The Committee on Commerce and Labor was called to order at 3:45 p.m., on Thursday, February 25, 1999. Chairman Barbara Buckley presided in Room 3138 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Guest List. All Exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

COMMITTEE MEMBERS PRESENT:

Ms. Barbara Buckley, Chairman

Mr. Richard Perkins, Vice Chairman

Mr. Bob Beers

Ms. Merle Berman

Mr. Joe Dini, Jr.

Ms. Chris Giunchigliani

Mr. David Goldwater

Mr. Lynn Hettrick

Mr. David Humke

Mr. Dennis Nolan

Mr. David Parks

Mrs. Gene Segerblom

COMMITTEE MEMBERS ABSENT:

Mr. Morse Arberry, Jr, (Excused)

Ms. Jan Evans, (Excused)

GUEST LEGISLATORS PRESENT:

Assemblyman Bob Price, Assembly District 17

STAFF MEMBERS PRESENT:

OTHERS PRESENT:

Following roll call, Chairman Buckley opened the hearing on A.B. 193.

Assemblywoman Segerblom, Assembly District 22, presented A.B. 193 (Exhibit C) and noted the bill was designed to provide greater protection for the general public from the unscrupulous and annoying practices of some telephone solicitors. The bill revised provisions governing use of a device for automatic dialing and announcing on a telephone and placed restrictions on people who used such devices to sell goods or services to the public. Under certain circumstances, a device for automatic dialing and announcing could not be used to disseminate a prerecorded message unless the person who was called was informed of the nature of the call and the name, address, and telephone number of the business or organization.

Chairman Buckley noted many individuals found automatic telephone devices annoying and asked how identifying an annoying call was about to happen would be less annoying.

Mrs. Segerblom pointed out if the receiver of a call did not like the annoying person who was calling, the receiver of the call could hang up, and the caller could not call back. The caller had to identify himself or herself and state the nature of the call.

Mr. Perkins asked if A.B. 193 was the same bill that the commerce committee amended during the 69^th Session and if so, how it was different from A.B. 321 of the 69^th Session. Mrs. Segerblom said A.B. 193 was about the same as A.B. 321 of the 69^th Session and pointed out there were 3 months of committee hearings, issues were worked out with those who had objections, and the bill was agreed upon, but the bill was processed too late in the session.

Janine Hansen, President, Nevada Eagle Forum, testified against A.B. 193. She understood Mrs. Segerblom’s intentions were good and agreed telephone solicitations were annoying. She then explained the definition of fascism was private economic enterprise under centralized government control. She repeatedly saw well-intentioned bills meant to regulate private enterprise, and the vast number of government regulations and taxes made it almost impossible for private enterprise to exist. Ms. Hansen suggested A.B. 193 was a well-intentioned bill with onerous and burdensome regulations and unintentional effects.

Ms. Hansen referenced section 3 and noted she was unsure if listed entities, such as school districts or nonprofit organizations had to apply for approval in order to use an automatic dialing device. If an organization such as Nevada Eagle Forum, which was a nonprofit organization, had to apply for approval under A.B. 193, it would make it almost impossible for them to use their automatic dialing device.

Section 6, subsection (b) required the name, address, and telephone number of a caller be identified. Ms. Hansen noted she always identified herself or her organization’s name when she used her dialing device. She did not always give the address because she had only 1 minute to provide information, which included her message. If she were required to provide the name, address, and telephone number, there would be no time for the message.

If a person or organization were required to provide information as to the duration of a message, the number of proposed calls, the description of the device, and then submit the information, the organization’s use of the device would be eliminated. The Nevada Eagle Forum used the device for such activities as lobbying purposes to contact constituents, to inform individuals they were having a rummage sale, or to inform individuals of a meeting. Such events were not planned months in advance, which would make compliance difficult.

The issue of free speech was also a concern. Ms. Hansen quoted Professor Bradley A. Smith who noted government was inherently untrustworthy when it came to regulating political speech. The tendency to use government power to silence political criticism and stifle competition was the major reason for the First Amendment. A.B. 193 exempted organizations such as schools, nonprofit organizations, and cable companies, but there were no exemptions for political parties, committees, candidates, or committees organized to support or oppose an issue on the ballot. All those who were engaged in political free speech were subjected to bureaucrats who determined whether or not free speech could be utilized in encouraging individuals to vote, participate in a political event, or support or oppose a political issue.

At all costs, the idea of political free speech should be supported, or the underpinnings of freedom were jeopardized. It was important to protect the opportunity for opposition and exchange of ideas; agreement was not the issue. A.B. 193 did not protect political free speech and would be subject to challenge in the courts for limiting such speech.

Ms. Hansen noted there were other alternatives to dealing with the issue of annoying telephone calls, such as hanging up the telephone, screening the calls with an answering machine, or using a caller identification device.

Mrs. Segerblom referenced section 3 of A.B. 193 and noted the section did "not prohibit the use of a device for automatic dialing and announcing by any person exclusively on behalf of" and then listed the issues with which Ms. Hansen was concerned. Mrs. Segerblom said privacy in the home was very important, which was part of the bill.

Robert Barengo, Attorney and Counselor at Law, represented the Nevada Consumer Finance Association, which was an association of lenders in the State of Nevada. He noted section 2, subsection 1, which said, "incorporates a storage capability of telephone numbers to be called and a random or sequential number generator capable of producing telephone numbers to be called." Mr. Barengo noted language within A.B. 193 would make it a violation of the law if an individual or entity owned such a device. He stated the language should say, "incorporate a storage capability of telephone numbers to be called and utilizes a random or sequential number generator." He also noted the language should include "producing telephone numbers to be called" versus "capable of producing." The purpose was to regulate those who actually produced calls not those who were capable of producing calls.

Mr. Barengo suggested the insertion of "to solicit a person to purchase goods or services" after the word telephone in section 7 on line 11. He suggested an exemption in Nevada Revised Statutes (NRS) Chapter 598 such as that found in NRS Chapter 597 noting a preexisting business relationship. A person would not engage in a deceptive trade practice if they had a preexisting business relationship when calling to solicit someone to purchase goods or services.

There was no further testimony, and Chairman Buckley closed the hearing on A.B. 193 and opened the hearing on A.B. 208.

Assemblyman Bob Price, Assembly District 17, explained the prison system, at one point, considered permitting prisoners, through prison industries, to make telephone calls around the United States on behalf of various companies and services. He noted other states allowed prisoners to conduct such activity, and there was concern about the potential use of gained information. Mr. Price explained if a prisoner were to make calls for companies in the State of Nevada, it would be appropriate they identify themselves as a prisoner.

Mr. Price noted an amendment to A.B. 208 would require a prisoner making a solicitation by telephone to identify himself/herself as such, regardless of what state or country they resided, within 15 seconds of the conversation beginning.

Chairman Buckley thought it made little sense to allow prisoners access to private information about individuals.

Mr. Hettrick said it was his understanding a prisoner could only ask a recipient of a call if they wanted to be called back about an article or an issue. The prisoner had no private information. He noted he did not believe interstate commerce could be regulated from the State of Nevada.

Mr. Price also questioned whether the State of Nevada could regulate interstate commerce but personally felt the state should take action on the issue and if necessary, let the issue be challenged.

There were no further questions or testimony, and Chairman Buckley closed the hearing on A.B. 208. She read Exhibit D into the record which referenced the explosion at the Sierra Chemical Plant noting General Drennan Clark was appointed chairman of the Commission on Workplace Safety. Chairman Buckley noted on Monday March 1, 1999, the Committee on Commerce and Labor would hear testimony on bills A.B. 110, A.B. 111, A.B. 112 and A.B. 258, which resulted from the commission’s efforts. In addition, a copy of the commission’s report entitled "The Commission on Workplace Safety and Community Protection" was provided to committee members (Exhibit E).

Chairman Buckley opened the hearing on A.B. 106.

Randall H. Walker, Director of Aviation, Las Vegas McCarran International Airport, introduced E. Lee Thompson, Chief Deputy District Attorney, Clark County District Attorney’s Office, and Mike Alastuey, Assistant County Manager, Clark County. He noted A.B. 106 addressed a local contractor’s public works preference on bids. The bill added another provision by which a contractor could be defined as a local contractor. A.B. 106 also provided for a statewide uniform certification process and a mechanism to provide an advantage for local contractors without costing the public treasury additional funding over what would be necessary to award the bid under normal bidding circumstances.

Mr. Thompson was charged with administering bids under the statute and noted he successfully defended a constitutional challenge in the Aviation Constructors versus Clark County Case in 1991. During the 1990’s, no other statute caused the number and seriousness of bid disputes and litigation as NRS 338.147. A central problem was the types of proof submitted at the time of bidding, and the taxes claimed gave competing bidders a chance to raise issues and go to court causing a serious delay in the job award and commencement of construction. There was concern about long delays due to court cases involving uncooperative parties.

Section 1 proposed responsibility for determining eligibility for bid preference be vested with the state contractors board versus individual local governing bodies. He noted each local body applied their rules as to what was sufficient proof of payment of taxes. Mr. Thompson further suggested inquiries about the sufficiency of eligibility be raised after the bid and before the award. He said inquiries about sufficiency be in addition to annual state contractors certification.

Mr. Thompson noted Las Vegas Paving forgot to provide evidence of eligibility in a bid. He explained Las Vegas Paving had been around for many years and was an eligible bidder, but the act of not providing evidence of eligibility caused an unnecessary problem that needed correction by legislative action. Local bidders should not lose out because of a technicality.

Section 1, subsection 2(b)(1), clarified the situation about taxes paid for projects on Indian reservations and federal reservations of land. There were situations where contractors were not required to have a Nevada license but did substantial work and paid substantial local taxes. Mr. Thompson desired the legislature clear up the issue.

Section 1, subsection 2(b)(3), referred to the eligibility of taxes paid by subsidiaries, or related companies. Under A.B. 106, such payments would not be allowed. The county sought clarification as to whether such payments by related companies could be credited to the bidder.

Mr. Thompson said the contractor’s board requested changes to clarify what type of proof had to be submitted by a contractor to obtain eligibility. He noted an affidavit submitted by a Certified Public Accountant (CPA) was proof and had no objection to such a procedure. There was also a suggestion of a severe debarment penalty for those caught cheating on requirements, which was supported by Clark County.

Section 1, subsection 2, noted an additional way of becoming qualified as an eligible bidder be included. Under current regulation, the payment of $5,000 for 5 years or 60 months allowed for a bid preference. The result of that choice of criteria for eligibility created unintended consequences. The bill was touted as protection for local contractors, but the law did not always favor local contractors over out-of-state contractors. There could be discrimination towards a contractor, and a city or county would have to pay extra money to an out-of state contractor who was bid preference eligible over a local contractor who was not.

Mr. Walker pointed out the Las Vegas Department of Aviation had been in court six times during the 1990’s as a result of disputes over whether a contractor was entitled to the local preference. He said the department was building revenue-generating facilities and would start collecting rent once the facilities were put into service. Bonds were sold and payments had to be made on the bonds. Capitalized interest was received up front to help pay for the bonds while construction occurred, but if the department had a delay in putting the facilities into service, difficulties were created because of the "hit" on their operating fund. He noted the need to have issues resolved and not have projects delayed in court as a result of misunderstandings and challenges to the statutes.

Section 2, subsection 2(b), provided for a contractor who had a local preference over someone who did not have local preference. Mr. Walker referenced a contractor, who did not have the local preference but was the low bidder in terms of total dollars bid, and another contractor who was the second low bidder who had the 5 percent preference. With the 5 percent preference, the second low bidder would then be the low bidder, which enabled the second low bidder the ability to match the low bid and still be able to have the bid awarded because of local preference but not cost the local government money.

Mr. Walker explained what happened to the airport as a result of language in statute. Twenty-eight major projects were awarded in the 1990’s, which amounted to $680.5 million. Fifteen of the contracts were awarded to Nevada companies and 13 contracts were awarded to out-of-state companies. In addition, $266.6 million was awarded to Nevada companies for a total of 39 percent of the total dollar amount and $413.9 million was awarded to out-of-state companies. Out of the 28 contracts, there were only 2 bids where the local preference had an affect on the bid.

Mr. Walker explained two recent cases where the local preference provision resulted in increased costs to McCarran International Airport. In the first case, the airport was required to spend an additional $25,000 for construction of the charter and international terminal. A Massachusetts company won the bid, even though it was not the lowest bidder but qualified as a "local contractor" under the statute. In the second case, a Massachusetts/Hawaii combination qualified for the local preference on a project to construct the D gates at the airport. Those companies were awarded a bid costing the airport $3.7 million more than the low bid, which was submitted by a North Carolina firm that did not qualify for the local preference. In both cases, the preference resulted in increased payments to out-of-state contractors and did not benefit local contractors.

Mr. Walker said it was appropriate to have a local contractor match the low bid if he met the criteria thereby preserving the ability for local contractors to obtain Nevada work and not cost the local treasury money.

Chairman Buckley asked if the local preference had to be within 5 percent of the next competitor. Mr. Walker affirmed her question. Referring to the $3 million example at the airport, Chairman Buckley asked if the $3 million was within the percentage. Mr. Walker said the low bid was $102 million and 5 percent of that amount was slightly more than $5 million. Therefore, the $3 million amount was within the 5 percent margin.

Ms. Giunchigliani noted workers compensation payments and mentioned past discussions about assuring a company was in state, and if a company participated in bidding, it was to be assured the company paid workers compensation.

Mr. Thompson said he was not aware of the issue and did not want to add the workers compensation factor into what was already a complicated issue.

Mr. Walker said a contractor was required to provide evidence of workers compensation coverage on their employees.

Jack Jeffrey, Southern Nevada Building Construction Trades Council, testified in opposition to A.B. 106 and explained the statute originally attempted to bring the public works projects to local contractors. With local contractors, local workers would be on jobs. Mr. Jeffrey said the argument was in the definition of "local contractor" and referenced a contractor whose head office was out-of-state but who worked in the State of Nevada for 20 years.

Mr. Jeffrey explained the way the statute was developed and noted throughout the country the residency requirement had been thrown out of the courts. He said the first bill that started the process necessitated paying state or local taxes for the previous 5 years. He said the formula was convoluted and not easy to work with, and the reason for the convoluted formula was because of the residency issue.

Mr. Jeffrey referenced section 1 of A.B. 106 noting a central repository for paperwork for individuals who developed eligibility was a positive proposal. He stated the word residency could not be used, even in section 1.

Mr. Jeffrey understood there was a problem when local governments spent more on a project than they envisioned and asked if it was worth paying the additional amount to keep money in the local economy. Even if a corporation’s headquarters was out-of-state, workers were in the area and materials were bought from the local area. The economic turnover was beneficial to the local economy. Mr. Jeffrey explained that as difficult as the current statute was to work with, it served a good public policy and helped the local economy.

Steve Holloway, Executive Vice President, Associated General Contractors (AGC), Las Vegas Chapter, spoke in opposition to A.B. 106 but applauded Clark County on several proposals within the bill. He noted contractors in the State of Nevada did not want the two provisions, which dealt with residency and matching lower bids enacted into law.

According to the National Institute of Government Purchasing, there were 50 states and the District of Columbia with laws setting forth some sort of in-state preference for local goods and services. There were 20 states and the District of Columbia that had in-state preference laws similar to Nevada. California, Hawaii, Montana, New Mexico and Wyoming had a 5 percent bidder’s preference, such as Nevada. In recent years, two other states, which previously had a 5 percent bidder’s preference, no longer had it. In both states, the courts ruled against bidder’s preference laws because the laws were based on residency. The AGC believed there would be a similar result if A.B. 106, which included a residency requirement in section 1, was enacted.

Mr. Holloway noted there were good points in A.B. 106, but the matching requirement was negative. A.B. 106 was presented to address an exasperation encountered by only one public agency in the 10 years the law had been in effect. The proposed solution to the problem was to effectively put an end to bidder’s preference, which strengthened the tax base in Nevada.

Jesse C. Paulk, Director, TAB Contractors Inc., Associated General Contractors, spoke in opposition to A.B. 106 (Exhibit F). He noted section 1 of A.B. 106 imposed strict residency requirements, which were held to be unconstitutional and required the qualifying contractor match a nonqualifying contractor’s low bid. Mr. Paulk also noted AGC’s opposition to residency requirements was based on allowing an out-of-state contractor, anxious to expand into Nevada’s construction market, to form a corporation pursuant to the laws of the state with more than 50 percent of the outstanding shares of the corporations beneficially owned by a natural person who was a resident of the State of Nevada.

AGC opposed section 2, subsection 2(b), which required a qualifying contractor match the lowest bid of a nonqualifying contractor. That form of bid shopping sent a message to the entire construction industry that it was acceptable to shop subcontractor’s bids instead of incorporating the lowest responsive and responsible sub-bid price in a bid to a public entity.

Mr. Paulk noted comments about litigation on the bids and said there would always be a problem with nonresponsive bidders.

Chairman Buckley summarized Mr. Paulk’s position noting the local preference needed to be retained as it helped working people, the economy, local business, and those who had ties to local businesses. She further summarized the residency requirement could not legally work. Mr. Paulk was not opposed to a central repository, if the issue could be revised further, but he was opposed to the other sections of the bill. Mr. Paulk affirmed the Chair’s summation.

Mr. Holloway clarified AGC was opposed to the residency requirement and the requirement where the qualifying bidder had to match the nonqualifying low bid. The remaining portion of A.B. 106 was fine.

Margi Grein, Executive Officer, Nevada State Contractors Board, said Clark County did not approach the board regarding A.B. 106. She noted A.B. 106 was worded in such as way as to expose the board to significant liability in issuing the certificate.

Mr. Beers asked Ms. Grein to explain the liability faced by the board. Ms. Grein referenced section 1, which stated a contractor could apply to the board for certification as a qualified resident contractor. She noted the necessity of establishing a definition of qualified resident contractor and said the board did not have the resources or the staff to take on the responsibility of determining if taxes had been paid. The board did not have the expertise to sift through tax records or proof of bidder’s qualifications. The liability faced by Clark County would reverberate back to the board. The definition of qualified resident contractor needed to be simplified so the burden of who was qualified was not on the board.

Mr. Beers' thought the issue was concrete and asked how many more unlitigated possibilities existed. He saw benefit in having a central repository.

Chairman Buckley thought most were in favor of a central repository, but the question was whether the contractors board was in a position to do the work. She noted an additional issue the contractors board would deal with was whether a competitor would sue them for wrongfully issuing a preference if a competitor thought a company, who was awarded a bid, should not have been awarded it.

Michael Pack, President, Frehner Construction Company, expanded on Mr. Paulk’s statement with regard to section 2(b). He noted a situation where a local contractor was asked to match the bid of a nonlocal contractor and drop the local contractor’s bid down accordingly. Such action could be construed as a license to steal from subcontractors and suppliers. Mr. Pack asked where the money would come from and pointed out contractors worked hard over the past 10 or 15 years to get the listing of subcontractors and minorities into the bid procedure, and provisions in the bill would take away much of what had been done.

Kevin Weiske, Partner, Moody Weiske Contractors, offered support for the contractors board and opposed A.B. 106. He noted his work for the Washoe County Airport Authority and said when he protested a public works project, the Airport Authority had to go back to the contractors board for clarification, and the bid’s openings or the execution of a contract was postponed 30 to 60 days. For small or large contracts, 30 to 60 days was considered a long period of time.

John Madole, Associated General Contractors, Northern Nevada offered testimony in opposition to A.B. 106 saying it was unworkable and would be a difficult bill to administer. Mr. Madole thought another way of addressing the problems should be found.

Steve Hill, President, Silver State Materials, Associated Builders and Contractors (ABC), spoke in opposition to A.B. 106 and noted ABC agreed with the Building and Trades Council. He stated there would be another bill correctly addressing the issues. Mr. Hill explained the residency issue within A.B. 106 would be ruled unconstitutional and would outlaw the bidder’s preference. He noted bid matching was unethical, and ABC was opposed to it.

There being no further questions or testimony, Chairman Buckley closed the hearing on A.B. 106 and opened the hearing on A.B. 259.

Assemblyman Lee, Assembly District 3, offered written testimony as sponsor of A.B. 259 (Exhibit G). He noted A.B. 259 was a continuation of legislation from 1997, noting in 1997, the pool industry raised the issue of consumer protection, which the contractor’s board did not adequately address. Consumers and good reputable contractors felt the sting of the public perception that contractors and the contractor’s board were taking care of each other, rather than being sensitive to the public outcry of fraud.

The Nevada State Contractors Board was created in 1941, through action resulting from the efforts of the Associated General Contractors of America in an attempt to secure public safety when hiring contractors. It was the desire of Assemblyman Lee and many contractors, residents, and affiliated people to move the board into the present and prepare for the future.

Section 1 of A.B. 259 dealt with enforcement issues. The contractor’s board was not adequately set up to handle fraud issues and used the district attorney’s office when necessary. Construction fraud was not the highest priority in the district attorney’s office. Mr. Lee explained there were complaints issued to the contractor’s board, but the board did not follow up on the complaints. There was one person who worked on the issue 1 day a week.

Mr. Lee noted the members of the board served at the will of the governor, and in crafting A.B. 259, he was careful not to force the governor’s hand. It was Mr. Lee’s desire to design a board that was not detrimental for the residents of the State of Nevada. The intent of A.B. 259 was not the "wipe the board out" but to slowly bring it into a new concept.

The makeup of the board consisted of six contractors and one private person, and it was Mr. Lee’s intent to make the board friendly to residential people and contractors. He desired the makeup of the board consist of individuals with an expertise in particular areas so as to allow issues and complaints to expeditiously move through the process. Of the total members of the board, Mr. Lee desired two members be general contractors and one a subcontractor. Many subcontractors had problems with general contractors and desired to know there was a member on the board representing their interests. He further noted contractors needed to be actively engaged in the contracting business as a resident of the State of Nevada (section 5, subsection 1(a) (1)(2) (3).

Mr. Lee referenced section 5, subsection 1 (3)(b), noting he desired a building official be on the board. Mr. Lee pointed out the language in A.B. 259 referring to the individual as a building inspector was inaccurate. He explained a building official was "the one person in each jurisdiction (City or County) who is responsible for building code enforcement. That person also has sole authority to sign off on Certificates of Occupancy" (Exhibit G, page 3). According to A.B. 259 the building inspector was to be employed by a county whose population was 100,000 or more.

Section 5, subsection 1(3)(c), noted a member of the board was to be a certified public account (CPA). When individuals from the smaller ends of the construction industry came before the board with a financial statement, it would be helpful to have an individual on the board with an expert ability to comprehend accounting matters.

Section 5, subsection 1(3)(d), stated one member of the board was to be an architect or engineer. Mr. Lee thought it was important a member of the board be a person who understood the intricacies of construction, and an architect or engineer would have such understanding.

Section 5, subsection 1(3)(e), noted the final member of the board would be representative of the general public. Mr. Lee thought the member would be an interested person who might be retired from the industry or had something to do with the industry.

Section 5, subsection 2, said, "The chairman of the board must be chosen from among the board members who are qualified pursuant to paragraphs (c), (d) and (e) of subsection 1." Because there was concern about the illusion of contractors protecting contractors, he desired the chairman not be a contractor or building official. If one of the other members of the board were the chairman, the illusion would no long exist. Mr. Lee thought the issue was important but was flexible regarding it.

Section 5, subsection 3, stated, "a member shall serve for a term of 4 years or until his successor has been appointed. A member may not serve for more than two consecutive terms." Mr. Lee noted the years of membership by board members consisted of 1 member with 11 years, 1 member with almost 11 years, 2 members with 9½ years, two members with 5½ years and one member with 1½ year’s membership. Mr. Lee considered it important to have periodic change on the board to prevent stagnation, which would allow others, excited about issues, to get involved in the process.

Issues affecting construction had changed and it was time the contractor’s board looked at where it wanted to go, not where it had been, and he saw the changes as an approach to creating a visionary board that was prepared for the future.

Margi Grein, Executive Officer, Nevada State Contractors Board read into the record a position letter from the chairman of the Nevada State Contractors Board, Kim Gregory (Exhibit H). The letter noted opposition to A.B. 259 as well as changes and progress the board had made. She noted the numbers indicated the changes were working. From July 1, 1998, through December 31, 1998, the board revoked 40 licenses, as compared to 7 in 1997, and 4 in 1996. Ms. Gregory’s letter stated (Exhibit H) she was pleased with the boards increased efficiency but understood there were many ways in which they could improve their operation.

Ms. Grein noted under A.B. 259, the terms of office for all members of the board who were serving would expire upon the commencement of the terms of their successors appointed pursuant to subsection 2. Ms. Grein stated there was a lack of understanding as to what had occurred regarding changes the board made, and the removal of board members would be harmful to the entire operation of the board.

The 7 board members served 2 days a month in a capacity where they approved applications and held disciplinary hearings. Ms. Grein saw the change of board members required by A.B. 259 as an attack on her job performance. She stated the replacement of the 7 board members would cause the public greater harm rather than protect them, as the law required the board to do. She understood there were problems in the past, and the present board was paying for mistakes of past board members. The issue was about change; she understood where the board had been and would use such knowledge to direct the board toward a constructive future.

Ms. Grein explained the board had an excellent working relationship with the Office of the Attorney General. The board relied on the Office of the Attorney General for advisory opinions and advice on compliance with laws. Ms. Grein noted in May of 1998, Senator Porter asked the Office of the Attorney General to investigate the state contractor’s board for possible unscrupulous, unethical, or criminal activity. The board cooperated fully with the Office of the Attorney General; they had nothing to hide. Ms. Grein pointed out the board had 5 different segments of their internal audit, which was an extensive review she used as a guideline to develop policies and procedures in order to make changes and take action where needed.

George Lyford, Director, Special Investigations, Nevada State Contractors Board stated his employment with the board began on April 1, 1998. At that time, he was given the task of investigating construction fraud, unlicensed construction activity, and background investigations. The special investigation unit hired individuals with prior law enforcement experience and gave them the same mission as he had. Prior to that time, violations often fell through the cracks, as detailed investigations did not occur. In the past 18 months, there were four major fraud cases referred to the Office of the Attorney General. The cases involved such issues as a building contractor who defrauded victims in excess of $1 million and issues dealing with pool contractors. He noted one of the cases involving a pool contractor resulted in multiple misdemeanor charges of deceptive trade practices being filed against the contractor. Mr. Lyford mentioned another case he submitted involving an unlicensed contractor who, in his opinion, had at least 20 felony counts against him. He had yet to hear back from the Office of the Attorney General, and no action had been taken on the request.

Mr. Lyford mentioned he had an outstanding working relationship with the Clark County District Attorney’s office and there was a deputy district attorney who was specifically assigned to handle the board’s cases. Since July of 1998, the board received 627 complaints regarding unlicensed contracting activity or unlawful advertising. He noted 174 misdemeanor cases were filed throughout the state for contracting without a license, and for the first time, 8 cases were filed with felony charges that initially came in listed as contracting without a license. Mr. Lyford mentioned another 197 individuals who were involved in unlawful advertising activity. There was not sufficient evidence to proceed with a criminal charge against the individuals, and the cases were resolved with warning letters and cease and desist orders.

There were approximately 150 outstanding arrest warrants as a result of charges filed by the state contractor’s board against individuals. He noted little activity or any ongoing program by any law enforcement agency to locate and arrest those individuals. In addition, several unlicensed contractors in Las Vegas advertised in local newspapers and had outstanding arrest warrants issued.

Bill Rizzo, Investigations Administrator, Nevada State Contractors Board, noted he had been with the department for 14 years and reiterated Margi Grein’s statement about the board not being the same as it was 2 years ago. Tremendous changes had occurred for the better.

Ms. Giunchigliani asked what impediments, if any, the board had regarding unlicensed contractors.

Margi Grein explained the Office of the Attorney General did not have the funding or staff to adequately handle cases for the board regarding unlicensed contractors. As of April of 1998, the board improved their handling of cases regarding unlicensed contractors. She noted the fraud cases Mr. Lyford mentioned and said the cases stemmed from new legislation regarding construction fraud that was created by Senator Porter. Ms. Grein said the board attempted to turn cases that were ready over to the attorney general or district attorney, and the board had the right people in the department to allow for such to occur. Compliance investigations handled all license complaints, and the Special Investigations Unit handled unlicensed and fraudulent contracting and background checks.

Ms. Giunchigliani asked about penalties for unlicensed contractors.

George Lyford said the first penalty was a $500 fine. The second time, the act was considered a gross misdemeanor, and the fine was $1,000. He noted a $500 fine for an unlicensed contractor was an insignificant amount. A licensed contractor was required to obtain a license, which meant dealing with licensing requirements, paying into the state industrial insurance fund, and being responsible for their actions. There were many complaints against unlicensed contractors where an individual performed a job poorly, and the board had little recourse. If possible, the board filed a felony count but did not have the resources to deal with cases with large complex financial records. Such cases were referred to the Office of the Attorney General, but he did not think they had the resources available to properly deal with the cases.

Ms. Giunchigliani noted legislation the board brought forward and asked if there were recommendations to strengthen the penalties for unlicensed contractors. She stated the legislature had been dealing with the issue of unlicensed contractors for a period of time and asked about incentives for licensed contractors who followed the rules when there were minimal penalties assessed against unlicensed contractors. Ms. Giunchigliani contended penalties needed to be strengthened thus sending a strong message to unlicensed contractors.

Margi Grein replied penalties issued were part of the package the board was presenting to the legislature. They were setting different levels of misdemeanors up to cases classified as a felony.

George Lyford explained the board was recommending the third offense be a felony. He noted if a case were classified as a misdemeanor, law enforcement agencies did not respond favorably, but if a case was considered a felony, the response from law enforcement was enhanced.

Ben Graham, Legislative Representative, Nevada District Attorney’s Association, supported A.B. 259 and explained the relationship between the district attorneys and the contractors board had been erratic. The district attorney had been chastised and praised. He noted an effort was made to have a deputy available to supervise the cases. If needs were to be met, a specialized team who was served by a dedicated attorney general was preferable, as opposed to the district attorney’s office who handled issues of extradition, drug cases, business license, and heavier preliminary hearing duties.

Mr. Goldwater asked if the district attorney was relieved of its duties, would money revert back to the state.

Mr. Graham said the district attorney’s office offered to provide in-kind office space and secretarial duties. The district attorney would also prepare the cases for filing, provide data input services, and if a deputy attorney general could not make a calendar call, the district attorney’s office would offer to cover the call.

Irene Porter, Executive Director, Southern Nevada Home Builders Association offered support for A.B. 259. She noted they had suggested amendments and said the contractor’s board had performed admirably during the preceding year in their attempt to completely transform the board. The association was also concerned about consumers and their complaints and desired the complaints be properly handled and adjudicated. If the handling of complaints by the contractor’s board improved, lawsuits would be lessened.

Ms. Porter agreed with Mr. Graham’s suggestions with regard to handling of issues by the Office of the Attorney General. She noted contractor licensing fees were low and a modest increase could be put forth. The association believed the contractor’s board was a valuable tool to the industry, and was supported by the general public and association.

The association had no objections to the suggested composition of the board in A.B. 259 but thought there should be more contractors on the board than specified. Ms. Porter noted during the past 6 or 7 years, there were no board members who were active in the home building industry. A considerable amount of the work by the board, other than issues dealing with unlicensed contractors, dealt with consumer complaints in housing. Just as it was a valuable tool to have a CPA on the board to examine financial issues, it was also a valuable tool to have a representative of the homebuilding industry who understood various consumer concerns.

Ms. Porter referenced section 5, subsection 2, and noted the board should not be micromanaged to such an extent. The board should have the latitude to select the best-qualified individual to chair the board.

Section 10, subsection 2, said, "The board shall notify: the licensee; and each person with whom the board knows the licensee has an uncompleted contract." Ms. Porter noted such would be an incredible burden for the contractor’s board.

There could be a situation where 500 to 700 individuals had to be notified. She thought it would be wise to remove the section from A.B. 259, as the requirement could become onerous. The association would like to see additional regulation with regard to enforcement and look at the question of bonding.

Dan Musgrove, Office of Intergovernmental Relations, City of Las Vegas, represented Paul Wilkins, Certified Building Official, City of Las Vegas (Exhibit I). Mr. Musgrove agreed with comments made by Mr. Graham with regard to a specialized team served by a dedicated member of the attorney general’s office. He noted diversity on the board would enhance it and applauded the actions of the executive officer during the past couple of years. Mr. Musgrove believed A.B. 259 was a tool that would enable the board to continue their current direction, and the changes would help the individual building departments within the city and local governments.

Chairman Buckley noted her desire to put A.B. 259 in a subcommittee. The matters surrounding the bill were very important to the public and there was need of reform, which was Mr. Lee’s goal.

Jonathan Andrews, Chief Deputy Attorney General, Office of the Attorney General was supportive of any legislation strengthening protections for consumers and enhanced fair and consistent regulation of the construction industry. He understood the intent of the bill was to give the attorney general responsibility for providing civil and criminal legal services for the contractor’s board. They were prepared to assume whatever responsibilities given, but asked that resources be provided to carry out the actions. It was the understanding of his office there were over 300 active unlicensed activity cases statewide, which would require 2 criminal deputy attorney general positions. Mr. Andrews noted his office would work with the subcommittee on revising the fiscal note that was submitted to reflect given responsibilities.

Steve Holloway noted there were positive and negative aspects to A.B. 259 and encouraged the bill be considered along with other bills concerning the contractor’s board to be submitted during the session. He noted working with Assemblyman Lee, Senator John Porter, and the contractor’s board to address the issues. Mr. Holloway asked how the bill would be considered in light of the other bills.

Chairman Buckley affirmed A.B. 259 would be considered with the other bills and she commented on a case where an 80-year-old senior citizen had been dealing with a roofing company that had a $15,000 bond but went out of business. There were numerous individuals with claims, which far exceeded the bond. The current mechanism to claim a bond was to sue the victims. She asked how to explain to an 82-year-old individual why the roof of their mobile home collapsed, they were not going to get any money, but they were going to get a lawsuit. Chairman Buckley noted she had a bill on the measure and would work with the contractor’s board and any contractors in order to establish a better system.

Steve Hill, President, Associated Builders and Contractors, offered support for the direction A.B. 259 was taking and agreed the contractor’s board made substantial improvements. Mr. Hill noted term limits provided an opportunity for others in the industry to serve.

John Vergiels representing the National Swimming Pool Institute was specifically in agreement with the issue of a subcontractor being placed on the board and issues pertaining to enforcement and criminal prosecution of unscrupulous individuals.

Deborah Sheltra, Consumer Representative Member, Nevada State Contractors Board, noted she was responsive to the public and did not believe Mr. Lee had attended more than one board member meeting. Ms. Sheltra pointed out the state did not require, in NRS 624, payment and performance bonds and if they were required, the cost of construction to the consumer would increase. She did not believe Mr. Lee understood how the board worked. The board served part-time with staff doing backup work. In addition, the board conducted hearings after data was collected and served as the hearing board for all of the information. There was a certified public accounting firm who provided information on accepted accounting practices, which the board followed when they reviewed financial statements. The finances of a contractor were examined only when the contractor was initially licensed and finances were not examined again, unless there was trouble.

Ms. Sheltra explained during the many years she had been on the board, she fought to achieve some of the goals, which currently were being achieved. She pointed out some of the problems that occurred with contractors did so outside of the boards jurisdiction, such as buying advertising in the telephone yellow pages. The board could not stop the public from calling an advertisement and taking the lowest bid without consulting an attorney, such was their privilege. People needed to be responsible for their own actions. Ms. Sheltra pointed out the board had a consumer education program available, but even with all the attention, advertising, and special regulations adopted, people still availed themselves to what was at hand and did not contact the board or check records. People signed contracts with individuals who disappeared with their money.

Deborah Sheltra explained governors appointed the board, and if a board member was not responsive to the public, the member would not be reappointed. The composition of the board, left to the governor, worked adequately. In addition, the length of time she served on the board did not affect her effectiveness as a spokesperson for the people of the State of Nevada. "I think those of you who know me would say Debby is out there fighting all the time." As long as Ms. Sheltra had been on the board, subcontractors had served on it. She did not believe the board was stagnant and did not believe changing the composition of the board would make a difference.

Mr. Perkins pointed out his participation on the Committee on Commerce and Labor for four different legislative sessions and noted there were difficulties with the board in every one. Mr. Perkins explained the governor would still have the ability to appoint people to the board and credited Margi Grein with a number of successful accomplishments. He remarked at not seeing the necessary responsiveness from the board, which brought A.B. 259 forward. Mr. Perkins noted Mr. Lee’s knowledge of how the board functioned, due to the nature of his business relationships, and Mr. Lee’s attempt to replace the entire board and start with a clean slate was not perilous. Aside from workers compensation, the issues surrounding the contractor’s board were a chief constituent complaint. His constituents considered the board to be unresponsive and they were told the board did not have the ability to do their job, even though numerous actions had been taken. Mr. Perkins applauded Mr. Lee’s efforts in dealing with a serious situation.

Danny Thompson, Nevada State American Federation of Labor-Congress of Industrial Organizations (AFL-CIO), spoke in opposition to A.B. 259. The AFL-CIO did not believe changing the makeup of the board would solve the problems. Mr. Thompson considered the board to be more aggressive than in the past in dealing with contractors who had gone astray and looked forward to working with the committee to solve some of the problems.

Jack Jeffrey, Southern Nevada Building and Construction Trades Council, spoke in opposition to A.B. 259. Mr. Jeffrey did not think changing the makeup of the board would accomplish anything, and was concerned the change would cause additional problems. The board was a policy and licensing board. He thought it best to deal with individual problems and considered the present board to be dynamic.

Mr. Jeffrey noted a chief problem with the contractor’s board was it was a licensing board without police powers. The past board did not want police powers or to take responsibility. He noted the situation had changed. He would be willing to work with a subcommittee in an attempt to strengthen the statutes in order to establish a means for the board to deal with problems. He further noted a committee made up of the Clark County District Attorney and the justices of the peace had "come a long way" in their attempt to deal with the issue of unlicensed contractors.

Max Christiansen, concurred with much of what was said and noted the statutes limited the contractor’s board. He expressed a desire to work with a subcommittee on issues surrounding A.B. 259.

Mr. Lee noted he would be willing to chair the subcommittee noting the issue could not be worked out in one committee meeting. He further noted his availability and flexibility to work with the citizens of the State of Nevada

Chairman Buckley thanked Mr. Lee and noted her desire to deal with the issues that were brought forth in A.B. 259. It was her desire to move forward in a positive direction with regard to the issues.

RESPECTFULLY SUBMITTED:

Jane Baughman,

Committee Secretary

APPROVED BY:

Assemblywoman Barbara Buckley, Chairman

DATE: