The Committee on Transportation was called to order at 1:40 p.m., on Tuesday, March 23, 1999. Chairwoman Vonne Chowning 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:

Mrs. Vonne Chowning, Chairwoman

Ms. Genie Ohrenschall, Vice Chairwoman

Mr. Douglas Bache

Mr. John Carpenter

Mrs. Barbara Cegavske

Mr. Jerry Claborn

Mr. Tom Collins

Mr. Don Gustavson

Mrs. Kathy McClain

Mr. Dennis Nolan

Mr. David Parks

Ms. Bonnie Parnell

Mr. Kelly Thomas

GUEST LEGISLATORS PRESENT:

Assemblywoman Sharon Angle, District 29

STAFF MEMBERS PRESENT:

OTHERS PRESENT:

Peter Krueger, State Executive,

Nevada Petroleum Marketers Convenience Store Association

Mrs. Chowning opened the hearing on A.B. 378 and A.B. 377.

Assemblyman Gustavson, District 32, explained A.B. 377 and A.B. 378 were derived from complaints he and Assemblywoman Angle had received from constituents concerning the Department of Motor Vehicles and Public Safety (DMV & PS). They planned to testify together because of the similarities between the two bills. He testified most people were generally elated after purchasing an automobile or motorcycle; however, that elation soon ended after they realized they had to go to the DMV & PS to register their new vehicle. The members of the committee knew the department was attempting to alleviate some problems with Project Genesis, as was witnessed during a tour of the facility earlier in the session. The completion of the project was not due for another 4 years and he had doubts if the project would actually reduce both the long lines and time spent waiting in those lines. The residents of Nevada would save time if they were able to complete some department paper work at their insurance company, auto club, or dealership. The proposals were not new concepts which had never been tested but ideas derived from other states which had proven to be effective. In fact 40 states had privatized all or part of DMV & PS functions.

Mr. Gustavson testified A.B. 378 was modeled after Arizona’s privatization system (Exhibit C). It would require the director of the DMV & PS to enter into contracts with third parties to assist in carrying out the duties of the department, such as the issuance of new driver’s licenses and renewals, vehicle testing, and registration. The director would have the authority to not enter into a contract if he felt the third party was not qualified or if entering into the contract was not in the best interest of the state. DMV & PS had implied part of phase three of Project Genesis was the use of alternative service methods through third parties; however, without changes in the Nevada Revised Statute (NRS) the department may not be able to use third parties. Currently the only third party service being considered was internet access. A.B. 378 was in the best interest of the citizens of Nevada who should have the best service possible.

Assemblywoman Sharon Angle, District 29, testified out of the 40 states which used some form of privatization, 35 had reported favorable results, 3 reported the programs were not working, and 2 reported mixed results. A list of privatization survey results was presented to the committee (Exhibit D). The Arizona model noted by Assemblyman Gustavson was developed because of the large population increase the state had experienced. They used private contractors for driver’s license registration and vehicle registration instead of increasing state staffing levels. The program was established in 1993 by Governor Symington and placed into statute in 1996. The ideas behind both pieces of legislation were not new, in fact the Oklahoma program had been in place for 50 years. With the current budget crisis in Nevada, privatization of certain DMV & PS functions could free revenue needed for other programs.

Mrs. Angle emphasized Project Genesis was being touted as the program which would supply relief to the long lines and ease employee burden; however, the implementation date was still unclear while the bills before the committee would offer immediate relief. Project Genesis also appeared to be causing problems within the department with employees being transferred from other divisions to assist with the program and others retiring because of the frustrations associated with the program.

Mrs. Angle indicated there were concerns associated with privatization such as loss of jobs and security risks. Other states had reported there was some initial loss of staff; however, those who remained were able to focus more on other functions creating a more efficient overall process. There were some security risks associated with privatization, but they were no greater than the risks associated with the current DMV & PS system. Most states were able to control the flow of secure information through specific safety controls. For example, Arizona required all third party locations, advertising, and signage to be pre-approved by the state. Also all equipment must be compatible with state programs and were periodically checked for unauthorized alterations. Agreements with third party contractors could be terminated at any time if the state deemed the company used records inappropriately. A copy of the Arizona contract was used (Exhibit D) to show the detailed security issues which appeared critical for the success of privatization.

Mrs. Angle concluded most states had success when privatizing all or part of the DMV & PS functions and indicated there were considerable savings and cost avoidance. Missouri showed third party testing decreased workload for the highway patrol; Arizona eliminated the backlog of fleet renewal and registration; and Florida reported shorter lines and found most state employees were hired by the third parties and received higher pay and greater benefits. With Nevada’s population explosion, something needed to be done to bring the DMV & PS into compliance with consumer complaints. A.B. 377 and A.B. 378 would allow the department to follow the lead of other states who have had great success with the issue.

Mrs. Chowning wondered what the difference between the two bills was. Mrs. Angle mentioned Assemblyman Gustavson’s bill, A.B. 378, was a more comprehensive plan which allowed for the privatization of more functions than A.B. 377.

Mrs. Chowning clarified A.B. 377 only privatized the issuance of licenses plates, drivers licenses, commercial driver’s licenses (CDL), motorcycle licenses, instruction permits, and identification cards. Mrs. Angle stated she was correct and the bill was modeled after the program in Oklahoma.

Mrs. Chowning questioned what other functions were included in A.B. 378. Mr. Gustavson explained the bill he presented to the committee would allow the DMV & PS to enter into third party contracts for any function they deemed necessary. He did not want to limit the department on what areas could or could not be privatized.

Assemblyman Collins noted the states mentioned regarding the two bills had a flat rate for automobiles and was a fairly simple procedure. He wondered how those programs would work in Nevada with the sliding scale currently in place. Mr. Gustavson explained the third parties would have the information available to them on the rate and fee schedules. He did not believe there would be any problem since the rates would be in the computer system.

Mrs. Chowning asked if either legislator knew the cost savings in terms of dollars each state had reported. Mr. Gustavson explained the savings varied from state to state. They had not received any actual figures since some reported a cost savings, while others reported a relief in the workload. The primary objective of the two bills was to reduce the long lines and improve customer service.

Robert Gagnier, executive director, State of Nevada Employee Association (SNEA) read from prepared testimony (Exhibit E). He testified despite the promises of privatization being a "cure-all" for state governments, the reality was much different with privatization failing to improve services or reduce costs. Privatization tended to undercut employee benefits and wages in order to receive the desired contract. A United States Department of Labor task force conducted a study in 1996 and found that available data on contracting for services was easy to come by but the results did not support privatization arguments, showing promised improvements did not materialize. Competition did not improve service but created a new level of private bureaucrats with their own lobbyists fighting for more state revenue for their companies. The task force determined the most effective way to improve service was to allow input from public employees on how to efficiently organize the work needed to be completed and deliver services in a timely manner. The DMV & PS was currently working to improve the services available to the public and customer service. Project Genesis would implement long-term improvements with both employee classification and service to the general public. Confidentiality was a concern which appeared to be downplayed by the previous speakers. He felt private firms would be able to sell information about private citizens throughout the state when the populous became more aware of the access to confidential information. He urged the committee to vote against A.B. 377 and A.B. 378 since the department was working to correct the problems customers expressed.

Mr. Collins inquired regarding the impact on local governments concerning tax revenue, and the welfare of the state employees who would be replaced with lower paid employees and lose their benefits. Mr. Gagnier responded there were no definite answers to the questions. The Department of Labor study was inconclusive in its results. The only community impact results they had been able to track were those due to large industries closing, such as a steel mill. Despite assurances that the state workforce would not be affected, SNEA felt that would be the end product of privatization.

Mr. Collins indicated he had seen past studies from states which had repealed their prevailing wage laws which resulted in a loss of revenue. Other indicators showed workers’ compensation went up and insurance coverage went down. He wondered if there had been any similar studies done in Nevada. Mr. Gagnier communicated there had not been any studies completed in Nevada so the only way to determine the effects would be to wait and see. Issues regarding short and long-term results were inadequate, but long-term results appeared most devastating. He informed the committee another problem occurring was contracts being awarded to companies because of political orientation, instead of the proper bidding process, such as a current court case in New Jersey had indicated.

Assemblywoman Cegavske inquired about the selling of confidential information, noting the State of Nevada currently sold information to outside firms. Mr. Gagnier remarked the issue at hand was who controlled the dissemination of that information. The legislation before the committee would place the control in the hands of private firms outside of the jurisdiction of the legislature.

Mrs. Cegavske asked if there was a specific law restricting the information sold, who could make the private firms be subject to the same laws as DMV & PS. Mr. Gagnier stated he was unclear if there was a specific law in place which determined what information could be sold; however, he wanted to make the point that currently the state was in control of that information. Once a private firm had access to the information, they would be able to control where the information went.

Assemblyman Nolan called attention to the New Jersey court case and wondered how many other states had a problem with contracts being awarded for political affiliation. Mr. Gagnier explained SNEA was aware of several states where that was a problem. He highlighted the New Jersey case since it was the most recent. Political affiliation was not the only problem states had to overcome when developing selection criteria for private businesses, but it was the most visible.

Mr. Nolan indicated he would be interested in learning more about those cases since they directly pertained to the issues at hand.

Donna West, project manager, Project Genesis, DMV & PS, read from prepared testimony (Exhibit F). She testified the same issues and concerns brought forth by Assemblyman Gustavson and Assemblywoman Angle led the DMV & PS to initiate Project Genesis in 1995. It was developed as a long-term solution to the problems the department saw, such as long lines and poor customer service. Phase II of the program was due to be completed in the fall of 1999 and would streamline certain functions so the customer would be able to complete their business at one station instead of two or three. Phase III of the program would span fiscal years 2001 to 2003 and would implement interactive services so the customer would be able to complete their business without visiting a branch office. It would offer four new technological options, including telephone transactions, fax-on-demand, internet service, and the expansion of partnerships with third party providers (Exhibit G).

Ms. West concluded Project Genesis was filled with customer service initiatives which would ease frustrations customers seemed to have with the department. Additionally DMV & PS was looking into other services third parties would be able to perform after 2003 such as registration at dealerships and electronic titles. The American Association of Motor Vehicle Administrators had conducted two symposiums on privatization which discussed which programs that worked, those that did not, and why (Exhibit H). Included was information on necessary steps before, during, and after implementation in order to insure the best possible outcome was guaranteed.

Mr. Collins indicated the objectives proposed in A.B. 377 and A.B. 378 appeared to be implemented. Ms. West explained currently there were third party providers in rural areas who conducted CDL testing and motorcycle testing.

Mrs. Cegavske asked if privatization was considered as a viable option when the idea for Project Genesis was conceived, and when would the program be completed. Ms. West explained a pilot test was initiated March 29, 1999, with full implementation of the program to begin August 2, 1999. DMV & PS began the case study for the program in 1994 when a number of different options were investigated. It was decided the department must solve its own problems before other methods could be used. To share information with others would not be a workable solution at the current time, since DMV & PS was restructuring their organization. Expanding third party provider services was proceeding in Clark and Washoe Counties with CDL testing centers and emissions stations.

Assemblyman Claborn informed Ms. West some of the problems associated with CDL testing were due to the fact people had to wait 2 to 3 months simply to get an appointment for the test. Ms. West declared there was a large demand in Nevada for CDL testing. The department had limited staff with respect to CDL testers and encouraged all companies to participate in the third party testing program if they qualified. They were considering allowing unions to become third party testers but she was unsure of the status of the review.

Mrs. Chowning inquired on the turnaround time for titles which had been as long as a year at one point. Ms. West relayed the current turnaround on titles was 8 days. The change occurred by re-engineering the title function by removing repetitive steps, thus improving the process. Project Genesis should speed it up even more since staff was involved in the design of the new program.

Carol Vilardo, representing, Nevada Taxpayers Association, supported both A.B. 377 and A.B. 378. She felt the bills did not require privatization but partnerships. Project Genesis was going a long way in improving the service at DMV & PS, but there were many other partnerships which could be developed. The bills simply offered language suggesting the department look into alternate services and adopt them if they were practical and user friendly. For example, offering CDL testing at driving schools could be done on an as needed basis. The bills were nothing more than tools to better serve the taxpayers of the state by offering services at more convenient locations. They were taxpayer friendly legislation which deserved the committee’s support.

Mrs. Chowning observed Ms. Vilardo made the bills sound as if they contained permissive language and wondered how that was possible since they stated "the director shall." Ms. Vilardo clarified she was referring to the fact the department was not required to accept third party bids if they found problems with the company.

Mrs. Chowning claimed the department was able to cancel a contract if they felt it was in the best interest of the state but would still be required to enter into the contract.

Bob Crowell, representing, Farmer’s Insurance Company, remarked the language of the bills were such that "shall" should have been removed and "may" put in its place. Since the legislation gave the director the ability to not enter into any contract they deemed not in the best interests of the state, the language on the first page became permissive which was the reason Farmer’s Insurance Company supported the legislation. The bill provided protections for confidential information and employee benefits so those issues should not be considered a problem. He believed the bills also created partnerships, allowing private industry to assist DMV & PS.

Mr. Collins asked if the insurance companies and dealerships would offer the services as part of an overall package included with the insurance policy or new car and not charge an additional processing fee for the services. Mr. Crowell disclosed they were not in the business of offering services for free but would be able to use the service as a marketing technique and possibly offer deals where it would be done for free.

Terry Campbell, Reno resident, explained he had moved from Oklahoma to Reno about 10 years ago so he knew about DMV & PS privatization. His experience with the department in Nevada had been much like that of other residents who had to wait in long lines and deal with irate employees. In Oklahoma’s tag offices, lines were at a minimum which allowed for more cordial employees. As a past member of the Oklahoma State Legislature he had never received a complaint about the department.

Mr. Campbell expressed the need for Nevada to initiate a program to correct the flaws in the system and hoped they would not completely rely on Project Genesis. He felt there needed to be more offices located throughout the state, especially in urban areas, and extend hours for those who were required to take time off work to go to DMV & PS. Partnerships with insurance companies, dealerships, and emission stations were steps which would allow the consumer more flexibility at the same cost. The ideas offered in the bills were not new and had been tested. Nevada needed to simply choose the most reliable method and put them in place.

Tom Noblett, Sun Valley resident, testified as a small business owner he supported both A.B. 377 and A. B. 378. He had four trucks which were registered and had many problems with DMV & PS ranging from inadequate testing facilities to long lines with minimum service windows available. Local newspapers were reporting the conditions (Exhibit I). Residents knew about the conditions at the department and knew there was nothing they could do about it, except to avoid going to the DMV & PS during "peak" hours.

Mrs. Chowning closed the hearing on A.B. 377 and A.B. 378 and opened the hearing on A.B. 393.

Assemblywoman Kathy McClain, District 15, testified A.B. 393 was a sound wall bill. She wanted to amend the bill so the barrier would extend from the Boulder Highway exit to where the Highway 515 crossed Desert Inn Road along only one side of the road and not both as the original bill stated. The area was built in 1969, long before construction on the highway began. Many of her constituents had requested the legislation because their property values and quality of living had declined dramatically since their homes were built. The problem had intensified over the years with the increase in growth of Las Vegas. She had been working with the Nevada Department of Transportation (NDOT) who tested noise levels at 68 decibels in the affected area which was approximately three tenths of a mile. Contact had been made with Clark County to secure matching funds for the project. The shortened length of the proposed sound wall dropped the attached fiscal note to $500,000 for the project.

Dennis Baughman, social projects hearings officer, NDOT, reiterated the testimony he presented on A.B. 367. He testified local governments should share responsibility for the construction on the sound barriers since they contributed in the development of the affected areas. The 50 percent split with the local governments made the costs of the walls more negotiable for the state, considering the current lack of available revenue. The department would request provisions be made in all sound wall bills that future money for the barriers would only be spent in jurisdictions which required developers to provide noise mitigation in new developments. That should ease future requests for such legislation.

Mrs. Chowning mentioned such a policy would not apply to the bill in front of the committee since the residential area was constructed before the highway was. Mr. Baughman indicated she was correct and the proposed policy change would prevent the problem from proliferating.

Mr. Nolan wondered if the department could simply add sound walls when they originally construct the highways. There was currently construction in his district on a highway on open land which would soon become a residential area with residents who would complain about the noise and require him to submit legislation regarding the same topic of discussion. Mr. Baughman explained NDOT was required to follow strict guidelines set by the Federal Highway Administration on the construction of sound walls or lose their funding. Federal regulations prohibited the construction of sound walls next to vacant land no matter the zoning codes.

Mr. Nolan asked if the current sound walls were constructed with federal or state funds. Mr. Baughman explained the department used state funds.

Mr. Nolan indicated NDOT should use the state funds to construct the sound walls while they were constructing the highway. Mr. Baughman remarked the department could comply with such a request if their models for noise mitigation complied. The area affected in A.B. 393 was tested before the construction of the highway and the noise levels were not expected to exceed the required 66 decibels. Sound walls were expensive to construct and the department was willing to listen to any ideas which would reduce the costs.

Mrs. Chowning asked if Mr. Baughman agreed with Assemblywoman McClain’s testimony that the noise levels were two decibels higher than the federal limit of 66 decibels. Mr. Baughman remarked the testimony was correct.

Mrs. Chowning wondered if he also agreed with the new proposed fiscal note of $500,000. Mr. Baughman commented the figure was the department’s best estimate since a sound wall generally cost $1.5 million per mile and the proposed wall for Assemblywoman McClain was for three tenths of a mile.

Mrs. Chowning inquired if the affected area was a region NDOT had considered for a sound wall, or if the legislation was a surprise to them. Mr. Baughman indicated if Assemblywoman McClain was able to receive matching funds from the county then the wall would be placed higher on the list than other areas. There was an area east of Las Vegas Boulevard on Highway 515 with noise levels higher than the proposed area. The department had planned on erecting a barrier on that location but felt the fairest way to go about the proposals was to take those with matching funds first, since there was a limited number of resources.

Mrs. Chowning asked if there were many residents in the affected area. Mr. Baughman expressed there were quite a few. There was some commercial development but more residential development.

Mrs. Chowning questioned since the residents were in the area before the highway was constructed, why wasn’t a sound wall built while the highway was being constructed. Mr. Baughman indicated he would have Mr. Painter answer the question.

Mike Painter, engineer, Environmental Services Division, NDOT, explained the highway being discussed was built prior to passage of the National Environmental Protection Act in 1969. Residential homes were not tested for noise levels prior to the passage of that legislation. An environmental impact study was completed on the affected area in 1977 which identified several potential noise sensitive properties. A second study was preformed in 1984 which predicted levels no higher than 62 decibels by 2004, 5 decibels lower than the required levels for federal funding. Since the highway opened in 1986 one complaint was received by NDOT in 1996 to which they monitored levels. A peak of 68 decibels was recorded during the 5 p.m. rush hour. The department had not determined the reduction levels a sound wall would create since the area was complex and would require an involved scientific study.

Assemblyman Bache inquired if the cost of the sound wall was based on a 12 or 14 foot barrier. Mr. Painter informed him the wall would be 12 feet high.

Mr. Nolan felt the committee had been dealing with the issue of sound walls on an increased level over the past few sessions. He wondered what was the model used to predict noise levels was since the numbers seemed to be falling short of reality. Mr. Painter answered the model dated back to 1984 and was based upon estimates provided by the Clark County Regional Transportation Commission. Assumptions made during that time were based upon population growth in 1984 and a national speed limit of 55 miles per hour. Today there was a revised federal model which was more accurate. The department was also taking a more aggressive approach to noise mitigation using worst possible scenario conditions.

Mrs. Chowning closed the hearing on A.B. 393 and opened the work session on A.B. 35.

Peter Krueger, state executive, Nevada Petroleum Marketers Convenience Store Association, informed the committee he had with him Mike Rodriquez, from Sierra Pacific Gas Systems, to help explain some confusion. He brought some balloons as a visual representation of 125 cubic feet of natural gas. He also brought a full gallon container of liquid which represented the liquefied petroleum gas (LPG) in a liquid while the less full container represented the LPG after the conversion factor, which represented the portion of the gas which was taxed.

Mike Rodriguez, supervisor, Sierra Pacific Gas Systems, explained natural gas was measured as a vapor fuel since it was compressible, whereas a liquid was not. Thus if greater temperature and pressure were applied against a liquid it would not change dimensions, while a gas would. Propane, or LPG, was transferred as a liquid and measured in liquid meters. Fuel was commonly measured in British Thermal Units (BTU) which represented the energy involved. For example, a gallon of gasoline had 110,000 BTU per gallon, while LPG had 90,000 BTU per gallon. The way the bill was currently written, 125 cubic feet of LPG was equal to 1 gallon of fuel or 300,000 BTU, which was 3 times the amount of a gallon of gasoline. So according to the bill, 300,000 BTU of LPG was equal to 110,000 BTU of gasoline. Therefore, the consumer was receiving three times more energy per tax dollar for LPG than for gasoline.

Mrs. Chowning repeated the language in the current bill was incorrect since the formula allowed LPG three times the energy for every dollar taxed. Mr. Rodriguez confirmed her statement.

Mrs. Chowning wondered if Sierra Pacific had vehicles which used compressed natural gas (CNG). Mr. Rodriguez indicated they did.

Mrs. Chowning asked if they had any vehicles which used LPG. Mr. Rodriguez mentioned currently Sierra Pacific did not have any vehicles using LPG, only CNG and regular gasoline. They handled LPG at a satellite distribution center outside of Reno and were familiar with the handling, transportation, and transfer of both types of fuel.

Mrs. Chowning inquired as to the cost to convert a vehicle to a CNG system. Mr. Rodriguez claimed the current cost was approximately $1,000; however, as technology progressed the costs would come down.

Mr. Nolan wondered if LPG was delivered, transported, and stored in a pressurized form or in the liquid form shown. Mr. Rodriguez explained the pressurized form allowed the LPG to remain in a liquid. The confusion may exist in that LPG was a vapor and burned as a vapor, but was stored and transferred as a liquid.

Mr. Nolan asked if the natural atmospheric state was a vapor or a liquid. Mr. Rodriguez stated above negative 44 degrees Fahrenheit, LPG would be a vapor and below that temperature would be a liquid.

Elana Marton, committee policy analyst, informed the committee there were two possible amendments to A.B. 35 located on page 2 of the work session document (Exhibit J). The first amendment would allow tax to be based on energy content. The tax on CNG would remain at the current level but the tax on LPG would become $0.16 per gallon. The second amendment would change the taxation system to pollutants emitted from a vehicle. The United States Department of Energy had produced information discussing the pollution levels of regular gasoline, LPG, and CNG. CNG was the cleanest fuel burned with LPG next and then regular gasoline. There was a possible third amendment not included in the work session document which would tax LPG at a flat rate of $0.12 per gallon since it was a cleaner burning fuel.

Mrs. Chowning announced she and Ms. Marton had spent an enormous amount of time researching the possible amendments to the legislation. The current conversion factor in statute made no sense; however, the cost of doing business in Nevada was expensive and alternative fuels offered certain financial incentives for the businesses who chose to use them. Ms. Marton explained the reasons behind the bill and the amendments were due to the fact that the United States Department of Energy had shown there were advantages to using cleaner burning fuels but it cost a great deal to convert vehicles to those methods. There were not many users of LPG, but their tax rates were lower than any other method. The number of taxable CNG users were even less since most CNG vehicles in Nevada belonged to governmental agencies which did not pay the tax. She felt if the committee did not deal with the issue during the present session, they would have to deal with it in future sessions.

Mr. Collins remarked there had been discussions to move the bill to the Assembly Committee on Taxation. He felt if the committee was going to set a rate at which the fuel should be taxed, then it was in the wrong committee and should be rereferred. If the bill were to be passed "as is" then there would be no issue with setting the tax rate.

Mr. Nolan respectfully disagreed with Assemblyman Collins, claiming the legislation was a matter of policy and could be handled in the committee. The bill could be rereferred to the Assembly Committee on Taxation if the committee chose to change the tax rates for LPG. He agreed with the Chair that the issue would return if they did not deal with the legislation and that it was not unreasonable to tax cleaner burning fuels. He thought the amendments were viable options which should be considered and the bill should be voted upon.

Mrs. Chowning noted, with the upcoming deadlines, there was no time to have a subcommittee discuss the proposed amendments. Further, if the bill were to be re-referred, the other committee would still be limited to the same deadlines. She indicated the committee would have a few days to ponder the amendments and they would vote on the bill at a later date.

Mrs. Chowning adjourned the meeting at 3:30 p.m.

RESPECTFULLY SUBMITTED:

Jennifer Batchelder,

Committee Secretary

APPROVED BY:

Assemblywoman Vonne Chowning, Chairwoman

DATE: