The Committee on Commerce and Labor was called to order at 1:15 p.m., on Friday, March 26, 1999. Chairman Barbara Buckley presided in Room 3142 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.

Mrs. Jan Evans

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, Excused

GUEST LEGISLATORS PRESENT:

Assemblywoman Dawn Gibbons, Assembly District 25

STAFF MEMBERS PRESENT:

OTHERS PRESENT:

Following roll call, Assemblywoman Buckley opened the hearing on A.B. 489 as a subcommittee noting additional committee members would be joining the hearing shortly.

Assemblywoman Dawn Gibbons, Assembly District 25, introduced John Wiles, Division Counsel, Department of Business and Industry, Division of Industrial Relations. Ms. Gibbons noted Mr. Wiles was a bureaucrat who came to the forefront with solutions for business people who did not understand the requirements with which they had to comply.

Mr. Wiles explained section 1, subsection 1, required the administrator to clearly show there was a section within the division who enforced the Occupational Safety and Health Administration (OSHA) laws within the state and helped individuals comply with such laws.

Section 1, subsection 2, considered the issue of approval by the secretary of labor for a program of enforcement. The reason for the language was to require the division to obtain approval from the secretary of labor to ensure the designed plan was as consistent and effective as the Federal OSHA Act. Mr. Wiles noted targets were small employers, and the division did not have a

definition of small employers, but there were mechanisms in existing procedures to identify them.

Section 1, subsection 3, referenced a toll-free telephone number. The telephone number was an important assistance item for small employers, and there were many people in the business community who did not understand OSHA compliance requirements.

Chairman Buckley asked if the division, when assessing a fine, could not already consider a small employer’s lack of violation awareness and their ability to comply in the future.

Mr. Wiles explained the division had in their Nevada operations manual, which was consistent with federal law, a mechanism to provide reductions for employers based on company size. The knowledge issue was also an element in proving an offense under the OSHA act. He envisioned the proposed system would be in addition to what was already in place in that the division would provide a consultation referral.

Chairman Buckley asked if the division could perform such a function without legislation.

Mr. Wiles affirmed her question and said the division acted in such a manner on a case-by-case basis, but he was unsure if they could develop a program to their desired scope without the legislation. The division would have to go to the Department of Labor and convince them their plan would be as effective as the current program. The legislation would provide the state’s backing and demonstrate there was a comprehensive program designed for the specific purpose incorporated in the plan.

Chairman Buckley asked why the current program did not contain the elements desired in A.B. 489. She noted the encouragement of education and learning of regulations were common sense issues and asked why such a program was not in existence.

Mr. Wiles explained the division did not contain such because they were not components of existing state programs. He noted there was enforcement and consultation, and on a case-by-case basis, there were referrals for consultation. Once a fine was determined in accordance with the operations manual, there were some negotiations that occurred but no further reduction. The division sought further reductions on the monetary penalty because they believed small businesses were going to invest a substantial amount of time and effort in complying to reduce hazards in the workplace. Rather than have a small

business pay the division a penalty, the division preferred businesses invest money in reducing hazards in the workplace. Under OSHA law, the division could require a business pay a penalty and make the investment, and he hoped the program would be incentive based, encouraging employers to come to the division first before the division had to become punitive.

Ms. Giunchigliani asked if currently there was a toll-free telephone number.

Mr. Wiles said there was not an existing toll-free telephone number; however, the division just entered into a cooperative agreement with the Small Business Development Center, which would operate a toll-free number. The telephone number the division desired would be in addition and be a direct linkage to division staff.

Ms. Giunchigliani asked how the program would be funded.

Mr. Wiles stated there was a $3,900 fiscal note attached to the bill, but he believed the note could be withdrawn, and the amount absorbed within the existing program.

There were no additional questions or further testimony, and Chairman Buckley closed the hearing on A.B. 489 and opened the hearing on A.B. 451.

Major General Tony Clark, Adjutant General, Nevada Office of the Military, noted his service as the chairman of the Governor’s Commission on Workplace Safety and Community Protection, which investigated the explosion at the Sierra Chemical Plant in Washoe County on January 7, 1998, in which four lives were lost. There were 29 commission recommendations, 15 of which were adopted by gubernatorial executive order.

Major General Clark explained A.B. 451 required inspections of regulated facilities be coordinated among various regulating or inspecting agencies to reduce time burdens and disruptions to businesses and insure regular inspections by various agencies occurred. The bill was not directed at the mining operations, which were already regulated and regularly inspected. Major General Clark noted there were proposed amendments from the Division of Environmental Protection. He referenced Exhibit C, which was the Report of the Governor’s Commission on Workplace Safety and Community Protection produced by the commission in 1998. He stated page 17 of Exhibit C referred to A.B. 451.

Verne Rosse, Deputy Administrator, Division of Environmental Protection, noted Exhibit D, which was a suggested amendment to A.B. 451. He explained the division wanted to delete the language "produced, used, stored or handled to be conducted jointly by" and add language stating, "these inspections shall be scheduled to provide an opportunity for participation by. . ."

Chairman Buckley referenced Exhibit E, which were assembly bills resulting from the Commission on Workplace Safety and Community Protection. She noted a discussion of fines from a previous hearing and thought one of the issues discussed was whether enhanced fines would be for violations at explosive manufacturing plants or whether they would be across the board. Chairman Buckley also noted the necessity of discussing policy issues with regard to an amount that was appropriate; differences between small employers with a minor violation versus an explosive plant with major violations, fine increases due to inflation with the amount depending on the type of violation, and the nature and size of the business.

Mr Rosse explained there were provisions in statute allowing the division an opportunity to judge the penalty based on the size of the facility and the degree of harm or potential harm in existing Chemical Accident Prevention Programs (CAPP).

Mr. Wiles recommended that instead of providing in section 1, subsection 1, for the adoption of regulations, the bill stated the division enter into cooperative agreements which provided for inspections of regulated facilities. He noted there was an important distinction between regulations and a cooperative agreement program, which already existed under current law and would provide the coordination of those activities. With such a change, he believed section 3 would be unwarranted because it would be unnecessary for the division to develop regulations in such an area. The division would simply enter into a cooperative agreement as provided in section 1.

Chairman Buckley summarized Mr. Wiles was saying his division anticipated inspections being carried out by cooperative agreements, thus not necessitating a need to adopt regulations.

Mr. Wiles believed the laws and programs already existed for inspections, which would not necessitate having a regulatory program. He understood the intent of this bill was to provide a coordinating mechanism for access and inspections. Involved agencies under current law had the right to inspect facilities, and he did not believe the adoption of regulations to fulfill a statutory responsibility was necessary.

Chairman Buckley explained the concern was to ensure plants were inspected and agencies with different responsibilities coordinated. She noted the concern was not in statute versus regulations; the concern was the job be done.

Mr. Hettrick said if the cooperative agreement used existing regulation, he could not see forcing anyone to rewrite the regulations, but if the cooperative agreement did not use existing regulation, then he totally agreed. He stated if a cooperative agreement allowed for the use of existing regulation, it would save everyone time and money.

Chairman Buckley asked where the statute regarding inspections was currently located.

Mr. Wiles noted he was not familiar with chapter 459 but thought Mr. Rosse could address the question. Under chapter 618, the department had the ability to conduct inspections. The committee could require such agreements just as regulations were required.

Mr. Rosse stated the statutory reference was Nevada Revised Statutes (NRS) 459.387. He stated there were two required reference inspections, and one reference was after assessments had been done to ensure compliance with the assessment. He noted his department inspected at every milestone to ensure the milestone was met.

Chairman Buckley asked what was missing from current statutes if the goal of A.B. 451 was to require coordination of different agencies and ensure the job was done correctly.

What was missing according to Mr. Rosse was the reference of with whom the department needed to coordinate.

Chairman Buckley asked if Mr. Rosse would approve if language was amended requiring the program for inspection of facilities be conducted cooperatively with different agencies to ensure involvement and coordination.

Mr. Rosse would approve and added the division had no problem with notifying other agencies to participate in an inspection, but frequently the other agencies were busy and might not be available for the inspections, which was why his division wanted to be sure they gave other agencies an opportunity to participate. He noted it was up to the other agencies whether they participated or not.

Chairman Buckley explained NRS.459.387 stated the division may enter a facility for inspection to verify compliance with statutes and the quality of all work performed. She noted the division shall develop and enforce a system of record keeping and filing of annual reports, but the statute was silent on the need for coordination and cooperation with different agencies.

Mr. Hettrick suggested language for section 1, subsection 1, stating "the division shall enter into cooperative agreements to provide for inspections of regulated facilities where explosives are manufactured for sale." He then suggested using the proposed amendment in Exhibit D that said, "provide an opportunity for participation by" followed by the suggested language in the bill.

Chairman Buckley noted the failure of any of the joint partners to conduct their inspections did not excuse the state from performing their inspections. If a cooperative agreement was entered into and other parties did not show up, the state would still be expected to do its job.

Ray Bacon representing the Nevada Manufacturers Association submitted amendments to A.B. 451 (Exhibit F) and explained in the past, different agencies entered into a facility and inspected what was easy often duplicating previous efforts. There was no way of knowing whether the important pieces were inspected. He stressed the importance of a coordinated effort in inspections, that the inspections be done at one time, and done correctly so as to leave nothing out. Mr. Bacon stated whether such was accomplished through cooperative agreement did not matter.

Danny Evans, Chief Administrative Officer, Department of Business and Industry, Division of Industrial Relations Occupational Safety and Health Enforcement Section, agreed with statements by Mr. Wiles. He noted concern about conducting joint inspections noting if the department was to lead an inspection under OSHA laws, they were not supposed to provide advance notice of such inspection. If other entities, such as the police, fire departments, and the Environmental Protection Agencies were invited, word could get out to an employer that an inspection was to occur.

Chairman Buckley asked if one could not still enter into cooperative agreements to conduct joint inspections, which would ensure coordination, and if required by federal law, still conduct surprise inspections.

Mr. Evans thought it was possible, but he was not sure.

Chairman Buckley noted cooperative agreements generally meant the department conducted inspections within the ability, laws, and regulations governing the agency.

Mr. Evans was unsure how to respond without discussing the issue with those in the federal OSHA office. He referenced an amendment that was discussed in relation to A.B. 112 and was applicable to a violation classified as "criminal willful" where an employer deliberately committed a criminal violation without regard to employee safety. Mr. Evans thought there had been three cases in the past 15 years that fell into such a category and none of the cases were ever prosecuted in district court because local district attorneys had other matters to pursue, which was the reason for the amendment with regard to A.B. 112.

Mr. Evans referenced Exhibit G noting the $20,000 dollar amount be changed to $140,000 on a "criminal willful" violation. The section was left out when the penalties were multiplied by seven. He noted the serious violation change from $1,000 to $7,000 and the change from a willful citation from $10,000 to $70,000, which occurred in the 1989 or 1991 Session of the Nevada Legislature.

Exhibit G, section 2, was a recommendation from the Report of the Governor’s Commission on Workplace Safety and Community Protection (Exhibit C, page 24, item 7), which recommended the Nevada Legislature examine Arizona statute 23-418.01. The Arizona statute pertained to penalties collected for willful or repeated violations causing employees permanent disability or death. The penalties would go to the surviving widow or widower of someone killed on the job. Mr. Evans thought such was fair.

Chairman Buckley asserted the statute was only for willful violations involving death and did not pertain to the other statutes involving fines, whereby Mr. Evans agreed.

Chairman Buckley asked if there was a precedent in Nevada statutes where fines were paid to survivors or dependents.

Mr. Evans stated there were none in NRS 618. He referenced a discussion with the director of the Arizona program, noting they dealt with the issue three times in the last 10 years. The issue was not addressed very often, but he thought it was important the state have something in law deterring employers from being lax about employees.

Chairman Buckley had no doubt families deserved the consideration, but from a legal point of view, the statutory scheme needed to be considered.

Mr. Hettrick had no problem with the bill’s intent but desired a possible language change. He noted businesses were already under worker’s compensation laws, and families would receive family benefits for deaths. Mr. Hettrick thought the statute might include language stating the consideration "may" be used versus an absolute mandate.

Chairman Buckley stated the issues would be considered at the work session noting the tragedy of families not being able to bury their loved ones in their hometowns.

Mr. Evans explained the dollar amounts were adjusted by the operations manual. The amounts started at a certain level and were reduced from such level. There could be a 90 percent reduction for a small employer.

There being no questions or further testimony, Chairman Buckley closed the hearing on A.B. 451 and opened the hearing on A.B. 535.

Major General Clark explained A.B. 535 required explosive manufacturing facilities be subject to provisions of CAPP, which was administered by the Division of Environmental Protection. He noted the bill required an up-front assessment of risks, an analysis of hazards, and a plan to reduce such hazards or accidents in the operation of the facilities. The bill was not intended to apply to the mining industry. He understood Mr. Rosse had a number of amendments from the Division of Environmental Protection, and he supported them.

Mr. Rosse explained Exhibit H, which were amendments to A.B. 535. The amendments noted on page:

• 1, section 2, the importance of the definition of explosive being uniform;
• 3 line 28, the deletion of the new language "or explosives;"
• 3, line 38, added a new subsection 5, which stated, "facilities that manufactured explosives shall compensate the division for costs incurred to conduct site inspections and prepare inspection reports. The division may invoice the facility at any time for compensation;"

• 3, line 38, renumbered existing subsection 5 to subsection 6;

• 3, line 40, deleted the new language "and explosives;"
• 4, line 35, deleted the new language "Within 90 days;"

• 4, line 36, referenced amending the language to read, "(a) Within 90 days after a substance is added to the list of highly hazardous…;"
• 4, line 39, referenced amending the language to read, "(b) Within least 90 days before a highly hazardous substance is newly introduced into the…;"
• 4, line 42, referenced amending the language to read, "(c) At least 90 days before an explosive is newly introduced into the facility, if the…;"
• 7, line 6, referenced amending the language to read, "B. Failure to pay [annual] fees assessed pursuant to NRS 459.3824…75 percent of the fee;" and
• Item 11 replaced the term "produced and stored" with "manufactured for sale or manufactures for sale at the following locations: page 2, line 23; Page 2, line 41; Page 4, line 16; Page 4, line 43."

Ms. Berman mentioned Exhibit H, item 3, and stated the language appeared to be a punishment and asked for clarification.

Mr. Rosse explained the way the chemical action prevention program assessed fees to pay for the program was based on a facility fee and a per unit fee, which considered the quantity of chemicals a facility had on-site. When considering explosives, a fee generating mechanism did not work because the volumes and the way the division regulated the program were different. Mr. Rosse explained the division was going to charge a facility for their actual costs for regulating instead of putting the facility into a fee category.

Ms. Berman asked what a regular charge would be.

Mr. Rosse explained outside of explosives, the charge varied.

Ms. Berman again referenced Exhibit H, item 3, which said, "Facilities that manufacture explosives shall compensate the Division for costs…The division may invoice the facility at any time for compensation." She asked if the amendment was referring to the division being able to send a bill whenever the division determined it be done. Mr. Rosse affirmed Ms. Berman’s question.

Ms. Berman asked how many times Mr. Rosse envisioned the division would go to a specific company in a year.

Mr. Rosse explained when a new facility was to be constructed, the division considered construction plans before construction commenced to see if the plans met code and regulatory compliance. If a facility provided all the plans and there were no problems, the division would probably visit once. As the construction proceeded, the division would conduct inspections to ensure code standards were followed. It was difficult for Mr. Rosse to determine whether the division would visit a facility one time or a dozen times; it depended on the facility and the design of the facility.

Chairman Buckley inquired as to fees charged for licensing and inspection. She inquired as to the current fee structure, how much the division charged for initial licensure, whether the charge was to cover inspections, and if the division billed anyone else for inspections.

Mr. Rosse explained the statutes in section 7 said an owner had to pay a fee, and the annual fee was the sum of the base fee and any additional fees imposed by the commission. The base fee established by the commission was $3,100, and the additional fee was a per unit fee of $10.50 per unit. He explained how the division figured the units using chlorine as an example. Mr. Rosse noted the regulatory threshold of 1500 pounds amounted to 1 unit. If a facility had 3000 pounds, they had 2 units and paid $21. The greater number of units a facility had the higher the fee and the greater threat the facility was to the community.

Chairman Buckley asked if the chlorine facilities were charged for site inspections as well.

Mr. Rosse answered negatively noting the unit and base fees covered costs.

Chairman Buckley asked if any other entity in the state charged an inspection fee similar to such in paragraph 3, whereby, Mr. Rosse responded negatively.

Chairman Buckley asked why the state would not remain with the current statutory scheme and ensure the licensing fee was sufficient to conduct necessary inspections.

Mr. Rosse explained the division could implement the base fee, but for the unit fee, it would be difficult to know what the threshold quantity would be. A facility could have large quantities of chemicals that may not be hazardous by themselves, but when they were brought together, the chemicals could become a hazardous explosive.

Chairman Buckley asked how the fee was presently calculated in the law and if a licensure fee was paid.

Mr. Rosse noted the division did not calculate the fee; they were not regulated noting A.B. 535 was to bring explosives into the regulatory scheme.

According to Major General Clark, a reason the commission recommended explosives be added to the Chemical Accident Prevention Program was because the program was a well regulated program run by the division.

Chairman Buckley stated it bothered her the division would be so loose as to say they were going to inspect whenever they wanted and then send a bill. She thought it was appropriate that an initial licensure fee be paid, and the fee be reasonably based on inspection costs similar to the original recommendation drafted by Major General Clark.

Mr. Hettrick did not have a problem with the inspection fees and all the fees per se but was concerned with unit fees being a percentage. He noted they did not have a relationship with the actual cost of inspection but were a flat unit based on the 1500 pounds of chlorine, as the example was presented. He thought the fees ought to be tied to the actual cost of inspection. As proposed, a facility was punished for doing a good job and increasing the size of their business. Mr. Hettrick though the fees ought to have some relationship to cost when it came to government and not a percentage of profit.

Mr. Hettrick referenced section 6, subsection 1(a), of A.B. 535 and noted Exhibit H suggested a language change from "produced and stored" to "manufactured for sale or manufactures for sale." Mr. Hettrick thought the language "manufactures for sale" should also be used in the above-mentioned section so as to be consistent throughout the bill.

Major General Clark noted the background for A.B. 535 was found in the commission’s report (Exhibit C pages 19 and 20).

Mr. Rosse responded to the question about fees noting the establishment of the fees was not arbitrary. He explained there were 35 or 36 facilities with 45 processes that had different chemicals. The division estimated the cost of staff doing such work following the language on base fees and unit fees and came up with a total figure.

Mr. Hettrick considered it problematic when the division took their cost to conduct an inspection, divided the cost by the number of facilities they had to regulate, came up with a formula based on their production, and then assigned a cost. When production was increased, the division received more than the cost to conduct the inspection, and if production was decreased, they did not receive enough. Mr. Hettrick thought it was inappropriate to tie the fees as a percentage of production

Chairman Buckley noted the suggested choices were to leave the bill as it was, which was to be similar to hazardous materials and a unit cost assessment, or to use the suggested amendment provided by Mr. Rosse (Exhibit H, item 3) with regard to actual costs. Chairman Buckley noted concern with the second choice as the language in the amendment might turn out to be more arbitrary than language in the bill.

Mr. Bacon noted the association was comfortable with whichever way the bill went as per the above discussion.

Chairman Buckley closed the hearing on A.B. 535 and:

ASSEMBLYWOMAN SEGERBLOM MOVED TO AMEND AND DO PASS A.B. 535 CONSIDERING THE PROPOSED AMENDMENTS (EXHIBIT F, EXHIBIT G, and EXHIBIT H), MAKING THE EXPLOSIVE DEFINITION CONSISTENT WITH PREVIOUS BILLS AND WITH THE EXCEPTION OF ITEM 3 ON Exhibit H, WHICH WOULD KEEP THE FEES CONSISTENT WITH LANGUAGE IN A.B. 535.

ASSEMBLYWOMAN GIUNCHIGLIANI SECONDED THE MOTION.

THE MOTION CARRIED.

Chairman Buckley began the work session.

Vance Hughey, Committee Policy Analyst, noted the first two bills in the work session document (Exhibit I) were related and dealt with mortgage investments. He explained A.B. 64 was heard in committee on February 17, 1999, and referred to a subcommittee consisting of Assemblyman Goldwater and Assemblywoman Berman. He explained there was a subcommittee meeting on March 11, 1999, and the subcommittee agreed to recommend to the committee an amendment to A.B. 64, which was included as Exhibit I.

Assemblyman Goldwater, Assembly District 10, said there was no formal action taken as a subcommittee. He noted Ms. Berman saw the amendment to A.B. 64 and did not have a tremendous problem with it.

Kevin Powers, Senior Deputy Legislative Counsel, Legislative Counsel Bureau, Legal Division, explained during subcommittee discussions a motion was made to split the existing mortgage company chapter in (NRS) 645B so as to allow for two separate entities. Mortgage companies would have a new chapter (sections 2 through 39 of Exhibit I), and they would not handle investor funds. The companies that bought or sold notes secured by liens on real property or made loans secured by liens on real property using their own money were defined in section 8 of the proposed amendment (Exhibit I).

Mr. Powers noted the chapter, which consisted of provisions set forth as sections 2 to 39, was a reenactment of most of the existing provisions of chapter 645B.

Mr. Powers pointed out a change in the new chapter relating to mortgage companies was found in section 10, subsection 8, of the proposed amendment (Exhibit I). He explained any one natural person or husband and wife who provided money for investment in loans secured on real property on his or her own account was exempt from the mortgage company chapter. The subcommittee added language stating, "unless such a person makes a loan secured by a lien on real property using his own money and assigns all or part of his interest in the loan to another person, other than his spouse or child, within 5 years of the date on which the loan is made." The language was a recommendation to prevent certain individuals from circumventing the mortgage company provisions by making loans using their own money and then quickly assigning an interest in those loans to other people.

Mr. Powers noted an addition to the new mortgage company chapter was in section 28 (Exhibit I), which prohibited mortgage companies from charging a late fee, penalty, or an additional amount of interest to anyone who failed to deliver their payment on the due date. The section stated a mortgage company could not charge the additional amount of interest or penalty if the payment was delivered to the company before 5 p.m. on the due date. If the office of the mortgage company was not open on such day until 5 p.m., then the payment could be delivered without a late fee or penalty until 5 p.m. on the following day that the mortgage company had their office open.

The remainder of the items in the new chapter dealing with mortgage companies were existing provisions under chapter 645B. Mr. Powers noted if a mortgage company did not deal with investor money, existing statutes would apply to them, and some of the new provisions added by the interim subcommittee that were included in A.B. 64 would not apply to that type of mortgage company.

Mr. Goldwater explained one chapter applied to individuals who lent their own money, which was like current law. He noted mortgage brokers and individuals who lent investor money would be under different regulations. Compromises were reached with individuals from the title industry, mortgage bankers, and mortgage brokers who had concerns. Mr. Goldwater explained there were mortgage brokers who were still unhappy with A.B. 64, but the majority of mortgage brokers were willing to compromise and willing to negotiate, which resulted in a consumer friendly bill.

Mr. Powers stated the changes he would proceed through were changes to existing provisions of A.B. 64 that the subcommittee had agreed to amend, which began in section 46 in the proposed amendment (Exhibit I). He noted the subcommittee decided a mortgage agent could only be a natural person. The original language in A.B. 64 allowed for mortgage agents being a corporation, partnership, or an unincorporated association.

The proposed amendment added a provision in section 64 stating a license may be refused to a mortgage broker or agent if it appeared the applicant would be subject to control by a relative who would be ineligible to be licensed pursuant to the chapter. The new provision also provided a mortgage broker should teach mortgage agents the fundamentals of mortgage lending and the ethics of the profession as well as supervise the activities of mortgage agents.

Mr. Powers noted a major change from the original provisions of A.B. 64 was in section 68 of the proposed amendment. Originally A.B. 64 prohibited anyone licensed as a mortgage company from holding a license as an escrow agency, title agent, a title insurer, an escrow officer, or someone acting in the capacity of construction control. The prohibition was altered under the amendment noting a licensee could hold another license as one of the above mentioned entities, but they were prohibited from acting as a separate entity for any acts or transactions involving investor money for which the mortgage broker arranged the loan. If the mortgage broker arranged the loan, they could not act in the capacity of construction control, escrow agent, escrow office, title agent, or title insurer for the money involved in such loan.

Section 71 required a mortgage broker obtain a written appraisal of the real property that would secure the loan before accepting investor money unless the mortgage broker obtained a written waiver of the right to appraisal from each of investors involved in the loan.

Mr. Powers again noted section 72 and explained the original language in A.B. 64 provided the mortgage broker had to provide a copy of the deed of trust to each investor no later than 5 p.m. on the next business day after the deed of trust was recorded. The provision in the amendment provided a copy of the deed of trust had to be supplied to each investor no later than 3 business days after the mortgage broker received a copy of the recorded deed of trust.

An original provision of A.B. 64 was if a person filed a complaint with the commissioner of financial institutions, the commissioner had to schedule a hearing on the complaint if there was reasonable cause to believe the violator had committed the offense. In section 77, subsection 6, language was added, which provided the commissioner was not required to schedule or conduct a hearing on an alleged violation if the commissioner entered into a written consent agreement with the alleged violator.

Originally under A.B. 64 if a mortgage company breached any of the trust account provisions dealing with investor money, the commissioner was required to impose a fine and revoke the license of the mortgage company, broker, or agent. Under the amendment in section 78, the commissioner must impose a fine for a trust account violation on a mortgage broker or mortgage agent but had the discretion whether or not to suspend, revoke, or place conditions on the license. The revocation section became discretionary.

Mr. Powers noted Exhibit I, pages 57 and 106, and stated if the attorney general prevailed in a civil action to enjoin a mortgage broker who violated a chapter, the court shall order the person against whom the civil action was brought to pay court costs and reasonable costs of the investigation and prosecution of the civil action. In a criminal action, if the violator of the mortgage broker chapter was convicted or plead nolo contendere to a violation, the court would order the person to pay court costs and reasonable costs of the investigation and prosecution.

Two provisions were added on page 92 of Exhibit I in NRS 645B.175, which were the trust account provisions. He noted before a mortgage broker could release money to a debtor, a mortgage broker must provide written instruction to a title agent or title insurer requiring a policy of title insurance be issued for the real property securing the loan.

Exhibit I, page 94, was a new subsection 6. Originally the provision required when payment from a borrower was accepted by a mortgage broker, the exact proportion of money to each investor must be released. The amendment provided an investor may waive the right to receive all or a portion of any payment due under the loan.

The last main provision added by the proposed amendment was on page 102 of Exhibit I. The provision required any advertisement used by a mortgage broker comply with provisions concerning deceptive advertising in chapter 598 and any applicable federal law and regulation relating to deceptive advertising and the advertising of interest rates.

Mr. Goldwater said the consumer protection concepts had not changed nor had the methodology changed. There were technical changes and compromises made. He understood there were those in opposition and those who disagreed with actions taken, but the actions were generally accepted.

Mr. Hettrick referenced Exhibit I, section 64, page 41, which said, ". . . if it appears that the applicant would be subject to control. . ." and section 64, subsection 2(b) stated "it appears." He found the language to be ambiguous and thought it should be tightened.

Mr. Powers said the "it appears" language was common in title 54 dealing with professions. However, a more definite standard could be "a more reasonable standard to believe."

Mr. Hettrick noted Exhibit I, section 71, subsection 1, which said an appraisal must be provided. He explained the problem was if an individual was buying a beneficial interest in a loan secured by real property, the individual was purchasing a note or a portion thereof and could be in second position. The issue was not that an individual needed an appraisal, but rather a title search of all of the people who had security interest in a property. Mr. Hettrick thought the language should be "the broker has offered to obtain," and he thought the language should specify a complete title search or something that disclosed any other holdings in the property.

Mr. Goldwater explained such language was in A.B. 64; subordinate interests must be disclosed. He stated the appraisal language was introduced by the director of the Financial Institutions Division and was new language.

Mr. Powers said there was a requirement in NRS chapter 645B and the additional requirement was added stating before money was released to the debtor, the mortgage broker had to obtain or direct a title agent or title insurer to provide a title insurance policy. He further noted in the disclosure form referenced in Exhibit I, on page 98, it was provided a mortgage broker had to disclose to each prospective investor, "whether the real property that will secure the loan is encumbered by any other liens and, if so, the priority of each such lien, the amount of debt secured by each such lien and the current status of that debt, including, without limitation, whether the debt is being paid or is in default." The disclosure form under the provisions of A.B. 64, that the mortgage broker had to provide to each investor, must include whether there were prior liens and the priority of such liens.

Mr. Hettrick noted a title policy had to be provided stating a search would be conducted in order to provide the title policy. He observed the search information should also be provided to the investor.

Mr. Goldwater said Mr. Hettrick’s suggestion was originally included in the bill, but the title companies thought the inclusion of the information would be onerous. In a compromise, the concept of an issuance of title policy would require a title search.

Mr. Hettrick referenced Exhibit I, section 81, which said, "if the person fails to appear, without reasonable cause, at a hearing before the commissioner concerning . . . the commissioner shall." Mr. Hettrick said if the person did not arrive at the hearing, how would the commissioner know there was reasonable cause. He then noted language stating, "the commissioner shall notify . . . the attorney general shall request . . . the court shall issue . . ." He was concerned an individual would not have the opportunity to explain what his or her reasonable cause was. He desired language allowing the individual time to respond before action occurred.

Mr. Goldwater stated a problem found by the interim committee was the Financial Institutions Division had a great deal of discretion, and as a matter of public policy, the interim committee decided there was some discretion that should be taken away from the office. Assemblywoman Barbara Cegavske thought there were numerous things the office should have done and should have been bound to do.

Mr. Hettrick again referenced Exhibit I, section 81, which said, "The court shall issue a warrant for the arrest of the person if there is probable cause to believe that the person failed to appear without reasonable cause." He considered the process could take long enough so as to allow for the individual to provide proper information, but he thought the probable cause language should be moved up as high in the chain as possible before "shall order" arrest warrants were issued.

Mr. Powers thought what Mr. Hettrick was suggesting was feasible. The probable cause language in section 81, subsection 3, was tied to any court making a decision with an arrest warrant. The court could issue the warrant only with probable cause.

With regard to the issue of determining whether there was reasonable cause not to appear at a hearing, the provisions of section 81, subsections 1 and 2, were mandatory, and the commissioner had to immediately notify the attorney general, and the attorney general had to seek an arrest warrant. The first opportunity for a person to argue they had reasonable cause not to appear was when they were arrested or if they appeared voluntarily.

Chairman Buckley stated under separation of powers, the legislature could not mandate the court shall issue an arrest warrant.

Mr. Hettrick thought language noting probable cause needed to be moved up to section 81, subsection 2.

Mr. Goldwater said there was a reasonable cause standard in the language. If the committee desired the word reasonable be probable, he had no difficulty with such action.

Mr. Hettrick said the reasonable cause was in relation to the person who did not appear; the probable cause was in relation to the person who had the issue.

Mr. Powers said Mr. Hettrick’s remark was correct. As it stood, when an individual failed to appear, the commissioner had to notify the attorney general. The attorney general then requested an arrest warrant. As noted by Chairman Buckley, the court was not duty bound to issue an arrest warrant, even if there was probable cause.

Chairman Buckley asked if a person failed to appear at a hearing, would they not have to be provided an opportunity to show their failure to appear was without reasonable cause before the actions in section 81 took affect.

Mr. Powers said no. The action of seeking the arrest warrant would not require reasonable cause be shown.

Chairman Buckley stated Mr. Hettrick’s concerns could be addressed and yet stay within the intent of the bill.

Mr. Hettrick referenced Exhibit I, section 81, subsection 5, which said, "the commissioner may conduct the hearing in the person’s absence, draw any conclusions that the commissioner deems appropriate from his failure to appear and render a decision concerning the alleged conduct or violation." Mr. Hettrick thought the language was very broad and it concerned him that the commissioner could draw any conclusion whether the individual was there and as to what occurred. He would like to see language included indicating "reasonable" conclusion.

Mr. Goldwater noted there would be a reliance on the commissioner being a reasonable individual.

Mr. Hettrick noted section 86, subsection 3, which required records be kept in the office where they were generated. He wondered why there could not be a central office if the mortgage broker was being forced to provide the records.

Chairman Buckley considered the language to say the mortgage broker had to have a license for each branch office; there was nothing in the language about record keeping.

Mr. Powers thought Mr. Hettrick was referring to NRS 645B.080, which was on page 74, section 92. The language said, "Each mortgage broker and mortgage agent shall keep and maintain at all times at each location where the mortgage broker or mortgage agent conducts business in this state complete and suitable records of all mortgage transactions. . ." He said most of the language was existing language; the only additions were the change of the term mortgage company to mortgage broker and adding mortgage agent.

Seeing the language was mainly existing language, Mr. Hettrick had no problem with the issue. He referenced section 88, subsection 7, which said, "A mortgage agent may not change the mortgage broker with whom he is associated or employed, unless the commissioner gives his written approval and the mortgage agent pays the fee required pursuant to NRS 645.050." Mr. Hettrick understood the intent of the language, but would like to change the language to read "notified in writing." He did not understand how the state could tell a person who they could work for or not work for. To have to obtain written permission from the commissioner seemed heavy handed in the law.

Mr. Powers said the language came from the escrow agent and escrow agency chapter where an escrow agent had to obtain written approval from the commissioner of financial institutions in order to change the escrow agency with whom the agent was associated. He also thought the language was similar to the real estate broker and real estate person chapter.

Chairman Buckley noted if someone was going to change their affiliation, they had to go through the licensing procedure.

Mr. Humke asked to make a motion to:

AMEND AND REREFER A.B. 64 TO THE ASSEMBLY COMMITTEE ON WAYS AND MEANS.

Chairman Buckley did not accept the motion desiring to hear additional testimony.

Mr. Goldwater noted A.B. 64 was not an entirely new bill. A.B. 64, presented at a previous hearing, was now for brokers with very few modifications in the amendment (Exhibit I). The only reason the amendment was so thick was because there was an entirely new chapter for bankers.

Mr. Hettrick referenced Exhibit I, section 57, subsection 1(c) and (d). He thought the language created an individual who held themselves out as being able to make a loan secured by a lien on real property. He noted under the definition, the person became a mortgage broker, and he believed the intent was not to affect an individual who acted in such a manner. Mr. Hettrick believed those who held themselves out as being able to buy or sell notes secured by liens on real property would be considered a mortgage broker. He desired the language be clarified.

Mr. Powers said the definition of section 57 was taken from NRS 645B.010, as it currently existed for the definition of a mortgage company. He noted the concerns of Mr. Hettrick would probably be addressed by the exemptions existing in NRS 645B and would continue to exist under the bill. The exemptions were located in NRS 645B.015, which was section 85 of A.B. 64. He noted there were 10 exemptions and one was, "any one natural person who lends money on their own account."

Marty LeVasseur representing the Nevada Association of Mortgage Brokers stated opposition to the dilution of rights as mortgage brokers but noted they were not opposed to reform. He desired the bill to go forward; reform was necessary. Mr. LeVasseur referenced section 65 of A.B. 64 and noted a desire for continuing education to be placed in the section. The association thought the standards should be raised, and the industry required the broker to teach ethics to their agents.

An additional item Mr. LeVasseur would like included in the bill was a "net worth requirement." He cautioned the committee noting the average net worth of a mortgage broker was $5,000. Placing net worth requirements on the industry would force them to change the nature of their business to corporations and begin to accumulate cash, which was not the way the mortgage brokers currently conducted business. The net worth requirement would begin a migration to a corporate structure as they had a tendency to segregate the capitalized businesses versus the noncapitalized businesses.

Chairman Buckley entertained a motion.

ASSEMBLYMAN DINI MOVED TO AMEND AND REFER A.B. 64 TO THE ASSEMBLY COMMITTEE ON WAYS AND MEANS.

ASSEMBLYMAN PARKS SECONDED THE MOTION.

THE MOTION CARRIED.

Chairman Buckley noted most of Mr. Hettrick’s concerns appeared to deal with issues of language clarification. To the extent that Mr. Goldwater and Mr. Powers could incorporate the language into the final version of the bill, such would be fine with the rest of the committee.

Mr. Hughey referenced Exhibit I noting A.B. 72 also considered issues of mortgage investment.

Mr. Hughey explained A.B. 72 repealed an existing exemption from registration requirements of chapter 90, which was the Securities Act of the NRS for transactions involving one or more promissory notes secured by a lien on real estate or participating interests in such notes by a mortgage company licensed pursuant to chapter 645B of NRS to engage in such transactions. The bill also allowed the administrator of the Securities Division of the Office of the Secretary of State to, by regulation or order, continue to exempt transactions complying with certain federal regulations regarding "accredited investors."

Mr. Hughey noted two proposed amendments included in Exhibit I, which were explained by Mr. Goldwater.

Mr. Goldwater explained A.B. 72 was not considered by the subcommittee. He noted two amendments, which required registration of deeds of trust if the value of the note was over $5 million and there were 35 unaccredited investors. The unaccredited language came from Regulation D of the Securities Act. The argument for such language was because the loans were large syndicated loans where an unaccredited investor had a great deal of exposure. There was not as much exposure for smaller notes so there was not the need for consumer protection, but arguments against stated consumers needed the protection and everything should be registered as proposed in A.B. 72. The second amendment was proposed by the Office of the Secretary of State.

Secretary of State Dean Heller noted concern with the first proposed amendments to A.B. 72 because they would give the Office of the Secretary of State 25 percent of the authority and 100 percent of the responsibility. He explained the majority of problems encountered in securities selling was with those who sold securities on a commission basis. Generally the sales were "hard" sells that went beyond the rules and regulations. Amendment (a) considered the issue noting, "no commission or other similar compensation is paid or given, directly or indirectly, for soliciting a prospective subscriber" (Exhibit I, page 2).

The second amendment proposed by the Office of the Secretary of State (Exhibit I) stated, "no public advertising or general solicitation is used in connection with the offer to sell or sale." Mr. Heller explained an entity could advertise and pay a commission to salespeople, but if they acted in such a manner, they must register with the Office of the Secretary of State.

Mr. Goldwater noted there were three options before the committee, which were: A.B. 72 as it was written; amendment number one as proposed, or amendment number two. All three took a step towards consumer protection.

Chairman Buckley asked Secretary of State Heller why he thought his approach was best.

Mr. Heller said in the case of the particular amendments, option 3 was the medium approach. He supported the first option presented by Mr. Goldwater more than the amended options.

Chairman Buckley then clarified Mr. Heller’s first choice was A.B. 72 in its unamended form and his second alternative was to amend the bill to allow for exemptions, and he would further request clarifications in the amendment presented by his office.

Mr. Heller affirmed Chairman Buckley’s statement.

Chairman Buckley noted there was initial confusion about the purpose of A.B. 72 and what registration meant. She explained she was comfortable with the bill in its first printed version and thought the laws were not strong enough with regard to such transactions.

ASSEMBLYMAN NOLAN MOVED TO DO PASS A.B. 72.

ASSEMBLYMAN PERKINS SECONDED THE MOTION.

Mr. Hettrick was concerned with the allowed exemption. He referenced section 2, where language was removed stating, "a transaction involving one or more promissory notes. . ." and included language which said "The administrator by regulation or order may: exempt from NRS 90.460 and 90.560 a transaction involving one or more promissory notes. . ." The issue for Mr. Hettrick was the language said "may" rather than "must," which could result in no exemptions, and the language said one or more promissory notes. A single promissory note held by an individual on a single piece of property was not a security it was a note held by a deed of trust, and Nevada was a deed of trust state. The note was the disclosure.

Mr. Goldwater said a note was a security that required a specific exemption be provided from the Securities Act. The note was presumed a security that was exempted from registration.

Mr. Hettrick agreed with the idea of security in the sense of a security document instrument, but the issue was disclosure. Notes secured by a deed of trust were disclosed; it was the entire disclosure. A note held by a single person on a single piece of property was the disclosure, and A.B. 72 did not exempt such. He asked why a single note had to be treated like a security and noted he was talking about a security in the same sense of a stock.

Mr. Heller said the disclosure was very broad with the company. Principles were at issue. Issues such as past, poor, and failed transactions would be before an investor so when they received the note, better decisions could be made, which could not currently be done.

Mr. Hettrick did not understand how a person’s past history, in regard to a note, had any bearing on another individual buying a current note secured by a deed of trust on a piece of property. He did not care if a person failed on 100 notes previous to his transaction. The failure had nothing to do with the deed of trust secured by a note.

Mr. Heller said it was the generally accepted process of disclosing information to investors and the argument presented by Mr. Hettrick was a minority point of view, as the majority of states required the disclosure as in A.B. 72.

Mr. Goldwater said the public policy regarding the issue was established. The State of Nevada and all other states required registration of securities. The issue was repealing the specific exemption.

Chairman Buckley took a vote on the motion noting numerous committee members were absent. If the motion failed, she would bring the bill back for another work session and discuss it with the full committee present.

THE MOTION FAILED.

Mr. Hettrick, Mr. Beers, Ms. Berman and Mr. Humke voted no on A.B. 72.

Mr. Hughey explained A.B. 195.

He noted the bill was on another work session and there was a question regarding a provision dealing with food stamps and Medicare Part B coverage and it appeared the committee considered such to be income items not asset items. Mr. Hughey checked with Assemblywoman Ohrenschall and Renee Diamond from the Manufactured Housing Division and it was proposed to move the provisions out of section 1, page 2, by deleting lines 22 through 25, and adding a provision to section 1, page 2, where it was appropriate, stating the administrator must exclude from the calculation of monthly household income the value of any food stamps received pursuant to the Food Stamp Act of 1997, as amended, or if the person was receiving Medicare Part B coverage, the cost of such coverage, whichever was greater (Exhibit I).

Chairman Buckley reiterated some of Mr. Hughey’s comments and noted Assemblywoman Ohrenschall, Ms. Diamond, and Joe Guild who represented the Manufactured Home Community Owners were in agreement with all of the amendments.

ASSEMBLYMAN PERKINS MOVED TO AMEND AND DO PASS A.B. 195.

ASSEMBLYMAN HUMKE SECONDED THE MOTION.

THE MOTION CARRIED.

Mr. Hughey said Neena Laxalt, representing the Board for the Regulation of Liquified Petroleum Gas, requested the bill be withdrawn.

Major General Clark explained A.B. 536 required a permit for construction or modification of a facility that manufactured explosives or highly hazardous materials. The bill was not aimed at mining industry operations.

Mr. Rosse presented Exhibit J, which was a list of amendments to the bill as follows:

• Page 1, line 3, which was amended to read, "No person may commence construction and operation of a new process that is regulated pursuant to NRS 459.3813 {regulated facility} unless he first obtains {a} permits from the division for that construction and to commence operation,"
• Page 1, line 7 was amended to read, "3. The division may require the applicant to comply with requirements that is establishes by regulation before issuing {a} permits for construction and to commence operation,"
• Page 2, line 3 was amended to read, "5. The division shall adopt through the State Environmental Commission such regulations as are necessary to carry."

Item four of Exhibit J was amended to read, "Process means an activity that involves a substance listed pursuant to NRS 459.3816 or NRS 459.3833.2(a), including without limitation, the use, storage, manufacturing, handling or on-site movement of such a substance or a combination of such activities. The term includes a group of vessels that is interconnected or a group of separate vessels that is located in such a manner that the substance could be involved in a potential release. Vessel means a reactor, tank, drum, barrel, cylinder, vat, kettle boiler, pipe, hose or other container."

Mr. Rosse noted proposal number (5) was "cleanup" legislation for the fund for precaution against chemical accidents. He noted another necessary correction not included in Exhibit J, which was on page 3, lines 31 and 32, of the bill. Mr. Rosse explained the language should be amended to read, "construction or operation of a new regulated process has a penalty of $25,000."

Chairman Buckley asked if there was any other place within the bill where the penalties collected would go to a special revenue fund.

Mr. Rosse noted in all of the environmental laws, all of the penalties collected in the CAPP and hazardous waste programs went to the fund that supported the program.

Chairman Buckley asked if current collected penalties went into the general fund.

Mr. Rosse explained the penalties did not go directly into the general fund, but noted there was legislation to revise where air pollution and water pollution program fees went. He thought both currently went to the school fund.

Chairman Buckley was concerned with the bill getting hung up in the Assembly Committee on Ways and Means because of the restructuring of one amendment.

Major General Clark noted Exhibit C, page 23, was the back up information for A.B. 536.

Mr. Wiles concurred with Mr. Rosse’s amendments. While reviewing the bill, it occurred to those in the division there might be a way to combine the review process being discussed. He referenced sections 1 and 6 noting the issuance of a permit. Mr. Wiles called attention to section 6, subsection 6, which said "The provisions of this section do not apply to a person who is required to obtain a permit from the division of environmental protection of the state department of conservation and natural resources pursuant to section 1 of this act."

Mr. Wiles understood A.B. 535 would include explosives, which would shift all of the permitting to the Division of Environment Protection. He explained it might be appropriate under such circumstance to have a jointly issued permit, which could be accomplished fairly easily with existing language. Whereby, the division and the Division of Industrial Relations would jointly issue a permit for such facilities.

Mr. Bacon did not object to the suggestion of Mr. Wiles and sought clarification in section 1.1 of Exhibit J noting language, which said, "no person." He stated a contractor, who was building a box for a building and had no idea what was going into the building, could be fined. Mr. Bacon thought the language should be clarified so the fines applied to the owner of the facility unless there was a contractor who had been tasked to do a turnkey operation.

Cheryl Blomstrom, Director, State Governmental Affairs, Associated General Contractors of America (AGC), thought the intent of the bill was to ensure facilities were appropriately licensed. Ms. Blomstrom noted the word person could be changed to "owner or operator." The AGC did not want to "see contractors gathered into this net."

There being no further testimony and no questions, Chairman Buckley closed the hearing on A.B. 536 and opened the hearing on A.B. 603.

Major General Clark explained A.B. 603 required a facility, which manufactured explosives or highly hazardous materials, obtain a conditional use permit for the facility from local governmental authorities and required a public hearing on the application for a conditional use permit with notice to all those who lived within close proximity of the facility. The bill further required local governments take safety into consideration in the location of such facilities. He noted the bill was not intended to apply to mining operations and backup material for the bill was found in Exhibit C on page 13.

Mr. Rosse presented Exhibit K to the committee, which listed suggested amendments to A.B. 603. He commented on section 1, subsection 5, noting when dealing with facilities that handled hazardous materials or explosives, the planning commission staff should not be limited to 30 days to provide recommendations. At times, identifying infrastructure problems and determining solutions took more than 30 days.

Mr. Rosse noted the first suggested amendment of revising the application to substances dealing with CAPP and pointed out if such a change was made, section 1, subsection 7, paragraph (b) located on page 3, lines 11 and 12 should be deleted.

Chairman Buckley asked if in the course of the commission’s work it was found that counties or cities were not requiring a conditional use permit for such plants.

Major General Clark affirmed Chairman Buckley’s question and noted the neighborhood or the area in which special use permits were being allowed were not being taken into account nor were people given notice as to what was occurring around them.

Chairman Buckley commented that a conditional use permit for a homeless shelter was required but not for an explosive plant.

Major General Clark explained it slipped through the cracks and was a shame that they had to play catch-up after so many people were injured and there were four deaths.

Mr. Bacon expressed concern with the wording of the bill noting the existing permitted facilities, under the chemical accident prevention program, would have to start all over again by going through the planning process. He suggested including a section 8 in the bill that would grandfather in existing facilities or change section 1, subsection 1, from, "no person may operate or maintain" to "no person may open or startup" a facility.

Chairman Buckley stated once a plant had been built, one did not go back and put them out of business. She noted there were established nuisance laws which one did not overturn. Chairman Buckley thought it amazing that such precautions were not taken in the first place.

Tom Stoneburner representing the Alliance for Workers Rights stated the alliance supported A.B. 451, A.B. 535, A.B. 536, and A.B. 603 and generally concurred with all the proposed amendments. He noted workplace safety and the safety of communities was not up for negotiation. A price could not be put on the issues surrounding the bills, and the agencies that were charged with implementing the bills and enforcing them had to have the means of performing necessary tasks.

There being no further testimony or additional questions, Chairman Buckley closed the hearing on A.B. 603 and adjourned at 3:55 p.m.

RESPECTFULLY SUBMITTED:

Jane Baughman,

Committee Secretary

APPROVED BY:

Assemblywoman Barbara Buckley, Chairman

DATE: