MINUTES OF MEETING
ASSEMBLY COMMITTEE ON GOVERNMENT AFFAIRS
Sixty-seventh Session
February 24, 1993
The Assembly Committee on Government Affairs was called to order by Chairman Val Z. Garner at 8:08 a.m. Wednesday, February 24, 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
Mr. Lynn Hettrick
Mrs. Erin Kenny
Mrs. Joan A. Lambert
Mr. James W. McGaughey
Mrs. Gene W. Segerblom
Mr. Wendell P. Williams
COMMITTEE MEMBERS ABSENT:
Mr. Roy Neighbors, Excused
GUEST LEGISLATORS PRESENT:
None
STAFF MEMBERS PRESENT:
Ms. Dana Bennett
OTHERS PRESENT:
Mr. Roger H. Jones, Jr., Four Corners Group; Mr. Chas Horsey, Nevada Housing Division; Mr. John Swendseid, City of Reno; Mr. George Cotton, Clark County Manager's Office; Mr. Nile Carson, City of Reno Police Department; Mr. Michael Griffin, Nevada Department of Insurance; Ms. Carole Vilardo, Nevada Taxpayers Association; Ms. Lisa Foster, City of Sparks; Mr. G.P. Etcheverry; Mr. Brian Krolicki, Chief Deputy Treasurer, State of Nevada.
ASSEMBLY BILL 152 - Allows counties and cities to finance projects on behalf of corporations for public benefit and projects for affordable housing through issuance of certain revenue bonds.
Chairman Garner indicated the committee would hear testimony on AB 152 but no definitive action would be taken at this time and the bill would be rescheduled at a later date.
Mr. Roger H. Jones, Four Corners Group, stated the Group's interest in AB 152 was hopefully to provide Nevada with the same conduit financing vehicles which existed in the majority of the United States. Mr. Jones introduced John Swendseid who gave testimony.
Mr. John Swendseid, representing City of Reno, testified AB 152 was designed to allow cities and counties to issue two types of bonds which would benefit 501(c)(3) non-profit corporations (Exhibit C). Mr. Swendseid stated most other states allowed cities and counties to issue these kinds of bonds, and this bill would ask this to be done under the "economic development revenue bond law" which already authorized cities and counties to issue bonds for for-profit companies for purposes such as public utilities and industrial companies. Mr. Swendseid stressed it was important to realize with this kind of bond a city would lend its name to the bond issue but would not put its credit behind the bond. The significance of having a city put its name behind a bond would be to get lower interest rate tax exempt bonds under the Internal Revenue Code.
Assemblyman Chris Giunchigliani, Assembly District 9, testified she introduced this bill by request and felt more needed to be done for affordable housing. She indicated it would allow non-profit groups to bond without affecting the city credit line.
Mr. Jones stated one of the key issues facing the state was the reduction of overall revenue coming into the general fund. He noted the number of approved but not-built projects, both state and municipal, had grown dramatically in the past two years, including projects in the counties and rural areas.
Mr. Jones commented one possibility would be the creation of not-for-profit corporations to build and operate these projects, providing they could pay their own way. He gave the example of the Reno Neil Road Family Services Center, which is being developed by a consortium partially made up of the City of Reno, Parks and Recreation Department, Police Department and a number of 501(c)(3) not-for-profit public purpose corporations. These were care providers such as Children's Cabinet, Nevada Child Services, Nevada Hispanic Services, and community services which run the head-start program. He indicated the objective would be to have a facility to house all of those entities in one location, making it easier for low income neighborhoods to access those services. Mr. Jones added St. Mary's Hospital would be providing a health care facility and there would probably be a large day-care or after-school provider in the complex.
Mr. Jones said each of these had the ability to fund this project over a period of time, and there were clearly defined revenue streams in place which would permit the amortization or payback on bonds which would provide for construction of the facility. He indicated under current law no money could be lent to a non-profit consortium of this type, whereas, if this was a private for-profit corporation the bonds would be legal. Mr. Jones also pointed out this bill would create jobs in the construction industry.
Mrs. Augustine asked if there were impact fees tied to low income housing. Mr. Swendseid answered there were no impact fees under this bill, but whether a city's impact fees ordinance would apply to housing constructed under this bill would depend on the wording of the city ordinance.
Mrs. Augustine stated she had received information Clark County would have impact fees under this bill. Mr. Swendseid replied Washoe had an impact fee ordinance but he did not think Clark had one at the time.
Mr. McGaughey asked how this would affect financing building on public land.
Mr. Jones replied the lands could be leased, the ownership of the land was not significant, the real issue was the cash flows from the project.
Discussion ensued between Mr. Jones, Mr. Swendseid and Mr. McGaughey.
Mrs. Freeman asked Mr. Jones if he was involved in the project on Neil Road. He indicated he did all the financial analysis for the project.
Mr. Hettrick requested clarification whether the bill did not create, mandate or in any way require impact fees. Mr. Jones agreed it did not.
Mrs. Segerblom asked how this compared to a HUD project. Mr. Jones replied many of these could be HUD sponsored projects, however, that in itself might not be enough to pay for the entire project.
Mr. McGaughey questioned Mr. Swendseid what he presumed the interest rate would be on the bonds, how long would the payout be, and what would be the projected call dates.
Mr. Swendseid responded typically the payout would be 30 years. He stated call dates, if fixed rate financing, could be called in 10 years, or if a floating rate mortgage, could be callable at any time. He indicated the interest rates would depend on the credit rating, going from a range of 6 - 61/2 percent to 8 - 9 percent.
Discussion ensued between Mr. McGaughey and Mr. Swendseid regarding interest rates.
Mr. George Cotton, Clark County Affirmative Action Manager, testified in support of AB 152 with amendments. He stated the department of finance would be willing to work with the committee on the amendments. Mr. Cotton indicated the primary concern was AB 152 did not mention housing rehabilitation as an eligible use, and the bill made no mention of the periods of affordability and only referred to the Internal Revenue quote of 1986. He stated the finance department suggested housing rehabilitation be included as an expressed item and all such units should meet HUD section 8 income guidelines. He also said there was concern for the security for the bonds if issued by non-profit organizations, and the finance department wanted to ensure the State of Nevada used all CAP allocations prior to counties or cities being allowed to issue bonds.
Chairman Garner asked Mr. Cotton to work with Ms. Giunchigliani regarding the requested amendments.
Mr. Nile Carson, Reno Police Department, indicated he came to testify from a police standpoint. He stated he had been involved with the Neil Road Family Service Center and found the public service agencies were sometimes able to handle problems the police would normally be called for. Mr. Carson said the financing on the Center was found to be a problem until Mr. Jones provided help, and felt other states had abilities to promote this type of project which was not available to Nevada.
Ms. Lisa Foster, City of Sparks, testified in support of AB 152, stating Sparks had a real need for affordable housing but did not have many options for financing and felt this would be a viable option. She felt cities and counties should use extreme caution in the projects they chose as cities had been caught up in poor projects in the past.
Mr. Chas Horsey, Administrator of Nevada Housing Division, testified in opposition to AB 152. He felt some points brought up in previous testimony had been glossed over and wanted to bring them to the committee's attention. Mr. Horsey said the Nevada Housing Division was the largest issuer of municipal debt in Nevada, providing thousands of mortgage loans to low and moderate income first-time homebuyers by the sale of tax-exempt bonds on Wall Street. Mr. Horsey stated a troubling aspect of AB 152 which he felt was glossed over was the apparent intent of the bill to allow the issuance of non-rated or junk bonds. He felt careful consideration should be given to all aspects of issuance of these bonds by cities and counties. Mr. Horsey stated a lot of functions which had been mentioned as being permissible or socially attractive with AB 152 were already permissible activities.
Chairman Garner discussed non-rated "junk bonds" with Mr. Horsey and the relationship to non-profit 501(c)(3) groups. Chairman Garner asked Mr. Horsey to provide the committee with data on the success and failure rates obtained by other states using the scenario provided by AB 152. Mr. Horsey agreed to provide the information.
Chairman Garner asked Mr. Williams to work with Ms. Giunchigliani and research the concerns voiced in the meeting.
Mr. McGaughey stated Mr. Horsey had indicated municipalities backing these bonds had been asked to back them or repay. He requested documentation be provided on any community which had to repay the bonds in a default situation, and whether it affected the credit of the community. Mr. Horsey responded he would supply the information.
Mr. McGaughey questioned if it was fair to characterize these as "junk bonds." Mr. Horsey replied that was the common vernacular for non-rated bonds.
Mr. McGaughey asked Mr. Swendseid who would underwrite the bond and make the decisions for creditworthiness of the bond and projections of income.
Mr. Swendseid replied the bill did not require any particular underwriter, it would be someone willing to buy the bonds and that person would decide what protection was needed.
Discussion ensued between Mr. McGaughey, Mr. Swendseid and Mr. Horsey regarding junk bonds.
Mrs. Freeman asked Mr. Horsey to research information regarding a county in Oregon which had problems of the sort discussed approximately ten years ago.
Mr. Brian Krolicki, State Chief Deputy Treasurer, suggested the State Board of Finance have some oversight role if AB 152 were passed. He felt it was very important for any paper in the public marketplace to have some scrutiny as it could affect in a negative way any Nevada paper in the market. Mr. Krolicki stated currently the Board of Finance had that role with Department of Commerce and Nevada Housing Division, and part of his job was studying their bond issues.
Chairman Garner reiterated he had asked Mr. Williams to coordinate this with Ms. Giunchigliani. As there was no further testimony the hearing on AB 152 was closed.
ASSEMBLY BILL 153 - Directs coordination of governmental collection of money and information from business.
Mr. Michael Griffin, Nevada Department of Insurance, gave brief testimony in support of AB 153. Mr. Griffin brought to the committee's attention the Department of Insurance was responsible for collection of the premium tax, the third largest revenue source for the state, and would be involved with coordinating with Department of Taxation.
Ms. Carole Vilardo, Nevada Taxpayers Association, testified in favor of AB 153. She indicated she had talked with Ms. Giunchigliani regarding duplicate reports, one required by Clark County and the other required by the state, both of which had fees. Ms. Vilardo stated it was important to consolidate the forms so they would not have to be duplicated. She also recommended section 2, subsection 14, should be amended to add someone from the Department of Data Processing, or if under reorganization the Department of Information Management Systems.
Mrs. Lambert asked Ms. Vilardo which would be better, a multi-copy form, with one copy going to state and one to county, or one form to move physically from agency to agency.
Ms. Vilardo replied, "I see a consolidation of the forms but I can't tell you whether it would be at the local government level, which would be the most efficient or at the state level."
Mrs. Lambert commented a neighboring state trying to improve its business climate proposed something along those lines. She thought its form would move from agency to agency but there was concern about one agency holding it and missing time lines, she felt reducing fees which would be received if the form was not moved in the proper time frame could solve the problem.
Ms. Vilardo stated the idea eventually would be to get to the point where the information required on the forms would be computer accessed, which was the reason the amendment had been requested which would add a person from data processing.
Assemblyman Chris Giunchigliani testified AB 153 came out of discussions with business groups about excess paperwork and fee requirements. She stated this bill would cut down on duplication of forms, "If we could come up with information that needs to be filed once, computerize it and allow it to be drawn and accessed at the point, if the feds need to know your payroll tax, it's going to be on your SIIS information anyway, so why not begin to consolidate." She stressed there was a need to get an idea of what is being charged to businesses, why the charges are made and then get a grasp on the information processing component.
Chairman Garner commented the proposed amendment, along with what might come out of the legislature on reorganization, would hold this bill hostage until final decisions had been made on reorganization. Chairman Garner and Ms. Giunchigliani discussed possibly changing the wording to keep it from being held up by the reorganization.
Chairman Garner assigned Mrs. Segerblom to coordinate with Ms. Giunchigliani for an appropriate amendment on AB 153.
Mrs. Freeman asked if this had been discussed with any state agencies, and if so, what types of response had been received.
Ms. Giunchigliani replied she had spoken to a few agencies and they were open to this as a step which needed to be taken.
Mr. G. P. Etcheverry testified he felt AB 153 had merit and concurred with making amendment to include other sectors which were involved. He indicated NRS had a local government advisory committee which made recommendations to the tax department and the tax commission, and felt those people should be involved in this process.
Mr. Etcheverry voiced a concern with line 12 of the bill, "On or before May 1 of each year," as tentative and final budgets for approximately 240 local governments would be reviewed at the same time. He suggested the date be changed.
There being no further testimony, Chairman Garner closed the hearing on AB 153.
There being no further business to come before committee, the meeting was adjourned at 9:17 a.m.
RESPECTFULLY SUBMITTED:
LINDA FEATHERINGILL
Committee Secretary
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Assembly Committee on Government Affairs
February 24, 1993
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