of the state that disappears. He noted that nobody would be prohibited from venting gas but it would become more expensive and it would provide some incentive to recapture the gas.

Mr. Paul Ulrich of EnCana stated that gas is only flared for safety reasons and that there was no way to measure the gas that is vented.

Mr. Hinchey stated that the companies do not want to waste the gas because it is a product that can be sold and noted that it is only done for safety.

Co-chair Schiffer moved that the bill pass. The motion was seconded and failed by voice vote.

10LSO-0092.W5 Sales and use tax revisions

Representative Wallis provided a bill draft on sales and use tax revisions 10LSO-0092.W5 (see Appendix 17 for a copy of the bill draft). She stated that the goal of the bill is to spread the sales tax as broad as possible and make the rate as low as possible. She noted that it would be adjusted to gain the same amount of tax dollars, adjusted for inflation.

After additional discussion, Representative Wallis requested that the Committee not consider the bill further at this time.

The Committee was given a handout on the digital products bill for the following day (see Appendix 18 for a copy of the handout).

Meeting Recess

The Committee recessed at 4:50 pm.

Call To Order (11/19/2009)

Co-Chairman Schiffer called the meeting to order at 8:30 am.

Tax Increment Financing

Mr. Mark Harris of the Wyoming Association of Municipalities provided a bill draft to the Committee on Tax increment financing 10LSO-0137.W1 (see Appendix 19 for a copy of the handout). He noted that the bill authorizes increment areas for bonding or other financing for improvements. He noted that the areas would be limited to 40 acres in size and would be similar to a local improvement district.

He noted that the areas would be created similar to the urban renewal act and the downtown development authority and noted that those provisions already provide for tax increment financing. He noted that the bill would allow the deferral of the State's and the county’s share of the increment until the bond is paid off.

In response to a question, Mr. Harris noted that the payoff in the case of a shortfall would depend on the type of bond, if it were a special revenue bond it would be limited to the revenues generated but if it were a general obligation bond the municipality would have to make up the shortfall from other sources.

Mr. Dan Noble of the Department of Revenue noted that there are some grey areas, including what to do if a business drops off, or if a business has multiple locations which are not all within the increment area.

Ms. Lynn Birlefi of the Wyoming Economic Development Association stated that they support the bill because it is another tool to take advantage of time sensitive development opportunities. She noted that there is interest from all quarters of the state on this issue.

Mr. Evans suggested that the bill should be amended to take the revenue to the counties out of the portion that would be included for the municipalities.

Ms. Taylor stated that her association had not really discussed this proposal. She noted that about 48 states have some type of tax increment financing and that a report is available. In response to a question, Ms. Taylor noted that there were possibly some concerns with the cornerstones of taxation. Senator Case requested a copy of the report mentioned.

Co-chair Anderson moved bill. The motion was seconded and passed by roll call vote as a house bill (see copy of the vote form attached to the bill draft).

CAMA System Follow-up

Representative Madden provided two bills to the Committee, 10LSO-157.W1 Statement of consideration and 10LSO-0173.W1 Property tax-review of assessment (see Appendix 20 and 21 for a copy of each bill draft). Ms. Arnold stated that the assessors support the open disclosure of sales. In response to a question, she noted that 45 states have public disclosure.

Mr. Applequist stated that it is a transparency issue and noted that it is appropriate to share the information.

Co-chair Anderson moved 10LSO-157.W1 as a senate file. The motion was seconded and passed by roll call vote (see copy of the vote form attached to the bill).

Ms. Arnold stated that 10LSO-173.W1 clarifies that the 30 day limitation applies and deletes the postmark date in order to clarify what she believes was the original intent of the provision.

Co-chair Anderson moved the bill as a senate file. The motion was seconded and passed by roll call vote (see copy of the vote form attached to the bill).

Ms. Arnold provided a handout to the Committee on appeals (see Appendix 22 for a copy of the handout). In response to a question she noted that appeals have not changed much in volume statewide.

Taxation of Digital Products

Mr. Noble provided a bill draft to the Committee on the taxation of specified digital products 10LSO-0195.W1 (see Appendix 23 for a copy of the handout). He noted that there was a group of industry representatives that helped with the development of the proposal. He noted that tangible personal property such as computer software has been taxed for years. He noted that commerce is evolving and that the states are behind and that establishing a definition for specified digital products is a response to that evolution.

He noted that the line of taxation is drawn at possession. He stated that the definition may be a potential violation of the streamlined sales tax agreement but that determination would be left to the governing board.

Mr. Noble provided a handout to the Committee on language related to pay per view (see Appendix 24 for a copy of the handout). He stated that the intent of the bill is to maintain the status quo. He noted that the tax would not apply to items streamed to the computer. He noted that a streamed product means that once the downloaded item is done playing it is no longer available to the customer.

Mr. Dave Picard of Dish Network provided a handout to the Committee (see Appendix 25 for a copy of the handout). Mr. Picard noted that the tax would be passed through to the consumers.

Co-chair Anderson moved that the Committee sponsor the bill as a house bill. The motion was seconded and passed by roll call vote (see copy of the vote form attached to the bill).

Other Business

Representative Wallis provided a handout to the committee on suggested language for a budget task force (see Appendix 26 for a copy of the handout). In response to a question, Representative Wallis stated that while the Appropriations Committee v looks at the budget year to year, the proposed group would look at particular agencies in a phased manner. She noted that the suggestion would be to look at the possibility of establishing such a group and how to assemble the group.

The Committee directed staff to prepare a bill draft and distribute for a vote by mail ballot.

Ms. Gorin provided a handout to the Committee on the gender wage gap (see Appendix 27 for a copy of the handout).

Mr. Ed Schmidt, Director of the Department of Revenue, provided a handout to the Committee on the property tax refund program (see Appendix 28 for a copy of the handout). He noted that the program has grown significantly and that there are fewer denials of applications.

The Committee received additional handouts of reports and written comments, see Appendix 29 though Appendix 34 for a copy of the handouts.

Meeting Adjournment

There being no further business, Co-Chairman Schiffer adjourned the meeting at 2:30 pm.

Respectfully submitted,

Senator Schiffer, Co-Chairman Representative Anderson, Co-Chairman

File Storage: F:\AA\COM\REV\MINUTES

Appendix	Appendix Topic	Appendix Description	Appendix Provider
1	Committee Sign-In Sheet	Lists meeting attendees	Legislative Service Office
2	Committee Meeting Agenda	Provides an outline of the topics the Committee planned to address at meeting	Legislative Service Office
3	Wind Energy	Wind energy task force report	Legislative Service Office
4	Wind energy	Wind energy tax	Wind energy task force
5	10LSO-0126.W4	Electrical generation tax	Legislative Service Office
6	Tax proposal comment	Tax proposal comment	Pacificorp
7	Tax proposal comment	Tax proposal comment	Wasatch Wind
8	Tax proposal comment	Tax proposal comment	Equality State Policy Center
9	10LSO-0062.W2	Electricity production-taxation	Legislative Service Office
10	10LSO---94.W1	Statewide mill levy	Legislative Service Office
11	Statewide mill levy	Estimated revenue increase	Legislative Service Office
12	10LSO-0089.W1	Property tax exemptions-repeal	Legislative Service Office
13	10LSO-0090.W1	Property tax exemptions-reporting	Legislative Service Office
14	10LSO-0093.W3	Fuel tax increase	Legislative Service Office
15	Fuel tax increase	Estimated revenue increase	Legislative Service Office
16	10LSO-0091.W1	Tax exemption-vented gas	Legislative Service Office
17	10LSO-0092.W5	Sales and use tax revisions	Legislative Service Office
18	Digital products	Digital products comment	Sutherland
19	10LSO-0137.W1	Tax increment financing	Legislative Service Office
20	10LSO-0157.W1	Statement of consideration	Legislative Service Office
21	10LSO-0173.W1	Property tax-review of assessment	Legislative Service Office
22	Appeal summary	Appeal summary	Brenda Arnold
23	10LSO-0195.W1	Taxation of specified digital products	Legislative Service Office
24	Definition	Definition	Department of Revenue
25	Digital products matrix	Digital products matrix	Dave Picard
26	State budget task force	State budget task force	Representative Wallis
27	Gender wage gap	Gender wage gap	Equality state policy center
28	Property tax refund program	Property tax refund program	Department of Revenue
29	Property tax assessment limits	Property tax assessment limits
30	Report on severance tax exemptions	Report on severance tax exemptions	Department of Revenue
31	Sales and use tax exemptions report	Sales and use tax exemptions report	Department of Revenue
32	Natural gas valuation	Natural gas valuation report	Department of Revenue
33	Sales tax comment	Sales tax comment on manufacturing equipment
34	Sales tax comment	Sales tax comment on manufacturing equipment	Neiman Enterprises