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Nevada Might Erase 'Hidden Taxes’

4/17/2005 8:00 PM Eastern

The franchise-fee obligations of Nevada cable operators and utilities could evaporate if legislators approve a bill pending in the state Senate.

But the measure faces a fight from cities and counties, which count on franchise-fee revenue for a substantial portion of their local general funds.

Sen. Randolph Townsend (R-Washoe County), the sponsor, calls the estimated $141 million in franchise fees collected from telecommunications providers, power, sewer and water companies “hidden taxes,” for which Nevadans get nothing in return.

Franchise fees are also possible from “interactive computer services,” a legal term that needs further definition.

The bill — which has had a hearing at the Senate Commerce and Labor Committee — would lower the current 5% of revenue franchise-fee cap to 3% after July 1 of this year.

It would step down further, to a 1% cap, after July 1, 2006; and sunset totally in July 2007.

The bill also would bar local governments from re-creating the revenue by writing new assessments based on the privilege of doing business locally.

Though beneficial to cable companies, the Nevada State Cable Telecommunications Association is not publicly supporting the bill. Executive director Robert Gastonguay noted that the industry deals with the legislature for only four months every two years. It deals with city and county regulators every day, and can’t afford to alienate them.

“This proposal was from out of the blue. It didn’t come from us,” Gastonguay added.

Andrew List, executive director of the Nevada Association of Counties, said the measure would cost $52 million a year for just the state’s counties.

For emphasis, he cited sparsely populated Humboldt County, on the state’s northern border. It’s home to only 40,000 people, and franchise fees from various sources earn about $1 million — or 10% of the county’s budget.

Meanwhile, chances for passage look bleak for another Nevada bill — this one promoted by cable — to create a new tax on satellite services. It would create a grant fund for emergency responders to buy technology for intra-agency communications.

But because the new would not apply to industries already at the 5% franchise cap, like cable, it would only be levied on direct-broadcast satellite providers.

Cable operators have an ongoing campaign soliciting consumer support, but DirecTV Inc. and EchoStar Communications Corp. delivered a letter of opposition directly to Gov. Kenny Guinn.

Guinn has already said publicly that the bill would violate his “no new taxes” stance and that he’d veto it.


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