MINUTES OF MEETING

      ASSEMBLY COMMITTEE ON GOVERNMENT AFFAIRS

 

      Sixty-seventh Session

      February 5, 1993

 

 

 

The Assembly Committee on Government Affairs was called to order by Chairman Val Z. Garner at 8:04 a.m., Friday, February 5, 1993, in Room 330 of the Legislative Building, Carson City, Nevada.  Exhibit A is the Meeting Agenda.  Exhibit B is the Attendance Roster.

 

 

COMMITTEE MEMBERS PRESENT:

 

      Mr. Val Z. Garner, Chairman

      Mr. Rick C. Bennett, Vice Chairman

      Mrs. Kathy M. Augustine

      Mr. Douglas A. Bache

      Mrs. Marcia de Braga

      Mrs. Vivian L. Freeman

      Mrs. Erin Kenny

      Mrs. Joan A. Lambert

      Mr. James W. McGaughey

      Mr. Wendell P. Williams

 

 

COMMITTEE MEMBERS ABSENT:

 

      Mr. Lynn Hettrick       (Excused)

      Mr. Roy Neighbors       (Excused)

      Mrs. Gene W. Segerblom  (Excused)

 

GUEST LEGISLATORS PRESENT:

 

      None

 

STAFF MEMBERS PRESENT:

 

      Dana Bennett, Research Analyst

 

OTHERS PRESENT:

 

      Robert Seale, Treasurer, State of Nevada; Barbara McKenzie, City of Reno.

 

ASSEMBLY JOINT RESOLUTION 24  -      Proposes amendment to Nevada

of the Sixty sixth Session          constitution to authorize state to enter into certain agreements notwithstanding limitations on state indebtedness.

 

 

Robert Seale, Treasurer, State of Nevada, testified he was not sure he could enlighten the committee regarding A.J.R. 24 of the Sixty-sixth Session.  He said he had just happened upon it yesterday and was compelled to attempt to find out the purpose of the resolution.  He mentioned, on the surface, A.J.R. 24 of the Sixty-sixth Session could be of value to the state, stating his reasons why.  He concluded by saying the state treasurer's office was in the process of creating a master lease pool, but based upon his understanding of the law, his office was unable to provide a mechanism for local governments to lease, long term, anything greater than 10 years.  Therefore, if he understood the language of the legislation being presented, he favored it.  He then asked if anyone could help him understand the intent of the legislation.

 

Mr. Garner stated, humorously, Mr. Seale's testimony was a lukewarm endorsement.  Mr. Seale countered, in the same mood, he could make it stronger if he understood the wording.

 

Mr. Garner said he vaguely remembered the resolution proposed to raise the debt limit, notwithstanding the limitations placed on the overall amount of indebtedness the state could incur.  He added, he remembered Mr. Lou Bergevin had real heartache with the legislation, at first, and said it was another attempt to get around the limitations placed upon what the state could accept in terms of indebtedness.  Mr. Garner then said, in the end, after testimony, Mr. Bergevin ended up supporting the bill.

 

Mrs. Lambert stated she, too, had been opposed to the resolution at first.  She said the legislation had been killed when no one came to testify.  Later Judy Matteucci came to ask the committee to reconsider as the legislation would allow the state to privatize a prison or buy buildings under lease-purchase agreements.  Mrs. Lambert added it gave more flexibility in the modern financial world, but she had no idea if the legislation would allow the treasurer to do what he had suggested.  She thought it would be wise to talk to the bond counsel.

 

Mr. Garner said it would also be wise to bring Judy Matteucci back again.  He asked Mr. Seale to bring his concerns before the committee at that time, but added any language changes would cause the committee to start over.

 

Mr. Seale said his biggest concern was understanding the new language.  He explained, when attempting to lease, an obligation was being made for a long period of time for which money was appropriated in two-year increments.  Therefore, when entering into long-term obligations, if money would not be appropriated by the legislature for any reason during the lease, the impact of not doing so would have an incredibly negative effect on the bond reading.  He gave an example of what had occurred in the State of Florida when the state decided not to follow through with a project.  The penalty which had to be paid was extreme.

Mr. Seale then added he had talked to bond counsel out of New York as it related to the Treasurer's office, and was concerned with the language.  He said, "If I understand it to mean that it is providing a mechanism such that it would be an impossibility to not go forward with the lease once it has been entered into.  If that's not the case, then I am a little bit concerned.  If I understand this to read under no circumstances could there be an interruption of that lease, then I am perfectly comfortable with it.  So I am for it, or against it, depending on whether or not my understanding is correct or incorrect."

 

Mrs. Lambert said she understood it to mean the only way the state could enter into those agreements is if they could be extinguished by the legislature not continuing to appropriate money.  Mrs. Lambert asked if it was possible for Mr. Seale to address his bond counsel with the specific language and have them explain it to the committee.  Mr. Garner said he had no problem with Mr. Seale doing that, but Mr. Garner wanted to get back with the supporters of the resolution.

 

Mr. Bache added Judy Matteucci was the one who had eventually presented the legislation after the committee had indefinitely postponed it.  He said the bill had then been amended as the original language dealt more with the building of schools.  It had been amended to allow for flexibility in leasing out space in prisons. 

 

Mr. Garner said he recalled the testimony seemed to make the legislation critical to "our thrust to do any privatizing."

 

In addition, Mr. McGaughey recalled, "The legislation was one of the things where if the state did not appropriate the money or was not able to buy something, the state could enter into lease agreements in lieu of the large capital expenditure and fund them.  One of the concerns was if this legislation became the way the state would do business, we could have tremendous numbers of leases out there with very long-term obligations and, then, if in the future, the money was not available to pay these leases, the state would still have the obligation.  And the legislature could be forced, every biennium, to include a certain amount of money to pay for some very heavy leases, like prisons and whatever, which would take a big chunk out of the biennium budget before you did anything else.  You would have to fund this liability and they could go for a long time.  That is were I had a problem and Mr. Bergevin did too.  It is binding a future legislature to an appropriations measure when you do this." 

 

Mr. Seale asked if the legislative history was available to shed light on what the thinking had been.  Mr. Garner replied absolutely.

 

Mr. Seale then said, "Mr. McGaughey is absolutely right, you do obligate yourself into the future when you do leases.  I would also point out, when you decide to bond for a prison, the process is you go to the people and you get that approved.  You issue the bond, and then you are obligated to pay the bond back.  That, too, is over a long period of time.  That money is set aside, in perpetuity, or whatever the length of the bond is, and that's one of the things I end up getting to do, making sure all those bonds are paid back.  You still have a sum of money that you have to deal with in the future.  I think some of the heartburn that was being referred to by Mr. Bergevin, is you miss a step in there, and you can do leases directly without involving the people.  That can be a danger, there is no question about it."

 

Mr. Garner asked Dana Bennett to obtain the history on A.J.R. 24 of the Sixty-sixth Session.  He said the resolution would be rescheduled and the supporters notified.  He added he did not know how to explain this legislation to the voters sufficiently, but he did feel the committee was under obligation to move forward with the resolution.

 

 

The hearing on A.J.R. 24 was closed with no action taken.

 

 

Mrs. Lambert presented the amendment to A.B. 166.  Mr. Garner asked Barbara McKenzie, City of Reno, to explain what the amendment did.  She explained the changes as shown in Exhibit C.

 

 

 

      ASSEMBLYMAN BENNETT MOVED AMEND AND DO PASS ON A.B. 166.

 

      ASSEMBLYMAN WILLIAMS SECONDED THE MOTION.

 

      THE MOTION CARRIED.

 

There being no further business to come before committee, the meeting was adjourned at 8:26 a.m.

 

      RESPECTFULLY SUBMITTED:

 

 

                             

      BETTY WILLS

      Committee Secretary

 

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Assembly Committee on Government Affairs

February 5, 1993

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