MINUTES OF THE
ASSEMBLY COMMITTEE ON WAYS AND MEANS
Sixty-seventh Session
February 22, 1993
The Assembly Committee on Ways and Means was called to order by Chairman Morse Arberry, Jr., at 8:10 a.m., on Monday, February 22, 1993, in Room 352 of the Legislative Building, Carson City, Nevada. Exhibit A is the Meeting Agenda. Exhibit B is the Attendance Roster.
COMMITTEE MEMBERS PRESENT:
Mr. Morse Arberry, Jr., Chairman
Mr. Larry L. Spitler, Vice Chairman
Mrs. Vonne Chowning
Mr. Joseph E. Dini, Jr.
Mrs. Jan Evans
Ms. Christina R. Giunchigliani
Mr. Dean A. Heller
Mr. David E. Humke
Mr. John W. Marvel
Mr. Richard Perkins
Mr. Robert E. Price
Mrs. Sandra Tiffany
Mrs. Myrna T. Williams
COMMITTEE MEMBERS ABSENT:
None
STAFF MEMBERS PRESENT:
Mark Stevens, Fiscal Analyst
Gary Ghiggeri, Deputy Fiscal Analyst
Chairman Arberry commended the committee for their work during the two-week adjournment.
Chairman Arberry then announced the agenda would be heard out of order to accommodate people traveling from Las Vegas who wished to testify on A.B. 170.
STATE PRINTING OFFICE - PAGE 214
Mr. Donald Bailey, Superintendent of State Printing, Division of General Services, read from a written statement describing the services by the State Printing Division (see Exhibit C attached). He noted State Printing finalized its budget request at 2 percent under fiscal year 1992-93.
Mr. Bailey explained base revenues from sales were projected at $3,513,676 for the first year of the biennium and $3,593,796 for the second year. Sales were billed to the state agencies based on direct labor and material costs plus overhead.
Mr. Bailey stated personnel expenses were projected at $1,563,873 for fiscal year 1993-94 and $1,639,538 for fiscal year 1994-95. Personnel expenses included all payroll assessments, retirement contributions, Medicare, shift differentials, longevity pay, etc. Operating expenses were projected at $369,786 in the first year of the biennium and $368,330 in the second year.
Mr. Marvel asked why the Governor's recommendation for operating expense was significantly more than the agency's request. Mr. Bailey responded the Administration recommended three accounting positions be moved to the Accounting Department and one full-time position be eliminated from the budget.
Ellen Townsend, Principal Budget Analyst, Department of Administration, stated the increase in operating expenses related to the administrative assessments to cover the cost of the services of the three accounting positions recommended to be moved to the Administrative Services Division.
Mr. Stevens explained the Governor recommended the cost of the three positions be reduced from the personnel expense category and transferred to the operating expense category to cover the cost of the administrative assessments for the transferred positions.
Ms. Giunchigliani asked the Budget Division to provide to the committee a schedule of the various assessments.
Ms. Giunchigliani asked for an explanation of the difference in the agency request and the Governor's recommendation for depreciation expense. Ms. Townsend indicated the Governor's recommendation represented actual depreciation on printing equipment reflected in schedules from the Controller's Office.
Ms. Giunchigliani inquired why depreciation expense did not appear in other budget accounts. Ms. Townsend replied depreciation expense also appeared in the Motor Pool budget. Ms. Giunchigliani said it would make sense to include depreciation expense in every agency budget.
Mr. Dini questioned whether depreciation was paid into a reserve account to fund new equipment purchases. Mr. Bailey responded affirmatively. He said depreciation was transferred into account no. 741-1331 (Printing Office Equipment Purchase) to offset the cost of new equipment for the Printing Division.
Mr. Bailey said operating expenses included shipping costs of $30,867 in both years of the biennium; equipment repair costs of $53,000 in both years and Buildings and Grounds costs for janitorial services and building repairs of $17,921 in both years.
Chairman Arberry inquired about a projected expenditure of $72,000 for maintenance of a photocopy machine. Mr. Bailey replied the major portion of the copy center operating expenses--$108,613 in each year--was comprised of leases on two Xerox photocopy machines. $1,800 was allocated in each year for equipment maintenance not covered by maintenance agreements. $38,000 was allocated in each year for paper stock. $5,000 was allocated in each year for plates and transparencies. $12,000 was allocated in each year for inks, developers and materials to run the photocopy equipment.
Mr. Bailey reported operating expenses also included interest expenses of $19,215 in the first year of the biennium and $13,643 in the second year. Those amounts represented interest paid to finance the purchase of a two-color, 40-inch press and a web press acquired several years ago. Professional services expense of $79,285 in each year of the biennium were projected to cover the cost of outside services required to hard case bound books, for color separation and other operations which the Printing Division did not have the capability to perform. Projected inter-fund transfers of $118,203 in the first year of the biennium and $122,062 in the second year represented the administrative assessments for the transferred accounting positions, a general service accountant, director's fees, purchasing assessments and the Attorney General's Office assessment.
Ms. Giunchigliani inquired about desktop publishing. Mr. Bailey replied the desktop publishing position was eliminated from the budget and the function was moved to the composition department. Ms. Giunchigliani asked if the committee's 1991 directive had been complied with. Mr. Bailey replied it had.
Ms. Giunchigliani asked about the outside contract for desktop publishing. Mr. Bailey responded the contract was with a trainer for the desktop publishing operator in the composition department who was not yet proficient in the operation.
Ms. Giunchigliani questioned whether a request for proposal had been let for the training contract. She stated it was her understanding the trainer formerly worked for the company from whom the desktop publishing equipment was purchased. Mr. Bailey replied the trainer had once worked for the equipment vendor. That company was now bankrupt and out of business. He indicated no requests for proposal had been let.
Ms. Giunchigliani asked how the Printing Division had come to hire this trainer. Mr. Bailey answered the trainer had trained the original operator who was terminated. The Division felt she had performed well in that instance and kept her on board to train the second operator.
Ms. Giunchigliani inquired about the trainer's hourly wage and the impact of that cost on the budget. Mr. Bailey stated the trainer was paid $40 per hour.
Ms. Giunchigliani questioned whether the equipment vendor had gone bankrupt prior to the Division contracting with the trainer. Mr. Bailey estimated the bankruptcy occurred several months after the Division contracted with the trainer.
Ms. Giunchigliani expressed concern about contracting for services with someone who worked for the company from whom the equipment was purchased. She questioned why requests for proposals were not solicited from others.
Ms. Giunchigliani asked why the original operator had been terminated rather than moved into the composition department as the committee originally requested. Mr. Bailey responded there was no room in the budget for the position. The person filling the position was relocated to a part-time position at Nevada Magazine so the state was still benefitting from the training she had received.
Ms. Giunchigliani requested an explanation for why the Printing Division did exactly the opposite of what the committee had asked it to do in this regard. Mr. Bailey answered his understanding of the committee directive was different than the committee's. He stated he understood he was to hire someone to do the job within limited salary parameters. He hired someone for a salary which was well below the limit. He did not understand the position was to be located in a specified area.
Ms. Giunchigliani noted several negotiation sessions had occurred with Mr. Bailey, the Director of the Department of General Services and union representatives. She felt the committee's directive had been very clear. The intent was the position would be a union position within the composition department.
Ms. Giunchigliani said she was upset at the way state agencies did not follow committee directives.
Mr. Terry Sullivan, Director, Department of General Services, said the Division had not intended to defy a committee directive. He noted the Division never received a letter of intent from the committee with regard to this issue, as was the common practice of both this committee and the Senate Finance Committee. The Division did not fully realize the committee's intent until a Printing Office employee read the minutes of the meeting and brought it to the Director's attention. By that time an individual had been hired to fill the position. The Administration then instructed the Division to follow the committee directive and the Division did so immediately.
Mr. Sullivan stated he understood Ms. Giunchigliani's concerns about hiring the trainer. He indicated the trainer had been hired as part of the equipment purchase contract.
Ms. Giunchigliani questioned why the budget narrative indicated training was to be done by existing staff and why there had been no reference to training as a part of the equipment purchase contract during the discussions which took place in 1991. Mr. Sullivan said he was not familiar with the budget narrative. Mr. Bailey explained training was part of the equipment purchase package.
Ms. Giunchigliani asked when the training had begun. Mr. Sullivan stated it had taken some time to put the equipment in service. When the Division was instructed to follow the committee directive the trainer was rehired.
Ms. Giunchigliani requested a copy of the purchase contract, including the training component. Mr. Sullivan agreed to provide a copy of the contract.
Mr. Bailey referred to the maintenance budget. He indicated the Governor recommended an increase in operating expenses for employee bonds and insurance. The Governor recommended $216 in each year of the biennium for inflationary increases for utility costs.
Mr. Marvel questioned whether the proposed federal energy tax had been taken into account in the Executive Budget. Mr. P. Forrest "Woody" Thorne, Deputy Budget Administrator, Budget Division, responded the federal tax had only recently been announced and the Budget Office had not yet evaluated its impact.
Mr. Bailey continued his explanation of the maintenance budget. He noted the Governor recommended $3,147 in fiscal year 1993-94 and $3,300 in fiscal year 1994-95 to fund the promotion of a staff accountant following an occupational study by the Personnel Department. The Governor recommended additional personnel expenses of $5,489 in the first year of the biennium and $16,703 in the second year for worker's compensation insurance and employee health insurance increases.
Mr. Bailey stated there was no enhancement budget.
Mr. Bailey said performance indicators were based on historical figures. Average turnaround time for print jobs was 3 to 6 weeks.
Chairman Arberry asked Mr. Bailey to provide a more detailed explanation of turnaround time. Mr. Heller noted the information contained in the Executive Budget was not measurable. The committee needed to understand whether the 3 to 6 weeks turnaround time was reasonable.
Mrs. Evans requested more information about technical services. The committee wanted to know what types of technical services were provided to agencies.
PRINTING OFFICE EQUIPMENT PURCHASE - PAGE 218
Mr. Bailey explained revenues were transferred from the depreciation fund. The account was established to support new equipment purchases. The Governor recommended expenditures from the account for new equipment of $32,500 in fiscal year 1993-94 and $38,000 in fiscal year 1994-95. The first year expenditure would be for three additional pieces of equipment. The second year expenditure would be for replacement equipment.
RECORDS MANAGEMENT - MICROGRAPHIC - PAGE 220
Mr. Bailey reported the Governor recommended sales revenue of $220,546 in the first year of the biennium and $221,598 in the second year. Personnel expenses covered the cost of four staff positions. Operating expenses included equipment repair, state-owned building rent in the new State Library facility and stipends for inmate labor.
Chairman Arberry questioned why the performance indicators reflected projected total sales in fiscal year 1994-95 in excess of the Governor's recommendation. Mr. Thorne explained the performance indicators should be adjusted to reflect the Governor's recommendation.
Chairman Arberry asked how the higher sales figure had been derived. Mr. Thorne indicated he would have to review the original agency submission. The number should have been updated during the budget process.
Mrs. Tiffany asked Mr. Bailey to explain the records management operation. Mr. Bailey stated the Division stored some film and microfiche for other state agencies. It also transferred data from hard copies of agency records to microfilm and microfiche. Normally the micrographic material as well as the hard copies were returned to the agency.
Mrs. Tiffany requested a list of agencies serviced as well as the Division's recommendation for any other technology which might be more efficient than what was currently used. Mr. Bailey agreed to provide the information.
ASSEMBLY BILL 170 - Requires issuance of bonds to provide revenue for grants for preservation and promotion of cultural resources of state.
Assemblyman John Marvel, Assembly District No. 34, testified A.B. 170 was designed to correct some legal problems which were encountered with A.B. 590 of the Sixty-sixth Legislative Session. He explained A.B. 590 of the Sixty-sixth Legislative Session had been passed to provide for the issuance of general obligation bonds to finance grants for the preservation of the state's cultural resources. However, bond counsel objected to the language of A.B. 590 of the Sixty-sixth Legislative Session and the bonds were never issued. He noted Mr. Heller had requested the Budget Division to obtain an opinion from bond counsel during the 1991 legislative session. Unfortunately the Budget Division did not obtain the opinion prior to adjournment of the 1991 session. He noted in the interim one of the major historical preservation projects in his district--the Nixon Opera House--had been destroyed by fire.
Assemblyman Joe Dini, Assembly District No. 38, said he was testifying for himself and also on behalf of this wife, Jeanne Dini, Chairman of the Preservation Committee for Yerington Grammar School No. 9. He noted during the 1991 legislative session there had been tremendous statewide support for A.B. 590 of the Sixty-sixth Legislative Session. He noted fundraising for the Yerington Grammar School had fallen off because other major donors were withholding commitment to the project until it was determined whether bonds would be issued. He suggested appointment of a subcommittee to work with the Budget Division to avoid any difficulties with the new legislation.
Mr. Dini added there were projects throughout the state which could benefit from passage of A.B. 170. He said $20 million was not too much for this project although due to the current bond market he suggested issuing the first $4 million worth of bonds and then increasing the bonding capacity in the 1993-95 legislation session. He urged the committee's serious consideration of A.B. 170.
Mr. Lorne Malkiewich, Legislative Counsel, explained A.B. 590 of the Sixty-sixth Legislative Session was drafted in response to the late Senator Nick Horn's idea to use bond revenue to finance grants to various cultural resource preservation projects. A committee of people knowledgeable in the area of cultural preservation would select grant recipients rather than have each project seek separate appropriations from the Legislature. A.B. 590 of the Sixty-sixth Legislative Session purported to place the bonds outside the state debt limit. Unfortunately the language referred to protection and preservation of the cultural resources of the state rather than to the property or natural resources of the state and was not in accordance with the provisions of the Nevada Constitution. Therefore, the state's bond counsel objected to issuance of the bonds outside the debt limit and since they could not be certain the Legislature would want bonds issued within the debt limit they declined to give a clean legal opinion. Without an opinion from bond counsel, bonds cannot be issued.
The Legislative Commission then directed the Legislative Counsel to file a writ of mandamus with the Supreme Court to compel issuance of the bonds. The Legislative Counsel argued the bond issuance was for the protection and preservation of property within the state and therefore was outside the debt limit. He further argued even if it was within the debt limit, it was severable. Mr. Heller's statement was entered as evidence the Legislature would have intended the issuance of the bonds within the debt limit because the committee did not wait for an opinion from bond counsel. Had that been a critical issue the committee would not have processed the bill absent a legal opinion. The Supreme Court disagreed. In its decision issued in November 1992 the court stated under a writ of mandamus there was no showing the Board of Examiners had failed to exercise their duty under the bill. They had simply not yet issued the bonds. The court expressed concern the money would not go solely to state agencies but theoretically could be used to protect and preserve private properties of historic significance. The court also felt since the Legislature would be convening within two months this was a matter for the Legislature to address.
Mr. Malkiewich then explained the provisions of A.B. 170. He stated subsection 1. of Section 1. required the Commission for Cultural Affairs to determine annually the amount to grant and notify the Board of Examiners of the amount to be granted. It provided grants were deemed to be made in the calendar year in which the notice was given to the Board of Examiners so as not to preclude a further issuance of the grant in the following year. Subsection 2. required the Board of Examiners to issue the general obligation bonds within 90 days after receiving notice from the Commission for Cultural Affairs.
Mr. Malkiewich noted one of the issues of the Supreme Court decision was while the state argued the statute said the Board of Examiners "shall" issue bonds, the language did not impose a duty to do so on the Board of Examiners. The Board of Examiners retained the discretion under the Securities Act to issue bonds as they saw fit. The 90-day limit was included in A.B. 170 to make the legislation more mandatory.
Mr. Malkiewich said the next sentence in subsection 2. stating, "No public debt is created, within the meaning of section 3 of article 9 of the constitution of the State of Nevada, until the issuance of the bonds" addressed the concern that $20 million must be reserved against the debt limit even though only $2 million worth of bonds were issued each year. This would provide that only the actual amount issued each year would be counted against the debt limit.
Mr. Malkiewich stated subsection 4. addressed again the issue of how to make "shall" more mandatory. The phrase "except that issuance of the bonds at the time and in the amount required by this section is a mandatory obligation of the state board of examiners, notwithstanding any provision to the contrary in the State Securities Law" was added. Subsection 5. stated expenses related to the bond issuance were to be paid from the reserve for statutory contingency account. This language was to assure expenses were not deducted from bond proceeds and there would be a source of revenue to pay the expenses.
Mr. Malkiewich noted subsection 1. of Section 2. addressed whether grants would go to private entities. Reference to private entities was deleted from the statute and substituted with "entities and nonprofit corporations formed for educational or charitable purposes, including, without limitation, the preservation or promotion of cultural resources." He said none of the grants under the original legislation would have gone to purely private entities but the new language would prevent a challenge to the statute on that basis.
Mr. Malkiewich referred to lines 46 and 47 on page 2 of A.B. 170. He explained the language "the amount remaining unspent, plus any unspent amount from previous years, may be carried forward for expenditure in the next calendar year" allowed that if the Commission recommended granting less than $2 million in any year, the balance would not be lost but would be carried forward to the next year.
Mr. Malkiewich said Section 4. was a technical amendment to allow expenditure out of the reserve for statutory contingency fund. Section 5. repealed the prior requirement to issue the bonds. He explained Section 6. was a transitory provision allowing for the Commission to catch up on the $2 million in grants approved in 1992. The general rule under A.B. 170 was $2 million in grants could be issued annually. However, Section 6. made a special provision for the first year to allow $2 million for the prior grants as well as $2 million for the current year.
Mr. Malkiewich noted Section 7. was the severability clause. He explained the Legislature felt the general severability analysis would have allowed issuance of the bonds within the debt limit; however, the Supreme Court noted A.B. 590 of the Sixty-sixth Legislative Session contained no severability provision and the general severability provision of the Nevada Revised Statutes did not apply.
Mr. Malkiewich indicated A.B. 170 had been shown to bond counsel and although they had not issued a formal opinion their initial response was there would be no problem with issuing bonds under the bill as written. He suggested the committee request a formal opinion from bond counsel.
Mrs. Williams asked the difference between "shall" and "must" in statutory language. Mr. Malkiewich explained the word "shall" usually imposed a duty. "Shall" was sometimes changed to "must" in the statutes to avoid imposing duties on buildings. There were some inconsistent court opinions. In some cases courts did not hold "shall" to be mandatory. Therefore a section was added to the Nevada Revised Statutes defining "shall," "may" and "must" as used therein. That section clearly indicated "shall," when applied to a natural person, imposed a duty.
Mr. Heller asked who the state's bond counsel was. Mr. Malkiewich responded John Swendseid of the law firm of Swendseid & Stern was the local affiliate of Sherman & Howard, a national bond counsel firm. The state had worked with Mr. Swendseid and his partner, Jennifer Stern, for many years.
Mr. Heller questioned whether bond counsel's preliminary approval for A.B. 170 was in writing. Mr. Malkiewich said there was no written statement from bond counsel. He pointed out bond counsel worked for the Administration not the Legislature but he would request a written statement from them.
Mr. Humke asked if it would be most appropriate to query the Administration regarding seeking opinion of bond counsel. Mr. Malkiewich said if the Administration sought a legal opinion there would be no question of who bond counsel was working for. He noted he had a good working relationship with both John Swendseid and Jennifer Stern and routinely sought their informal opinions on bond questions. However, due to the adversarial position on A.B. 590 of the Sixty-sixth Legislative Session bond counsel might be reluctant to provide advice directly to the Legislature.
Mr. Humke suggested it would be appropriate for this committee and perhaps the Senate Finance Committee to seek a position from the Administration as to whether they would be willing to obtain a formal legal opinion from bond counsel.
Mr. Spitler asked whether the Board of Education could receive funding under this legislation which could be granted from some other source. Mr. Malkiewich said it would be possible. However, the criteria for projects were intended to limit funding for preservation of historic sites which would then be used by their communities for cultural events and would become self-supporting.
Mr. Spitler stated he would not want to see the intent of A.B. 170 changed from that of A.B. 590 of the Sixty-sixth Legislative Session.
Chairman Arberry called for public testimony.
Senator Matthew Callister, Clark County Senatorial District No. 8, noted this was a measure that had long been supported by members of the committee and its implementation was long overdue. He expressed concern about the problems with A.B. 590 of the Sixty-sixth Legislative Session and the hope that A.B. 170 would correct those problems. The intent of the legislation was to craft a device to fund historic preservation projects throughout the state. He pointed out there were as many historic preservation projects in southern Nevada as in northern and rural Nevada. In the past projects were forced to compete with each other for the same dollars. This legislation was drafted to create a continuing fund which would, at minimal expense to the state, provide grant money for those projects and, hopefully, depoliticize the process. He urged support for A.B. 170.
Ms. Giunchigliani noted the intent of A.B. 590 of the Sixty-sixth Legislative Session was to first restore and preserve historical sites and then promote cultural uses for the facilities. She questioned whether it would be more appropriate in the bill to refer to the "preservation and, in turn, promotion" of cultural resources rather than to the "preservation or promotion" of cultural resources to ensure promotion of cultural activity did not occur prior to site preservation. Senator Callister agreed with Ms. Giunchigliani. He said bond counsel had noted the more the bill language related to the physical premises, the more immune from challenge it would be. Further, the Legislature had agreed the first need was the preservation of the historic sites.
Ms. Giunchigliani stated perhaps a language change should be pursued in order to clarify the intent. Mr. Malkiewich said since the legislation was not purporting to hold the bond issuance outside the debt limit, this aspect of A.B. 170 was not as important as it would be if the bill was attempting to provide justification for exemption from the debt limit. Since the Supreme Court held this bond issuance could not be outside the debt limit, there was no need to provide that justification for constitutional reasons. This issue was now only a policy concern.
Ms. Mimi Rodden stated she was representing Lt. Governor Sue Wagner who was unable to attend the meeting. She read a statement prepared by Lt. Governor Wagner (Exhibit D). She noted Nevada's historic sites were of great value and contributed to the state's tourist industry. It was the responsibility of the state to set policy and encourage the private sector to demonstrate careful stewardship of those cultural resources and A.B. 170 would be a strong step toward the enhancement of those resources.
Assemblyman Gene Segerblom, Assembly District No. 22, testified she was a former resident of Winnemucca. Her parents attended events in the Nixon Opera House in the 1910s. She submitted letters in support of A.B. 170 from the City of Winnemucca (Exhibit E) and the Friends of Nixon Opera House, Inc. (Exhibit F).
Mrs. Segerblom added Boulder City could also benefit from a grant to preserve the Boulder Dam Hotel.
Mr. Bob Hadfield, Nevada Association of Counties, stated his association was pleased to be a part of passage of A.B. 590 of the Sixty-sixth Legislative Session and reiterated Nevada's counties' support for this program. He urged support for A.B. 170.
Mr. Tom Grady, Nevada League of Cities, noted some historical sites had already been destroyed and the state could not afford to lose more. Historical sites in Caliente and Yerington could be affected by A.B. 170. He said he had also been encouraged by Jeanne Dini to support the bill.
Mr. Grady explained the Nevada League of Cities had always taken the position that if legislation was passed which would affect one city, all the cities would support it.
Mr. Glenn Van Roekel, City of Caliente, said A.B. 170 was very important to Caliente. The city had been awarded a $100,000 grant pursuant to A.B. 590 of the Sixty-sixth Legislative Session for the Caliente depot restoration project. That award had served as a green light for several other funding sources to contribute to the project and the City found itself in an awkward position when the state funding was withheld. He urged support of A.B. 170.
Ms. Marcia Growdon, Chairman of the Commission for Cultural Affairs, explained in 1992 the Commission had received applications for $9 million worth of grants from nearly every community and county in the state. She assured the committee sensible, long-range planning was a key factor in selecting grant recipients. One of the things which would ensure the sites would remain in good condition once restored was that good community programming would be in place following the restoration. The Commission looked at how communities proposed to sustain the site physically and programmatically in the long-term. She noted the grant funds were one-time dollars.
Ms. Growdon noted she was impressed by the nature of the economic investment represented by the grants awarded. The grants were a statewide investment which attracted other public and private funding and provided jobs for Nevadans as well as a long-term investment in cultural tourism and the economic diversity of the state.
Ms. Growdon said the other intriguing aspect of the Commission was the amount of resource sharing which occurred when all four major state cultural agencies were brought together informally.
Ms. Growdon stated the Commission had taken the steps necessary to assure grant monies would be well and carefully spent. Historic preservation would precede programming but the programming would ensure the preservation.
Mr. Heller commended Ms. Growdon and the Commission for their work thus far. He asked if the grants which had already been awarded by the Commission would be funded if A.B. 170 was approved. Ms. Growdon responded common sense would dictate that the full selection process not be repeated. There was no staff to start again from the beginning. However, potential grant recipients would be required to provide project updates for evaluation by the Commission prior to funding. Money earmarked for the sites which had been destroyed over the past year could be issued to new projects.
Mr. Heller said for the record he was in support of A.B. 170.
Ms. Valerie Serpa, Churchill Arts Council, provided a written statement in support of A.B. 170 (Exhibit G).
Mr. Max Hershenow, representing the American Institute of Architects, Northern Nevada, expressed support for A.B. 170 for the reasons previously stated by other witnesses.
Mr. Glenn Logan, President, Carson Valley Historical Society, expressed support for A.B. 170. He explained the Carson Valley Historical Society was working to restore the Douglas County High School in Gardnerville which was built over 75 years ago. Since funding for the school restoration under A.B. 590 of the Sixty-sixth Legislative Session was withheld, the Carson Valley Historical Society owed the Department of Forestry over $12,000 for the services of inmate labor. The Carson Valley Historical Society had already invested over $300,000 in the project and required $450,000 to reach completion. Mr. Logan noted much of the project was being accomplished using volunteer and community service labor and materials donated at cost.
Mr. Richard Lenz stated he represented the Friends of the Huntridge Theatre. He said the Huntridge Theatre was the oldest standing movie theater in Clark County and would be celebrating its 50th anniversary in 1994. He distributed information packets, a copy of which is on file in the Fiscal Division.
Mr. Lenz expressed support for A.B. 170. He indicated the Huntridge Theatre project was unique. It was currently open and operating as a performing arts center. However, restoration work on the premises remained to be done. He stated the current diverse and multi-cultural programming should allow the theater to survive for another 50 to 100 years.
Ms. Giunchigliani said she was familiar with the programs at the Huntridge Theatre. She noted the issue of asbestos in the building had been raised. She asked the status of the problem. Mr. Lenz replied the issue was almost moot because asbestos was found in less than 3 percent of the building. It was only contained in the theater wall between the projection room and the theater and had been encapsulated.
Ms. Giunchigliani also expressed concern about the structure located next to the theater. Mr. Lenz explained the Huntridge Theatre project combined the efforts of the public, private and nonprofit sectors. Funding was being sought from the Redevelopment Department. He said he would personally acquire the building next to the theater because it had no historical value.
Ms. Giunchigliani asked if it was true Loretta Young had been a part owner of the theater. Mr. Lenz said Loretta Young and Irene Dunne were both partners in the theater at one time. Mrs. Williams noted the theater had been opened by Lloyd and Edith Katz who were friends of many members of the committee. She said Mrs. Katz was pleased with the activity to restore the theater.
Mr. Thorne presented the Administration's concerns with A.B. 170 as currently drafted. A debt affordability study suggested the state must be wary of entering into large amounts of general obligation debt, regardless of whether or not it was applied against the debt limit. Until the state could reduce debt service as a percentage of revenue to the median range judged prudent by the rating agencies concern for the state's bond rating would continue. The study also indicated the state should limit entering into additional amounts of debt until the economic picture relative to gaming competition and its impact on state revenue became more apparent. A.B. 170 would provide for the immediate issuance of $4 million worth of general obligation bond debt and $2 million thereafter. According to financial advisors, the state should not issue much more than the $59.8 million proposed by the Governor. Policy decisions were necessary to set priorities for additional debt.
Mr. Thorne noted subsection 2. of Section 1. of A.B. 170 required the Board of Examiners to issue bonds within 90 days of receiving the recommendation from the Commission for Cultural Affairs. He said a time limit for bond issuance should not be mandated but rather left to the discretion of the Board of Examiners who could take into consideration bond market conditions, economic circumstances, etc. The last sentence of subsection 2. required clarification as to intent. Subsection 5. of Section 1. required an unnecessary expenditure from the General Fund for the costs of issuance. Since 1989 the practice of the Legislature had been to allow the Board of Examiners to cover the costs of debt issuance through the issuance itself. Mr. Thorne stated subsection 2. of Section 4. addressed the same issue.
Mr. Thorne noted subsection 3. of Section 2. was also a concern. Programs should not be funded by bonds. Rather, the proposed bonding program should be for projects lasting at least as long as the debt repayment period, up to 20 years. The Administration recommended the uses of the bond proceeds be restricted to preservation of historic buildings.
Mr. Thorne indicated A.B. 170 provided no means by which the bonds were to be repaid. General obligation bonds required a means for repayment included with the measure authorizing them.
Mr. Thorne reported Judy Matteucci, Budget Director, had indicated her willingness to discuss these issues with the committee.
Ms. Deana Guthrie, Carson City Children's Museum, introduced Ms. Anne Macquorie, Executive Director of the museum. Ms. Guthrie said the children's museum had been awarded a $75,000 grant under A.B. 590 of the Sixty-sixth Legislative Session. Although that funding had not been received the museum had moved forward with other fundraising efforts.
Ms. Macquorie explained the children's museum had approached many private foundations and corporations for funding and received some funding for programming, i.e., exhibits. However, state funding for the capital portion of the project--the renovation of the historic building--would leverage private funding for the programming.
Senator Mike McGinness, Central Nevada Senatorial District, testified he represented a vast area of rural Nevada. He stated there were a number of historical buildings of significance within his district as well as throughout the state. A.B. 170 would be an excellent vehicle to allow some of those buildings to be restored before they were lost.
Mr. Bob Still, Executive Director, Stewart Indian Museum, stated the museum had been awarded a $60,000 grant under A.B. 590 of the Sixty-sixth Legislative Session to restore Building No. 1 on the Stewart Indian School campus. Building No. 1 was to become the anchor building of the proposed Great Basin Indian Cultural Center to promote Native American culture. He said A.B. 170 was very important to the museum.
Mr. Marvel acknowledged the presence in the audience of Ms. Mary Ellen McMullen, a member of the Commission for Cultural Affairs.
MOTOR POOL - PAGE 228
Mr. Dennis Colling, Administrator, Motor Pool Division, explained the Motor Pool operated under the authority of NRS 336. There were three Motor Pool facilities located at the Las Vegas and Reno airports and in Carson City. Staff included 13 full-time positions and 2 part-time student positions. There were approximately 515 vehicles currently in operation. It was expected annual mileage would total 5.2 million miles each year during the biennium. Revenue was primarily derived from charges to other agencies for the use of Motor Pool vehicles. Other revenue was from insurance recovery, repairs to other agency vehicles, a carry forward and other miscellaneous charges.
Mr. Colling noted the Governor recommended less than the agency request for personnel expenses. The reduction was to account for two employees who were to be moved to the Administrative Services Department under the Governor's proposed reorganization. There was a corresponding increase in the Governor's recommended operating expenses to cover administrative assessments for the services of those two positions. Out-of-state travel expenses were to cover the cost of the Administrator's attendance at a national conference. In-state travel expense was to cover the cost of travel by the Administrator and Motor Pool mechanics on road calls.
Chairman Arberry noted the Governor recommended less for data processing expenses than the amounts for the fiscal year 1991-92 actual expenditures and fiscal year 1992-93 work program. The 1991 Legislature had authorized implementation of a new billing system. He asked if the new billing system would continue under the Governor's proposed reorganization plan. Mr. Colling replied the billing system would move with the two positions if the positions were physically moved from the Motor Pool facility. If the move was simply an administrative one for salary and control purposes and the positions remained located at the Motor Pool facility there would be no impact.
Mrs. Williams asked how the Motor Pool was complying with federal regulations regarding alternative fuels and if there would be any problems with central refueling areas. Mr. Colling stated six alternative fuel vehicles were currently on order and due to be received in March 1993. The Motor Pool would continue to acquire alternative fuel vehicles as they became available. The Motor Pool had oral agreements with Southwest Gas in southern Nevada and Sierra Pacific Power in northern Nevada for fueling natural gas vehicles. The new Motor Pool facility at the new state office building in Las Vegas would include a satellite pool in the parking lot for daily fueling use. He noted he would approach the 1995 Legislature with a request for funding for that facility and staffing. If usage of alternative fuel vehicles became extensive some type of refueling facility would be necessary at the Motor Pool itself. The Las Vegas site was ideally situated for the use of natural gas vehicles because most of the 250 vehicles used in Las Vegas never traveled outside the Las Vegas valley. He suggested a fueling facility could be built on property located across the street from the Motor Pool facility and could be shared with Clark County, McCarran International Airport and the public. Similar facilities could be built in Carson City and Reno.
Chairman Arberry asked Mr. Colling to explain the agency's request for $25,500 for the conversion of 10 vehicles. Mr. Colling said vehicles could either be converted to use alternative fuels or OEM ("originally equipped by the manufacturer") vehicles could be purchased. When the budget was drafted it was not known whether any OEM vehicles would be available for purchase. However, OEM vehicles were now available and the conversion money was no longer needed.
Mr. Marvel questioned how the proposed federal energy tax would affect the Motor Pool budget. Mr. Colling said he was unable to answer the question but would provide the information at a later time.
Mrs. Williams inquired about the difference in price between a regular vehicle and an alternative fuel vehicle. Mr. Colling said the cost to convert a vehicle to natural gas was approximately $2,500 to $3,500. OEMs cost approximately $3,000 to $4,000 more per vehicle than regular vehicles. He noted natural gas was cheaper than gasoline but the reduced operating cost represented a long-time recovery of the higher purchase cost.
Mrs. Williams questioned whether converted vehicles had warranty coverage. Mr. Colling indicated there were some warranties available depending on whether or not the conversion was performed by an authorized manufacturer's representative and whether or not a warrantied conversion kit was used. He expressed his opinion purchasing OEMs was preferable to converting standard vehicles.
Chairman Arberry asked Mr. Colling to explain the agency request to purchase cellular telephones. Mr. Colling answered the Motor Pool operated a shuttle service to and from McCarran International Airport. One cellular telephone would be placed in the shuttle bus to facilitate communication with the bus driver regarding the location of incoming passengers. The other cellular telephone would be placed in the shop truck to facilitate communication with the mechanic regarding service calls.
Chairman Arberry asked Mr. Colling to address the agency request for a car wash. Mr. Colling replied the Motor Pool requested a car wash facility in Las Vegas. Cars were presently being washed by hand using a hose and bucket, which was not an environmentally sound method. The proposed facility would be self-contained. It would be used to wash Motor Pool vehicles and, for a small fee, other state agency vehicles.
Chairman Arberry questioned whether the Motor Pool had contracted with any private car washes. Mr. Colling said the agency had contracted with car washes extensively in Las Vegas. The cost was from $3.00 to $5.00 per wash. Vehicles were washed twice per month. Total contract costs were approximately $6,000 to $8,000 per year. Those contracts had not been issued during the past couple of years because of budget restraints.
Chairman Arberry asked if the Motor Pool washed Highway Patrol vehicles. Mr. Colling said Highway Patrol vehicles were washed at the Carson City facility utilizing inmate labor.
Chairman Arberry noted the agency requested nearly $200,000 for the car wash facility. He asked whether the agency had made a long-range comparison of the cost of contract services versus building, maintaining and using a state-owned facility. Mr. Colling replied the contract costs referenced earlier did not include the cost of washing Motor Pool vehicles, which were washed manually. Environmental constraints precluded further manual car washing. The proposed car wash facility included recycling tanks in compliance with environmental requirements.
Mr. Price inquired whether rental car agencies could provide car wash services to the Motor Pool. Mr. Colling said he had not considered the possibility but he would look into it.
MOTOR POOL VEHICLE PURCHASE - PAGE 234
Mr. Colling indicated revenue was from depreciation transferred from budget account no. 711-1354 and salvage sales. The Motor Pool did not plan to purchase any additional vehicles. The agency request for funding was to purchase replacement vehicles.
Ms. Giunchigliani noted the 1991 Legislature had encouraged the purchase of alternative fuel vehicles. She asked if the purchase of alternative fuel vehicles was contemplated by this budget. Mr. Colling responded six alternative fuel vehicles would be purchased in fiscal year 1992-93. A.B. 12 would impose an additional requirement on all public entities to purchase alternative fuel vehicles. He said the Motor Pool would exceed the requirement.
PURCHASING - PAGE 236
Mr. Thorne noted Purchasing was one of the areas focused on by the KPMG Peat Marwick government reorganization study. He introduced Mr. Jeff Myers from KPMG Peat Marwick to provide an overview of the results of the study.
Mr. Myers explained state purchasing was centralized for the most part. Surcharges to other agencies supported the Purchasing Division. The Purchasing Division purchased items costing over $5,000. In many cases individual agencies had the authority to purchase items up to the $5,000 limit.
Mr. Myers stated the KPMG Peat Marwick study revealed an imbalance within the Purchasing Division. On the one hand the state wanted to maintain central control of the purchasing function and ensure the quality of goods. On the other hand the state wanted to delegate to the individual agencies the authority to select and purchase their own items. KPMG Peat Marwick found the threshold of purchasing authority to the individual agencies (i.e., the $5,000 limit) was lower and the purchasing function was more centralized in Nevada than they believed efficient or had seen in other governmental entities. The KPMG Peat Marwick report suggested increasing the threshold of purchasing authority of the agencies and decentralizing purchasing somewhat.
Mr. Myers related to the committee the eight recommendations contained in the KPMG Peat Marwick report. The first recommendation was to increase the threshold of purchasing authority of the individual agencies. A substantial amount of effort could be saved within the Purchasing Division by allowing agencies to purchase items costing up to $7,500 or $10,000. This would remove the necessity for paperwork and delegate more authority and autonomy to managers within the Executive Branch and as a result improve morale in the agencies. A number of agency employees and directors expressed frustration with some of the current centralized purchasing restrictions. Additionally, there was a perception within the agencies they could achieve better prices for goods than the Purchasing Division was charging them.
Mr. Myers said the second recommendation was to allow agencies to order goods directly from major vendors once the Purchasing Division had negotiated the open-term contracts with those vendors. This would eliminate order processing by the Purchasing Division thus reducing work load and accelerating delivery of materials and supplies to the agencies.
The third recommendation was to allow agencies the opportunity to compare the prices offered by the Purchasing Division with the prices of other suppliers and choose the best price. Mr. Myers said the requirement that agencies purchase only through the Purchasing Division created a monopoly and provided the Purchasing Division no incentive to minimize costs. He noted the surcharge on warehoused goods was recently increased from 10 percent to 15 percent. It was anticipated usage of warehoused goods would fall if agencies were allowed to purchase less expensive goods from other suppliers. As a result the work load of the Purchasing Division would decrease and administrative savings would be realized.
Mr. Myers said the fourth recommendation was to substitute the pre-audit function currently being done by the Controller's Office for a post facto review of purchase requisitions. The current pre-audit function delayed the purchasing process and its elimination would streamline purchasing and reduce the work load of the Budget Division.
The fifth recommendation was to have major vendors carry state inventory in their warehouses and deliver to state agencies as needed rather than for the Purchasing Division to continue its warehouse operations, which had been operating at a loss in recent years.
Mr. Marvel asked whether the large wholesalers had been interviewed as part of the study. Mr. Myers replied wholesalers had not been surveyed. Mr. Marvel questioned whether vendors would be willing to tie up their warehouse space. Mr. Myers answered most large vendors had warehouse space or some sort of distribution point available.
Mr. Price said Mr. Myers had given the impression certain items could not be purchased through the Purchasing Division. He asked what those items were. Mr. Myers stated he had not intended to give that impression. He had tried to convey that state agencies could sometimes not get items quickly.
Mr. Myers said the KPMG Peat Marwick study also addressed local government use of state purchasing contracts. Local governments were allowed to purchase goods under the state's contracts; however, the state remained responsible for paying vendors for the orders placed and in many cases the local governments were slow in reimbursing the state. The sixth recommendation was to impose a finance charge or surcharge on local government purchases to ensure timely repayment.
The seventh recommendation related to commodities and federal surplus property storage functions performed within the Purchasing Division. Approximately $76,000 worth of staff time was currently allocated to those programs and charged to the federal government. KPMG Peat Marwick identified approximately ten full-time equivalent staff positions dedicated to those functions and charges to the federal government should be approximately $347,000 rather than $76,000.
Finally, with additional delegation of purchasing authority to the agencies, the agencies should become more accountable. The KPMG Peat Marwick report suggested the State Controller's review of vendor invoices include an effort to review and monitor those purchases which were rejected to determine if one agency was consistently mismanaging its budget or if there were consistent coding errors.
Mrs. Williams stated she had received a number of letters from small businesses and minority-owned businesses who felt the decentralization of the purchasing process would have a negative impact on their ability to access state contracts. Also, she questioned whether the federal government would be amenable to an increase in charges for commodities storage from $76,000 to $347,000.
Mr. Myers responded current purchasing policies would continue for items over $7,500 or $10,000. Those policies would encourage open bidding with the potential for any bidder to respond. It was anticipated the bulk of purchasing below the purchasing limit would also continue to be done as it was currently under open-term contracts which could be awarded to any qualified vendor. Hopefully, the individual agencies would first purchase items through the state's open-term contracts and, if those contracts did not meet their needs, would then consider other vendors. He noted a policy decision was required to determine whether the state wanted agencies to have some autonomy and ability to be responsive or whether it sought to achieve other goals. He suggested the other goals would be met above the purchasing threshold and in many cases below the threshold as the open-term contracts currently in place were used.
Mr. Heller asked if KPMG Peat Marwick had discussed with the Controller's Office the impact of eliminating the pre-audit requirement and the invoice rejections which might result. Mr. Myers said he did not expect the work load in the Controller's Office to change. The Controller was currently performing post audits on all payments and would continue to perform that function. The rejections would be kicked back to the agency or the Budget Division to correct. The added work load for the agency would provide an incentive to increase its efforts to assure the correctness of purchase requisitions.
Mr. Heller asked whether rejections from the Controller's Office resulted from staff judgments or system audits. Mr. Myers said the rejections were mechanically rejected by the computer system. Mr. Thorne stated invoices were rejected for reasons similar to rejections of purchase requisitions during the current pre-audit process. Under the proposed new procedure the purchase order would be revised and a copy would be sent to the Controller to encumber the funds. If it was rejected for coding errors or lack of funds it would be kicked back to pre-audit or the Budget Division and the normal review would take place then. The new procedure should not have a significant impact.
Mrs. Williams asked if Mr. Myers would respond to her earlier question about charges to the federal government for commodities storage. Mr. Myers stated he was not familiar enough with the grants received in the commodities program to say whether or not the federal government would willingly accept the increased charges.
Mrs. Williams questioned whether there was a limit on administrative costs and, if so, what the impact would be on the commodities program. Mr. Thorne said he would research the question and provide a response at a later time.
Ms. Tiffany inquired whether the revision to the pre-audit function would require any additional computer programming in the Controller's Office. Mr. Thorne indicated the programming was already in place.
Ms. Tiffany asked if agencies would be allowed to purchase computer equipment outside the Purchasing Division. Mr. Myers replied there might be standards set for the purchase of computer equipment. He was uncertain whether personal computers fell within the restrictions of such standards. Ms. Tiffany expressed her concern about control of computer equipment purchases.
Mr. Thorne stated the Budget Division was developing standards for purchasing computer equipment. The standards would be updated periodically and open-term contracts would coincide with the requirements of the purchasing standards.
Ms. Tiffany commented vendors could bill local governments directly. She suggested vendor contracts be renegotiated to incorporate such a condition.
Chairman Arberry asked Mr. Sullivan to address Mrs. Williams' concern regarding federal commodities contracts. Mr. Sullivan said he did not know where Mr. Myers obtained the figures he reported. In fact, the $76,000 figure was accurate. He stated the commodities storage program worked very well in concert with the purchasing program. He noted if Mr. Myers' figures were correct the cost of food would be increased considerably and he speculated the federal government would privatize the program.
Mr. Sullivan stated, in response to Ms. Tiffany's question, the Purchasing Division had realized significant savings on the purchase of data processing equipment and software. He would report those savings to the committee in the future.
Ms. Giunchigliani said it appeared payments to vendors would become more sporadic. She asked what accommodations would be made to assure timely payment to vendors. Mr. Thorne responded invoices would be paid by the individual agencies rather than by the Purchasing Division. He noted agencies were currently paying invoices for small purchases. Ms. Giunchigliani asked Mr. Thorne and Mr. Sullivan to provide to the committee performance indicators reflecting the timeliness of bill paying.
Mr. Price asked what Mr. Myers' credentials were. Mr. Myers replied he held degrees in public policy and business.
Mr. Price asked how large an organization KPMG Peat Marwick was. Mr. Myers answered there were 17 offices and approximately 2,500 professional employees.
Mr. Price questioned whether KPMG Peat Marwick used a centralized purchasing program. Mr. Myers stated there was a centralized purchasing unit within the New York office for specialized items. For the most part each individual office purchased their own office supplies and computer equipment.
Mr. Price stated his secretary had just spoken by telephone to Mr. Don Robertson of KPMG Peat Marwick and Mr. Robertson had not supported Mr. Myers' statement.
Mr. Price said he presumed the purpose of the KPMG Peat Marwick was to promote efficiency and cost savings within the state government. Mr. Myers said Mr. Price's presumption was correct.
Mr. Price pointed out most of the procedures within the state government had been put into place for reasons. One of the reasons, as in this instance, was to impose sufficient control of potential fraud and abuse. He asked whether the KPMG Peat Marwick study took into consideration the reasoning behind the present system.
Mr. Myers said purchasing within his office was done by a single person in order to consolidate the purchasing responsibility. He suggested the KPMG Peat Marwick System was the way it ought to be happening within state agencies for small items and statewide for large ticket items. In fact, under the current purchasing thresholds, there was someone in each agency with such purchasing responsibility.
Mr. Myers agreed there was a grave public image risk which accompanied public perception that inappropriate decisions were being made by low-level staff within agencies and the potential for fraud and misuse of public funds was high. He suggested; however, there needed to be some balance within the system. Elimination of the risk entirely would mean lowering the purchasing threshold to an unreasonably low level. He noted it would also be unreasonable to set the threshold too high. He said this was a policy decision. KPMG Peat Marwick's job was to explain whether the current system was efficient and comparable to other entities' systems as well as to point out system advantages and disadvantages.
Mr. Price questioned whether the study had revealed any instances of fraud within the state purchasing system. Mr. Myers said the study did not review the details of the purchasing system sufficiently to expose fraud. The review of systems and policies did reveal extremely careful controls designed to minimize the risk of fraud. The KPMG Peat Marwick recommendation pointed out those controls were so stringent they made the process burdensome and damaging to the morale of agency employees.
Mrs. Evans indicated she still required clarification regarding how the proposed system would function and what responsibilities would fall to the individual agencies.
Chairman Arberry indicated time had expired. He announced the remainder of the agenda would be heard on Friday, February 26, 1993.
There being no further business, the meeting was adjourned at 10:55 a.m.
RESPECTFULLY SUBMITTED:
_________________________
C. Dale Gray
Committee Secretary
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Assembly Committee on Ways and Means
February 22, 1993
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