CARSON CITY — After nearly seven hours of open and closed door meetings Monday, the state Senate adjourned without voting on a petition to raise the room tax rate by 3 percentage points in Clark and Washoe counties.
“Some members still have questions,” said Senate Majority Leader Steven Horsford. “We have until Friday.”
Eight senators expressed various reservations about the tax increase designed to raise $233 million over the next two years and help address the state’s budget crisis.
The Assembly passed the proposal Feb. 24 on a 35-7 vote, with all 28 Democrats and seven of 14 Republicans voting in favor.
Normally an ardent foe of tax increases, Gov. Jim Gibbons has said he would sign the tax increase petition into law. Gibbons even included the revenue from the tax in his $6.17 billion, two-year budget.
When Gibbons released his proposed budget in January, he anticipated the tax would raise $292 million. But since then, the economy has continued to decline, with room tax revenues and occupancy levels falling. Legislative budget analysts last week estimated the tax would bring in $233 million, but said Monday that it might even be lower than that.
The proposed room tax increase would need the support of 14 of the 21 senators before going to Gibbons for his signature.
Although Horsford said he had not counted votes, a lack of sufficient support appeared to be why he did not take a final vote. One legislator said Horsford would have scheduled a Monday night vote if he had the 14 votes required for approval.
Even Senate Taxation Chairman Bob Coffin, D-Las Vegas, who has advocated tax increases to cover perceived budget shortfalls, said he was “teetering” on whether to back the room tax increase.
He did not like the idea of implementing tax increases through initiative petitions.
“It takes away the ability of the Legislature to act,” he said. “It is harmful to the legislative process.”
The tax increase petition plan ran into rough waters almost from the moment the debate began in a committee of all 21 senators.
Sen. John Lee, D-North Las Vegas, and Sen. Barbara Cegavske, R-Las Vegas, both complained that Clark County hotels and motels were being treated unfairly because nearly 99 percent of the room tax revenue would be raised in the state’s most populated county.
Less than $3 million would come from sales in Washoe County and none from the remainder of the state.
“Clark County will subsidize the entire state,” Cegavske said.
Lee said he wanted a trailer bill that would require the tax increase to be levied in every county.
“I believe every business should be taxed the same,” Lee said. “I am going to look for something that shows me parity.”
What the senators ultimately may vote on is the tax petition circulated last fall by the Nevada State Education Association.
About 130,000 residents signed the petition to change state law and increase the room tax rate in Clark and Washoe counties by as much as 3 percentage points, but to no more than a 13 percent tax rate.
Under the state constitution, the tax proposal must be approved or rejected by the Senate by Friday, or it will be placed before voters as a ballot question on the election ballot in November 2010.
The proposal received support from 66 percent of the voters in Clark County and 57 percent in Washoe County when it appeared as an advisory question on ballots in November.
Because of the voter support, Gibbons agreed to sign the increase into law if it reaches his desk.
Since rooms in most of Clark County are now taxed at 9 percent or 10 percent, depending on the area, patrons at hotels and motels would be assessed an additional 3 percentage points.
In Washoe County, only hotels and motels in unincorporated areas now pay less than 13 percent in lodging taxes. Consequently, only a small amount of money would be raised there.
In testifying for the tax increase, Wynn Resorts general counsel Kim Sinatra said that even with the increase, the 13 percent tax rate in Las Vegas would be less than most other major convention cities.
New York has a 14 percent lodging tax and a $3 a room charge. The rate in San Francisco is 14 percent, the same as Los Angeles and Atlantic City. New Orleans has a 13 percent tax.
Under terms of the petition, the money raised between July 1, 2009, and June 30, 2011, can be placed in the general fund budget and used for any purpose.
But starting on July 1, 2011, money raised through the increase must be used only for programs to increase student achievement, or to increase salaries of teachers.
“The single most important matrix in the classroom is the teacher,” Sinatra said in backing the increase.
While money isn’t everything, she said it is a factor in retaining and securing quality teachers.
Sinatra added that Las Vegas business leaders are frustrated because job candidates often are “unprepared” because of the lack of a good education.
She said Wynn Resorts, Station Casinos and Harrah’s continue to back the increase despite the deterioration of the gaming industry.
“We are long-term thinkers,” she said. “We have confidence our industry will recover.”
The Las Vegas Sands Inc., however, opposes the tax increase.
In response to questions, Sinatra admitted her company agreed to back the room tax petition in exchange for the union’s decision to drop a petition to increase the gaming tax by 3 percentage points.
NSEA President Lynn Warne said her 28,000-member association agreed to drop the gaming tax plan because “we certainly didn’t want to cripple the industry.”
Wynn Resorts and the other companies came to the NSEA with the alternative plan to increase the room tax, she added.
“We know it doesn’t fill the entire need (for education),” she added. “We need another $500 million to get back to 2007 funding levels.”
Warne added the NSEA simply is tired of Nevada ranking at or near the bottom of lists for per capita funding of public education.
No gaming companies or the Las Vegas Convention and Visitors Authority sent representatives to speak against the tax increase plan.
Sen. Terry Care, who chaired the committee hearing, called it “inexcusable and indefensible” that the convention and visitors authority did not testify on the tax plan.
“It makes me wonder if the LVCVA is going to be a player this session,” added Care, D-Las Vegas.
After hearing opposition to the tax increase, Senate Minority Leader Bill Raggio, R-Reno, reminded members that if they reject the proposal, then they will have even a bigger hole in the budget to plug.
“We are faced with a very severe budget crisis,” he said.
The room tax proposal may be more palatable than other tax increases because the tax would be paid by tourists, he added.
Contact Capital Bureau Chief Ed Vogel at email@example.com or 775-687-3901.