MINUTES OF THE
SENATE COMMITTEE ON GOVERNMENT AFFAIRS
Sixty-seventh Session
April 21, 1993
The Senate Committee on Government Affairs was called to order by Chairman Ann O'Connell, at 2:04 p.m., on Wednesday, April 21, 1993, in Room 227 of the Legislative Building, Carson City, Nevada. Exhibit A is the Meeting Agenda. Exhibit B is the Attendance Roster.
COMMITTEE MEMBERS PRESENT:
Senator Ann O'Connell, Chairman
Senator Sue Lowden, Vice Chairman
Senator Thomas J. Hickey
Senator Leonard V. Nevin
Senator Matthew Q. Callister
COMMITTEE MEMBERS ABSENT:
Senator William J. Raggio (Excused)
Senator Dean A. Rhoads (Excused)
STAFF MEMBERS PRESENT:
Caren Jenkins, Senior Research Analyst
Ricka Benum, Committee Secretary
OTHERS PRESENT:
Jack Jeffrey, Lobbyist, Southern Nevada Building and Construction
Trade Council
Linda Ricciarini, Consultant, Southern Nevada Foundation For
Fair Contracting
David Dietrich, Business Agent, Teamsters Local 631,
Las Vegas, Nevada
Carole J. Vilardo, Nevada Taxpayers Association
Pam Miller, Lobbyist, Associated General Contractors
Elaine McNeill, Associated Builders and Contractors
Brian Hutchins, Deputy Attorney General, Transportation Division
Barbara Smith Campbell, Controller, Helms Construction
Frank MacDonald, Labor Commissioner, Office of the Labor
Commissioner
Shelly Berkley, Member, University Board of Regents
Chairman O'Connell the opened the meeting to testimony on Senate Bill (S.B.) 350 and invited proponents of the bill to address the measure first. She explained that in an effort to accommodate the travel schedules of persons wishing to testify, bills would be taken out of their sequenced order.
SENATE BILL 350: Provides that various provisions governing construction of public work apply to construction of certain projects that are not public work. (BDR 28-724)
Jack Jeffrey, Lobbyist, Southern Nevada Building and Construction Trade Council, informed the committee that S.B. 350 was requested to address problems occurring over the prevailing wage issue in the construction industry. Mr. Jeffrey explained the prevailing wage applies when construction projects are paid for with public funds or bond issue. According to Mr. Jeffrey, out-of-state developers circumvent prevailing wage by entering into a construction agreement with a governmental entity, then offering to lease the building back to the entity. Over a period of years, the building is just turned over to the local government, rather than actually leased, bypassing any prevailing wage laws.
Linda Ricciarini, Consultant, Southern Nevada Foundation For Fair Contracting, spoke in favor of S.B. 350. Ms. Ricciarini stated the bill will ensure that construction projects paid for with taxpayer dollars will have guidelines to be followed as do all other public works projects. She remarked that enactment of the measure would eliminate the circumvention of wage laws that are designed to protect the government bodies, workers and taxpayers. Ms. Ricciarini spoke from prepared text referenced as Exhibit C.
David Dietrich, Business Agent, Teamsters Local 631, Las Vegas, Nevada, also expressed support for S.B. 350. Mr. Dietrich stated the bill would serve to address the problem of public entities masking public work projects by placing them outside the provisions of Nevada Revised Statutes. He expounded on the circumstances of entering into leases or lease purchase agreements with the prime contractors. According to Mr. Dietrich, applying the same rules to lease/lease purchase agreements that are applied to all other public works projects, will prevent the statutes from being circumvented.
Chairman O'Connell closed the hearing on S.B. 350 and requested testimony from persons in favor of S.B. 374.
SENATE BILL 374: Allows unsuccessful bidder on public works contract under certain circumstances to bring civil action for damages against contractor who was awarded bid. (BDR 28-184)
Ms. Ricciarini testified in favor of S.B. 374, describing it as a measure designed to allow responsible contractors to take action against contractors that operate outside the law. To substantiate her testimony Ms. Ricciarini gave an example of a contractor awarded a public works project in Laughlin, Nevada, who had an employee killed on the job. The widow of the employee collected benefits from the State of Nevada although the contractor did not have workers compensation in the state. She stated further investigation of the contractor showed he ran his payroll through a different company than the company under which the project was bid.
Ms. Ricciarini informed the committee that during the previous week, she personally visited the labor commission office to review required certified payroll records on a particular contractor. The subject general contractor had not submitted any certified payroll records, and currently had four public works projects in operation.
She called attention to the fact that there are many contractors who are able to "under bid" their competition, only because they have become experts at "working the system" to their advantage. Please refer to Exhibit D for a copy of Ms. Ricciarini's testimony.
Mr. Dietrich also expressed support for S.B. 374 and distributed copies of his testimony to the committee members (Exhibit E). He expounded on the problems of awarding public works projects. Currently, public work projects are awarded to the lowest bidder with no investigation of the past records of the low bid contractor. According to Mr. Dietrich the quality of past performances, convictions of failure to pay prevailing wage, unemployment compensation and proper licensing should be determining factors when public works projects are awarded.
The chairman requested Mr. Dietrich to continue with his testimony on S.B. 376.
SENATE BILL 376: Restricts preference given to certain contractors on public works. (BDR 28-1644)
Mr. Dietrich began his testimony by pointing out the best bidder for a public works project may not necessarily be the lowest bidder. He explained that S.B. 376 was designed to further enhance S.B. 374 by giving statute definition to the term "responsible contractor." Mr. Dietrich's prepared testimony is referenced as Exhibit F.
Ms. Ricciarini added to the comments of Mr. Dietrich in support of S.B. 376. She indicated many projects are being bid as a "joint venture." Mr. Ricciarini determined this to be when a responsible
contractor joins with a contractor having "a poor track record" to make the irresponsible contractor appear to be more reputable. She submitted her testimony to the committee, it is referenced herein as Exhibit G.
Chairman O'Connell invited any remaining testimony on S.B. 350.
Carole J. Vilardo, Nevada Taxpayers Association, opposed the measure stating the bill would definitely have a negative impact on the taxpayers of the state. Ms. Vilardo expressed concern over agreements entered into by local governments, then subsequently expecting the public sector to finance the agreement. She pointed out the cost of the lease purchase would somewhere along the line have to be increased to absorb costs. Ms. Vilardo urged the committee to review the negative consequences this will have on the already financially burdened local governments.
It was also pointed out by Ms. Vilardo that there is no project a private contractor could do, that would not require obtaining an occupancy permit as well all the normal inspections. Therefore, according to Ms. Vilardo, the proponents of the bill are in error to claim the bill would insure standards are met and conformance in compliance of construction standards.
The hearing was closed on S.B. 350. Chairman O'Connell announced copies were available of Amendment No. 248 to S.B. 196. She requested those wishing to speak to review the proposed language and direct testimony to the amendment.
Senator Nevin offered background information on S.B. 374 and
S.B. 376. He saw a need to request the bill drafts on behalf of labor representatives, in an attempt to address past problems with public works projects.
Chairman O'Connell questioned the penalty language contained in the S.B. 374. The chairman was under the impression there are current statutes that set out the penalties for noncompliance with the industrial insurance and unemployment compensation laws.
Mr. Jeffrey responded to Chairman O'Connell's question by explaining that entities, such as the labor commission, do not have the manpower to police their own statutes. Contractors are aware that if they are caught not paying prevailing wages, the penalties do not amount to much and therefore, are not an effective deterrent. Mr. Jeffrey testified he believed the fine for noncompliance of the prevailing wage law to be $5 a day penalty, for each worker affected plus having to pay the wage he should have paid. He further stated that the penalty amount is so small compared to what a contractor could save, that it actually acts as an incentive to not pay the prevailing wage.
According to Mr. Jeffrey, California and Connecticut have enacted similar laws, and that S.B. 374 is patterned from the California statute. He pointed out that if civil proceeding can be brought against the offenders it will serve to as an incentive for contractors not to cheat.
In response to a question from Senator Hickey, Mr. Jeffrey characterized the most common offenders as out-of-state contractors who may not be known in Nevada. He was not aware of any case where a contractor was convicted of not paying prevailing wage. Continuing, Mr. Jeffrey explained the usual scenario is for the labor commission to collect the owed money for the aggrieved party and possibly levy a fine, most often with no attempt to obtain a conviction against the contractor. He stated that without an actual conviction, the guilty contractors can not be barred from other public works projects.
Pam Miller, Lobbyist, Associated General Contractors, noted that suspect contractors are commonly repeat offenders. Ms. Miller cited as an example of the typical situation is for a contractor to pay into the system for five employees, when the actual number working on a project is 10. She agreed with Mr. Jeffrey's response regarding the penalties for noncompliance.
Senator Lowden asked why no one is sent to verify the number of employees a contractor reports, especially since it is known who the offending contractors are.
Ms. Miller stated the agencies do not have the funds to investigate every public works projects. She said violations surface only when an audit occurs, which is usually after a complaint, but most of the cheating contractors are not caught.
Senator Lowden commented:
Mr. Jeffrey, you must know at least who a least a handful are...I am just curious why you have not been able to track these people down and do something about it...even with the limited amount of people available for investigation...why have we not cracked down on this?
Responding, Mr. Jeffrey stated:
When we find people that we think are doing this...we do turn them in...particularly with prevailing wage and SIIS [violations]...employment security may be fairly significant but, in the overall scheme of things, it is not as big an item in the bid, as [State Industrial Insurance System] SIIS or prevailing wage...but, as we find them, we ask...for them to be investigated... we do not know what happens to them...we report what we think is going on...many times even if we have strong suspicions, these agencies, particularly the labor commission, does not have the people to do an audit...on prevailing wage we practically have to build the case for the labor commissioner...the employee must file a complaint on their own, we can not do that for them... many times they do not because...they may be fired and in some cases blackballed...generally [workers] that are being cheated, do not complain until the job is over...
Brian Hutchins, Deputy Attorney General, Transportation Division, expressed concern as to what effect S.B. 374 may have on projects already in progress. Mr. Hutchins, referring to section 3, stated the bill provides the ability for civil action to be brought against a contractor, however, it does not specify a time frame. He asked if the public entity would be expected to somehow undo already existing contracts.
Senator Hickey pointed out the concerns raised by Mr. Hutchins should be taken care of by the bond contractors are required to post.
Mr. Jeffrey commented that a lawsuit could be filed any time after a contractor is convicted. However, he agreed it would be impractical to stop a public works project midway, and expect another contractor to finish the work.
Barbara Smith Campbell, Controller, Helms Construction, questioned whether or not a state, county or city entity is bound to protect information that may be confidential.
Mr. Jeffrey testified that prevailing wage information is public record. However, he said it would be necessary for agencies such as SIIS and unemployment insurance, to find discrepancies through their audit process.
Elaine McNeill, Associated Builders and Contractors, opposed S.B. 374 by stating the measure is not really needed. Ms. McNeill testified the labor commission already has the necessary authority to address the problems, however, it lacks the funding needed to carry out the duties. She further stated current law provides a method that allows the labor commission to bar a contractor from bidding on public works projects for 2 years.
Frank MacDonald, Labor Commissioner, Office of the Labor Commissioner, read from subsection 2 of NRS 339.090. He emphasized the wording of the law is specific to say a contractor must be convicted to be barred from bidding on a project.
Chairman O'Connell closed the hearing to testimony on S.B. 374 and moved to the next order of business, S.B. 376.
Mr. Jeffrey testified that S.B. 376 resulted from an opinion issued by the Office of the Attorney General regarding the 5 percent bidder's preference on public works projects. He explained Clark County has experienced problems where contractors have entered into joint venture business associations for the purpose of qualifying for the bidder's preference.
Ms. Miller spoke in favor of S.B. 376, commenting the bill maintains the integrity of existing law, while benefiting Nevada contractors.
Mr. Hutchins, informed the committee that he wrote the opinion mentioned by Mr. Jeffrey. The opinion was issued by the Office of the Attorney General in March of 1992. According to Mr. Hutchins, it was questioned at that time, if the intent of the legislature was to restrict joint venture contractors from receiving bidder preferences.
Chairman O'Connell asked Mr. Hutchins if he agreed with the proponents that S.B. 376 would close what they saw to be a loophole in the statutes concerning joint ventures.
Mr. Hutchins stated:
...that depends up on your point of view...if it is a loophole or whether it is something the legislature intended...we indicated in the opinion it appeared the legislature wanted it that way...typically, are not long term ventures...they are entered into for a brief period of time...it would certainly would be extremely difficult for a joint venture to be in existence for 5 years and qualify for the bidders preference by having paid the taxes for the period of time...there are a few contractors who enter into joint ventures in the State of Nevada...that are in-state and have been in-state for a... [very] long time...and we thought maybe the legislature intended not to penalize them by saying if you enter into a joint venture with an out-of-state contractor you are not entitled to a bidder's preference... although, they would be if they were on their own...
Ms. Campbell spoke in opposition to S.B. 376. She commented that the impact of the recession is being felt particularly hard and resulted in major changes to the banking industry in Nevada. The financing market, as it is today, could not have been predicted at the time of the last legislative session. Ms. Campbell explained the construction industry has been harshly affected by financial changes that have occurred. Many construction firms have seen banks close their working lines of credit and with new banking regulations, they find alternatives for funding to be much smaller sources.
Continuing, Ms. Campbell stated the construction industry has found joint ventures to be one way to strengthen their bonding capabilities' potential. She urged the committee members not to pass the measure because it would close a source of financing for local construction firms. Ms. Campbell cautioned the language contained in S.B. 376 would classify contractors who have invested in Nevada for many years, as out-of-state bidders. She concluded her remarks by saying joint ventures are becoming a recognized form of business in an economy that needs strong sources of stimulation.
Senator Hickey pointed out the philosophy behind the bidder preference was to provide local contractors the advantage over out-of-state bidders. He questioned the fairness of including an out-of-state contractor in consideration for preference, because they enter into a joint venture situation.
Mr. Jeffrey suggested amended language be developed to address the concerns raised by Ms. Campbell. Mr. Jeffrey agreed that there are many long-time Nevada contractors who have entered into joint ventures only as financial alternatives.
Ms. McNeill voiced concern that the 5 percent bidders preference is worded only to exclude new, and usually small, Nevada businesses. The only way those businesses have been able to bid on public works projects and receive the 5 percent preference is to have entered into a joint venture, since they do not have a 5 year tax history.
Chairman O'Connell closed the hearing to testimony on S.B. 376 and opened the hearing on S.B. 196.
SENATE BILL 196: Requires state agency receiving appropriation from state general fund to submit report to certain legislative committees and appropriates portion of any money that state agency does not expend to increase salaries of its employees. (BDR 31-134)
Senator Nevin explained the reason he requested S.B. 196 be drafted was that state agencies are not required to report back to the finance committees amounts left in their budgets that were not spent or to report how the money was used. He explained the bill is intended to curtail the end of budget year spending that the agencies heads encourage. The bill states that the legislature can not penalize an agency for turning money back the was not spent by refusing to approve what is requested in the next budget.
Carole Vilardo, Lobbyist, Nevada Taxpayers Association, explained she worked on the amendments with Senator Nevin. Amendment No. 248 to S.B. 196 is referenced as Exhibit H.
Ms. Vilardo stated the measure would apply only to General Fund agencies and would require the agency head to request a cash flow report from the Budget Division, Department of Administration. She indicated this report would show the amount of actual expenses compared to the actual appropriations authorized by the legislature, and eventually would be reported to the Interim Finance Committees (IFC). Ms. Vilardo explained the savings report to IFC would include the begin/end dates of the agency work program, the dollar amount expended, the dollar amount saved, how, when and any efficiency or service gains to the clientele of the agency. She explained this was to ensure a legitimate savings, rather than transfers of money or "paperwork savings."
Continuing, Ms. Vilardo stated revenues set aside for trust funds, such as unemployment insurance or workers compensation insurance, could not be considered a savings. If any agency was authorized to make a purchase, decided not to and deferred the amount, that amount could not qualify for a savings either. Other circumstances that would not entitle an agency to claim a savings are supplemental appropriations that were not spent in full, shifting costs to other department or agencies or, not hiring a person if the position is not totally eliminated, but the hiring is just deferred.
Ms. Vilardo agreed with Senator Nevin's viewpoint that state employees know more places where money can be saved and the proper way in which do it. Those employees deserve to be recognized, if they are willing to work to help the legislature achieve those savings. She indicated the purpose of the amended language is to ensure legitimate savings, and put it into a bonus situation, rather than applying it to the basis of salaries, because most savings will occur on a one-time basis. It was also explained by Ms. Vilardo that concerns of the Budget Division regarding existing reversionary funds are also addressed in the amendment.
Senator Nevin pointed out that IFC can only move funds internally within the budget. They do not receive reports back on what is left in an agency budget.
Chairman O'Connell closed the hearing on S.B. 196 and opened the hearing on S.B. 322.
SENATE BILL 322: Regulates university foundations.
(BDR 34-577)
Senator Nevin explained the measure would require the university system to comply with the open meeting laws. The University of Nevada Las Vegas (UNLV) became the center of controversy arising from complaints of closed door meetings.
He also explained that money given to foundations was being used for purposes other than what the donors believed. Senator Nevin stated that S.B. 322 would not require the university system to list who their donors are, but it would require an accounting of foundation money within the university system. The senator pointed out it does not single out any one portion of the university, it covers the entire system.
Shelly Berkley, Member, University Board of Regents, offered a brief historical background of the university system's foundations. Ms. Berkley said the foundation board has been in existence about 10 years, and has suffered from pains of rapid growth.
Ms. Berkley testified she has not been shy with her criticism of the regents in the past. Currently, her opinion is that the board is aware of the controversial situation the university is in and requested they be allowed time to "get a handle on the situation."
She further stated the board is cognizant of the fact of the constitutional mandate to run the university and community college system. Continuing she indicated the attention brought with the legislation introduced has caused the regents to focus on their responsibility of straightening out the numerous foundations.
Ms. Berkley agreed that the many foundations should be accountable to the board of regents. She admitted they have not done a good job to this point however, she felt they are on the right track with the organization of the newly formed foundation liaison committee. The board of regents is planning to put into writing what is their role and responsibility in relationship to the foundation board. Ms. Berkley stated in her opinion the ultimate authority rests with the elected board of officials, which is constitutionally mandated carry out the job.
According to Ms. Berkley S.B. 322 is inappropriate legislation, even though she agrees with much of the concept of the bill, it is the board of regents' responsibility to review how the university business will be conducted.
Ms. Berkley again asked the committee to give the regents the opportunity to do their job now that they are focused. She stated emphatically the foundation board at UNLV knows what it is that the regents expect from them. She continued:
...at no time will a volunteer organization have pre-eminence over an elected board of regents...and it is time that the board of regents take control of the situation...again as much as I respect your authority, in this particular instance...I think this is an invasion of our constitutional mandate. I am asking you to please give us the opportunity to do our jobs...
Senator Nevin questioned Ms. Berkley if the regents intended to address the open meeting law controversy.
Ms. Berkley stated total agreement with Senator Nevin's earlier comments pertaining to allegations of nonconformance with the open meeting law. She stated her position was to help set policies for public institutions and she would not condone conduct of private organizations that do not disclose records.
Chairman O'Connell asked whether or not UNLV could perform the same functions the foundation board does and if the board was necessary.
Ms. Berkley indicated there are regents who believe the foundation board is not necessary and that money could be raised as effectively by the regents. However, it is her belief that the foundation board is, at this time, willing to accept guidance from the board of regents and allow them to take charge of the foundation disputes.
Further general comments were made by Ms. Berkley in regard to the direction and plans the regents will be working towards. Chairman O'Connell expressed great interest in what the regents determine in the following meetings. She commented further:
...having served on the foundation committee and as chairman of this committee, I am extremely interested in the focus and criteria that you set out...for a public versus private foundation, how the money will be spent, if it public...what the leeway is of a private foundation ...I think most of the concern from the opposition to the way the funds were handled were some of the supportive things that went to the president...the funds that there was no accountability for from the public...I would ask you to please get back to us on how...that is going to be set up...and what the objectives and time lines are...
Ms. Berkley solicited suggestions from the committee to share with the regents. She commented on the president's discretionary fund by saying:
...that was the focus of a lot of the...problems...it was my position from the start that all of that information was public...that should have been disclosed...and what I said from the beginning...was that the public had a right to know what we are doing with the money as a public institution...if there was anything that was inappropriate and I am not talking about deliberately...illegal or improper but, just incorrect expenditure of these discretionary funds, I would be the first one to say we apologize and...change the way we did business...what I was very uncomfortable about from the beginning was the fact of not disclosing it all...I would defend any expenditure, what I would never defend is keeping it secret.
Chairman O'Connell stated it was critical for the board of regents to report to the Senate Committee on Government Affairs, the results of the meeting with the foundation board.
There being no further testimony Chairman O'Connell adjourned the meeting at 4:05 p.m.
RESPECTFULLY SUBMITTED:
Ricka Benum,
Committee Secretary
APPROVED BY:
Senator Ann O'Connell, Chairman
DATE:
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Senate Committee on Government Affairs
April 21, 1993
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