MINUTES OF THE

      ASSEMBLY COMMITTEE ON WAYS AND MEANS

 

      Sixty-seventh Session

      June 8, 1993

 

 

The Assembly Committee on Ways and Means was called to order by Chairman Morse Arberry, Jr., at 9:35 a.m., on Tuesday, June 8, 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

     

AJR35Proposes to amend Nevada constitution to allow investment by state to stimulate economic development.

 

Mr. Larry Struve, Director of Commerce, testified in support of AJR35.  He pointed out AJR35 was an effort to redraft a proposed amendment to the Nevada constitution as suggested to the committee by Mr. Beldon Daniels of Economic Innovation International during his presentation on April 22, 1993.  He provided the committee with a letter and attachments (see EXHIBIT C) which encapsulated the background of AJR35 and showed how the four-point recommendations had been included in the resolution.

 

Mr. Struve explained there were a number of "whereas" clauses in the resolution which Legislative Counsel had included because the clauses better explained to the voters why the Legislature would ask them to again consider the very important issue:  Whether to allow the Legislature to consider authorizing investments in public/private partnerships to provide new sources of capital for the state's economic diversification effort.  He emphasized the language of AJR35 related to the constitutional provisions was developed by LCB based on the recommendations of Mr. Daniels and also on language from other states. 

 

Mr. Struve stressed the significance of AJR35 was it would not be an open-ended invitation to appropriate money to private corporations.  There would need to be a determination first by some person or organization that the types of investments would give a market rate of return based on risk.  The decision would need a two-thirds vote of each house of the Nevada Legislature.  This provision would be similar to provisions in the states of Oklahoma and Kansas which were successful in having amendments passed by voters.  He remarked the amendment included in AJR35 was directly tied to the economic development effort of the State of Nevada and would be confined to this function.

 

Ms. Cecilia Colling, Deputy Director, Commission on Economic Development, provided the committee with a letter of support for both AJR35 and AJR36 from Lt. Governor Sue Wagner.

 

Mr. Spitler requested examples of the types of investments of other states which had enacted legislation similar to AJR35.  Mr. Struve replied Oklahoma set up a fund in which the Legislature had participated in some of the initial capitalization of the fund.  He explained Oklahoma oil companies had been given a credit against certain taxes owed to the state which then were contributed to capitalize the fund.  He noted once the fund was capitalized, the state would hire a manager who would go out and review plans for various types of business enterprises.  The focus in Oklahoma had been on job creation, especially higher paying jobs which would add to the economy of the state. 

 

Mr. Struve pointed out he did not have specific examples of firms which had been funded, but he was aware of a Nevada company which had gone to Oklahoma as a start-up company.  He emphasized AJR35 did not appropriate any money.  He explained it could only recommend to the voters of Nevada that they give the Legislature the option to consider legislation to set up vehicles and, if necessary, put in seed financing from appropriations to allow these types of investments to be made through an appropriate vehicle.  He noted the vehicle would be set up in the statute itself.  He stressed the language in AJR35 would require the state to assure there would be a reasonable expectation of a market rate of return based on the risk and, if the state did participate, it had to be on either more favorable or equal terms to those of any private sector investors which were participating in the venture.  Mr. Struve pointed out these conditions had not been included in the proposal which went to the voters in November 1992.

 

Mr. Spitler questioned if any states with existing legislation had a proven track record.  Ms. Colling responded most programs had been designed to whatever economy exists in each state.  She stated examples she had seen include venture capital pools, revolving loan funds for small business, export assistance loans, which were to be developed as a result of state involvement in financial incentive packages.  He asked which states had participated in these types of ventures.  Ms. Colling replied Oregon had quite a few export assistance programs related to recycling, and Texas, Idaho and Utah had set up some type of financial programs.  Mr. Struve indicated Mr. Daniels had worked directly with states which had set up similar funds.

 

Ms. Tiffany inquired how the original funding would occur and what would the guarantee vehicles be.  She wondered when there was a change in the economic situation within the state and more funding became available for private enterprise, would the state cut back its investment.  Mr. Struve stated any change in investment would occur based on negotiations should this resolution be passed by voters.  He explained the 1983 Legislature passed the provisions of NRS 670A which are based upon a law in New York which created the New York State Development Corporation.  In this program, the seed funding was provided by the Legislature.  The additional capitalization came from insurance companies, banks and other institutions in New York which were given certain tax breaks in order to provide the capital.  The capital was then utilized to make loans in target areas of New York where the state was attempting to bring new businesses and to create new jobs in line with the state's economic plan.  He emphasized the reason why Nevada could not replicate New York's program was due to two prohibitions in the Nevada Constitution.  First, the state could not specifically create a corporation by law, and secondly, no state funds could initially capitalize a corporation.  He remarked the premise was to have the state utilize a challenge grant with the private sector paying the state back the match amount.

 

Ms. Tiffany asked if the corporation would be considered an enterprise zone or independent quasi-government.  Mr. Struve stated other states had set up the corporations in such a way.  These were important issues which would be addressed should this legislation be approved.  Mr. Struve emphasized the constitution would need to be amended in order to implement this idea along with the private sector as suggested in Mr. Daniels' study.  He reiterated this concept would be part of a broad based strategy over the long term to try to create better jobs for Nevada.

 

Mr. Marvel noted a group of people worked together during the interim to create language which would be workable, but it was ill received by the public.  He emphasized it would be quite important to educate the public on what the purpose of the legislation would be.

 

Mr. Stan Warren, representing Austin Steadum, President of Sierra Pacific Resources, testified Mr. Steadum had supported AB286 of the Sixty-sixth session which was the vehicle which began the program being discussed .  He emphasized Mr. Steadum had been the chair of the steering committee and pledged support of both AJR35 and AJR36.

 

Mr. Struve explained the steering committee pledged, if the resolution was passed and placed on the general election ballot, they would assist in raising funds to educate the voters on the importance of this issue for the future of the state.  All members of the steering committee were from the private sector and their participation was important if the state wanted to truly diversify the economy.

 

Mr. Warren concurred and emphasized public education would be a necessity to successfully pass this legislation.

 

Mrs. Evans commented the impact of knowledge and educating the public on "What It Means to Nevada" is critical.  The process of "changing the constitution" without fully explaining why to the voters would only result in another "NO" vote.  She pointed out this situation was similar to the Estate Tax votes which continually bombed on the ballot, until a coalition educated the public, the issue would not pass.

 

Ms. Giunchigliani expressed her concern about using public tax dollars and possibly, in the future, public employee's retirement monies.  She asked what safeguards there would be to prevent this from occurring.  She noted state funding barely supports the necessities and asked where the money for the project would come from.  Mr. Struve reiterated the resolution did nothing to earmark funding for the project.  It would only enable the Legislature to investigate opportunities and options.  He explained if this were passed by the voters in 1996, the 1997 Legislature would still need to decide what funding would be provided and where it would come from.  Perhaps by that time, the economy would improve and funding sources would be available for earmarking toward investment in new types of jobs for Nevada's citizens.  Ms. Giunchigliani remarked she did not trust future Legislatures.

 

Mr. Humke commented he had been involved with these issues as long as he had been a legislator.  He stated a constitutional amendment does not occur easily and requires money behind it for a marketing campaign to educate the voters.  He stressed a group of private people going to the advisory boards was a very prudent idea.  He did not want to see this issue drop because it was very important.  He emphasized the legislation was well crafted requiring a two-thirds majority to spend any funds.  He mentioned he did trust future Legislatures either.

 

Mr. Bob Seale, State Treasurer, testified in support of AJR35.  He pointed out the changes in the resolution did not eliminate the language which suggested the state shall not donate or loan money or its credit or subscribe to be interested in any stock of a company.  He said it was this language that had killed the issue with the voters in November 1992.  The correct message had yet to be conveyed to the voters and by cleaning up the language there would be a better chance of getting voter approval.

 

Vice Chairman Spitler closed the hearing on AJR35.

 

AJR36Urges Congress and President to extend permanently authority of states to issue tax-exempt small issue industrial development bonds and qualified mortgage revenue bonds.

 

Mr. Struve testified AJR36 was one of five recommendations made to the Legislature by Mr. Daniels.  He stated Nevada had done well in establishing a program and a mechanism by which the state could assist new manufacturing firms with the financing of capital expansion.  He explained the state did this through the Department of Commerce by issuing what was called a Tax-Exempt Revenue Bond.  He emphasized there was no obligation of the state's credit for the bonds.  The purchasers knew the bonds were limited purpose, revenue bonds and would not commit the general obligation of either the state or local government where the project would be located.

 

      * * * * *

 

      MRS. WILLIAMS MOVED DO PASS AJR35.

 

      MRS. EVANS SECONDED THE MOTION.

 

      THE MOTION CARRIED BY VOICE VOTE.  MR. HUMKE WAS NOT PRESENT AT THE TIME OF THE VOTE.

 

      * * * * *

 

      MS. HELLER MOVED DO PASS AJR36.

 

      MRS. CHOWNING SECONDED THE MOTION.

 

      THE MOTION CARRIED BY VOICE VOTE.  MR. HUMKE WAS NOT PRESENT AT THE TIME OF THE VOTE.

 

      * * * * *

 

Chairman Arberry requested the committee consider the introduction of BDR S-2138.  A two-thirds majority was present as required for a committee introduction.

 

      * * * * *

 

      MRS. EVANS MOVED FOR A COMMITTEE INTRODUCTION OF BDR S-2138.

 

      MRS. CHOWNING SECONDED THE MOTION.

 

      THE MOTION CARRIED BY VOICE VOTE.  MR. HUMKE WAS NOT PRESENT AT THE TIME OF THE VOTE.

 

      * * * * *

 

Chairman Arberry adjourned the hearing on 10:10 a.m.

 

                                                RESPECTFULLY SUBMITTED:

 

 

                                                _________________________

                                                Kerin E. Putnam

                                                Committee Secretary

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Assembly Committee on Ways and Means

June 8, 1993

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