MINUTES OF THE
ASSEMBLY COMMITTEE ON WAYS AND MEANS
Sixty-seventh Session
April 5, 1993
The Assembly Committee on Ways and Means was called to order by Vice Chairman Larry Spitler, at 8:04 a.m., on Monday, April 5, 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
Ms. Sandra Tiffany
Mrs. Myrna T. Williams
COMMITTEE MEMBERS ABSENT:
None
STAFF MEMBERS PRESENT:
Mark Stevens, Fiscal Analyst
Gary Ghiggeri, Deputy Fiscal Analyst
AB329Makes appropriation to City of North Las Vegas for costs of relocating residents of Windsor Park whose homes are sinking.
Ms. Anita Laruy, Director of Intergovernmental Relations for the City of North Las Vegas, indicated she was in support of AB329. She stated in 1988, the residents of Windsor Park approached the city because of a subsidence problem which was causing their homes to sink and deteriorate. Since that time, the city has been working with the Windsor Park community attempting to help them resolve their housing problems. Many of these homes are paid for and many of the homeowners are elderly persons, with limited incomes, that have nowhere else to go.
Ms. Laruy testified, for the past two sessions, the legislature has been very generous in appropriating funds to help the residents of the Windsor Park subdivision. She explained, once again, the city is requesting from the Legislature financial assistance for these people, whose homes are deteriorating through no fault of their own.
Ms. Laruy introduced Mr. James Hobby, Project Administrator for the city's Windsor Park project, and indicated he would provide a summary of the problem, the attempts to resolve it, the funding that has been obtained and what is currently being done to help the residents of Windsor Park.
Mr. Hobby explained Windsor Park, built in 1966 and 1967, is located in the southwest quadrant of North Las Vegas near the airport. The subdivision comprises 241 single-family homes and, even today, many of the homes are still occupied by the original residents. Many are senior citizens and their homes in Windsor Park represent their lifelong investment.
Mr. Hobby said the subsidence problem was brought to the attention of the city and the public approximately four years ago. The Housing and Urban Development Department (HUD) was brought in to survey the extent of damage which is published in a 1988 study. It was determined many of the homes had foundations that were cracking, as well as cracked walls, sidewalks and streets, which greatly affected the livableness of the homes, as well as the entire subdivision. The city spent thousands of dollars in repairing and maintaining the infrastructure throughout the subdivision. It was felt, at that time, the entire subdivision had to be relocated with a price tag of about $12 to $14 million.
Mr. Hobby explained he became the Project Administrator in September 1991 charged with to developing a plan of action that would lead to a solution to the problem in Windsor Park. The plan was created in November 1991 and Mr. Hobby was able to lower the funding needs to approximately $5.4 million. He noted it was anticipated $750,000 could be raised from Community Development Block Grant Funds (CDBG), $1 million could be raised from a state grant, and the balance could be raised from HUD special purpose grants.
Mr. Hobby indicated, to date, Congress has allocated $2 million for the Windsor Park Project. The city, through the CDBG program, has allocated $750,000 with the state allocating $500,000 ($250,000 by the 1989 Legislature and $250,000 by the 1991 Legislature). He pointed out the city is requesting the Ways and Means Committee recommend approval of an additional $500,000 by the 1993 Legislature. If approved, this would mean the city would have already raised $3.75 million of the estimated $5.4 million needed. This would allow the Windsor Park families to reestablish their living conditions to the standard that once existed in Windsor Park.
Mr. Hobby discussed the progress that had been made since the initial state allocation in 1989. He stated in order to come up with a reasonable and economic solution to the problem in Windsor Park, it was necessary to conduct engineering studies to determine the extent and magnitude of the fissure problem which was responsible for the subsidence in Windsor Park. Mr. Hobby explained the engineers performed a surface evaluation, as well as a subsurface evaluation, and determined several fault lines ran diagonally through Windsor Park. The engineers divided Windsor Park into four risk zones. He indicated zones 1 and 2 were identified as the areas where all attempts should be made to relocate families to safer conditions outside the Windsor Park subdivision. Zones 3 and 4, even though determined to carry a risk, were substantially less damaged overall than zones 1 and 2.
Mr. Hobby testified the city held ground-breaking ceremonies in January 1993 for the development of eight lots, which will serve as prototypes for moving the first of 53 homes from Windsor Park. The building of the subdivision's infrastructure, as well as the foundations, moving of the homes, temporary displacement of the families and the rehabilitation of the homes is all budgeted into the requested state funds. He emphasized the city recognizes this phase could possibly experience a $91,000 shortfall before its completion. On March 17, 1993, a contract was awarded for developing an infrastructure for a 45-lot subdivision on city-owned property adjacent to Walker Pool Park. It is proposed, within the plan, to begin moving homes onto this section by May 15, 1993. He noted it is projected HUD will release the federal grant funds allocated for the city to complete, in its entirety, the foundation, moving and rehabilitation of the homes onto the completed lots.
Mr. Hobby stressed, in order for the city to continue to move all the families, who are voluntarily relocating to the new subdivision, additional land will need to be acquired and infrastructure built to accommodate the new families.
Mr. Hobby concluded, if $500,000 is allocated by the 1993 Legislature, the city would be able to acquire 22 additional lots, which would be expanded to 25 lots after subdividing the property. This would enable the city to increase the relocation of at-risk homes from the projected 53 homes to 78 homes. Additionally, Mr. Hobby noted, another 11 lots, which are also owned by the city, would be utilized in relocating Windsor Park families. Using all available resources, this would bring the total up to 89 families who would be relocated and have their homes saved from destruction.
Mr. Hobby provided a map showing both the new subdivision and the current location of Windsor Park (see EXHIBIT C).
Mr. Marvel inquired what would be done with the land in the old subdivision. Mr. Hobby replied the city was looking into a possible greenbelt area. He indicated engineers are looking at the feasibility of redeveloping those areas into modular homes which do not require a fixed foundation. The city is restricted from putting in anything which would have a fixed foundation because the same structural damage would occur.
Ms. Giunchigliani commented the Windsor Park homes were constructed with federal HUD funds. Mr. Hobby clarified the homes were guaranteed by HUD. Ms. Laruy stated the owners received a loan guaranteed by HUD similar to FHA. She stated there had been a private developer and contractor and both parties are deceased. Ms. Giunchigliani asked why the city was not going after the private developer for damages and lack of engineering. Ms. Laruy reiterated they are deceased and no family has been found, therefore there would be no means of recovering funds. Mr. Hobby remarked the engineers who provided the current land evaluations indicated the technology to detect the subsidence fault problem was not available at the time the homes were built. He emphasized if the engineers had been utilized at the time the homes were built, they would not have been able to detect the problem.
Ms. Giunchigliani asked who owns the land itself. Mr. Hobby stated each homeowner owns a 6,000 square foot lot. Ms. Giunchigliani noted two years ago the Legislature was led to believe the funds they provided would be the end of the state's obligation to relocating the families. She commented this adds to the discussion of state versus county/city responsibility. She emphasized the Windsor Park relocation was not a state responsibility, however, for the families' benefit the state is involved. Ms. Giunchigliani voiced her concern about the city returning with another request for funds knowing the total request still will not support the full need. She asked where the additional funds to cover the shortfall would be coming from. Mr. Hobby replied the city has requested $1 million from the federal government two years in a row. The federal government has granted $1 million in each year for 1992 and 1993. He stated the city is requesting from Congress the balance of the project's costs.
Ms. Giunchigliani wondered if the city would likely get the balance from the federal government. She commented if the original loan funds were from a loan guaranteed by the federal government, then the federal government should bear the brunt of the burden rather than the city or state. Mr. Hobby responded the federal government has not taken the position this is their responsibility. He noted the federal government loaned the money, but did not build the project yet they have been willing to help. Mr. Hobby emphasized the city feels confident the federal government will allocate the balance of the funding needed in light of the $2 million they have already invested.
Mr. Hobby recognized if the funding does not come through, the project will have to be stopped. Ms. Giunchigliani asked what would happen if the project was halted. Mr. Hobby replied only those homes in the high-risk area already moved would be completed. Ms. Giunchigliani asked if any revenues were generated from redeveloping the old subdivision with modular homes, would the funds be utilized to repay state or federal allocations. Mr. Hobby responded repayment of funding with any revenues as a result of redevelopment would be investigated as an option. The city is looking for any assistance to provide a safe area for the Windsor Park homes and families, even to the extent of asking contractors and developers to pay for fees which were waived by different agencies assisting in the project.
Ms. Laruy emphasized HUD has never acknowledged any type of liability or responsibility in this situation.
Ms. Tiffany asked about the profile of the Windsor Park families. Mr. Hobby stated the vast majority of the Windsor Park residents are moderate to low income families. Ms. Tiffany asked what responsibilities the families are bearing in the relocation costs, whether that are contributing through sweat-equity or loans from the city or state. She concurred with Ms. Giunchigliani that this is not a state responsibility. She pointed out if this went to court, the federal government would probably be the responsible entity. Mr. Hobby explained the majority of Windsor Park families are senior citizens who are widows or widowers and some are still paying on a 25 or 30 year loan. He pointed out most do not have the funds to pay for another loan. The city has installed as part of the relocation plan package, to prevent anyone from taking advantage of the project, $15,000 of the rehabilitation of the home as a deferred loan. This would allow the city to defer 20 percent of the loan for five years. The rationale is if someone is waiting for the city to move his/her home in order to sell it and pockets the funds, the deferred loan clause will allow the city to recoup $15,000. The deferment aspect was designed after a HUD program which is a rental-rehabilitation program where resident participation is the key.
Ms. Tiffany inquired if any of the residents had insurance on their homes. Mr. Hobby remarked insurance for the majority of residents has been canceled. He noted he gets calls monthly about an insurance company canceling Windsor Park residents' insurance and the homeowners are unable to acquire replacement insurance. The residents are in a real predicament because they cannot sell their home or property, HUD has redlined the area and will not give loans in the area, and the property is uninsurable. Ms. Laruy explained because of the subsidence problem, the insurance companies began canceling insurance in 1988 and as time progressed, more homes have become uninsured. Mr. Hobby emphasized at the least indication of subsidence, insurance is canceled.
Mrs. Chowning stressed the Windsor Park area looks like a war zone and for people to live like this is unconscionable. These residents are in fear of their homes crumbling around them. This is a devastating situation. She emphasized the most tragic victims are those who have been forced to walk away from their property and take a total loss because their home became unlivable. She asked if the residents will be required to start another 30-year mortgage again. She stated many of these residents cannot qualify for a 25 or 30 year loan. She inquired what the City of North Las Vegas has contributed to the project thus far and what is the city's future commitment.
Mr. Hobby replied the relocation plan requires the existing lien holders to agree to move their security to the new property site. Basically, the families will be allowed to maintain the exact status they are currently holding. He noted the plan is to keep the people as whole as possible. Maintaining the current lien status will allow the residents to continue paying the same amount on their loan. He emphasized some lien holders are challenging the requirement and have added some conditions which would need to be met. Mr. Hobby pointed out other problems exist with the titles themselves, such as IRS liens and bankruptcies. This requires Mr. Hobby to negotiate with the various agencies to reach an agreement to move the agency's lien to the new site.
Mrs. Chowning recognized, in some cases, some homes cannot be relocated because of severe structural damage. She asked how the total cost is covered if the home should need to be reconstructed on the new site and the original lien is minimal. Mr. Hobby replied the house movers have indicated they will be able to keep all the homes scheduled for relocation together and rehabilitation will occur on the new lots.
Mr. Hobby responded the City of North Las Vegas has committed $500,000 already and plans to commit $250,000 more in the next phase in addition to donating land for the new subdivision. He reiterated a number of the expenses including his salary have been borne by the city. HUD funds will also be available to help the city's matching portion. Mrs. Chowning pointed out the city has no percentage of commitment from this point forward. Mr. Hobby replied the city's commitment has been stated out of this year's CDD allocation. Mrs. Chowning asked the approximate value of the donated. Mr. Hobby stated approximately $5,000 for each of the 56 lots.
Mrs. Chowning commented the Windsor Park relocations concern her greatly because of a previous development called "Bonanza Greens" on East Bonanza where the homes were cracking. She emphasized other areas of the city have subsidence problems also. She exclaimed this type of problem needs to be addressed because the Windsor Park situation could easily occur again and the state, in cooperation with the city, needs to be careful to ascertain future liability.
Ms. Laruy stressed with the Bonanza Green situation, the city was able to reach the developer and the developer shored up the homes. She reiterated the problem with Windsor Park is there is no contractor to turn to for reclamation costs.
Mr. Humke noted he had been at the Windsor Park site four years ago on a CIP tour and it is indeed a very tragic situation. He inquired if a lawsuit has been filed. Ms. Laruy replied, to date, there have been rumors the homeowners association has discussed filing a lawsuit which would include not only the city and federal government, but the county as well. She indicated the rationale was Clark County was involved in the original permitting for the development. She remarked no lawsuit has yet been filed primarily because a suit takes money and these people do not have funds to pay for attorneys. An attorney would need to work pro bono and no one has come forth to provide services.
Mr. Humke asked how the city would react if passage of AB329 was contingent on the filing of a lawsuit. Mr. Laruy indicated she was unable to answer on the grounds it would incriminate her.
Mrs. Evans clarified there are 241 homes in the area and 89 will be relocated based on high risk-zone placement. She asked how many more would need to be moved in the future if funding is available. Mr. Hobby indicated possibly six more homes. He remarked the move is voluntary and some people do not want to move even though their homes are in risk of further damage. He explained in zone 1 and 2 there are over 100 homes and 89 of those families are anticipated to voluntarily move.
Mrs. Evans inquired what the city would do if the state cannot fund AB329, and if the state could allocate the funds, would this be the last time the city requests funds for Windsor Park. Mr. Hobby replied if funding is not provided, it will seriously jeopardize the city's attempt to solve the situation. He reiterated there is a potential shortfall for the initial phase of the project. The state's assistance is needed to complete the current work. He stated the city does not anticipate the need to come back for additional funding from the state, if the current request is approved. Ms. Laruy interjected the city said last session they would not come back, but did so. She asserted the city would not say this time they will not come back in two years because the city may in fact try.
Ms. Giunchigliani commented $2 million has already been allocated by Congress and the city, through the community grant program, has committed $750,000, however the grant dollars are also federal dollars. She noted the city has not put forth any general fund dollars other than covering Mr. Hobby's salary and the donated property costs. Ms. Laruy asserted the city has not given any general funds because the city currently faces a $3 to $4 million shortfall. Ms. Giunchigliani noted the state is also short of funds. She voiced her concern if the state is being requested to allocate general funds, the city should also be committing general funds for the project. She commented if the city intends to utilize the old subdivision land, she would like to see some language in the bill which would provide for repayment to the state general fund. Ms. Laruy responded the city would not have a problem with the inclusion of a repayment clause, if and when the city received state general fund monies. Ms. Laruy encouraged the committee to support AB329.
AB107Makes appropriation to state fire marshal division for establishment of toll-free telephone line to provide information on regulations related to hazardous materials.
Mr. Ray Blehm, State Fire Marshal, indicated AB107 is a straightforward piece of legislation which came out of the Interim Study Committee on Hazardous Materials (ACR79). AB107 would appropriate $5,000 to operate a toll-free line for the fire marshall's office to answer questions regarding the hazardous materials permitting system and schedule training for those individuals trying to obtain education. He stated the appropriation would not be a general fund expense. He explained the Hazardous Materials Training Center budget (101-3834), has significant reserves due to the interim freeze on hiring and other related costs. Since the hazardous materials program is new, he indicated there was more than adequate funding available to handle the transfer from reserves in budget account 101-3834. Mr. Blehm noted the ACR79 Committee agreed easy access to the hazardous materials information for local area first responders and local businesses was important.
Vice Chairman Spitler asked, since the bill currently indicated general fund appropriation was Mr. Blehm proposing to amend the bill to utilize the reserve funds in budget account 101-3834 as the funding source. Mr. Blehm responded, as he had told the Assembly Natural Resources Committee, in his opinion it made sense to pull funds from reserves to provide access to the information.
Mr. Spitler clarified two options for funding could be discussed: adjust the budget account in closing or amend AB107 authorizing transfer of reserve funds. Mr. Blehm recognized either option would accomplish the same result. Mr. Spitler indicated the goal would be to take the funding source from other than the general fund which could be done with or without the bill. Mr. Spitler reiterated he wanted to be assured there were adequate funds in the reserve to pay all the costs. Mr. Blehm stated yes, there were enough funds, but much was still to be seen with the reorganization and he was not sure what was planned with the reserve portion of the Hazardous Materials Training Center budget.
Vice Chairman Spitler asked if the "800" number would be a voice-mail system or would the phone be answered by an individual. Mr. Blehm replied the fire marshal's office did not have a voice-mail system and a person would be assigned to answer the phone. If the line generated enough need and went beyond current staffing, a back-up voice-mail system could be investigated.
Mr. Marvel asked Mark Stevens, Fiscal Analyst, if the funds requested were currently available in the general fund or in an uncommitted reserve fund. Mr. Stevens replied the bill would appropriate $5,000 per fiscal year from the general fund. He stated the discussion was if there would be enough reserve funds in budget account 101-3834 for the purpose. He indicated AB107 could be changed to authorize payment from the reserve category or AB107 could not be processed and initiate the appropriation through budget closings. Mr. Marvel commented either option would not diminish the general fund. Mr. Stevens replied if AB107 were processed as it is currently written, it would cost the general fund $10,000. He reiterated the program could still be accomplished without a general fund appropriation by amending the bill or through budget closing.
Mr. Blehm restated as a result of the freeze on hiring and travel, in addition to the generation of fees from the Beatty Dump, the money accumulated in the fund which is dedicated to fire service and hazmat training. He added permit fees also go into the fund. This fund currently has, in reserve, over half a million dollars.
Mr. Humke asked Mr. Blehm to clarify the reorganization options which could affect AB107. Mr. Blehm commented he is not a spokesman for the reorganization plan, but he understood the division is slated to move to the proposed Department of Public Safety. He explained under the proposed organization chart, the division would be merged into the Law Enforcement Services Division. As such, the fire marshal would be a sub-section of the Investigations unit and the law enforcement training program would be consolidated. He asserted these kinds of activities would greatly disrupt some of the ACR79 recommendations because the objectives were approached as if these units were an intact organization rather than separated into different areas and divisions. Mr. Humke restated the reorganization would disrupt the functions as envisioned under ACR79. He asked if the functions included in AB107 would follow the fire marshal's office through the reorganization. Mr. Blehm stated this would be a technical point, but essentially the permitting portion of the training program is completed through the Uniform Fire Code and Hazardous Materials permitting system. The separation of responsibilities will disrupt this function by separating the rule-making authority from the administrative unit.
AB108Requires state agencies to develop and update plan for emergency management.
Mr. Bill Langley, Chief of Plans and Programs for the Division of Emergency Management, stated the legislative authority and responsibilities for the division are contained in NRS 414. He elaborated NRS 414.040 specifies the powers and duties of the Director and states, "He shall coordinate the activities of all organizations for emergency management within the state." With few exceptions, there are no mandates now that direct or require state agencies to have, or maintain, any internal or external emergency plan. Some agencies have plans, while many do not.
Mr. Langley explained Governor Miller, realizing the need for Emergency Management plans, issued a letter in September 1991 (see EXHIBIT D) to all agency heads which stated one of the most fundamental tasks state agencies share as public servants is public safety. The state must ensure the safety of Nevada's citizens, and the means to ensure this is with the development and support of a high quality, emergency planning system within state government. To accomplish this, the Governor directed, primarily, all departments to review their present emergency plans, procedures, and training programs, update all outdated plans, and he noted the Emergency Management Division was available to provide guidance toward this goal. Secondly, the Governor encouraged all agency directors to attend a November 1991 "Introduction to Emergency Management" class sponsored by the Emergency Management division.
Mr. Langley stated the class was held as scheduled and, since that time several follow-up emergency planning courses have been presented to various state and local government audiences. He noted the most recent class was held several weeks ago in Las Vegas. He reiterated the Division of Emergency Management views emergency planning as a most important task for state agencies and had submitted the BDR as a result of ACR79 recommendations.
Mr. Langley commented Nevada has not had a Presidentially declared disaster since the 1986 floods. He emphasized the potential for a major natural disaster (fire, flood, earthquake, etc.) or technological event (chemical or hazardous material spill, explosion, etc.) is always present. He explained a major concern is that Nevada is the third most seismically active state in the nation, following Alaska and California. He noted several earthquakes with magnitudes of 6.0 or greater have occurred in the Reno/Carson City area since 1860. Mr. Langley urged the committee to envision the damage to state facilities and the disruption to government should a major earthquake occur here tomorrow.
Mr. Langley explained the historical occurrence rate in Nevada for an earthquake with a magnitude of 7.0 or greater earthquake is every 27 years. The last major earthquake registered a magnitude of 7.2 on December 16, 1954, in the Fairview Peak area. He pointed out the PEPCON explosion of a few years ago and emphasized the potential is always there for some type of catastrophic incident to occur. With this in mind, he explained it would be prudent for all state agencies to be prepared for emergencies. This is done through a viable emergency plan which is realistic, well thought out, encompassing, and addressing the realities of each particular agency. He explained the plan should be tested or evaluated on a regular basis and loopholes or omissions filled. The plan will then be a flexible, living document responsive to the needs and requirements of the agency.
Mr. Langley emphasized, first and foremost the concern is safety and protection of the employees. Individuals with disabilities will have special requirements and needs which must be addressed. Agencies which are "service" related and have customers or clients within the facilities also require special attention. He remarked business disruption requirements should be addressed and cited a number of examples; (1) are critical and special documents protected; (2) are backup computer files maintained in a separate location; (3) does the agency have an alternate facility to work out of if the primary one is damaged or unusable, etc. He pointed out the situation of the recent massive explosion at the World Trade Center in New York and the turmoil which has resulted.
Mr. Langley maintained an emergency situation does not have to be a natural or technological emergency to disrupt state government. Civil unrest could be a factor and temporarily paralyze government, such as last April's rioting in Los Angeles following the verdict of the Rodney King trial which ignited several days of unrest in Las Vegas requiring the attention of government at all levels. He pointed out the state could be facing this situation again very soon.
Mr. Langley remarked another important benefit of state agencies having a viable emergency plan is local governments and their citizens will be better served if state agencies are properly prepared and have a plan in place. He pointed out arbitrary agency reactions to emergency incidents would be reduced and a plan of action could be enacted based upon proven and tested procedures or guidance.
He emphasized the State Comprehensive Emergency Management Plan is under revision and when completed, it will designate a Plan Coordinating Committee which will meet quarterly and will be composed of state agency representatives whose responsibility will include continuously updating the state plan. He remarked the state plan will be a true master document which reflects the state's overall emergency preparedness status.
Mr. Langley explained for those agencies which do not have an emergency plan, it will take time, manpower and funding to prepare one. The time to develop one will vary with the requirements of the agency and the expertise of the individuals the director has assigned to develop and write the plan. He stressed it is absolutely imperative this planning effort have the support and involvement of the agency head or it will fall short of a viable plan. He asserted the Division of Emergency Management is available to assist in this endeavor and can help with plan development, training, providing materials that describe in detail how to prepare and evaluate a plan, and can assist with in the evaluation of a test exercise.
Mr. Langley summarized the Division of Emergency Management supports AB108 because it will result in a more responsive and effective government to the jurisdictions and citizens of the state, especially during times of emergencies.
Mr. Perkins concurred a plan is necessary, but it does no good to have a plan which sits on a shelf and no one is aware of its contents. He noted AB108 does not address training to inform employees of the plan, its implementation, and the period between evaluations. He pointed out the City of Henderson had a plan in place when PEPCON exploded, but no one knew what the plan was. He explained there were no funds allocated to training and implementation of the plan in the fiscal note. Mr. Langley stated the funding issue had not been addressed in the bill, but he was unaware of the exact reason other than billing each agency and creating a full budget would take too much time. He pointed out some agencies would be able to devise a plan quickly and inexpensively, while others would require a significant amount of funding. He stated the issue of training and implementation would need to be addressed in each specific agency's plan. Mr. Langley stressed the Division of Emergency Management provides training on how to create, implement, and evaluate the plan. This will take both time and funding.
Mr. Perkins asked why the issue of training was not addressed in AB108. Mr. Langley asserted the bill could be looked at again to include such issues. He stressed determining training was left up to each agency because the agencies will have issues special to their areas.
Mr. Heller wondered since the Governor issued the September 1991 letter to agency heads (see EXHIBIT D), have any agencies developed emergency plans which are currently in place. Mr. Langley responded there were, but he has not seen any submitted to the Division for feedback. Many agencies have participated in training, including SIIS, and responses for training have been good.
Mr. Heller inquired if the Division of Emergency Management has a time table for completion of the plan outlined in AB108. Mr. Langley replied, as specified in the bill, the plan should be to the Division by July 1994 and this would be an adequate time for agencies to have a plan completed and in place if AB108 is passed.
Mr. Spitler remarked, based on the response related to the fiscal notes attached, some agencies must already have plans in place because only one fiscal note has been attached to AB108. Mr. Langley concurred some do have plans, but agencies were not required to respond to the Division of Emergency Management when the plan was done.
Vice Chairman Spitler closed the hearing on AB108.
AB114Requires department of motor vehicles and public safety to develop training program relating to hazardous materials.
Ms. Jan Capaldi, Assistant to the Director of the Department of Motor Vehicles and Public Safety, stated she was not prepared to testify on behalf of AB114, but wanted to address some revised wording. She indicated with the revisions the department is willing to accept the changes which will allow more flexibility and better coordinate the resources within the department. She stated the basic change was from "Nevada Highway Patrol..." to "the Department...".
Mr. Spitler asked if the department was supporting the first reprint of AB114. Ms. Capaldi indicated that was correct. Mr. Spitler inquired if the change in wording changes the fiscal note. Ms. Capaldi replied she did not have any information on a fiscal note.
Vice Chairman Spitler asked staff to inquire into the status of the fiscal note as a result of the reprint.
Vice Chairman Spitler closed the hearing on AB114.
AB208Makes appropriation to the commission on economic development for distribution to Rural Nevada Development Corporation.
Mr. Mike Sheppard, Commissioner of the Commission on Economic Development, stated Rural Economic development probably has as its most important facet the retention and expansion of the existing businesses. He stressed the single most significant impediment to progress is the lack of debt capital. He indicated he has provided the committee with some excerpts from documents each member has previously received entitled "Focus 2000: Nevada Looks to the Future" and "Rural Nevada 2000" (see EXHIBIT E and EXHIBIT F).
Mr. Sheppard explained there are eleven issues in Nevada's product improvement as included in "Focus 2000." He said number four is Business Financing and Capital Availability. One of the goals is to establish innovative programs to provide new sources of capital for business through private and quasi-public enterprises. One of the strategies to achieve this goal is to institutionalize the Rural Nevada Development Corporation (RNDC).
He stated "Rural Nevada 2000" was formulated because "Focus 2000" evolved from stake holders throughout the State of Nevada who came together for a three-day session in order to state the issues which will lead Nevada into the year 2000. Mr. Sheppard stressed the people in rural Nevada felt so strongly committed to some of the differences and disparities in their concerns juxtaposed with those of the entire state, "Rural Nevada 2000" focuses more intensely on issues which are key to rural Nevada.
Mr. Sheppard read from page 14 of "Rural Nevada 2000": "Rural businesses are finding it more and more difficult to acquire expansion or start-up financing from banks and other traditional financial institutions across the country. In rural Nevada, this tightening of credit is compounded by a lack of locally-owned banks, rapid growth in the state's urban areas which attracts the available debt capital, and bank decision centers which are at best in Reno or Las Vegas, but often are out of state. In addition, a perception by the banks of rural Nevada having a boom and bust economy dampens their enthusiasm for rural business lending."
Mr. Sheppard continued, "Credit availability is market driven, but it can also be public enhanced especially in rural areas. The situation in rural Nevada calls for action to bring the market for business loans to the attention of lender's and also to guarantee or reduce the lender's risk in making rural loans, and to support effective nonbank lending resources."
Mr. Sheppard stated the goal under this statement is to provide financing for economically-viable businesses in rural Nevada with one strategy most important to this bill which is to maintain the nonprofit RNDC as a source of debt capital for rural businesses (see EXHIBIT F). He asserted it is imperative to maintain RNDC because it is just in an embryonic stage and is on the edge of effectively producing the work it was set up to address.
Mr. Sheppard emphasized the Commission on Economic Development (CED) requested, as a first-priority budget enhancement, $40,000 in each year of the biennium but, as the committee is acutely aware, there were no enhancements recommended to the Commission's budget. Therefore the Commission strongly supports AB208.
Vice Chairman Spitler commented RNDC was previously funded from a federal grant. Mr. Sheppard indicated most of the funding for the RNDC came from the EDA (Economic Development Administration), which came about through the efforts of the Commission's staff who has diligently pursued federal funding. Mr. Spitler noted funding for this program was supposedly drying up at the federal level, but there could possibly be a one-year continuation.
Ms. Giunchigliani inquired why room tax was not being utilized because it funds a percentage of the CED. Mr. Sheppard stated originally a one-cent jet fuel tax provided the funding for the CED, but that revenue was rerouted to the general fund. Most of the funding for CED currently comes from a general fund appropriation.
Mr. Ray Bacon, Nevada Manufacturing Association (NMA), testified in favor of AB208. He stated there would likely be some changes in the grazing and mining laws on the federal level which would have a strong possibility of putting the State of Nevada's rural areas back into an economic depression. He indicated the NMA views RNDC as one of the state's opportunities for taking a reasonably small investment which has the potential of continuing great economic diversification in the rural areas and lessening the impact of federal changes in grazing and mining laws.
Mr. Bacon pointed out, regardless of Congress' and the President's action, the Rayhall Bill is still moving through Congress which imposes 8 percent on royalties and could severely impair Nevada's mining business if passed. He emphasized most people in the East do not understand the Western states' concerns and therefore have little empathy or sympathy for Nevada's needs.
Mrs. Evans asked how RNDC works. She asked if she had a small business in rural Nevada and a bank would not provide a loan, what would RNDC do. Ms. Charlene Wood, Executive Director of RNDC, stated if a small rural business was rejected by a bank, it would then come to RNDC and go through the application process and would be pre-qualified. She stated one of the criteria is the business must not be able to fund the project through its personal resources or through a commercial lender. At this point, the business would be eligible for RNDC funds.
Ms. Wood noted certain businesses are ineligible under this application process. Eligible businesses would go through credit analysis, the loan committee process and eventually the project would be funded.
Mrs. Evans inquired what size loans are generally provided. Ms. Wood stated the maximum loan under the Farmer's Home Administration program is $150,000. RNDC can finance up to 75 percent of need not to exceed the $150,000 cap. She noted the funds can also be pooled and work in tandem with the Small Business Administration 504 and 7(a) programs in addition to banks. She explained although businesses must be rejected by a bank to be eligible, it does not necessarily mean 100 percent rejection. Today's lending climate typically finances 40 or 60 percent of the total requested by rural Nevada businesses. Therefore, RNDC funds can serve as gap financing or up to 75 percent of the total need.
Mrs. Evans commented $40,000 per year appears to be such a small amount and asked if it would really help make a difference. Ms. Wood asserted it would help tremendously. She explained in the RNDC's five year projection, the $40,000 represents the gap which exists. Also, RNDC can earn some revenue off the interest through the program. Mrs. Evans asked if the agency had participated in the market study on development capital with Mr. Daniels. Ms. Wood replied RNDC submitted their annual report to Mr. Daniels and he is recommending RNDC be placed in the study.
Senator Mike McGinness stated his support of RNDC. He indicated it is a very positive step for the rural counties and represents an opportunity for the legislature to promote rural economic development. He pointed out from the time he was Chairman of the Churchill County Chamber of Commerce, there has always been the need for a business to come in and provide 30 or 40 jobs. RNDC can be utilized to get such businesses out in rural Nevada. The funds allocated by AB208 can also be utilized to keep some of the businesses already in rural Nevada. Senator McGinness presented a letter from the City of Caliente and Glenn Van Roekel for the record (see EXHIBIT G). Senator McGinness read from the letter, "Down to earth, rural oriented businesses are for the most part, the brainchild of people who were raised and have a desire to live in a rural atmosphere. Unfortunately, until now most of the ideas that were born in rural Nevada have also died on the front steps of the local bank." He reiterated his support of AB208.
Mr. Ron Carrion, a businessman from Eureka and President of the Eureka Chamber of Commerce and Economic Development Council, testified he has lived in rural Nevada most of his life and has been an active participant in rural development efforts. He stated he was pleased to have taken part in the creation of RNDC and he is currently serving as a member of the RNDC Board of Directors. He indicated he was proud of RNDC's accomplishments to date.
Mr. Carrion explained RNDC was the brainstorm of Sarah Mersereau, Charlene Wood and Karen Rohala. RNDC is centered in Ely as the center of rural Nevada. He explained RNDC was incorporated in January 1992 and is a specialized development corporation with a 16 member Board of Directors representing Nevada's commercial banks, development authorities, business leaders, local government and Nevada's Indian tribes. All board members serve on a volunteer basis and receive no compensation for any activities.
Mr. Carrion emphasized RNDC's primary mission is to provide loan capital for small business start-ups and business expansions. The secondary focus is to rehabilitate rural Nevada's housing stock by providing housing rehabilitation services primarily to senior citizens with very low income.
Mr. Carrion read a portion of a letter dated December 1, 1992, from Norma Adair of Panaca: "I have sincerely appreciated the service I have received through this program. I will now be able to stay in my home during the winter months. Since I recently lost my husband and had replacements on both my knees, my activities are limited. Keeping a wood burning stove going to keep the pipes from freezing was impossible. All the winterizing done on my home and the convenience of a new furnace have made the difference. I can now live alone and manage. I thank all the personnel and this great program and all that you have done."
Mr. Carrion emphasized this is just one facet of the activities RNDC is centered in providing. He noted RNDC has been awarded a $1 million intermediary relending program (IRP) loan from Farmer's Home Administration (FHA) to assist small businesses throughout rural Nevada. The IRP can only be awarded to private development nonprofit corporations and this is the first time this program has been awarded to any entity in the state of Nevada.
Mr. Carrion explained the IRP loan to RNDC closed March 3, 1993, and since that time RNDC has loaned $106,000 for a new hardware store in Eureka. This new store will yield four jobs and a projected annual sales tax revenue to the state in excess of $20,000. He read a portion of a letter received by RNDC from the hardware store owners, Jerry and Trina Machacek. He stated these business people are typical examples of what businesses run into with banks in rural Nevada. "We have been rural Nevadans living in Eureka for over 30 years and are very excited to finally have a nonprofit source of finance available strictly for the development of rural Nevada. In the past, other financial institutions have been hot and cold, (mostly cold), towards non Reno/Vegas Nevada [businesses]. The fact that RNDC is nonprofit means their sole purpose of being is to help develop areas of Nevada that are desperate to survive and grow. Which in the long run helps all of Nevada.
The way RNDC's funding for business creation and expansion is set up, it will become a revolving fund able to assist many people develop ideas into much needed businesses in outlying areas of Nevada. Their loan process and guidelines are set up in a way that only those people who are willing to work hard for themselves and who are truly interested in starting and running their own business in a small town, need apply. This process assures the continuation of RNDC's programs.
Working with RNDC, specifically Charlene Wood, has been a pleasure. Her expertise in finding her way through a paper maze, along with her enthusiasm about small business development has made our financial trip worth the bumpy ride.
"We realize that during these tight financial times, cuts are bound to be made. And many people come before you pleading their cases. So why fund RNDC? Because at this point in time, it's not only the only game in town, but it's a game that is working and working well. And with your support it will continue to grow and develop as a very helpful organization that rural Nevada will use to its fullest potential."
Mr. Carrion expressed his concern for more funding for RNDC. He emphasized, as a businessman, the state needs to keep this type of funding available in rural Nevada. He clarified, in defining "rural Nevada," RNDC encompasses 15 of the 17 Nevada counties. This is not just an Ely, Eureka, Panaca type of issue. He encouraged the committee to fund RNDC with the $80,000 requested for the biennium.
Mr. Carrion commented how the $40,000 per year will be utilized. He noted Ms. Wood has done a large amount of work on her own, without pay. The funds will go solely for expenses to run the RNDC office. He reiterated the 16 member board volunteers their time and efforts.
Mr. Marvel asked how many applications have been received to date. Ms. Wood replied 225 responses in excess of $6.5 million in the last 14 months. Mr. Marvel inquired how many will be viable. Ms. Wood indicated RNDC should be able to loan out the funding within the next 14 months. She noted RNDC has $300,000 in requests ready to go to the loan committee. Mr. Marvel commented this proves the viability of this program. Ms. Wood reiterated the demand and need is most certainly apparent and there are a number of viable projects where prudent, sound and selective loan decisions can be made.
Vice Chairman Spitler commented the committee has also received a letter from H.E.L.P. of Southern Nevada supporting AB208.
Ms. Wood testified she has lived in Nevada her entire life and has resided in Ely for the past six years. She stated during her career, she has worked both in the private and public sector and her past experience has given her tremendous insight into the many areas of economic diversification needed for rural Nevada. Over the past 14 months, she has fielded requests for financing from rural businesses in excess of $6.5 million. These requests alone demonstrate the need for small business financing and the services that RNDC can offer. Many of these inquiries have been successfully referred to local banks for private financing. She explained these businesses were given the technical assistance by RNDC to obtain private financing, therefore, 15 jobs have been created, and the much needed services in their respective communities are now being met.
Ms. Wood indicated three loan requests in the amount of $200,000 are currently pending loan approval from RNDC's IRP. The loan committee is scheduled to meet at the end of April to review these applications. When approved, these businesses will generate eight new jobs and projected annual sales tax revenue of $125,000. Five additional loan applications tolling $300,000 are in the process of being reviewed, one of which will be working in tandem with Nevada State Development Corporation and possibly First Interstate Bank of Nevada. If approved, RNDC will provide a $100,000 working capital loan for this business.
She emphasized in order to make the maximum amount of resources available, RNDC works closely with Nevada's banks, development authorities, small business development centers and the state's revolving loan fund. Based on the level of interest to date, RNDC anticipates loaning the first $1 million by September 1994. Upon recommendation by FHA, RNDC will soon be applying for additional revolving loan funds to continue to serve the needs of rural Nevada's businesses.
Ms. Wood stated on the housing side through the housing rehabilitation program, RNDC has established private public partnerships, and has pooled its resources to provide more "bang for the buck" in housing rehabilitation. RNDC has been able to provide plumbing for a single elderly woman who was having to fill her tub with water from an outside hose, and then fill a bucket and empty this water from the bucket to her toilet just to flush it. She explained other types of repairs have included simple luxuries such as installation of water heaters where no hot water was available to the owner for years; upgrades to electrical wiring to meet code; and installation of new furnaces where no heating systems were in place.
Ms. Wood summarized through this program, RNDC has been able to contribute to the appearance of the community, meet basic health and safety needs to low-income families and senior citizens and most importantly, improve the overall quality of life for seniors so they could stay in their homes instead of having to be placed in care centers. She indicated she had a photo album with her which demonstrates the before and after types of housing rehabilitation RNDC has successfully completed.
She concluded RNDC has only just started filling business financing and housing rehabilitation gaps in rural Nevada. She stated she believes very strongly in the programs RNDC is administering and noted these are worthwhile programs which are actually improving the quality of life for Nevadans. Ms. Wood strongly urged the committee to support AB208.
Mr. Heller asked how much money is currently available in the loan fund and what interest rate will be charged. Ms. Wood replied $900,000 which will be loaned at 8 percent. Mr. Heller inquired if the $40,000 will be matching funds for federal dollars and if the funds were not allocated would it jeopardize the receipt of additional dollars. Ms. Wood responded if enough funding is not available for operating purposes, then RNDC cannot staff the office and get the monies loaned out. Therefore, she indicated they could lose the $1 million revolving loan fund.
Mr. Don Brady, Nevada League of Cities, stated as a previous banker he had worked with RNDC. He noted RNDC is not in competition with the local banks, but rather works with the banks to supply the needed funding to local rural businesses. He provided a letter, as noted by Senator McGinness, from the City of Caliente (see EXHIBIT G) which explains Caliente's position with the RNDC. The Nevada League of Cities believes the $40,000 asked per year is the only means to fund the office of RNDC. He indicated many programs lose their effectiveness after they have been established because they are unable to fund qualified staff to continue operations. Mr. Brady emphasized RNDC is one program which can really provide top-notch services for the low amount of funding requested. Mr. Brady encouraged the committee to approve AB208.
Mr. Spitler asked Ms. Wood if a breakdown was available on how the $40,000 will be utilized in terms of administrative costs. Ms. Wood indicated she did and would provide it to the committee.
Mr. Anthony Roman, Vice Chairman of the Board of Director for RNDC, stated he lives in Tonopah and reiterated Mrs. Evans statement that for the small amount of $40,000 a great deal can be accomplished. He pointed out the reason he supports RNDC is because approximately $110,000 has been received from the state to date which is primarily federal funds and the return has been $1.3 million. RNDC looks at the federal and state funds solely as seed money. RNDC borrows from FHA at one percent and relends at eight percent. Mr. Roman pointed out over the next five years RNDC hopes the return on the interest will be able to fund the operations on the administrative side. He indicated RNDC is only asking for the $40,000 per year funding to assist this young organization to build a foundation on which to continue providing a much needed program.
Mr. Marvel asked how much longer RNDC will have the one-percent FHA funds available to reloan. Ms. Wood indicated she was unable to answer and requested Mr. Roger Van Vulcanberg of FHA to answer. Mr. Van Vulcanberg stated FHA is interested in an organization, such as RNDC, to effectively deliver the programs. He pointed out this means two things: adequate staffing and an adequate level of expertise. He explained a number of the programs are not simple nor is dealing with emerging rural businesses an easy task to take on. He reiterated RNDC has been successful primarily in the intermediary relending program. In regard to future funding, he stated FHA will be looking closely at the track record, ability to deliver the programs effectively with success, and self-sufficiency through the interest rate differential.
Mr. Marvel asked if FHA will be raising the initial interest rate. Mr. Van Vulcanberg replied no, not at this point in time.
Ms. Janice Barber, Executive Director of the Nevada Self-Employment Trust (NSET), which is a micro-enterprise program in the state of Nevada, stated her support of RNDC. She indicated NSET provides micro-lending in the Reno/Sparks area for $500 to $5,000 and NSET is currently going out into rural Nevada. NSET would fit underneath RNDC wherein NSET supports very small businesses. She thanked the committee for their support of AB208.
Sarah Mersereau-Adler, Codirector for Rural Programs, Commission on Economic Development (CED), advocated AB 208. She explained AB 208 would enable the Commission's rural program to qualify for federal small business financing.
Ms. Mersereau-Adler commented Steve Rhode, a business finance expert from Development Finance in Washington D.C., recommended the state invest $1 million in general funds to establish a rural Business and Industrial Development Corporation, (BIDCO). The agency received the initial investment capital of $1 million and a $110,000 State Planning Grant which would provide start up funds for the program. She explained a $40,000 general fund allocation in each year of the biennium would provide temporary operating support for the program.
Mr. Spitler asked the agency to petition the federal grant source for FY94 operating costs of $40,000, with the understanding the state would finance FY95 operating costs at the same amount. Ms. Mersereau-Adler agreed to make the request.
Ms. Giunchigliani stated legislation was currently in progress which would enable nonprofit organizations to apply for federal lending programs which were currently available only to cities and counties.
Speaker Dini submitted a statement in support of AB 208 (see Exhibit H). He asserted by providing $80,000 over the next biennium, the state would be leveraging federal funds at a minimum ratio of 15 federal dollars for each state dollar invested. Speaker Dini encouraged the committee to vote in favor of AB 208.
Vice Chairman Spitler adjourned the hearing at 9:58 a.m.
RESPECTFULLY SUBMITTED:
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Kerin E. Putnam
Committee Secretary
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Assembly Committee on Ways and Means
April 5, 1993
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