The Committee on Government Affairs was called to order at 8:15 a.m., on Friday, March 19, 1999. Chairman Douglas Bache presided in Room 3143 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:

Mr. Douglas Bache, Chairman

Mr. John Jay Lee, Vice Chairman

Ms. Merle Berman

Mrs. Vivian Freeman

Mr. David Humke

Mr. Harry Mortenson

Mr. Roy Neighbors

Ms. Bonnie Parnell

Ms. Gene Segerblom

Mr. Kelly Thomas

Ms. Sandra Tiffany

Ms. Kathy Von Tobel

Mr. Wendell Williams

COMMITTEE MEMBERS EXCUSED:

Ms. Dawn Gibbons

STAFF MEMBERS PRESENT:

OTHERS PRESENT:

Chairman Bache stated before hearing the presentation from Kafoury, Armstrong & Company he wished to introduce two bill draft requests.

• BDR 36-755 – Makes various changes to provisions relating to emergency management (A.B. 626).

• BDR 19-544 – Makes various changes regarding public records (A.B. 625).

Randal Kuckenmeister, shareholder with Kafoury, Armstrong & Company in Carson City testified about services his company provided to the State of Nevada over the past several years regarding the self-insurance trust fund. He said he had been in the audience when UICI testified before the committee and wanted to respond to some of their statements regarding the testing and reporting his company performed for the Committee on Benefits. Mr. Kuckenmeister handed out a letter containing his remarks (Exhibit C) explaining his company had been performing financial audits and related claims testing for the State of Nevada Self Insurance Trust Fund since the mid-1980’s. The company had also been involved in other audits and claims testing for various insurance related clients, including the State of Nevada Insurance Premiums Trust Fund. They also handled firm audits for self-insured groups handling worker’s compensation for various industries within the state. He added Kafoury, Armstrong & Company was one of the largest 100 firms in the United States.

Mr. Kuckenmeister stated he wanted to address the rebuttal prepared by UICI titled, "Rebuttal to the Kafoury, Armstrong Financial Audit," which he believed contained many inaccurate comments. The financial audit was a report on the balance sheet, income statement, and statement of cash flows of the fund and was the type of audit historically performed for issuance of audited financial statements. He believed the rebuttal had to do with agreed-upon procedures for claims testing and issued relative to Kafoury, Armstrong & Company procedures performed at UICI and felt UICI had no understanding of the difference between a financial audit and an agreed-upon procedures engagement. He requested the committee take that into account when reviewing any technical type issues within UICI’s documents regarding whether or not the firm performed appropriate "audit procedures."

Mr. Kuckenmeister said it was not a financial audit but a compliance testing engagement, whereby 195 checks were randomly selected from all checks disbursed between September 5, 1997, and May 19, 1998. UICI claimed the selection was made from claims draft listings, rather than a full claims listing, and the audit did not contain a consistent selection method. He pointed out the primary focus of the engagement was to select the aforementioned 195 claims during the particular time period and covered almost $67,000,000 in disbursements. When some checks had more than one claim associated with it, a specific claim tied to that check was selected on a nonrandom basis. Since the company was not in a specific financial audit environment, the professional standards did not require further random testing to develop that sample. To wait for a complete year would have resulted in excessive delays in performing the procedures and a random selection covering $67,000,000 seemed adequate for the purposes of the procedures.

Mr. Kuckenmeister added significant errors were found within the population including one large overpayment in the amount of approximately $86,000 and he equated the total dollar amount of errors to the population in order to provide the Committee on Benefits information as to the potential for misstatement of claims liabilities. Due to the audit the state recovered $86,000 however, at no time was there any proposal to adjust accounting within the books and records of the state relative to the projection. Based upon discovery of the large overpayment, coupled with an error rate of 10.77 percent on the first 195 claims the company met with management of the Self-Insurance Trust Fund to determine whether further procedures were warranted.

Based on discussions with management and the volume of errors, Kafoury, Armstrong & Company were then asked to select a specifically skewed additional sample for testing. Since the large overpayment claim was for an open-heart surgery case and the company was uncomfortable with the manner in which the claim was processed, management asked that all open-heart surgery cases for fiscal year 1997-98 be examined. In addition, management requested selection of another 25 large claims wherever billed charges exceeded $50,000 since it appeared the larger claims were the problem. It too, turned out to be a skewed sample and not meant to be statistically valid since it was within a tightly defined population. Twenty-three claims were selected, since 2 of the initial claims selected were either voided checks or not easily located. Therefore, UICI was in fact correct there was not a consistent selection method within the report, since the second two samples were selected specifically through agreement with management. However, had UICI understood the difference between a statistically valid claims audit and agreed-upon procedures engagement, they would have realized selection criteria was completely appropriate.

Mr. Kuckenmeister, in closing, pointed out the role of the independent CPA was to be objective and to report findings regardless of whether those findings were positive or negative. The duty of performing the audit was to assure correct procedures within the public entity and ultimately to the citizens of the State of Nevada. He felt it was unusual for a CPA firm to have to step into a political arena and defend themselves against attacks by an entity who had engaged them to perform claims testing procedures. Although UICI was attempting to discredit Kafoury, Armstrong & Company he believed the firm’s almost 60 years of service to the governments, businesses, and citizens of the State of Nevada had been exemplary. Kafoury, Armstrong & Company expected UICI to extend all of the courtesies, which had been extended to the most recent auditors, in performing a timely and constructive claims testing engagement regardless of differences of opinion between firms, which had been expressed to the committee over the past few weeks.

Chairman Bache questioned if on the high-end claims the excessive error rate was identified as originating during processing by L&H with UICI picking them up, or were those new claims handled by UICI. Mr. Kuckenmeister responded it was a combination of both. The first high-end claim had a processing date of July 16, 1998, but some were found in 1997 so there was a cross over in error rates between the companies.

Mr. Lee asked if Kafoury, Armstrong & Company did all the auditing for the state as a whole. Mr. Kuckenmeister said he was assigned to the Carson City office but the Reno office was the external auditor for the State of Nevada performing and signing off on the state’s financial audit report as independent auditors.

Mr. Lee questioned if the audit was special or a routine audit. Mr. Kuckenmeister pointed out it was a routine audit and his company had been involved with the Self-insurance Trust Fund for about 15 years. Kafoury, Armstrong & Company went back to the days of CoreSource, when audits of the program were first started with testing of claims, giving assurance as to accuracy of claim payments and evaluating turnaround time. A separate financial audit was also conducted on the fund that was contracted for by the Committee on Benefits. While not mandated by statute they felt it was appropriate due to the size of the fund.

Mr. Lee knew Mr. Crews appeared before many committees advising agencies about recommendations made by his office, and questioned if UICI was following the recommendations of Kafoury, Armstrong & Company. Mr. Kuckenmeister replied auditing started with CoreSource, who was subsequently acquired by L&H during the fiscal year 1996-97. When Kafoury, Armstrong & Company attempted to do claims testing, however, L&H denied access and problems were becoming apparent. Since there was no access to L&H records the opinion issued was qualified on the Self-insurance Trust Fund based on a scope limitation for the year ending June 30, 1997. 1998 was the first time they dealt with UICI, so UICI received no previous comments from Kafoury, Armstrong & Company.

Mr. Lee queried if it was general practice for a company to say there was no access to records for auditing purposes and was it possible for UICI to be uncooperative in the future if they too had problems. Mr. Kuckenmeister asserted everything the audit involved was not statutorily mandated, so there were no requirements to audit the fund. He felt the reason they were denied access to L&H was the company was the process of shutting down as a third party insurance provider. Because of bankruptcy, L&H attorneys were unwilling to give access to records, and by the time access was obtained records had either been transferred to UICI or lost.

Ms. Segerblom questioned if the fund was audited annually. Mr. Kuckenmeister replied annual audits had been ongoing since 1985.

Ms. Berman referred to page 3 of the handout where it stated $67 million in claims had been lost, and asked if there was a contract with the state to do the audits. Mr. Kuckenmeister related they contracted with the Committee on Benefits for those services. The committee historically went out for bid on a 4 year basis for auditing and claims testing services, and his company had successfully bid for the contract over the past 15 years. The $67 million represented the first 195 claims of the overall population claims samples.

Ms. Berman questioned the total funds expended. Mr. Kuckenmeister replied in the first 195 samples the total in over and underpayment errors amounted to $91,000, from total disbursements of $591,000. Part of that amount was the one large overpayment of $86,000. If the one large payment was carved out of the $91,000 it was not significant, but they were uncomfortable with the number of errors they were seeing. Because of the large amount the scope was expanded. Of 32 open heart claims there were errors of $107,000 out of that population and another $29,000 out of the other 23 claims that were over $50,000.

Ms. Tiffany said on her commute to the legislature that morning she heard there was a lot of over-billing by Medicare and they were recommending every time a bill was submitted the doctor signed the claim stating what had been provided. She asked how much of the problem was the third party provider paying duplicate claims or billing inappropriately. Mr. Kuckenmeister replied there were problems with all large plans and it was difficult for a company to test in such an environment. What was relied upon was paperwork submitted to the office and it would be a different scope of auditing to go into the field to determine if those services were actually provided.

Ms. Tiffany said she was trying to determine if there was a billing problem as well as a payment problem, and if there was a way to reconcile the two procedures. Mr. Kuckenmeister remarked it would be very difficult. Some states went online whereby the providers were connected to third party administrators electronically, but Nevada did not have that capability.

Ms. Tiffany pointed out many times a person would keep being billed months after the service was provided and finally gave up and paid the bill. She questioned if there was a way to determine when a claim was paid by the Committee on Benefits and if was underpaid, overpaid, or the amount of times the bill had been processed. Mr. Kuckenmeister noted when testing was implemented that was one area checked. UICI had also contracted with an electronic company to identify potential duplicate payments and several areas were examined for overpayments.

Ms. Tiffany stated she knew claims were being checked but wondered if reserves were being considered and if large claims were paid out, how the reserves would be affected. Mr. Kuckenmeister responded reserve areas relied on the actuary for their analysis of the claims. The trust fund was the largest and had the most material liability. When the claims testing was completed the historical data was transferred to the actuary in order to track the trends, analyze the data, and provide the company with a reserve amount. That was one of the reasons no opinion was rendered on the financial statements of UICI. It was felt information on the tapes transmitted to the actuary had a significant number of errors so the reserve balance might not be correct.

Ms. Tiffany pointed out when she served on the Committee on Ways and Means there was a lot of money in the reserves of the actuary and ways of spending down those reserves had been examined. The next thing of which she became was there were no reserves and the program was $30 to $40 million dollars in the hole. Mr. Kuckenmeister acknowledged that was why the tapes being submitted each month were so critical so when errors were identified they could be corrected immediately.

Ms. Tiffany questioned if any type of theft or inappropriate use of money had been discovered. Mr. Kuckenmeister responded nothing of that nature had been discovered at UICI and everyone was well aware of the money lost at L&H in fiscal year 1996-97, but most of it was recovered.

Ms. Tiffany asked if internal controls and checking mechanisms would identify illegal activity, if in fact it had occurred. Mr. Kuckenmeister stated a problem would only show up if it was identified in one of the test claims, specific features were not being designed in the program to detect fraud, but each claim received was scrutinized for defects.

Ms. Tiffany wondered if he felt the fraud was of minor concern. Mr. Kuckenmeister replied about $500,000 was diverted at L&H but subsequently the bulk of that was recovered, so he felt it was pretty minor when the entire picture was viewed. There was a lot about L&H, which was unknown because Kafoury, Armstrong & Company had been denied access to their records.

Ms. Tiffany questioned if there was some way to assure problems such as occurred at L&H would never occur in the future. Mr. Kuckenmeister thought with additional claims auditing, and review by various departments such as the Legislative Counsel Bureau (LCB), everyone could be comfortable with the situation. Kafoury, Armstrong & Company were scheduled to audit the program sometime after June 30, 1999, and would look closely at all the other reports done in the interim.

Ms. Tiffany wondered if any thought had been given to changing any benefits in the program. Mr. Kuckenmeister said that was left to the consultants. The auditors looked at the numbers with the Committee on Benefits and the consultants making all the other decisions.

Ms. Von Tobel indicated she was alarmed as she recalled from previous testimony claims were not being discounted but paid at 100 percent. Apparently a contract had been negotiated with providers stating if claims were not paid in 30 days the discount was void and the auditor made the decision to pay those at 100 percent. She recalled the figure paid out as close to $9 million because untimely payments could not receive a discount. Mr. Kuckenmeister thought it was probably considerably higher because of the one high claim where the internal auditor overrode a discounted claim in order to process a late check. The concern was the claim was initially processed for a lesser amount, but there was no documentation as to why the change was made.

Ms. Von Tobel questioned if the program had the right to pay any claim at 100 percent and if there was a possibility of fraud. Mr. Kuckenmeister felt contractually, they had the obligation to process the claims within 45 days as it was stated in the contract. He added without really going back and looking at each claim more closely it was hard to say if there was a more far reaching problem than just the one claim.

Ms. Von Tobel thought there should be a more in-depth look at the claims, as it seemed there were other problems to equal a $9 million loss. She asked if there was a way to negotiate with the hospitals and doctors to assure there was some sort of a discount. She knew a discount could be as much as 40 percent, and in paying 100 percent, the loss added up to a great deal more than the original discount payment. Mr. Kuckenmeister added there should have been more communication with all providers, as everyone was aware of the problems with L&H. Unfortunately the way the contract with UICI was structured, bills could be paid at a higher amount.

Chairman Bache stated if there were no further comments he would take testimony on A.B. 371.

Assemblywoman Bonnie Parnell, District 40, testified many state government employees resided in her district. A.B. 371 pertained to the classified state employees’ grievance procedure. Currently the final administrative level of a grievance went before the Employee Management Committee, composed of state employees and officials appointed by the governor. The language in the bill provided an alternative procedure, whereby an employee filing a grievance could elect to be heard by an outside professional arbitrator who would be paid by the losing party. It also provided for appointment of a panel of three arbitrators from a list supplied by either the American Arbitration Association (AAA) or the Federal Mediation and Conciliation Service (FMCS) and would serve for 1 year. Under the present procedure the Department of Personnel bore the entire cost of the grievance arbitration, and with approval of the bill the cost could be borne by the agencies which generated the grievances.

She added, the bill was requested by the State of Nevada Employees Association (SNEA) and asked Bob Gagnier, Executive Director of SNEA to continue the dissertation.

Mr. Gagnier wanted to thank Ms. Parnell and the other sponsors of the bill. When the grievance procedure was first started for state employees in 1972, the only resolution was the Employee Management Committee. The committee predated the establishment of the grievance procedure and was appointed by the governor, including three state administrators and three employee representatives recommended by employee groups. It was his understanding if someone was recommended from an employee organization the appointment was for life. More importantly than the makeup of the committee were the problems with the committee’s decisions. Those serving on the committee were not professional arbitrators, nor were they knowledgeable about personnel matters. The biggest problem was the burden of proof, because at least one of the management members had to vote with the employee and if the vote was tied the employee automatically lost.

He added several sessions ago SNEA tried to eliminate the employee management committee and have it replaced with professional arbitrators but the request was resisted by the legislature. They felt it would be very costly for the employee, who did not belong to any labor organization, because they would bear the cost of the arbitrator. With the proposed legislation the employee had the choice of requesting the Employees Management Committee or an independent arbitrator. If the arbitrator was selected the cost would be borne by the employee.

Mr. Gagnier went on to say there was a fiscal note as the present committee was paid by the agency with which the member was associated and received compensation from that agency. He felt it would be an offset impact, and although it was soft money, the committee members would then be attending to the business for which the state agency was paying them.

Danny Coyle, president of the Retiree Chapter of SNEA wished to support the bill. He had been a previous member of the Employee Management Committee from October 1976 to October 1991. It was his opinion an arbitrator or arbitration panel was a necessary addition to the grievance process. When he was on the committee there were three classified employees from various agencies and three unclassified employees, usually department or division administrators. In cases where there were grievances addressing evaluations, one-on-one confrontations, harassment perceived or real, interpretations of oral exams, and things of that nature, the process became bogged down, much to the disadvantage of the person bringing the grievance. During hearings it became apparent there were philosophical differences, many times ending in a three/three tie. There was no fair way to break the tie and often ended with a decision that was vague and benefited the agency. He felt with the arbitration procedure the hearing would equate to an equitable and timely resolution of grievances.

Ms. Segerblom questioned if the arbitrator must be an attorney. Mr. Gagnier replied a little over half of the professional arbitrators were attorneys. He pointed out with establishment of a three-person panel, management could strike a name, the employee could strike a name, and the one left would be the arbitrator. Ms. Segerblom asked if the one left could be an employee. Mr. Gagnier added, under the procedure spelled out in the bill it would have to be one of the professional arbitrators from either AAA or FMCS.

Mr. Lee asked if the present bill was similar to the one submitted in the 69th Session. Mr. Gagnier responded to the best of his recollection it was exactly the same bill.

Dennis Kifer, SNEA senior employee representative, testified there were several cases in the past where the outcome might have been different if an arbitrator had heard the grievance. One was where an employee was in the running for a promotional position and challenged the person who was eventually chosen on the basis that person lacked the minimum qualifications for the position. In looking at the minimum qualifications the appointee did not have even the minimum qualifications for Nevada state service, which were spelled out in the announcement from state personnel class specifications. However, the committee ruled that some sort of equivalent configuration of experience was sufficient and overturned the appeal.

He added in another case, the petitioner contended he was required to serve on standby status for several years. He was serving as the state’s management contact for that period of time without reimbursement for standby duty, even though state personnel rules allowed reimbursement. During the appeal hearing it was established he met all five criteria for receipt of standby pay, but somehow the committee felt they could ignore the criteria and denied the appeal. It was pursued to district court where it was ruled in favor of the petitioner, and when the state pursued it to the Supreme Court it was overturned, mainly because of the award by district court. He felt it could have been a fair outcome if the case could have been taken to an arbitrator in the beginning and probably eliminated the need to go through the entire judicial process.

Mr. Kifer stated there were three cases, all similar in nature in which the petitioners had a chronic illness and used sick leave to a point where they had a minimal amount or were completely out of sick leave. In those cases the employer required the employee to bring a doctor’s excuse for each and every use of sick leave which was an arbitrary decision and allowed by regulation, but only in cases where the appointing authority suspected abuse. The committee ruled it was the sole prerogative of an agency to impose the requirement to submit a doctor’s statement.

There were other cases in which the Employee Management Committee imposed its interpretation on disciplinary matters with decisions validated by use of language such as "written warnings" and "documented oral warnings." He went on to stress under the present system there was almost always a tie, which unfortunately ruled in favor of the employer.

Mr. Gagnier interjected A.B. 371 would be totally unnecessary if collective bargaining was approved.

As there was no further discussion, Chairman Bache asked Mrs. Freeman to testify on the next bill, as she was one of the sponsors.

Assemblywoman Freeman, District 24 testified she would like to provide some background on the bill. When she campaigned in 1988 she found many constituents would have liked more leadership from their local governments. The public had the perception there was little cooperation between Washoe, Sparks and the county. The Washoe County Commission met and decided all the entities needed direction from the legislature in working together on regional planning for Washoe County. She pointed out the cities were much smaller in 1988 with most of the development in outlying areas, but there was constant fighting between the entities in providing jurisdictions with annexation issues. The issue was addressed in regional plans at that time. Over the years there were revisions to the regional plan, but a good example was when a real estate developer went into an area, and even though there was opposition in the neighborhood, because of the response of local government the development was eventually built. A golf course was built on wetlands, but also houses were constructed all around the golf course resulting in serious damage to the homes by the flooding in 1997. She believed most people buying those homes did not understand the area was a flood plain, which resulted in serious damage with considerable outlay to clean up the area.

Mrs. Freeman related she represented an older area of Reno, and although growth issues were addressed in the 1989 legislature over the years she had seen what happened in older urban areas, with most of the funding going to outlying areas. There was an unspoken feeling older areas did not deserve much attention and when realtors started referring to an area as transitional, it conveyed a whole different perception of an area. Her particular district included the university, and due to a lack foresight and planning adequate student housing was not provided, impacting the surrounding community.

Another problem in Washoe County was special events, which increased economic development as federal dollars were infused into the community. However, most of the events were either in her district or right on the border. People living in those areas were quite good natured about crowds, but it was difficult for them to deal with such things as RVs parked in front or behind their houses holding all night parties celebrating balloon races, the Reno rodeo, football games, and other such events. Many homeowners in the area had trouble finding parking places. She worked with the city councilman for her area and the police department on most of the issues, but in dealing with other entities she came to realize it was a regional planning issue. She felt the focus needed to be on the downtown area rather than outlying areas of the county.

Mrs. Freeman added in talking with David Ziegler, Legislative Counsel Bureau Analyst, she learned there was something called the McCarran Ring which encompassed almost all of Reno and Sparks. The city changed the zoning to allow someone who had an older home to sell that home, and remodel it into smaller units for university students, where some of the conditions were appalling. One structure being rented to a student was an old chicken coop, it contained an old rug and had extension wires running everywhere. In one of the divided apartments there was a shower in the living room.

Another point she wished to make was a lot of the older homes were being sold and turned into businesses with many areas of her district becoming a mixture of commercial and residential. She felt the city should fix the problems in a regional concept. She understood people would be speaking in opposition of the bill and felt it was probably because they were not consulted before the bill was drafted. Very often cooperation was not forthcoming and she felt it was better to draft a bill, and then the language could be amended after all the parties involved worked on the bill. She pointed out entities including schools and the university, were added as they were state-owned and there was not much cooperation between states and local entities.

David Ziegler, committee policy analyst, disclosed he had worked as an independent contractor for the Regional Planning Agency in Washoe County on three separate occasions, and in the spring of 1998 did a tour of duty as acting executive director of the agency. He had no association with them presently and neither opposed or supported the legislation and was testifying only to provide information and respond to questions.

He pointed out there was an amendment (Exhibit D) and he would explain the bill and the changes requested. Section 2 was drafted to clarify consistency, doctrine, and required all actions of local government related to zoning and sub-division land or capital improvements to conform to the comprehensive regional plan. Specifically, in terms of adopting ordinances or regulations to conform to the comprehensive regional plan. When the regional plan was amended from time to time, local governments should review and if necessary amend their local plan to conform to the regional plan. Page 2, line 7, addressed the resolution of disputes, and section 3 was enabling language providing additional authority to the Regional Planning Agency in establishing an urban service boundary within a timeframe of 20 years.

Section 4 created an advisory committee on capital improvement plans. The idea being the advisory committee would recommend action to the regional planning agency that would be incorporated into the regional plan. Mr. Ziegler added section 5 of the bill addressed counties with populations of 100,000 to 400,000 and added language to capital improvement plans of local governments. Section 6 added universities and community colleges to the definition of affected entities and required the universities and community colleges to undergo conformance review at the Regional Planning Agency. Section 7 contained an alternative form of membership for the commission. There was a board/commission relationship in which the commission prepared the plan, the board adopted it and had the final decision on all matters.

Mr. Ziegler related section 8 of the bill required new elements within the regional plan including goals, policies, maps, and other documents relating to limitation of urban sprawl, the preservation of neighborhoods, and revitalization of urban areas. Section 9 covered statewide applicability and was an enabling authority allowing local government within their zoning ordinances to use inclusionary and minimum density zoning. He added inclusionary zoning provided incentives to developers and required a certain percentage of residential construction to be affordable housing. Section 10 dealt with impact fees and expanded allowable uses of impact fees, it was only enabling legislation. The final section required a report be submitted to the legislature as a means of identifying what the commission was doing in promoting older neighborhoods in the Truckee Meadows.

Mrs. Freeman interjected she was eliminating section 10 because the impact fee issue was statewide, and she had not planned it for the entire state, only Washoe County. She pointed out Assemblywomen Chris Giunchigliani and Kathy Von Tobel had bills on regional planning, and she planned to work with them in drafting a viable plan.

Ms. Segerblom questioned if the advisory committee reported to the Regional Planning Commission. Mr. Ziegler replied that was correct. She asked if the county commission then overrode the Regional Planning Commission.

Mrs. Freeman stated her understanding was all decisions went before the Regional Governing Board who were elected members. Mr. Ziegler told members, structurally there was a Regional Planning Commission including three planning commissioners from Sparks, three from Reno, and three from unincorporated Washoe County. On the governing board there were 10 members, 4 from Reno, 3 from Sparks, and 3 from unincorporated Washoe County. The relationship between the Regional Governing Board and the local governing board occurred when the local government amended its master plan or approved something of regional significance, that action had to come before the Regional Governing Board for conformance review before it could take effect. If the Regional Governing Board ultimately found it was not in conformance with the plan it was sent back.

Mrs. Segerblom observed the final say was then with the Regional Governing Board rather than the Regional Planning Commission or advisory commission. Mr. Ziegler pointed out the board did not have the ability to deny a project but did have the authority to send back a project to local government and ask for it to be revised.

Mr. Lee stated as he read the bill it seemed to be a controlled growth issue "zero growth if the Regional Planning Commission decided not to do something." He pointed out the speedway in Las Vegas would not exist if the commission had not approved it. Although there was a population cap for creation of the commission it seemed every other section dealt with Clark County. Mrs. Freeman said the bill was designed for Washoe County and did not affect Clark County except in a couple of areas.

Mr. Lee observed section 7 dealt with the makeup of the board, but he felt the rest of the bill appeared it could be codified and affect Clark County. Mr. Ziegler replied sections .026 to .029 in Nevada Revised Statutes (NRS) 278 applied only in counties between 100,000 and 400,000. He would check, but it appeared only sections 5 and 9 would have statewide applicability.

Mrs. Freeman pointed out Reno was a much smaller municipality and the builders and developers could not be blamed for developing virgin land rather than older areas where eminent domain became an issue. On the other hand areas in the core and downtown area deteriorated, so crime moved in and families moved out.

Mr. Mortensen questioned the statement the board could not make a decision, only the planning commission. And questioned if it happened on all zoning matters. Mr. Ziegler replied the way the regional plan was implemented was through conformance review. Amendments to local master plans must go before the Regional Planning Commission for that review. However, amendments to ordinances did not come up for conformance review.

Judy Herman, stated she was testifying as a former member of the Reno City Council, and a representative at that time of Ward 4, which was similar in makeup to Mrs. Freeman’s area and in fact part of her area. She specifically wanted to support the changes in section 7 regarding the makeup of the members. She felt the Regional Planning Commission was a clearinghouse, rubber stamping anything that dealt with regional significance or master plan rezoning.

An example was the Home Depot in northeast Reno. The zoning was changed from single family to commercial and there was a strong outcry from the citizens. Yet because of the friendship of Summit Engineering with the mayor, the Regional Planning Commission, and the northeast advisory board chairman, it was passed and another area of the community was ruined. The Reno Planning Commission was a stepping stone to go on to bigger and better things. For example the Reno City Council Mayor, Jeff Griffin, Councilwoman Sherry Doyle, Dave Rigden, and Bill Newberg had all served as planning commissioners. She felt it was a testing ground to see the interaction with certain builders and in the Reno area it was well known campaign contributions came from the construction industries, the Associated General Contractors, and casinos.

Mary Henderson, representing the city of Reno felt it was important, for the record, to make some introductory remarks. She pointed out to Mrs. Freeman her belief many of the provisions in the bill were not worthy and should be considered over the next 2 years as the update of the regional plan began. The regional plan was a process put in place by the legislature and done on a regional basis every 5 years. She introduced Emily Braswell, who was the executive director of the Truckee Meadows Regional Planning Agency and Mike Harper with Washoe County who would be addressing the bill. She felt it was important for the committee to take into account the city’s major plan revision over the next 2 years. Although the legislature put the framework together it was up to local governments to put the plan in place, and was something agreed by consensus in 1991.

Emily Braswell, director of the Truckee Meadows Regional Planning Agency, said on March 11, 3 days after the bill was introduced she reviewed the bill with the agency. They directed her to work with local government staff and the Washoe delegation to develop a regional consensus and the concerns expressed revolved around the makeup of the Regional Planning Commission. One issue was the vital need of citizen representation on the planning commission. Although a panel of experts, while invaluable in providing professional expertise, might not represent the concerns of the citizens. The other primary concern was sweeping changes were needed in strengthening citizen participation as well as local, regional and statewide collaboration.

Mrs. Freeman asked if there had been any mention of calling the sponsors of the bill and speaking to them before submitting the letter she had before her (Exhibit E) when the meeting was held. Ms. Braswell replied her agency had been asked to put together a meeting with the Washoe delegation, but she had not been able to do that because of the short timeframe.

Mrs. Freeman said as she was the major sponsor she felt local elected officials should have had the courtesy to at least make some phone calls rather than attacking her in the media.

Mr. Humke questioned the letter as far as the third paragraph was concerned, and certainly would defend Mrs. Freeman’s drafting of the bill as she was a duly elected official and in requesting withdrawal of the bill, was done before anyone had bothered to consult with her. He added several years ago, before there was regional planning legislation affecting Washoe County, Senator Raggio and Assemblyman Sader said to all the local entities, "you better get together and work as a whole or the legislature would do it." The bill was an example of the problems the Senators saw, and it was Mrs. Freeman’s right to propose a bill to correct what she perceived as a problem which local entities had not addressed.

Mrs. Freeman said some of the lobbyists had talked with her and one councilman had visited with her, but he was not a member of the Regional Planning Governing Board. She did not hear from the other board members of the planning commission.

Ms. Henderson apologized if Mrs. Freeman perceived it as a personal attack as it was not the intent of local governments. The bill was received last Tuesday with a governing board meeting on Thursday in which they had to hastily respond. She added there had been dialogue in January or February, but none of the board members had actually seen the bill in its present form until the meeting on Thursday. The response was not to embarrass anyone by withdrawing the bill, the idea was during the next 2 years the local governments be given the opportunity to work with the Washoe delegation to see if a solution could be achieved. If there was no equitable solution in 2 years the issue could be revisited and addressed in the 71st Session.

Mrs. Freeman said she had been contacted by Sherry Doyle and also had a tape of the Washoe County meeting and was offended by some of the comments. She added she would not withdraw the bill as she felt there were some good parts in the bill and what most local governments wanted and felt the entire Washoe community should work together in solving the problems. She worked on the bill in an honest and sincere effort to do something that would improve the community and she would appreciate any and all cooperation with the other local entities.

Ms. Segerblom questioned if the city council could override the Regional Planning Commission. Ms. Henderson replied the Regional Planning Commission answered to the Regional Planning Governing Board and four members of the Reno City Council sat on the board.

Ms. Segerblom asked if the county commission could override the planning commission. Ms. Henderson stated that was correct.

Ms. Von Tobel felt with everyone working together a lot of constituent concerns would be alleviated. She pointed out it was not being done to usurp local government authority, but if everyone worked together it would benefit all the citizens.

Mike Harper, special projects manager for Washoe County, testified Washoe County had reviewed the bill and they requested consideration of postponing action on the bill. Delaying the bill would give local governments time to interact with the regional agency and elected officials to resolve everyone’s concern. He pointed out he was at the 1989 Legislative Session when the original legislation passed, and he realized it was needed as there was no cooperation between the entities. He added it took almost 2 years to put together a regional plan in response to the bill with Washoe County taking another 3 years to revise its entire planning process and be responsive to the regional planning guidelines. He felt some of the language in A.B. 424 could be misinterpreted. Language in section 2 could be construed, as every local governmental decision needed to be brought before the Regional Planning Governing Board. There was also concern with the capital improvement program advisory committee, it appeared to consist of people who did nothing more than put together a report. There were also concerns over the composition of the Regional Planning Commission as there would still be seven members locally appointed. He also questioned the wisdom of segmenting the Regional Planning Commission into various interest groups, as all interest groups should be brought into the process.

Mr. Harper pointed out as a professional planner he was in favor of section 8 dealing with limiting urban sprawl. He realized the main problem in American cities was unlimited urban sprawl. However, the manner in which the bill was written indicated the legislature was going to tell Washoe County exactly how to deal with their urban sprawl, and questioned if that was legislative intent. If urban sprawl was to be addressed it should also address social and economic costs, reliance on transportation, and not interspersing commercial and residential developments. When visiting with Mrs. Freeman he told her one of the ways local government used the interspersion of affordable housing was replacing old dilapidated houses with manufactured housing, and it had been a very successful program in Oakland. Santa Monica encouraged business to locate closer to downtown areas by rezoning the back half of every residential lot for commercial use.

Mr. Harper opined inclusionary zoning was not defined properly in section 9. It did not provide the opportunity to provide incentives. If the issue was affordable housing then that should be dealt without directive tools. The Washoe County Board of Commissioners would like the opportunity to address those issues, and he felt perhaps it was time regional planning issues were examined as a statewide issue.

Mrs. Freeman thanked him for his cooperation but as already indicated she was not willing to withdraw the bill. She felt it should be passed, and then everyone could work together over the next 2 years in evaluating the program and if amendments were needed, she would be happy to work with the local entities to establish a workable program.

Mr. Harper said he understood there were other regional planning bills in the legislature, and there may be an interest in combining the bills. He would like to see a combination so all the entity’s needs and concerns could be addressed.

Mrs. Freeman responded she was working with Ms. Von Tobel and Ms. Giunchigliani as there were population differences but there seemed to be enough common ground for them to work on solutions.

Dave Rigden, Reno city councilman in Ward 2, said he was also the vice-chairman of the Regional Fiscal Working Group which was an ad-hoc committee dealing with development. The City of Reno voted to oppose the bill. The main reason was because it changed the regional planning process and also the actual composition of the planning commission. Currently the Regional Planning Commission was made up of representatives from each of the local planning commissions, while the Regional Planning Governing Board was made up from each of the local governing bodies. The Regional Planning Commission had some autonomous authority given to it in state law so it could act without oversight from the governing board or any of the local entities. He felt the bill would take away from citizen representation by changing the makeup to professional representation. There was already plenty of input from professional planners. In the Reno/Sparks/Truckee Meadows area there were six governmental agencies employing full-time planning staff and at least two dozen private planning firms representing developers throughout the process. The only place the citizens had any representation was through their involvement with the various boards and commissions. He concluded by saying his ward encompassed the oldest part of the city which had the highest population density and he had been working diligently over the last few years to come up with innovative and new solutions from the planning standpoint to improve those areas.

Mrs. Freeman said one of the reasons she wanted the bill was because she heard from her constituents that they were not heard in the planning process. She questioned if the vote from the commission to withdraw the bill was a unanimous vote. Mr. Rigden replied he was not sure if it was unanimous but as he recalled there was only one member dissenting. It was not the city council’s intent to exclude the state in the process, the exact motion by them was to write a letter requesting to meet with Mrs. Freeman and work on the issues. However, because of the shortened session it was determined there was not enough time for a meeting, so the bill would be opposed as presently written.

Mr. Freeman recalled there was more than one council member who did not support the motion and only two members of the commission got in touch with her regarding the bill. Although she heard from no one, she would still be willing to work on the language toward an equitable solution.

Dick Heikka, Southern Nevada Homebuilders Association, stated his group had determined section 10 was probably not legal as written and section 9 was already covered under existing planning programs. He added his group would like to work with the committee in developing any new language.

Mr. Lee stated he would be very cautious if he were the northern Nevada delegation. If the issue were seen as a no growth, or slow growth issue, revenues would decrease. Because of regional planning and the fair share tax issue it could become a major issue, because it could impact the rest of the state. Mr. Heikka replied it was something that needed to be addressed as the big concern in A.B. 424 was section 10, it did not provide for slow growth, it effectively killed growth. If the cost of improvements was placed on developments for the life expectancy of those capital improvements then it could run into thousands of dollars.

Mrs. Freeman pointed out she was already deleting section 10. Mr. Heikka replied he just wanted to reinforce the need to delete that section.

Mr. Mortensen asked why there was an objection in identifying funds required to maintain a capital improvement project, as the project did have to be maintained. Mr. Heikka said it was not the issue of maintenance, but the requirement of the cost being placed on a house for the life of the capital improvement it would serve. Taxes were paid for road maintenance and infrastructure, but the way the bill read if there was a road in a subdivision the life expectancy for the maintenance of the road would have to be paid up front and was unconstitutional.

Mr. Mortensen stated he did not understand the problem, because if a road was built it must be maintained. Mr. Heikka said his objection was imposing fees on a house at the time it was built.

Neena Laxalt, representing the city of Sparks, testified the city of Sparks had asked her to convey willingness of the Regional Planning Governing Board to work with Mrs. Freeman on language changes in the bill.

Leigh Daisy, northern Nevada director, Citizen Alert, said she had not planned to speak, but felt it was her responsibility to say she felt it was a good bill. Generally the bill did reflect the will of the people, and it was clear there was a need for proper planning in the Truckee Meadows. Residents did have the perception planning was not occurring to the degree necessary as urban sprawl was occurring at a faster rate than was comfortable for most people. One suggestion she had was in section 7 where she felt citizens at large should be designated as members in the bill.

As there was no further testimony Chairman Bache closed the hearing on A.B. 424 and added he had another bill draft for introduction.

• BDR 22-592 - Revises provisions governing types of facilities for neighborhood parks for which money from residential construction tax may be expended. (A.B. 630)

Chairman Bache remarked he wanted to consider A.B. 255 before floor session, it was Senator Raggio’s bill and he had offered an amendment.

Mr. Humke stated it was a difficult bill and had regional significance in Washoe County and northern Nevada. He stated he would vote for the bill to get it to the floor, but based on additional research he intended to do on the bill he reserved the right to change his vote. Mrs. Freeman added she felt the same way.

A.B. 371 – Authorizes use of arbitration in adjustment of certain grievances of state employees (BDR 23-1164).

ASSEMBLYWOMAN SEGERBLOM MOVED DO PASS ON A.B. 371.

ASSEMBLYWOMAN PARNELL SECONDED THE MOTION.

Mr. Humke stated he had an emergency when the bill was heard and therefore did not know enough about the bill, and would be voting no as the present time.

RESPECTFULLY SUBMITTED:

Virginia Letts,

Committee Secretary

APPROVED BY:

Assemblyman Douglas Bache, Chairman

DATE: