MINUTES OF THE

      SENATE COMMITTEE ON FINANCE

 

      Sixty-seventh Session

      March 2, 1993

 

The Senate Committee on Finance was called to order by Chairman William J. Raggio, at 8:00 a.m., on Tuesday, March 2, 1993, in Room 223 of the Legislative Building, Carson City, Nevada.  Exhibit A is the Meeting Agenda.  Exhibit B is the Attendance Roster.

 

COMMITTEE MEMBERS PRESENT:

 

Senator William J. Raggio, Chairman

Senator Raymond D. Rawson, Vice Chairman

Senator Lawrence E. Jacobsen

Senator Bob Coffin

Senator Diana Glomb

Senator William R. O'Donnell

Senator Matthew Q. Callister

 

STAFF MEMBERS PRESENT:

 

Dan Miles, Fiscal Analyst

Bob Guernsey, Principal Deputy Fiscal Analyst

Marion Entrekin, Committee Secretary

 

OTHERS PRESENT:

 

Larry D. Struve, Director, Department of Commerce

Judy Matteucci, Director, Department of Administration

Rochelle Summers, Principal Budget Analyst, Budget Division,         Department of Administration

James M. Start, Acting Administrator, Division of Unclaimed          Property, Department of Commerce

L. Scott Walshaw, Administrator, Division of Financial               Institutions, Department of Commerce

Joan G. Buchanan, Division Coordinator, Real Estate Division,

  Department of Commerce

Patsy S. Redmond, Executive Vice President and Corporate Secretary,

  The Nevada Association of Realtors

Joan Clements, Administrator, Manufactured Housing Division,         Department of Commerce

Charles (Chas) Horsey, Administrator, Housing Division, Department    of Commerce

Mamie Chinn Hechter, Deputy Administrator, Housing Division,         Department of Commerce

Lon DeWeese, Chief Financial Officer, Housing Division, Department    of Commerce   

 

Department of Commerce - Director's Office - Page 1686

 

Larry D. Struve, Director, Department of Commerce, believed it would be helpful to present an overview even though the budget for the director of the Department of Commerce is recommended for deletion as part of the proposed reorganization.

 

The Department of Commerce as currently constructed is composed of the director's office, seven divisions, and the Office of Protection and Advocacy.  Under the proposed reorganization three of the current divisions in the Department of Commerce will go to other departments.  The Division of Unclaimed Property will go to the Department of Administration, the State Fire Marshal Division will go to the Department of Motor Vehicles and Public Safety, and the Office of Protection and Advocacy which was placed under the Department of Commerce by order of the Governor will go to the Department of Employment and Training.  The five remaining divisions will go into the reorganized Department of Business and Industry and will be split into two sections.  The Division of

 

 

Financial Institutions, Real Estate Division and Manufactured Housing Division will be placed under the reorganized Business Regulation Division. The Consumer Affairs Division and Housing Division will be placed under the reorganized Consumer Services Division.

 

Currently four of the eight divisions in the Department of Commerce do not have administrative heads, Mr. Struve stated.  The Consumer Affairs Division and the Real Estate Division do not have administrators as a result of hiring freezes, budget reductions or the process of filling the position.  The Office of Protection and Advocacy and the Unclaimed Property Division are being headed by acting administrators pending a decision whether there will be an actual head of those divisions under the reorganization. 

 

In order to provide continuity and services, the director of the Department of Commerce utilized powers contained in Nevada Revised Statutes (NRS) 232.250 which basically gives the director the legal authority to act in the place of any division chief he appoints.  It is Mr. Struve's understanding that under reorganization, that same authority will be given to the director of the Department of Business and Industry so that continuity can be maintained

throughout the reorganizational structure of the new Department of Business and Industry. 

 

Mr. Struve pointed out that in the process of taking the budget for the director's office (3810) and rolling it into the budget for the Consumer Affairs Division (3811) certain reorganization savings will be accomplished.  The position of the Director of the Department of Commerce is transformed into a new position that will be called Chief of Consumer Services, and he presumes that will mean this individual would now head up the Consumer Affairs Division  under the reorganized Department of Business and Industry.  The position of deputy director of the Department of Commerce is slated to be terminated unless some other reorganization savings can be found.  Two clerical positions currently in the Department of Commerce, Office of the Director, will be retained in the budget for the Consumer Affairs Division.  The authority for the director of the Department of Commerce to issue industrial revenue bonds and establish nonprofit corporations will be transferred to the director of the Department of Business and Industry.  The total savings accomplished from this reorganization will be in the budget categories of Salary, In-State Travel and Operating.  In addition, Mr. Struve believes the new Department of Business and Industry will have administrative support from the transfer of positions from both the Department of Commerce and other agencies that are coming into the new department.

 

Senator Rawson asked, "Will all the changes you described be housed in one single building?"

 

Mr. Struve replied it was his assumption the various divisions will remain in the places they currently are in now although it would be desirable to bring the departments and divisions together at a future time to achieve the economies of scale.

 

Judy Matteucci, Director, Department of Administration, stated Mr. Struve's assumption is correct.  She anticipates most of the programs will be housed where the Department of Commerce is now located.  The long-term desire is to reconstitute the new Department of Business and Industry within the capitol complex when sufficient space is available.

 

Since many of the offices under the jurisdiction of the Department of Commerce are located in scattered locations throughout the state, Senator Rawson commented it would be desirable to bring these offices together into a single location.

 

Ms. Matteucci said:

 

      We anticipate moving them into leased space...and there are a number of other non-commerce department agencies that are included in the Department of Business and Industry...some of which are located in that vicinity and some of which are not....The Division of Industrial Insurance Regulation is in other leased space, but if you agree with the consolidation with insurance we would anticipate they will be merged together in that space simply because we do not have space on the capitol complex....The long-term goal would be to get that space as it has been for a number of years.

 

Senator Rawson asked, "Does economic development and tourism fit into this area naturally?"

 

Ms. Matteucci replied:

 

      They are in that functional area, but they are not combined in [the Department of] Business and Industry.  Our proposal would be that [the Division of] Economic Development and [the Division of] Tourism be moved into the old library after it is rehabilitated.  They were chosen about 2 years ago in an advance planning effort for moving into that particular building.

 

Senator Rawson asked, "In the reorganization charts who would they

[the Division of Economic Development and Division of Tourism]

report to?"

 

Ms. Matteucci answered, "[The Division of] Tourism and [Division of] Economic Development remained unchanged.  They are one of their own units in the 20 we are proposing in the streamlined structure, and the commissions will remain unchanged by the reorganization."

 

Business and Industry Administration - Page 512

 

Senator Raggio indicated page 512 of the Governor's Executive Budget refers to the new budget for the director of the Department of Business and Industry.

 

Rochelle Summers, Principal Budget Analyst, Budget Division, Department of Administration, said this new budget will provide overall direction for the new proposed Department of Business and Industry.  Staffing for this budget includes a new Management Analyst II position to provide administrative support to the professional licensing and regulatory boards of the new department.  Also included would be an unclassified director for the Department of Business and Industry.

 

Ms. Summers stated the legal expenses that were previously reflected under the Department of Commerce were transferred into this new budget.  There was a pool within the Department of Commerce for agencies under this department which needed to have access to court reporters and witness fees requiring the transfer of the necessary funds to the new budget.  The revenue and expenditures for the water bonds have also been placed in this budget as well as a purchasing assessment that will be collected

from the different divisions within the Department of Business and Industry that will be transferred to the Purchasing Division.

 

Senator Raggio commented, "The biggest issue we have is the proposed assessment to the boards.  Let us hear your explanation about this."

 

Ms. Matteucci answered:

 

      All of the boards and commissions currently that do not report to a central agency liaison with an agency...and the most likely area since most of these occupational licensing boards are directly related to a business function or other is that they liaison here....In order to do that an additional position was necessary and the assessment that is made to the boards is to fund that particular position...very similar to the assessment that is made to fund a budget analyst in my office that does their budget work.

 

Senator Raggio asked, "At the present time there are no assessments of this nature imposed on boards are there?"

 

Ms. Matteucci replied, "Yes there is.  We assess the cost of the budget analyst in my office to all the boards...so this assessment is patterned...."

 

Senator Raggio interrupted and asked, "Why am I getting so many calls from boards who are being assessed and have stated this is something new?"                                                  

                                                  

Ms. Matteucci replied, "I have no idea. We have been assessing them since the legislature mandated that we do that in 1985 or 1987."

 

Senator Raggio stated:

 

      In fiscal year 1994 the total assessment was in  excess of $36,000 and in fiscal year 1995 it was over $45,000.  Also, an additional $63,978 was assessed in each year of the biennium for the cost of the Budget Analyst position.  Is this correct?

 

Ms. Matteucci answered, "It is $36,779 in [fiscal year] 1994 and

$45,887 in [fiscal year] 1995 and that just funds the Management Analyst position."

 

Senator Raggio asked, "The total assessment is $100,757 in fiscal year 1994 and $109,865 in fiscal year 1995...is this correct?

Are these all assessments to the boards?"

 

Ms. Matteucci answered, "No, not for the boards.  The $36,779 is the only assessment to the boards....that is just for the Management Analyst position.  I do not know what the calls you are getting...."

 

Senator Raggio referred the committee to Exhibit C, "Occupational Board Assessments for Budget/Business and Industry Services" and noted that in fiscal year 1994 there was a budget assessment and a business and industry assessment.

 

Ms. Matteucci commented:

 

      Those are for both the budget analyst they have been paying for some years and the Budget Analyst position in my office that are being assessed....The only new assessment the boards are getting is for the new position.

 

Senator Raggio said, "That is what I am asking.  Is there a new assessment that has not previously been assessed to these boards?"

 

Ms. Matteucci answered, "There is one new position, but they have been assessed before for a position that is in the Budget Division.  They have been assessed that position since 1987 so there are two assessments now."

 

Senator Raggio said, "So, there are no new dollars being assessed?"

 

Ms. Matteucci answered, "Yes.  There are new dollars for one new position...this Management Analyst position used for liaison."

 

Senator Raggio said that is what he is trying to understand and asked, "What new dollars are being assessed to the boards that were not previously assessed?"

 

Ms. Matteucci replied, "...$36,779 in [fiscal year 1994] and $45,887 in [fiscal year] 1995."

 

Senator Raggio asked, "What is the justification of now assessing these boards additional dollars?  What will they get for this?"

 

Ms. Matteucci answered:

 

      What they are going to get is...this position will be dedicated to overseeing what the boards and commissions are doing relative to their communication with the liaison agency which happens to be the new Department of Business and Industry.  This position will assist them in keeping their activities...essentially establishing a flow of communication between the state government and what the agencies are doing....The agencies rotate out in doing whatever their various activities are, and there is very little communication so that is what this particular position has been added for.  All of their budget requests and all of their requests and communications with our office will flow through this particular position and into the Budget Division.  It will handle all of their contracts; it will store their files if necessary.  A number of the smaller boards and commissions do not have storage space....Those kinds of administrative activities is essentially what that position will do.

 

Senator Raggio asked:

 

      Have you identified those who will need this service?  Apparently many of them think they do not need this service.  Would you provide the committee with a list of those boards who do not have this kind of service now who indicate they need it?  

 

Ms. Matteucci commented:

 

      None of them have indicated they need it.  The boards and commissions have been particularly reluctant to become more involved with the state.  You can see the smaller boards and commissions in this list (Exhibit C) of the occupational board assessments.  The issue here is not that these agencies are requesting service, the issue here is...this proposal is to bring those boards and commissions into much more frequent contact with an agency so that we can keep in contact with them and they can keep in contact with us much easier than they are right now.

 

Senator Raggio stated:

 

      These boards feel they are being assessed something and getting nothing back and this so-called liaison is more illusory then real. The boards do not feel this is in keeping with the pledge they received that there were not going to be any real changes or cost or impairment of their financial situation as a result of this reorganization.  Apparently there were meetings between many of these boards and your office or the Governor's Office, and they were given assurances that this was cosmetic more than substance, and there was not going to be this kind of additional assessment.  I do not know if it will be worth the heartburn over $36,000 or $45,000 if that is the case.

 

Ms. Matteucci responded:

 

      First of all whoever is representing that to you never received any assurances there was not going to be an assessment.  In fact we told those agencies that met directly with the Governor there was likely to be an assessment and the maximum would be a doubling of what they were being charged for the Budget Division assessment right now....That did not bother those boards who met with the Governor.  As far as any other restrictions on their independence the proposals we have do not do that for the larger agencies and you are talking about accounting, architecture, engineering, nursing, pharmacy...those kinds of agencies...and we never indicated we were not going to assess them for a particular position.  If we did not provide a position to provide oversight to them it would have been illusory....We simply do not have a position that can provide oversight without assessing for it...$36,000 over $10.8 million in funds that are outside the treasury and run by those occupational licensing boards does not seem to be a tremendous assessment.

 

Senator Raggio said, "These are their own funds.  These are license fees and fees paid by them for their own internal regulations.  The boards are not to that extent imposing upon the General Fund are they?

 

Ms. Matteucci answered:

 

      Yes they are.  In fact if these agencies generally lose like a tort claim...the dispensing opticians lost a tort claim...the General Fund had to pay that particular assessment.  We are not assessing these people for covering tort claims.  They are not getting assessed any kind of an allocation for the statewide cost allocation plan....They are simply getting assessed for one position to provide the communication that is necessary....

 

Senator Raggio asked if this one position will be assigned solely to the oversight of boards, and Ms. Matteucci responded in the affirmative.

 

Senator Coffin said:

 

      Mr. Chairman, I appreciate that thought on your part because when I have looked at the budget these past years it has always been a one-dimensional aspect and that was we knew it was not General Funds so we never really paid that much attention to the boards.  I do not believe we ever inspected their budgets very closely.  We sometimes make the mistake of assuming that everybody in an association who is paying dues or fees is really supportive of the board's actions.  I have been contacted by people who have expressed dissatisfaction of how money is being spent.  Perhaps this is a way to do oversight in a gentle way, but at least maintain control over these budgets, but not to tell those folks how to spend their money...but to reassure their memberships that money is being spent properly.  In a way this is a double line of authority on these guys because they are liaisoning with their agency but they will also have a line to your office [Budget Division] which gives you more of an oversight.  It gives you an opportunity to double- check....

 

Ms. Matteucci stated:

 

      Currently we cannot immediately check it out.  We do not get those allegations.  We deal with them, and we have tried to bring boards and commissions to submit their work program changes to the Interim Finance Committee.  In some cases they do and in some cases certain agencies do not.  They are also supposed to submit their budget requests directly to our office.  This particular agency would help them provide services.  There are some boards and commissions that are very large and do a very good job, and we are not questioning them...but there are some agencies that need help in complying with this sort of thing, and I would expect that this particular position would be the point by which there would be complaints such as addressed that we could look into.  We simply do not have the time in the Budget Division to do all of that...with this position we believe we will have a much more coordinated way of keeping in contact with the boards and commissions.  There are a number of them.

 

Senator Raggio asked:

 

      The Governor makes the appointments, but in each case it varies.   Most of these boards serve at the pleasure of the Governor, and in some cases they are term.  What authority will this position and the director of the new Department of Business and Industry have over the boards and commissions?  I think we need to have this clearly on record.

 

 Ms. Matteucci answered:

 

      This position and the director of the department are not going to have any authority over these boards other than they will submit their paperwork to the state through this particular area.  The reason we have connected them is to try and keep them in communication with the state.  They are authorized as a result of statute, they operate as an extension of the state and yet they do not run their money through the state accounting system...this proposal does not ask them to do that.  In many cases their contracts are not submitted through the [State] Board of Examiners, although they are getting better at doing that.  That is the kind of thing we are trying to establish here...to be sure they are in compliance with the regulations in the administrative manual for the state.  That is the only thing that this particular position is established to do.  There is not going to be any authority extended.

 

Senator Raggio questioned, "Is the authority which they presently have in varying degrees over licensure, discipline, and the ability to enact regulations going to be impaired or dictated in any form by this new alignment?"

 

Ms. Matteucci answered:

 

      No, that is not going to be adjusted.  In fact in the skeleton bill we have specific language that was requested by one group to allay concerns of these boards and commissions...and states nothing by the fact of this administrative-support relationship being established is to be interpreted as changing any of their financial relationships now.  We have done everything we can to assure the boards and commissions that have talked to the Governor or my office or to me directly that there is no attempt to take any authority away from the boards and commissions but just to bring them into a communication line with state government.

 

Senator Raggio asked what will be transferred into this new budget,and Ms. Matteucci responded:

 

      Coming into this new budget is the new director of the Department of Business and Industry and the new management analyst.  We are building in a small allocation for In-State Travel that will accommodate both the director and the management analyst as it is anticipated the management analyst will have to do some travelling in order to reach some of the boards and commissions...some operating expenses for both the director and the analyst.  We also anticipate there will be some new office equipment required for the management analyst but believe there will be some surplus equipment available for the new director.  Additionally the legal expenses that were originally reflected in the Department of Commerce budget are now transferred to the Department of Business and Industry to be used for witness fees and  court-reporting services for the smaller agencies within that department.

 

Senator Raggio asked, "Have the salary levels for the directors of the new departments been recommended."

 

Ms. Matteucci stated at an earlier meeting the committee was given a copy of the proposed exempt-appointed salary levels and she believes this indicates that most of the agency directors were recommended for salaries of $80,950 per annum.  The salary for the current director of the Department of Commerce currently is $68,687 per annum.

 

Senator Callister asked where the clerical support for the new office is reflected in the budget.

 

Ms. Summers answered it is anticipated after the reorganization is complete the administrator will have the ability to organize the administrative support including clerical, personnel and accounting staff.  The Budget Division is asking for the flexibility within the Appropriations Act to transfer General Fund dollars as needed after bringing it to the Interim Finance Committee for their approval.

 

Ms. Matteucci commented:

 

      This is not unlike all of the other departments that you have looked at where you see an administrative services division.  Some of them we were able to identify specific positions and most of them we were not able to, so that is where you get the value of these particular positions.... We are recommending strongly to you that the directors of the various departments be given the authority to transfer the positions when they have not only the Department of Commerce but the Department of Insurance and all of those particular agencies before them with their accounting, administrative, and clerical staff.

 

Senator Callister stated:

 

      It seems to me as you are trying to create this new liaison office...that I think is a good idea and long overdue...to create it and not have any clerical support emerge either now or later would be really troubling to me and suggests that perhaps it was less than what it might have accomplished.

 

Senator Raggio inquired, "The budget shows 1.5 positions in fiscal year 1994 and 2 positions for fiscal year 1995.  What are you saying to Senator Callister, you will have other positions that will be coming into this budget?"

 

Senator Callister commented,  "I think they are saying within that total budgetary-position count there will be a level of flexibility in terms of what portion is clerical or administrative."

 

Ms. Matteucci clarified:

 

      We have not moved those positions specifically in there preferring to let the director of the department make that choice.  We have identified accounting positions in the Manufactured Housing Division, Housing Division, Real Estate Division, Department of Industrial Relations, and several other agencies that will be available for transfer...and there are personnel positions in the Department of Industrial Relations which has a fairly significant administrative unit which we suggest will probably be what the new director will be looking at.   We did not want to make that decision for the new director, but preferred instead to allow the flexibility not only for the director to choose which positions they believe could be transferred into the administrative services unit for the entire department, but also which positions could be deleted in the value of reorganization savings that you have heard so much about.

 

At the request of Senator Callister, Ms. Matteucci provided the committee with a copy of Exhibit D, "Department of Business and Industry Proposed Administrative Services Staff Pool."

 

Unclaimed Property - Page 252

 

Mr. Struve introduced James M. Start, Acting Administrator, Division of Unclaimed Property, Department of Commerce, and advised the committee Mr. Start had been the Chief Auditor for the Division of Unclaimed Property for several years prior to being appointed the Acting Administrator in January 1993.

 

Mr. Start distributed Exhibit E, a pamphlet and a brief program narrative describing the function of the Unclaimed Property Division which is responsible for receiving unclaimed property and then trying to locate the rightful owner.

 

Mr. Start stated the budget for the Unclaimed Property Division is

a status quo budget which contains no new people, no new equipment, and no new programs.  As a part of the reorganization, the Division of Unclaimed Property will move from the Department of Commerce to the Department of Administration.

 

Senator Raggio asked what effect, if any, the budget reduction may have had on the Division of Unclaimed Property.

 

Mr. Start stated rather than to fill a previously authorized desk-audit position, the division eliminated the position and that elimination was carried forward into this budget.

 

Senator Raggio asked why it was decided to move the Division of Unclaimed Property to the Department of Administration.

 

Ms. Matteucci replied:

 

      When the consultants reviewed the duties and responsibilities of the new Department of Business and Industry, they found that many of them were either consumer services related or regulatory....The consultants felt the function of the unclaimed property division is a housekeeping function that is not included in the regulatory function of the Department of Commerce.  That is why the transfer is proposed to the Department of Administration.

 

Senator Raggio asked if there would be seven full-time positions in this budget, and Mr. Start answered in the affirmative.

 

Senator Raggio inquired, "Are there any new areas where this division has been looking for unclaimed property?"

 

Mr. Start replied, "No. We are doing the same things with the same people."

 

Mr. Struve wished to elaborate and stated:

 

      Over the past 2 years this division has been achieving some good success through participation with two national organizations....Basically what they are looking for are the abandoned stock and dividends that are paid on that stock which belong to either Nevada corporations or to Nevada residents who cannot be located.  All of that property has been accumulating within transfer agent's offices on Wall Street and other places.  Through our participation with the national organizations they have been able to audit these records and find property for all of the states.  There is currently pending a major United States Supreme Court case in which Nevada is a party...in which the organization is seeking to have all of this accumulated property over the last several years returned to the states where either the owner of the stock lived or, if it was a corporation incorporated in a state like Nevada and they cannot locate any other site where that property belongs, it would come back to the state of incorporation.  I believe this case has been heard, and we are expecting a decision later this year. 

Senator Coffin stated:

 

      When the Division of Unclaimed Property was created 10 years ago, it made sense that it had to be in the area of state government that had to deal with financial institutions because that is where the money was being found.  The reorganization proposes to move it in with the State Motor Pool, Purchasing Division, and a few other divisions.  Is this really a smart move from the standpoint of distancing its mission from the most readily accessible data in the financial divisions that contain the money....

 

Mr. Struve answered: 

 

      That, of course, is the policy decision and we defer to the Governor's consultants and the decisions they have made....In answer to your question, there are three basic functions of the Division of Unclaimed Property.  One is regulatory because that involves going out and collecting abandoned property.  I think it has been beneficial to the state during the start-up phase of this program that it be an agency like commerce because we have examiners that go into financial institutions, insurance companies and various other types of holders that may not have been aware of the unclaimed property laws....We have been engaged in the last 10 years in an educational program so that if they have abandoned property they will report it and find the owners and get it back to them.  If they cannot find the owners, the property is remitted to a trust fund for unclaimed property and the state has had the benefit of that.  As the handout (Exhibit E) indicates, $29 million has been remitted into the state's General Fund over the last 10 years.  I think the budget that you are considering now anticipates $3.5 million in each year of the next biennium.  Clearly that is an important function.

 

      Secondly, it is a consumer services function in that the owners have one place where they can go to get the money returned to them.  In the case of a safety-deposit box content, they can get the article that had not been sold and if it had been sold they would get the value for which it was sold.  The same goes for stock certificates. 

      I think Ms. Matteucci is correct on this third function which I would consider to be housekeeping which is we will keep the stock certificates in our custody through an agent with a stockbroker.  Safety-deposit box contents we will keep...and the division will occasionally conduct auctions of safety-deposit box contents which may be similar to agencies that conduct excess-property auctions.

 

      My hope will be in reorganization...if you put it into the Department of Administration they will maintain liaison with regulatory agencies that have occasions to discover unclaimed property and to continue the teamwork that has resulted in a fine program that benefits not only the state but the owners of the property.

 

Senator Coffin asked:

 

      Do you understand my quandary here?  I think that, whether by chance, luck or design, for 10 years the agency was placed in the correct place to find the money that belonged to somebody else.  It is nice they are in a division that has the long arm of the regulatory law to reach out and threaten those folks....It is implied if you are a part of the Department of Commerce  you have a bit of leverage on these people and if they fail to report unclaimed property, they could get into a little more trouble than just whatever might be asserted by this particular small division.  What does it have to do with motor pool, printing and purchasing?  I do not understand that.

 

Ms. Matteucci responded:

 

      You have to keep in mind as the consultants went through here they were trying to consolidate what they perceived to be like functions together.  They did not see this any longer as being particularly a regulatory function.  There is no doubt the Division of Unclaimed Property does have to work with some of the financial institution examiners, but it really is much more of a housekeeping function than it is a regulatory function....That is why they moved it to the Department of Administration which is generally housekeeping...and it does not have just motor pool in it...there are many things going into the Department of Administration and they saw it [the Division of Unclaimed Property] fitting better there....

      They mentioned to me that in many states unclaimed property is not in commerce.  They saw unclaimed property falling out of the mission of what the new Department of Business and Industry would be and more into the mission of the housekeeping. 

 

Senator Jacobsen said he shares the same concerns as Senator Coffin and having served on the committee that adopted this legislation many years ago believes the division has become a very important revenue source for the state. He had some concerns regarding the list of individuals the division contacts and said:

 

      Occasionally I follow the lists that are published and I have noticed the names of individuals I know.  I contacted the people who said they had not received notification of any kind.  I think maybe you are not going to extremes to make certain those people are notified.

 

Mr. Start replied:

 

      Prior to the advertisement we send a first-class mailing to the last known address which is our first attempt to contact the missing owner.  Then we have the advertisement.  Following that we have access to records such as voter registration and motor vehicles records....We have a contract with a credit agency and we can access their files.  The newspaper advertisement is just the second in a series of attempts to find the missing owner.  We use eight different newspapers across the state, and we advertise in the county of the last known address of the missing owner.

 

Financial Institutions - Page 394

 

L. Scott Walshaw, Administrator, Division of Financial Institutions, Department of Commerce, said the primary function of the division is to license, examine and regulate all state-licensed financial institutions.  Administrative guidelines have been established to provide an optimum goal of examining each licensee once every 12 months, and in some cases, more frequently.

 

Mr. Walshaw stated the division has been exempt from budget cuts and reorganization savings primarily because their budget is considered revenue neutral.  He explained that if their budget were cut the revenues the division brings in would go down by a commensurate amount generating no savings to the General Fund.  This budget also has a unique feature in that it has been approved for the maintenance of vacant but unfilled positions from one biennium to the next.  The premise behind this was those positions that represent financial-institution examiner slots could be filled if there was a necessity to do so.  Currently, there are six vacant positions within the division's budget all represented by institutional-examiner positions. 

 

Continuing, Mr. Walshaw said the budget is a current-services budget with the exception of some items he wished to call to the attention of the committee members.  He said:

 

      First of all, I believe you are all aware of the occupational study that was done.  There will be an impact on my office.  That study recommended increases in all of the three classes of examiners that the division has.  I believe each one of those were increased by one grade.

 

      The Enhancements category reflects a total of $38,000 requested in the first year of the biennium and $31,000 in the second year of the biennium.  You will note on page 396 of the Governor's Executive Budget there are two items that were not approved, the first was Out-Of-State Travel.  We had a request to break this item out from the Investigative Account budget category.  We decided to leave it as it was and to live with the situation rather than create a new account for out-of-state travel within the Financial Institutions account. The next item not approved is Operating Expenses.  I am requesting that the committee reinsert this item primarily because it represents a self-insurance fund for our computer equipment.  We do not have separate contracts for the maintenance of this equipment and for the last biennium and the next one we want to use this fund which represents a percentage of the gross-purchase price of our equipment to self-insure us against any problems that might come up.  If no computer problems occur then the money would revert to the General Fund.  The amounts $2,775 and $3,060 reflected in the budget are based on a percentage of the purchase price of the equipment.  Instead of going out and paying somebody a contract which we would spend and not get back, it was felt if the money was in reserve and a piece of equipment needed repair we could take the money out of this account and fix it.

 

      The last item and the largest item represents a Data Processing Enhancement.  In 1991 the [United States] Congress passed what is known as the Federal Deposit Insurance Corporation (FDIC) Improvement Act of 1991. A major provision of that act was to mandate that the FDIC

      do annual examinations of all insured financial institutions regardless of their chartering affiliation.  The FDIC went to the states, in our case we have an agreement in place with them, and asked us to do independent examinations of all well-rated banks or banks that are not considered to have problems. In this way they intend to free their examiners to handle problems in other parts of the country.  Previously we had done this on a joint basis where my office would send four examiners and the FDIC would send two examiners and we prepared joint reports.  There are no problem state banks at the present time so we are anticipating as we implement this plan over the next biennium we will be doing all of the examinations on an independent basis.  Currently we are going through the first phase of this, and we are continuing to do joint examinations.  We just completed the examination of U.S. Bank of Nevada and are about to start the Bank of America examination on a joint basis with the FDIC and federal examiners.  Once we get through the initial round of examinations we will be doing independent examinations.  We are anticipating filling at least two positions during the next biennium to make up for the difference of not having federal examiners assist us on these jobs. 

 

      The computer equipment is being requested to bring our computer equipment up to speed with that of the FDIC and the federal examiners.  It will allow the banks that we have jurisdiction over to electronically transmit call-report information and other data.  It will also allow our examiners to transfer report data not only to our office but to the FDIC.  It is our understanding from meetings we had last fall with the regional director of the FDIC they have just about completed a complete upgrade of their computer system rendering our current capability to be compatible with them somewhat questionable.  Over the next biennium we will need these funds to go to the next generation of equipment and completely upgrade our field equipment in the way of lap-top computers as well as the office-network system.  Primarily this involves a difference in the speed of the equipment and its storage capacity.

 

      The next item dealing with the increases in the Travel and Training budget categories....If we do fill these two new positions, we will need an increase over this present status quo budget to handle increases in training and travel.  This fund is replaced by assessments that we levy on the financial institutions so it is a dollar for dollar proposition.  If we fill the new positions and we use this $2,200 for training and travel, that will all be factored into the fee assessment to the financial institutions at the end of the year.  The mechanism is such that we determine the amount of the assessment at the end of the fiscal year and any unused monies that we get from the General Fund revert to the General Fund and the balance that is actually expended is reimbursed to us by the financial institutions.

 

Senator Raggio asked, "What is the total amount anticipated from the financial institutions under this assessment annually?"

 

Mr. Walshaw replied:

 

      Last year the actual assessment paid by depository institutions was about $600,000.  The rest of it was a combination of monies that reverted to the General Fund, about $150,000 actually reverted.  There were also licensing fees and hourly-examination fees that were levied on nonfinancial institutions such as collection agencies and mortgage companies.

 

Senator Raggio asked if the division anticipates that the $1,102,000 and $1,115,000 will be paid into this budget from the General Fund, and Mr. Walshaw replied in the affirmative.

 

Ms. Matteucci commented, "Whatever Mr. Walshaw spends...at the end of the year he sends out an assessment and recoups that and usually slightly more."

 

Senator Raggio asked how many financial institutions in each category are now under the jurisdiction of the Division of Financial Institutions.

 

Mr. Walshaw replied at the present time there are approximately 12 banks, 200 mortgage companies, and nine credit unions.  In total there are about 300 licensees.  There is also one savings and loan institution that is a ward of the Resolution Trust Corporation (RTC) that was taken into conservatorship as the result of RTC's takeover of the institution's parent company.  Mr. Walshaw said there are only a few savings and loan institutions left in the state and all of these are federally chartered with the exception of the one in conservatorship.

 

Senator Raggio asked, "Other than the ones you mentioned what other types of institutions do you regulate?"

 

Mr. Walshaw answered:

 

      Independent trust companies, mortgage companies, installment-loan companies, collection agencies, money- transmitter companies, corporations for economic revitalization, and a whole litany of what are called financial intermediaries under about 11 different chapter areas, some of which have no licensee at the present time and some of which have many....Mortgage companies are the largest number of licensees we have jurisdiction over.

 

Senator Raggio asked if the budget and staff for the division is adequate to fulfill all of their duties with respect to all of the institutions under their jurisdiction.

 

Mr. Walshaw replied, "At present we believe it is."

 

Mr. Walshaw said before the Performance Indicators were implemented in the new budget format, the division had been keeping records of the hours and the number of examinations performed for a number of years, making the transition to Performance Indicators easy.

 

Senator Raggio referred to Exhibit F, a memorandum dated February 25, 1993, from Mr. Walshaw to Robert A. Guernsey, Principal Deputy Fiscal Analyst, Fiscal Division, Legislative Counsel Bureau, and asked if the changes requested in this memorandum had been properly addressed.

 

Mr. Walshaw responded:

 

      Yes.  What I mentioned regarding out-of-state travel we have agreed to omit and continue with what we had been doing...use the Investigative Account to handle out-of-state travel.  We have the funds available to us in this account at present. 

 

Financial Institutions Investigations - Page 399

 

Mr. Walshaw said this account is used to support the salary and operating costs of one investigator assigned to the State Gaming Control Board who assists the Division of Financial Institutions in the investigation for licensing of financial institutions and special investigations relating to those institutions.

 

Senator Raggio questioned, "What type of investigations are handled by this individual?  How are they assigned?"

 

Mr. Walshaw answered:

 

      I would get an application for a new bank, mortgage company, collection agency, or whatever the institution is.  The individual applicants then file personal and financial history forms with us as well as the other information required as a part of the application.  They would pay a fee as required by statute....That fee and the information would then be transmitted with my instructions to the investigating agent to perform some kind of background investigation.  He would do that then prepare a report which is shipped back to me for review.  I would use the report as a determining factor on whether or not to issue a license to somebody.  I cannot stress to you enough how successful this program has been for us.  The agent is physically located at the State Gaming Control Board but is assigned to our office.  He does no gaming work, we pay his salary and expenses....We have had more than ample money put into the fund to reimburse him for his expenses.  Keep in mind this fund was created for two purposes.  What I just described...the other is to handle expenditures in conjunction with my office being named receiver of a defunct company.  Right now I am in the possession of a defunct escrow company....It is about ready to be placed out of receivership.  We believe the losses will be limited in this case to about $10 per account holder and as a result of this we will expend some money out of the Investigative Account to pay for the costs of that receivership.

 

Senator Raggio asked, "Is this covered under the general assessment made to the institutions?"

 

Mr. Walshaw replied, "No.  The funds in this budget account are primarily application funds required by statute.  This money stays in this fund and rolls over each year.  It is a revolving fund."

 

Senator Raggio inquired, "What was collected under this assessment for this budget?"

 

Ms. Matteucci responded, "The application fees were about $63,000.  They had a balance forward of $77,000 in 1992.  They carried forward $75,000 in 1993 and have work-program authority for $75,000.  Their ongoing collections average about $65,000 each year."

 

Audit Program - Page 401

 

Mr. Walshaw said this account was created by legislative action in 1985 and creates the basis for the Division of Financial Institutions to employ on a full-time basis a staff certified public accountant (CPA) whose primary responsibility is to review financial statements submitted by new applicants as well as existing licensees.  The CPA also is a "trouble shooter" for the division to perform other duties such as audits of troubled financial institutions. 

 

Mr. Walshaw stated the fees represented in this budget are determined by regulation and levied on all of the division's  licensees.  The fee averages about $300 per year per licensee.  The assessment is a carry forward of any unexpended monies into next year's budget to reduce the amount of assessment that is levied on licensees to pay for this position.  Mr. Walshaw said the division is asking for anticipated increases in travel and training expenses associated with this position which will be used to form the basis of the fee assessment that is done each year.  The amount collected for this budget is tailored specifically to the amount needed from one year to the next.  This position has nothing to do with the examination function.

 

Real Estate Administration - Page 404

 

Joan G. Buchanan, Division Coordinator, Real Estate Division, Department of Commerce, stated the Real Estate Division was originally created to license and regulate real estate agents.

Authority within this division has now expanded to land registrations, appraisers, and time-share projects.  The Carson City office has a staff of 15 employees and the Las Vegas office has a staff of eight. The proposed reorganization would move the division to the new Department of Business and Industry.

 

Ms. Buchanan stated the main item for discussion in this budget is the increase of license fees for a real estate salesman from $100 to $130 and for a broker salesman from $130 to $170.  This will enable the division to fund the vacant positions of administrator and deputy administrator within the Real Estate Division since the fee increase will produce revenues of $254,000 for fiscal year 1993-1994, $204,000 for fiscal year 1994-1995 or $459,000 for the biennium.  Ms. Buchanan reminded the committee this is the first fee increase since 1981 and will place the real estate licensee fees in the approximate percentile of 65 percent of all other United States jurisdictions.

 

Senator O'Donnell referred to the Governor Recommends category on budget page 404 and commented, "We have increased the number of dollars that a licensee is going to pay, but we have actually reduced the amount of money going to that particular budget.  I am not sure how the Budget Division arrived at the figures."

 

Ms. Matteucci said:

 

      If you will refer to page A-2 in Volume 1 of the Governor's Executive Budget you will see where the license fees are listed.  This brings the total revenue estimated for the next biennium to $1.2 million the first year and $946,000 the second year....That is about $2.1 million over the course of the biennium and the division is at about $2.1 million in budget over the biennium so they have paid for themselves....When we established the revenue targets for the General Fund agencies, the division was asked to prepare proposals as to how they would address it; and we did not say they could not come up with a proposal to increase their fees.

 

Ms. Buchanan continued her testimony by referring to the Maintenance section reflected on page 405 of the budget and said there is a request to add $8,700 in the Operating Expenses category for payment of fingerprint cards for new licensees based on anticipated growth in the number of licensees and the increase for the cost of fingerprinting service for licensees and time-share agents from $14 to $38. There is also a request to add $11,745 in the Appraiser Report Fees category to allow the division to pay to a federal registry a $50 fee for each of their 862 appraisers.

 

Ms. Buchanan stated under the reorganization plan the division's accountant position has been targeted for deletion with the anticipation that accounting will be centralized in the new Department of Business and Industry.

 

Senator O'Donnell stated:

 

      My problem is I have many friends who are realtors and I am a broker myself...as a broker I am going to look at an increase in fees every 2 years and for that we have raised $459,000 and have one less position and less money in the budget.  You can extrapolate that what really happened here was that $459,000 that used to go from the General Fund into the Real Estate Division now is going back to the General Fund and the realtors are helping to balance the budget.

 

Ms. Matteucci responded:

 

      I do not think you should draw that conclusion.  The data processing position has been removed from this budget, but the services will still be provided by the new Information Technology Advancement Division.

 

Senator O'Donnell replied, "That is one position, but it is not worth $459,000."

 

Ms. Matteucci answered:

 

      In order to retain the two positions mentioned earlier of administrator and deputy administrator they had to raise the fees.  There is also the accountant position going into the Information Technology Advancement Division....Some $68,000 has been removed from the Operating category that used to pay for attorney general services and that money is being directly funded for the Office of the Attorney General because of the requirements of the cost allocation plan.  You are getting the services, but they are being shown in different areas.

 

Senator O'Donnell said, "Are we going to be getting the same amount of services from the Real Estate Division as we have in the past?"

 

Ms. Buchanan answered, "Yes, as long as we can have the administrator and deputy administrator positions filled."

 

Senator O'Donnell stated:

 

      With that said, we are also raising the fees to the tune of $459,000.  If we are getting the same amount of services and if we are raising the fees $459,000, then the $459,000 is going somewhere and if it is not going for enhanced services or additional services, obviously you must make the argument that we are using the $459,000 to balance the budget.

 

Ms. Matteucci replied:

 

      As you go through the budget you are going to see either budget reductions or fee proposals in order to keep these budgets going.  I do not think that any of the agency administrators are going to come forward to you and indicate because we raised your fees we are going to give you enhanced services.  They were coming up with proposals to deliver the same level of services  under the very serious restrictions that we had to give to them.

 

Senator O'Donnell stated, "I just wanted to make it clear what we are doing here on this committee...we are raising fees to balance the budget."

 

Ms. Matteucci said, "You are raising fees to keep the services level in this particular budget."

 

Senator Glomb arrived for the meeting at 9:35 a.m.

 

Senator Rawson referred the committee to the Performance Indicators on page 407 of the Governor's Executive Budget and asked Ms. Buchanan for a general explanation since the amounts reflected do not seem appropriate.

 

Ms. Buchanan replied:

 

      I would have to agree with you there is probably an error.  There was an initial infusion of test taking when the law went into effect in 1991 and I really do not know the derivative of that $837 [reflected in the column FY Actual for Appraiser's Exams].

 

Mr. Struve said it was his understanding that the amount $225 shown as Projected for fiscal year 1992 for Appraiser's Exams was based on people who were identified as being in the appraisal business in the State of Nevada.  Mr. Struve also said since the licensee under Nevada law can qualify under new federal regulations to be an appraiser to do work for federally-chartered institutions, people have been coming into Nevada so they can qualify to do the federal work. 

 

Senator Rawson commented:

 

      It looks like there has not been much thought here.  I am asking that you review all of the Performance Indicators and clarify the discrepancies since we are going to base more and more of our decisions on what is found in this part of the budget.  It will be well worth your while to spend some time on this.  We will get back to the Performance Indicators before we actually close this budget.  There are a number of figures [Performance Indicators] on page 408 that also need clarification.

 

Ms. Buchanan said she believes the Performance Indicators on page 408 are accurate, but she will review all of the figures reflected on pages 407 and 408 and will provide the information to the committee.

 

Real Estate Education and Research - Page 409

 

Ms. Buchanan stated this is a non-General Fund account.  Each licensee pays a $40 renewal fee to an Education Research and Recovery Fund to provide for a comprehensive real estate education program of continuing education courses.  The budget supports two positions, one in Las Vegas and the other in Carson City, Nevada.

The proposed reorganization will move this account as a part of the Real Estate Division to the new Department of Business and Industry.

 

Real Estate Investigative Fund - Page 412

 

Ms. Buchanan stated this is really a holding account of developers funds.  The budget account reflects expenses incurred by the Real Estate Division in carrying out investigations and inspections of applicants under the Land Sales Act. As a part of the Real Estate Division, this budget account will be moved to the Department of Business and Industry.

 

Real Estate Recovery Account - Page 414

 

Ms. Buchanan remarked this account is utilized to pay damages awarded by the courts to persons defrauded by real estate licensees.  The account is used in lieu of previous bonding requirements for real estate licensees.  Under the proposed

reorganization plan, this account will move to the Department of Business and Industry.

 

Senator O'Donnell asked why there are no Performance Indicators reflected for this budget account.

 

Ms. Buchanan stated her office does maintain a report of claims filed on an annual basis and asked if the committee wanted this report.

 

Senator O'Donnell commented this information is supposed to be shown as a Performance Indicator in the budget for this account.

 

Senator Rawson clarified that if the committee could see at the bottom of the appropriate budget account a reflection of what is going on it would be of assistance to them.

 

In concluding her testimony, Ms. Buchanan stressed the importance of filling the administrator and deputy administrator positions for the Real Estate Division.  She stated the deputy administrator position would be for the Las Vegas office since 63 percent of the licensees and an equal amount of revenue is generated from the Las Vegas area, requiring administrative activities on a daily basis.

 

Mr. Struve reiterated the Governor's Executive Budget does

recommend retaining these positions and even though they have been vacant he strongly urged the committee to keep the authorization in the budget.

 

Patsy Redmond, Executive Vice President and Corporate Secretary, Nevada Association of Realtors, testified that after a formal poll of their members, the Nevada Association of Realtors feels very strongly the positions of administrator and deputy administrator need to be retained for the good of the real estate industry.  

As a result, the association would not object to an increase in fees to retain the positions.

 

Senator O'Donnell asked:

 

      The agents and brokers may have enough resources to fund the Real Estate Division to make this a non-General Fund account.  Has there been any talk by leadership in the association to make this a non-General Fund budget?  For a few dollars more we could make this a non-General Fund budget which would result in more autonomy.

 

Ms. Redmond responded:

 

      Even though we have had some concerns and have had in the past, that money over and above the licensing fees may have gone into the General Fund, I have not heard any discussion about that.

 

Senator O'Donnell stated he was not talking in terms of having the money go into the General Fund but in having some autonomy regarding how the expenses are doled out in that particular account.

 

Ms. Redmond responded, "No, I have not."

 

Manufactured Housing Fund - Page 416

 

Joan Clements, Administrator, Manufactured Housing Division, Department of Commerce, said the Manufactured Housing Division licenses and regulates the manufacturers, dealers, salesmen, installers and servicemen of manufactured houses and mobile homes and conducts audits and investigations as well as handles consumer complaints. 

 

Ms. Clements continued her testimony by reading from prepared text (Exhibit G).  She also distributed to the committee  Exhibit H, "Proposed Budget Highlights 1993-1995" which contains a detailed outline of the budget for the Manufactured Housing Fund.

 

Senator O'Donnell asked, "You said the fees charged are the same.  Does that mean the dollar amounts are the same, there is no increase in the fee?"

 

Ms. Clements referred the committee to the Performance Indicators shown on page 3 of Exhibit H and said the committee will see a decrease in the number of inspections, plans and specifications that were reviewed and approved as well as the number of ownership certificates that were issued.  However, there was an increase in the number of licenses issued, license examinations and the number of complaints.  She stated the complaints do not bring in a fee but would indicate the activity handled in this area on a daily basis.

The fees projected as revenue are an average for the previous 3 years.  The fee amount has remained the same.  There has not been an increase in fees charged since 1985.

 

Senator Glomb asked what type of complaints are received in the

Manufactured Housing Division.

 

Ms. Clements answered:

 

      A complaint starts with the manufacture or construction of the home.  It goes sometimes to the installation of the home, sometimes to items that arise during the sale of the home....Sometimes people think they are going to receive things they hear about verbally but usually just receive the things that are in writing....People are very trusting when they deal with licensees and expect to receive everything they just discuss with the dealer....

 

Senator Glomb asked, "Is your focus to deal with the licensees to install the mobile homes?"

 

Ms. Clements responded, "Yes, we license the manufacturers, the dealers, the salesmen, installers, and repairmen; and we handle all of the complaints having to do with those licensees."

 

Mobile Home Parks - Page 420

 

Ms. Clements continued her testimony concerning this budget by reading from Exhibit G and advised the committee page 6 of Exhibit H lists the Performance Indicators for this account dealing with landlord-tenant complaints for mobile home parks.

 

Senator Coffin noted that funds were transferred from the budget account 3814 for the Manufactured Housing Fund to account 3843 for Mobile Home Parks and stated:

 

      If you have 30,000 mobile home spaces occupied and you raised the fee for the spaces by even $1, you would have the money you would need for expenses for each account, and you would not have to comingle the budgets.  The people that contribute to the various budgets might resent that.

 

Senator Coffin stated, "If we decide to increase this budget, it appears it should be done directly through the means of revenue currently supporting the budget."

 

Senator Raggio commented:

 

      When this started out it was supposed to be a self-supported budget, but apparently it was determined the fees were not going to be adequate so the transfer was approved.  The question now is whether this type of transfer is something we should continue to do.

 

Senator Jacobsen said:

 

      The most complaints I receive are from individuals in the mobile home parks, especially in Carson City.  Seems to me the people need rent control relief of some type because the owners of parks can do whatever they please and raise the rent which is getting to be a problem for many of the inhabitants of the parks.

 

Ms. Clements said the biggest problem her office must deal with on a daily basis is trying to explain to individuals the Manufactured Housing Division does not have the authority to remedy complaints such as rent increases in mobile home parks.  Ms. Clements said the way the law reads now, owners of mobile home parks do not have to give their tenants a reason for a rent increase.

 

Lot Rent Subsidy - Page 423

 

Ms. Clements said during the last session of the legislature       this budget was created to assist eligible low-income owners of mobile homes by supplementing their monthly lot rent.  The  legislation stated that money may be distributed from the trust fund for low-income owners of mobile homes effective July 1, 1993.  The subsidy is funded from a $12 annual fee assessment from each occupied lot, and the division started collecting the fees on July 1, 1992.

 

Ms. Clements continued her testimony by reading from Exhibit G.

 

Senator Raggio asked, "How are the procedures being developed and how will they be prorogated to the various beneficiaries?"

 

Ms. Clements said as a part of the application process for this subsidy, the applicant must submit proof of income.  Procedural regulations have been drafted and a hearing is scheduled for

April 5, 1993, for adoption of the regulations.  If the regulations are adopted, the division will begin the application process sometime in May 1993.

 

Senator Raggio asked, "Will the applications contain some form of means test regarding income?"

 

Ms. Clements said the applicants will have to furnish proof of income and eligibility will be determined strictly by the amount of the applicant's monthly income.

 

Senator Raggio asked if the division will use income as a guideline or means, and Ms. Clements responded they will use monthly income as the criteria for determining eligibility for the lot-rent subsidy.  She further stated income has been defined in the regulations.  She stated the regulations do not address means as part of the eligibility requirements.

 

Senator Glomb asked the amount of monthly income that had been stipulated for eligibility.

 

Ms. Clements replied an applicant's monthly income cannot exceed $750 or the amount stipulated by federal guidelines, whichever is more.  She believes $750 is a higher amount than that specified in the federal low-income guidelines.

 

Senator Coffin suggested if the division matched the addresses for the residents of the parks to the data belonging to a social services agency for the county or city, this might provide them with a list of potential recipients.  If the social services agency in each county can furnish this data without violating confidentiality, the division would then have a good idea of the number of individuals eligible to arrive at an approximate amount the subsidy will cost on an annual basis.

 

Manufactured Housing Education/Recovery - Page 426

 

Reading from prepared testimony (Exhibit G), Ms. Clements continued her dissertation regarding the function of this account.

 

According to Ms. Clements, an education program can be established when the fund exceeds $500,000, and the fund balance at this time is $549,698.  She requested she be granted a 1-year period to observe and audit education classes available to determine what the division will need in addition to courses and classes that are currently being conducted by various sponsors.  If approved she would request an appearance before the Interim Finance Committee in 1994 regarding her findings concerning educational needs.

 

In behalf of himself and the committee Senator Raggio stated it would be appropriate for Ms. Clements to appear before the Interim Finance Committee at a time and date that will be scheduled in 1994. At that time Ms. Clements will be given the opportunity to describe the educational needs that may be required for this program.  Senator Raggio suggested that if the budget is adopted the committee should issue an appropriate letter-of-intent concerning this issue.

 

Senator Glomb asked how this account is funded, and Ms. Clements stated funding was set by statute.  She explained that for every new license and renewal license issued by the division, the statute determines a definite percentage of the fee amount each licensee pays goes into this fund, which cannot be paid unless by court order.

 

Senator Jacobsen asked if the court order allows the division any leeway in determining how the funds can be used and Ms. Clements answered, "No, the court order tells us the exact amount to pay."

 

Housing - Page 441

 

Charles (Chas) Horsey, Administrator, Housing Division, Department of Commerce, introduced Mamie Chinn Hechter, Deputy Administrator, Housing Division, Department of Commerce, and Lon DeWeese, Chief Financial Officer, Housing Division, Department of Commerce.

 

Mr. Horsey stated as part of the reorganization, the Housing Division will move from the Department of Commerce to the proposed Department of Business and Industry.  The division was created in 1975 to expand the low- to moderate-income housing market in Nevada through the issuance of tax-free revenue bonds.  The proceeds of these bonds were used to make low-interest construction or mortgage loans to developers and home buyers.  The division operates from revenues generated through its operation and has no General Fund appropriation.  Mr. Horsey wished to point out the Nevada Housing Division enjoys one of the finest reputations in the entire country earned over the years by very prudent lending and investment practices.

 

Mr. Horsey explained the HOME Program was created as part of the National Affordable Housing Act of 1990.  HOME encourages the state and participating local jurisdictions, in collaboration with private organizations to expand the supply of affordable housing and to increase the number of families who can be served with affordable housing.

 

The last biennium was most unusual for the division, according to Mr. Horsey, in that a number of factors such as declining interest rates, declining investment rates, a general lack of confidence in the real estate market, and other factors all contributed to the division's performance indicators.  Mr. Horsey continued his testimony of the Performance Indicators by reading from prepared text reflected in Exhibit I.

 

Senator Raggio asked if only one position is being recommended for this budget.

 

Mr. Horsey replied one position for Base budget 3841 for the Housing Division would be assigned to the HOME Program and would be paid out of allowable federal dollars.  A second position would go to their other budget 3837 for the Low Income Housing Trust Fund and is the one position shown in the budget account. 

 

Mr. Horsey turned the committee's attention to the Maintenance and Enhancement portion of the budget and continued his testimony of these budget items by reading from pages 3 and 4 of Exhibit I.

He also distributed Exhibit J to the committee, a 2-page document entitled the "History of Loan Payoffs."

 

Senator Raggio referred to items 3 and 4 of the Performance Indicators on page 445 of the Governor's Executive Budget and asked if the default amounts reflected are unusually high.  He also asked for an explanation of the default procedure.

 

Mr. Horsey responded:

 

      Even though we did spend a fair amount of activity on foreclosure and delinquency functions in the last biennium, the Housing Division is still in the fortunate position of having one of the lowest foreclosure rates in the United States.

 

Mamie Chinn Hechter, Deputy Administrator, Housing Division, Department of Commerce, stated as of the end of December 1992 the percentage of delinquent loans to their entire loan portfolio was 2.67 percent.  On a national level for the third quarter 1992 the percentage of delinquent loans was 3.25 percent (fourth quarter figures were not available).  Ms. Hechter said the delinquency rate for Nevada's Housing Division generally has been 1 percent or more below the national delinquency average.

 

Senator Raggio inquired, "What is your total dollar loss?  Have you computed that for a year?

 

Lon DeWeese, Chief Financial Officer, Housing Division, Department of Commerce, replied the entire loss for the Housing Division amounted to less than $12,000 during the last fiscal year.    He further stated the statute requires all of their loans have to be guaranteed or in some way covered with some form of insurance and the division is only obligated for uncollected amounts related to the first 60 days of delinquency.

 

Senator Callister commented, "I notice in looking at the information provided by staff the deputy director's position is targeted for elimination, and I wonder what the rationale was behind that decision."

 

Ms. Summers replied, "We were looking at mid-level management positions, and this position was earmarked for budget reductions.  However, the director will have the flexibility of making an analysis to determine which position should be eliminated."

 

Senator Callister asked, "Is that the extent of the analysis in this and each budget account?  If you are a deputy you will be eliminated?"

 

Ms. Summers answered, "Not necessarily. As you will notice there are other deputy-type positions that were determined to be extremely valuable and left in this budget."

 

Senator Callister questioned, "Then why was this one targeted?"

 

Ms. Summers answered, "You have a director, you have a deputy administrator, you have a division head...it was felt we had enough layers of management to accommodate the needs of the agency."

 

Senator Callister then asked, "What are the deputy director's responsibilities right now?"

 

Mr. Horsey replied:

 

      The deputy administrator and the deputy director position are both being eliminated.  The deputy administrator has primary responsibility in the division for the oversight and supervision of our multi-family section which includes the Tax-Credit Program, the HOME Program and the Low Income Housing Trust Fund.  In addition, the deputy administrator assists me with various administrative

      responsibilities such as personnel matters.  The deputy director for the Department of Commerce is a half-time position and domiciled in the office of the director of the department.  He also serves as a member of the division's executive committee which gives guidance on the timing and sizing of bond issues.

 

Senator Callister asked who will perform these duties under the new reorganization.

 

Mr. Horsey answered:

 

      The elimination of the full-time position will probably impact the division's ability to respond quickly on multi-family projects, tax-credit projects, and delay the implementation of new programs.  The elimination of the half-time deputy director position will probably fall on the other members of the executive committee which include myself, Mr. Struve, [Mamie Chinn Hechter] the deputy administrator, and Scott Walshaw [Administrator, Financial Institutions Division].

 

Senator Callister asked if the elimination of the deputy administrator position would retard the expansion of low-income housing development; and Mr. Horsey replied, "I believe that  argument could be made, yes."

 

Senator Callister asked Mr. Horsey to provide the committee with an itemized and detailed explanation of what all of the individual

staff members within the Housing Division do in order to have a better understanding of the positions and the duties that are assigned to the positions proposed for elimination under the reorganization plan.

 

Low Income Housing Trust Fund

 

Mr. Horsey explained that during the Sixty-fifth Session of the legislature a trust fund for low-income housing was created by the Housing Division.  The last session of the legislature increased the real property transfer tax from a rate of $.55 per $500 of unencumbered value to $.65 per $500 of value or a fraction thereof.  The intent of the additional funds generated by the $.10 increase per $500 of valuation was to help fund and match federal funds in Nevada's housing trust fund.  Mr. Horsey said the primary purpose for the creation of the Low Income Housing Trust Fund was to provide the State of Nevada with a matching fund source for the HOME Program.

 

Mr. Horsey continued his testimony by reading pages 5 and 6 of Exhibit I.

 

Senator Raggio asked, "This was to be a match and what kind of federal funding was it to develop?"

 

Mr. Horsey replied:

 

      The State of Nevada received $3 million during the current fiscal year and will receive a minimum of $3 million in the next 2 fiscal years.  Depending upon which category HOME funds are used for, the matching fund requirement might be 3 to 1, might be 2 to 1....

 

Ms. Hechter stated with the new changes under the HOME Program, if all of the $3 million were to be used for new construction then it would require a 3 to 1 match. Any other type of activity would require a 2 to 1 match.

 

Senator Raggio asked what amount the real property transfer tax is  expected to bring into this budget account and Mr. Horsey said $1.2 million each year.

 

Ms. Hechter commented:

 

      As of March 1, 1993, there is over $2 million in the Low Income Housing Trust Fund.  There have been no disbursements...according to the regulations we cannot disburse until there is at least $1.5 million in the trust fund.  We are in preparation of a work program to be submitted to the Interim Finance Committee to allow us to release the minimum 15 percent to the Welfare Division and to release some costs associated with administering the fund.

 

Senator Raggio asked when the division will apply for federal funding, and Mrs. Hechter said the division has already received their federal fiscal year 1992 funding and are in the process of getting approved for fiscal year 1993 federal funding.

 

Senator Raggio asked if the criteria is different for applicants  to qualify for assistance from the Low Income Housing Trust Fund.

 

Mr. Horsey responded:

 

      There are some differences....An advisory committee was

      set up to assist the division in developing the criteria for the use of this fund.  The advisory committee is comprised of seven members which include representatives of the construction and building industry, housing authorities, local governments and the private sector.  The primary purpose of the trust fund is to provide that matching fund requirement for the HOME Program...by walking in the back door the projects that receive HOME funding will get the matching funds from the trust fund.  It is also conceivable that there could be different types of projects funded out of the trust fund than HOME.  For example, the requirements on expanded home ownership opportunities for federal monies are so burdensome...as a consequence we think that expanded home ownership opportunities may be the type of project that is best funded out of the trust fund.

 

Senator Glomb noted that the last time she had spoken to Ms. Hechter she was working on putting the regulations together for this trust fund.

 

Ms. Hechter said the regulations for the housing trust fund were established a couple of years ago but may need modification because of an additional revenue source and the housing trust fund being used as the primary source of the state match.  She feels some of the regulations will have to be modified or amended to allow this.  The division is in the process, along with the advisory committee, of reviewing the regulations.

 

Senator Glomb stated, "It is my understanding this trust fund can be used for a variety of low-cost housing in our state.  For instance, apartment complexes or duplexes.  Are any efforts being made to do this?"

 

Mr. Horsey answered, "That type of activity can be considered, but we have to get the applications and they have not materialized to date."

 

Senator Glomb asked Mr. Horsey to submit a more detailed report of the activity that has taken place regarding this account.

 

Senator Raggio adjourned the meeting at 10:50 a.m.

 

            RESPECTFULLY SUBMITTED:

 

 

 

                                    

            Marion Entrekin,

            Committee Secretary

 

 

 

APPROVED BY:

 

 

 

 

                                   

Senator William J. Raggio, Chairman

 

 

DATE:                              

??

 

 

 

 

 

 

 

Senate Committee on Finance

March 2, 1993

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