The Committee on Ways and Means was called to order at 8:20 a.m., on Thursday, April 15, 1999. Chairman Morse Arberry Jr. and Vice-Chair Jan Evans presided in Room 3137 of the Legislative Building, Carson City, Nevada.

COMMITTEE MEMBERS PRESENT:

Mr. Morse Arberry Jr., Chairman

Ms. Jan Evans, Vice Chair

Mr. Bob Beers

Mrs. Barbara Cegavske

Mrs. Vonne Chowning

Mrs. Marcia de Braga

Mr. Joseph E. Dini, Jr.

Ms. Chris Giunchigliani

Mr. David Goldwater

Mr. Lynn Hettrick

Mr. John Marvel

Mr. David Parks

Mr. Richard Perkins

Mr. Bob Price

COMMITTEE MEMBERS ABSENT:

None

STAFF MEMBERS PRESENT:

The Chair recognized Frank Hawkins, Jr., Executive Director, Community Development Programs Center of Nevada, a local not-for-profit organization. The center was asking the legislature for its help to develop a 40-acre residential development called Gerson Park. Mr. Hawkins explained the center’s mission was to build affordable housing throughout the state, to assist first-time homebuyers, and to package commercial and mortgage loans. During the last two years the center had funded affordable housing projects in the amount of $20 million.

Mr. Hawkins told committee members the 40-acre parcel was owned by the Las Vegas Housing Authority. The first-time joint venture between the City of Las Vegas, the Las Vegas Housing Authority, the U.S. Department of Housing and Urban Development (HUD), and the private sector, would tear down 301 units of boarded-up, cinderblock public housing in census track 35, one of the poorest in the City of Las Vegas.

Mr. Hawkins referred committee members to Exhibit C, a site plan of the project. He said the center’s goal was to build a mixed-use, mixed-income community on the northeast corner of the property. The community would consist of 196 apartment units for low- to moderate-income families, a senior low-income development of 88 units, 124 town homes, and 184 single-family homes. He told committee members the importance of building rental properties and having the mixed-use community stemmed from the fact the residents of track 35 were concerned the developers would relocate them to older public housing rather than affording them the opportunity of new housing opportunities. There had been no multi-family low-income housing built in that community in well over 30-years. He said HUD has seen a resurgence of a public investment in the form of both a new high school and junior high school in the area. The city had purchased 72-acres for a park. The center felt the project would rid West Las Vegas of an eyesore that had been the center of the riots in 1993.

Mr. Hawkins went on to explain the project would serve families at 60 percent of median income. The median income for a family of three in southern Nevada was $45,600. That meant families at 60 percent of that income would have a place to live. It was hoped, through its training program and technical assistance, families would be moved from a rental situation to being homeowners. He said the town and single-family homes for sale were market rate. The center hoped to make as many as 50 units available to families at median income of 80 percent or less. The target goal was to have the development built by December of 2001.

While committee members looked at pictures Mr. Hawkins passed around, he told them the center spent $702,000 on the demolition of the site. He said the
40-year-old trees on the property had been spared. The first groundbreaking was scheduled for May 1999 and would involve construction of the 48-unit multi-family portion of the project (phase I). Phase I had been funded through tax credits in the amount of $5 million.

The Chair recognized Mrs. Chowning who expressed her pride in Mr. Hawkins for his level of success and that he was using that success to make a difference in his hometown community. She was excited about the redevelopment plan at Gerson Park and requested clarification of how many units would be multi-family versus single-family. Mr. Hawkins responded the ratio was almost 50/50. Funding had already been received for completion of 48 of the total 96 multi-family units scheduled for phase I. Mrs. Chowning said to make the dream of home ownership come true for those families was wonderful.

Mrs. Chowning stated the bill asked for $2.8 million and asked what percentage was state versus federal and other dollars. Mr. Hawkins explained the project had a $50 million build-out by December of 2001. The center was asking the state to leverage the $2.8 million to assist in providing home ownership for at least 50 of the units. He said he had attended the southern Nevada homebuilder’s show and had learned the average home sale was around $125,000 to $130,000. It was rare a new home could be found for $100,000 or less.

The Chair recognized Mr. Dini who asked Mr. Hawkins if the developer would be including land for a school or parks. Mr. Hawkins said Booker Elementary School existed at the north end of the property and to the south of the property, a new school, West Junior High School, had been opened in 1998. There was also a high school located approximately 1 ½ miles north of the property. In view of those locations, no request had been made for land for school construction.

The Chair recognized Mr. Marvel who asked how the $2.8 million request had been derived. Mr. Hawkins said those dollars would not necessarily buy anything. The center was committed to purchase the land through a payment plan to the Las Vegas Housing Authority for $2.5 million. The $2.8 million would help the center underwrite the land and the entire cost of the development.

The Chair asked if there was further testimony in opposition to, or in favor of, the legislation. There being none, the chair declared the hearing on A.B. 415 closed.

The Chair recognized Don Hataway, Deputy Budget Administrator, Budget Division, Department of Administration. Mr. Hataway explained Nevada Statutes required the state to maintain a certain ending-fund balance of 5 percent of the operating appropriation. On the basis of economic forum forecasts, the division estimated it would need approximately $130 million reversion to end the fiscal year above the 5 percent level. That figure took into consideration supplemental appropriation requirements that had been identified, i.e., the distributive school fund and class size reduction. He said the $130 million compared to $29 million actually reverted for FY 1998. The division reviewed every outstanding appropriation and availability of other programs that could be deferred. As committee members were aware, the mental health hospital that had been funded at $9 million as the result of the 1997 Legislature, had been deferred. Also deferred was the $2.1 million appropriation for the infrastructure and upgrading of the Boulder Railroad. He explained the division had been nondiscriminatory in its evaluations of the projects to be deferred.

Mr. Hataway told committee members the division had made a commitment on the provision outlined in A.B. 663 that it would be revisited in two years and, if funds were available, the division would recommend reinstating the program in some form. The decision to defer the project was based on the necessity to maintain the cash flow to survive FY 1999. He said the division had been able to identify additional savings since The Executive Budget had been presented; however, those savings did not put the budget "over the hump" in terms of meeting the 5 percent level.

Based upon the state’s financial situation, the division recommended the
$5 million that had been set aside for the V&T Railroad Project be reverted to the General Fund at the end of 1999.

Chairman Arberry excused himself from the meeting and turned the gavel over to Vice Chair Evans to proceed.

The Chair recognized Assemblyman Joseph E. Dini, Jr., Assembly District # 38, and Speaker of the Assembly, who offered several modifications to the bill that would allow for the project’s continuation. Speaker Dini referred committee members to Exhibit D, his proposed amendments to A.B. 663. The amendments would include the addition of a preamble and new section to the bill. He urged the committee’s passage of the bill, which, as amended, would allow the State Board of Finance to issue a general obligation bond for $5 million if, in fact, the requirement of a $15 million match were met. His concern was if there were no access to the $5 million, the donors of the $15 million match would walk away from the project. Speaker Dini suggested the bill not be passed until after the results of the Economic Forum revenue projections were published. He pointed out the bonds approved for issuance by the legislature during the current session would not all be issued at one time but would be staggered as the projects came on-line.

The Chair asked if the subject of the match would be discussed and whether or not the plan was living up to its expectations in terms of private benefactors. Speaker Dini responded the project had been difficult, with many engineering issues, to include how the Overman pit would be filled.

The Chair recognized Mr. Marvel who asked how much money had been raised from the private sector. Speaker Dini replied Storey County had added a
.25 cent sales tax as the result of a special election. Lyon County had turned down the proposition and in Carson City County the proposition lost by 94 votes. He said Carson City would have been a major funding source. Mr. Marvel asked if $15 million was still an accurate figure and Speaker Dini said, in his opinion, that level of match dollars would be difficult to attain. He told Mr. Marvel that if the $5 million were granted outright, without the match, the project could go forward. He felt once the project was rolling, money would come forward from the private sector for its completion.

Speaker Dini requested the following testimony of Steven Muniz, Executive Director, Virginia City Convention & Tourism Authority, be entered into the written record:

The Chair recognized Janice Ayres, President, Northern Nevada Railway Foundation, the non-profit organization given the assignment of raising money for the railroad. Ms. Ayres explained she was the chairperson for the Tricounty Railway Commission and had served on the commission since 1993. Both the foundation and commission were in favor of the amendment proposed by Mr. Dini and felt the state’s support was necessary in order to go forward with the project. She told committee members she had talked with many major foundations that had expressed their interest in the project based on the state’s commitment. She felt strongly the project would not go forward without the state’s involvement.

Ms. Ayres introduced Michael Rowe, general counsel to the Tricounty Railway Commission and a trustee of the Northern Nevada Railway Foundation Board who provided committee members with a status report regarding the acquisition of right-of-ways. Speaking on behalf of the commission, Mr. Rowe stated the acquisition of right-of-way was its priority. The commission had secured commitments from the property owners who owned the 1.1 mile stretch of the Intermodal Surface Transportation Efficiency Act (ISTEA)-funded portion of the railroad. He explained that portion would extend 1.1 miles beyond its current stopping point and cross the Overman pit.

The Chair interrupted Mr. Rowe’s testimony and asked him to provide the background of the V&T Railroad project. Mr. Rowe explained the legislature passed a bill in 1993 that created the Tricounty Railway Commission. The commission was comprised of members of the Carson City Board of Supervisors, the Lyon County Commissioners, the Storey County Commissioners, and a member from the V&T Historic Railroad Society. The five-member board met quarterly to review matters necessary to accomplish the reconstruction of the railroad. He said the first and most significant effort that had been made by the commission was to secure a commitment of ISTEA funds through the Nevada Department of Transportation (NDOT) for the reconstruction of the first 1.1 miles of the railroad. That $2.2 million commitment was still in effect and, in fact, NDOT was currently spending some of those funds on preliminary engineering. Mr. Rowe told committee members the largest problem was the quarter-mile deep Overman pit and that NDOT had been working on designs of methods to cross the pit. He explained the property on which the first 1.1 mile was to be built was owned by various property owners who had been very supportive of the project and had committed to donating the required right-of-way. The down-hill property owners had also indicated a willingness to donate property to the commission. Additionally, he said, significant donations had been received from Mr. Julius Bunkowski and Mr. Salzwimmer.

Mr. Rowe said the Bureau of Land Management (BLM) and the commission, through Mr. Williams, the special projects coordinator of the Western Nevada Development District (WNDD) were negotiating for a long-term lease on the BLM property that represented 50 percent of the old right-of-way. He felt acquisition/donation of the right-of-way was progressing nicely.

Mr. Rowe told committee members the commission had an operating agreement with Robert Gray, the current operator of the Virginia & Truckee Railroad that had been finalized in March of 1996. He said that agreement was ready to go depending on the outcome of the proposed amendment to the bill which, if adopted, would require modifications. The commission would use the same formulas contained in the amendment and the previous legislation for reimbursement to the state and establishment of the fare schedule.

The Chair asked Mr. Rowe to explain the benefits to participating jurisdictions.
Mr. Rowe said Exhibit E, a booklet of information titled "Virginia and Truckee Northern Nevada Railway Foundation," included a copy of a feasibility and economic impact study performed by Northwest Engineering beginning on page
E-12. The study had been completed in September of 1994 and reported the construction activity on the railroad would generate approximately 750 jobs. Those jobs translated to the infusion of $34.7 million into the local economy. Once constructed, railroad operations were predicted to generate $2.9 million, and 76 jobs. There would be a non-railroad impact of $4.5 million and 118 jobs. The study predicted an additional $4.3 million would be generated from gaming activity and the possibility existed for an additional 118 jobs. Mr. Rowe said Northwest Engineering predicted at the end of the project there would be 307 jobs and $11.7 million infused into northern Nevada’s economy.

The Chair recognized Mr. Marvel who agreed with Speaker Dini’s suggestion that the bill be held until after the results of the economic forum had been published. He felt the nostalgic restoration of the V&T Railroad was something many people were looking for and represented the other side of Nevada. It was important that Nevada become a destination point to the rest of the world. He said A.B. 663 had his support.

The Chair recognized Janice Ayres, President, Northern Nevada Railway Foundation, who introduced Shelly Aldean, Vice Chair of the foundation.
Ms. Aldean testified in support of Speaker Dini’s amendment. She told committee members she had been involved in the project for the last 3 ½-years and was originally brought on as the chair of the first fundraising campaign for the society. For a variety of reasons, she said, that campaign was not successful. The society regrouped and established a non-profit 501-C3 that became the North Nevada Railway Foundation, staffed by volunteers. She wanted to dispel the myth the foundation had not made any accomplishments since the initial appropriation had been made by the 1997 Legislature. The foundation had received a great deal of support from the Carson City Convention and Visitors Bureau. The bureau had set side $83,500 to be used as part of the required 5 percent matching in connection with the ISTEA money ($2.6 million). Ms. Aldean said a portion of the ISTEA money had been used to fund an environmental assessment study for the entire right-of-way and additional ISTEA money would be used to bridge the Overman pit. Additionally, she said, the bureau had spent $450,000 since 1992 in support of the project. The Western Nevada Development District (WNDD) had obtained a technical assistance grant in the amount of $18,750 to fund the feasibility study. The study had been used by the foundation as an enticement to generate support for the project. She explained many ancillary benefits would accrue to the

tri-county area. In order to fund the feasibility study, each of the counties had contributed over $6,200. Since 1993, WNDD had expended roughly $230,000 in support of the reconstruction effort. She verified Speaker Dini’s earlier testimony that Storey County had passed a .25 cent sales tax increase that would generate approximately $50,000 per year, also in support of the reconstruction effort.

Ms. Aldean said there had been many commitments made. She had talked to many people in the private sector including representatives from gaming, mining, banking, the Reno Sparks Convention and Visitors Authority (RSCVA), South Tahoe Gaming Alliance, Reno Hilton, and the Cal-Neva. Those entities were all interested in the project in spite of serious concerns. She said one of those concerns had been addressed with the negotiation of the operating agreement with Robert Gray and another with the feasibility of being able to traverse the Overman pit. The foundation had, by design, kept a low profile realizing that in order to make a legitimate presentation to prospective private sector donors, those problems had to be addressed and resolved. She was thoroughly convinced the balance of funds could be raised if the issues were resolved and the project would become reality. The support of the state was vitally important. Ms. Aldean felt as the biggest beneficiary, it was appropriate for the state to be a partner in the project. She said at a time when the state was looking for projects to diversify its economy, the V&T Railroad project should be supported. While the project was family-oriented, it was also a project that would generate sufficient revenue to better than break even. Ms. Aldean then read into the record excerpts from a letter of support that Tom Tait, Executive Director, Commission on Tourism, had written to the foundation in 1996:

The Chair recognized Chuck Haynes, Chairman of the Storey County Commission, who testified in support of A.B. 663. Mr. Haynes told committee members his background was in railroading construction and operation. As he saw it, the V&T Railroad project was one of the most important projects for northern Nevada as well as the entire state. It was a project of vast scope in a time when California’s Proposition 5 and other areas were competing for tourism and gaming revenues. Since the completion of the feasibility study in 1994, many other states had moved toward gaming of one nature or another and he felt it was very important for the State of Nevada to become far more competitive in attracting visitors. He said the project had been a "catch 22" situation in that there were many people with the funds to provide the $15 million match who were hesitant to come to the plate because the Overman pit portion of the project had not been completed. That portion of the project had been on NDOT’s plate for over six years, and he reminded committee members it took only six years to build the Transcontinental Railroad. He was sure each legislator had problems at one time or another with their projects coming to fruition in what would be considered a reasonable period of time. It was very necessary the government of the State of Nevada show support for the V&T Railroad project by building a fire under NDOT.

The Chair recognized Don Quilici, Chairman, Carson City Convention and Visitors Bureau, who testified in support of A.B. 663. Mr. Quilici told committee members the bureau had either spent or committed $495,735 to the project and strongly supported Speaker Dini’s amendment.

The Chair recognized Norman Williams, Special Projects Coordinator, Western Nevada Development District (WNDD) who referred committee members to
Exhibit F, a brochure that provided information about WNDD and its projects. Included with that information was Exhibit G, a copy of a letter from the WNDD Executive Director and a resolution adopted by WNDD. Mr. Williams read the resolution into the record as follows:

The Chair recognized Ms. Ayres who said the Mayor of Carson City, Ray Masayko, who was also the Chairman of the Carson City Board of Supervisors, heartily supported Speaker Dini’s proposed amendments to A.B. 663.

The Chair recognized Don Hataway, Deputy Budget Administrator, Budget Division, Department of Administration. Mr. Hataway said the division was not in opposition to Speaker Dini’s proposed amendment and said a bond would be better than tying up cash for a project like the V&T Railroad. The division provided several suggestions:

• The amendment be modified to place a June 30, 2003 time limit on review of the project;

• Submission of a business plan in terms of the project’s economic feasibility and the financial proforma of operations; and

• The statutes currently provided for a "loan" and the division wanted to keep that verbiage in place.

Mr. Hataway said the business plan would be included as part of the bond prospectus.

The Chair recognized Speaker Dini who shared with committee members and the audience a framed copy of the schedule of rates for the V&T Railroad that had been purchased at a garage sale in Kawai, Hawaii.

The Chair recognized Mr. Price who told committee members he had had the pleasure of riding the Durango and Silverton Railway in southern Colorado. It was his understanding the railway had generated a great deal of tourism to that area.

The Chair asked if there was further testimony in opposition to, or in favor of, the legislation. There being none, the chair declared the hearing on A.B. 663 closed.

Vice Chair Evans returned the gavel to Chairman Arberry to proceed with the meeting.

The Chair recognized Assemblywoman Dawn Gibbons, District # 25, southwest Reno. Ms. Gibbons said even though small businesses wanted to comply with Occupational Safety and Health Administration (OSHA) requirements that was not always possible due to the lack of education. A.B. 489 had been drafted in response to many complaints she had received from business people that had received huge fines as the result of non-compliance.

Ms. Gibbons then introduced Mary Keating, Administrative Services Officer, Division of Industrial Relations (DIR). Ms. Keating said the fiscal note associated with the bill represented the cost for a toll-free "1-800" number that would allow rural Nevada to call into the preventative safety side of the OSHA office. The fiscal note accurately reflected the estimated cost to run the toll-free number. She clarified DIR was requesting the toll-free number be paid for out of funds that had already been requested in its budget category 15, informational multi-media campaign.

The Chair recognized Vice Chair Evans who said committee members had heard legislation during the 1997 session regarding a parallel subject, that being the degree of misinformation and ignorance regarding the American’s with Disabilities Act (ADA). Many businesses did not know the requirements of ADA. In many cases it was not that people did not want to comply with ADA requirements but, rather, had not been educated regarding those requirements.

The Chair asked if there was further testimony in opposition to, or in favor of, the legislation. There being none, the chair declared the hearing on A.B. 489 closed.

The Chair recognized Mr. Hettrick who explained A.B. 664 came about as the result of discussions with former employees of the State Public Works Board (SPWB). He characterized some of those discussions as having been with disgruntled or dissatisfied employees who were, at the same time, attempting to make beneficial recommendations to the State Public Works Board (SPWB).
A.B. 664 resulted from those discussions.

Mr. Hettrick said he would in no way characterize the bill as an attack on Eric Raecke, or other management of the State of Nevada Public Works Board (SPWB). The bill was intended to address possible future issues with SPWB. As committee members were aware, SPWB dealt with a great deal of money and a multitude of projects on a continuing basis. Although he was not aware of any major situation that had cost the state a great deal of money, he felt the intent of the bill would address any areas that might cause a negative situation in the future.

Mr. Hettrick told committee members the bill suggested changes in structure and procedures and provided the following bill explanation:

• Section 2 required the Governor to replace any board member who missed three consecutive meetings. There had been some contention in the past regarding board members’ participation. Section 2 would resolve that issue.

• Section 3 prohibited engineers and architects from having outside employment in like jobs or businesses. This section was one of the major issues within the bill. There had been contention in the past regarding outside employment interfering to some degree with the work performed by architects and engineers at SPWB.

• Section 4 required a chief financial officer (created in Section 5 of the bill) to report to the Interim Finance Committee (IFC) if change orders exceeded 10 percent of a project.

• Section 5 allowed SPWB to appoint a chief financial officer who would work for the board, not the manager, prohibited outside work for that position and defined qualifications and duties. Subsection 4 of Section 5 created audit authority for any contractor receiving SPWB contracts.

• Section 6 established minimum board member qualifications.

• Section 7 included technical changes and required the manager and deputy to be licensed, a change in title from deputy manager to chief financial officer, and provided the authority for the manager to appoint assistants as necessary.

• The language in Section 8 revised the provision "the board, after consulting with the Interim Finance Committee, has" to read, "Before bids are solicited* * *." Mr. Hettrick felt the language in Section 8 should be changed to read, "IFC must approve every new construction or major repair project." He felt there was no need for IFC to approve designs.

The Chair recognized Mr. Price who asked if Section 2 of the bill provided a broad enough option for hospitalization or illness of a board member. Mr. Hettrick replied that Mr. Raecke would answer that question in his testimony.

The Chair recognized Don Hataway, Deputy Budget Administrator, Budget Division, Department of Administration. On behalf of Perry Comeaux, Director, Department of Administration, Mr. Hataway expressed Mr. Comeaux’s feelings that while there were several good points to the proposal, such as the prohibition of outside business activities, his initial reaction was if SPWB was not broke, why fix it. Beyond that, Mr. Hataway said the department had three general comments as follows:

• The three consecutive meetings issue was a common sense requirement for all boards and commissions. However, more appropriate language would read "three unexcused absences." That general language appeared in many city, county, and state regulations. A board appointment should be accepted with a commitment of regular attendance.

• The independent nature of the chief financial officer position was of concern. The department felt the position should work directly under the manager. The ability to hire additional staff was also of concern. To take that position out of the loop of span of control and supervisory responsibility of the manager position was of concern to the department.

• The general IFC approval of "plans" was the department’s third concern. The department envisioned tremendous time delays if the complete approval of "plans" by IFC was required. Mr. Hataway explained the reporting process and the 10 percent variance on change orders was common sense.

The Chair recognized Mr. Marvel who asked if the changes would be General Funded. Mr. Hataway said the existing position was in the administrative budget of SPWB that was all General Fund appropriation.

The Chair recognized Eric Raecke, Manager, State Public Works Board (SPWB). Mr. Raecke referred committee members to Exhibit H, a copy of SPWB’s comments regarding each section of A.B. 664. Mr. Raecke had discussed the bill with Assemblyman Hettrick and felt it appropriate to provide his comments as follows:

• Mr. Raecke did not disagree with the provisions of Section 2, but told committee members that of the last 33 meetings of SPWB (back to 1993), there had been a 75 percent attendance rate (5.2 members per meeting). A meeting had never died due to lack of a quorum. The requirement of reporting to the Governor was not an issue. At the time he was hired by SPWB, there had been a board member that had missed a number of meetings. He called the Governor’s Office and two months later a new board member was appointed.

• Mr. Raecke pointed out to committee members the positions identified in Section 3 were 40-hour, classified employees and felt the language would regulate their off-duty hours. He did not feel being a classified, hourly employee gave the state exclusive use of a person’s professional license. Committee members were reminded of a bill that had failed on its first reading earlier in the session, A.B. 619, that had been put forward by the Nevada Department of Prisons (NDOP). The bill asked that any employee of NDOP not engage in any other gainful employment without the approval of the director.

• Mr. Raecke corrected Mr. Hettrick’s earlier testimony regarding change orders. He clarified the language in the bill said if an amendment to an architect’s contract exceeded 10 percent of the aggregate, it was to be reported to the board. Mr. Raecke said he agreed with that language and felt it should be applied to both architectural and construction contracts.

• Regarding Section 5, Mr. Raecke felt SPWB functioned as a good team with one coach. He said the line of authority would be corrupted by the proposed language and he was concerned it would also breed dissention. Mr. Raecke said when he first came to Nevada 9-years ago, he could feel the tension in SPWB between its southern and northern offices. At that time, a financial officer position existed that reported directly to the board and it was SPWB’s lowest point.

• Regarding the language in Section 6.2, Mr. Raecke said SPWB currently had five out of six members who more than met the comprehensive knowledge requirements.

• Mr. Raecke felt the language in Section 8.1, would be to change the word "design" to "budget" or "project". He explained numerous design professionals worked for SPWB. The last project that had experienced a problem was Prison 7. After having the budget worked out, and estimates provided by both the architect-of-record and a third-party estimator in the amounts of $84 million and $87 million, SPWB placed a large alternate of $8 million in the contract. The bid came in at $97 million.

Mr. Raecke echoed Mr. Hataway’s sentiments that if the SPWB was not broken, there was no need to fix it.

Chairman Arberry excused himself from the meeting and turned the gavel over to Vice Chair Evans to proceed.

The Chair recognized Ms. Giunchigliani who asked Mr. Raecke what impact
A.B. 664 would have on school districts. Mr. Raecke said there would be no impact on school districts because SPWB reviewed both construction and ADA plans. A chief financial officer would be the "bean counter." Ms. Giunchigliani asked if SPWB checked Clark County and Mr. Raecke said it reviewed all prototypes and occasional checks. If a project in Clark County were a remodel with no structural and/or exiting changes, and under $5 million, it was done
in-house. Comments were then forwarded from the county to SPWB.

The Chair pointed out the bill called for both a chief financial officer position and an auditor position, both requiring specialized skills. She asked who currently handled those specialized tasks at SPWB. As he had testified earlier, Mr. Raecke reiterated the retired Deputy Manager Yvonne Benson, had always handled those duties. She had possessed both a business degree and had owned her own construction business. He would replace her with a candidate who possessed those same abilities. The Chair recalled Mr. Raecke’s earlier testimony that provided a list of additional duties the deputy manager performed. It appeared to her the deputy manager position had very heavy responsibility at SPWB. Mr. Raecke agreed and said SPWB’s 61 staff members handled approximately $150 million worth of construction each year, divided into 200 or so projects. The second deputy manager had 34 employees and, when necessary, Mr. Raecke said he would fill in. He acted as troubleshooter over all projects. Mr. Raecke said he would be happy to send a copy of SPWB’s organization structure to committee members. He felt the authority was divided evenly between the two deputy managers who were then responsible to the manager.

While committee members were not keen on adding positions to a budget, the Chair felt Mr. Raecke had described a situation that would warrant a deputy manager position to handle the financial and auditing responsibilities of SPWB. Mr. Hataway replied SPWB had always been conservative with its requests for staffing and would encourage an auditor position if the funding could be found. Mr. Raecke pointed out SPWB’s original budget request asked for two accounting positions. He did not know the outcome of that request but would appreciate any additional help.

The Chair recognized Mr. Hettrick who referred committee members to Section 7 of the bill that deleted a deputy for the administrative, fiscal and constructional services position and wondered if that position should be put back into the budget. He questioned whether a chief financial officer position should be added as one of the "deputies" or "other appointees." He said if the workload of the deputy manager position was so great then perhaps there also needed to be a chief financial officer.

The Chair recognized Bob Gagnier, Executive Director, State of Nevada Employees Association (SNEA). Mr. Gagnier told committee members SNEA was opposed to Section 3 of the bill for reasons that had already been stated in earlier testimony. He said it appeared there were a lot of people that wanted to restrict the activities of classified employees wishing to make additional money yet at the same time did not want to pay them for their work. SNEA felt Section 3 was not necessary in view of existing safeguards, prohibitions, and penalties some of which were outlined in NRS Chapter 284, personnel regulations, Nevada Administrative Code (NAC) 284, and the Ethics Code (NRS 281) that referenced conflicts of interest.

The Chair commented Section 3 appeared to have been prompted by a real or perceived problem in that area. Mr. Gagnier said that was possible, but if management were doing its job, the public’s interest would be protected. He was not saying the situation never happened, rather, there were adequate laws to prohibit it from happening. The Chair said that perhaps strengthening management would help.

The chair recognized Ron Crook, Project Manager, SPWB and a licensed architect as well. Mr. Crook opposed Section 3 of the bill that would specifically limit his activities outside of work. Through the indirect pleasure of the legislature, Mr. Crook had overseen projects at SPWB for the last nine years. He had always held the professional ethics and responsibilities associated with his license with the highest degree of care and tried to protect any appearance of improper conduct or conflict of interest in his job. Mr. Crook said he could only speculate as to the reasons why anyone felt ethics were a problem at SPWB. There were only six to eight professional positions at SPWB that would be affected by Section 3. He said safeguarding the workplace and misuse of time and materials and conflicts of interest were very admirable pursuits, but to go so far as to limit the practice of architecture/engineering on an individual’s personal time would seem to be unfair infringement. Mr. Crook agreed with earlier testimony that indicated there were sufficient safeguards to prohibit the misuse of state time and money. He did not feel those problems existed at SPWB.

Mr. Crook told committee members that during his tenure with SPWB he had been under three different managers and would concur with Mr. Raecke’s earlier testimony opposing two lines of command between the manager and the board. He believed the SPWB was experiencing the fruits of many of the labors of the Department of Administration working very closely with SPWB. Mr. Crook would hate to see that relationship be undermined.

The Chair recognized Mr. Hettrick who said he chose not to comment on why he included Section 3 in the bill simply because his information was second-hand and he could not vouch for its validity. He did, however, feel the issue of conflicts of interest needed to be addressed in some fashion and would be more than happy to work with Mr. Raecke or other parties to assure the public and the legislature that conflicts of interest at SPWB were not an issue.

The Chair asked if there was further testimony in opposition to, or in favor of, the legislation. There being none, the chair declared the hearing on A.B. 664 closed.

The Chair recognized Assemblywoman Bonnie Parnell, District # 40, Carson City. Ms. Parnell explained A.B. 532 corrected an oversight in the existing statute by revising the definition of police officer to include the officers of the Capitol Police Division of the Department of Motor Vehicles and Public Safety. A.B. 532 would allow capitol police officers to qualify for certain benefits under occupational diseases, often referred to as heart and lung coverage. Ms. Parnell had sponsored the legislation on behalf of the capitol police.

Ms. Parnell then introduced Mr. Ken Johnson, Chief, Capitol Police. Mr. Johnson explained A.B. 532 would include Nevada’s capitol police under the occupational diseases statute, NRS 617.135. In July of 1989, capitol police officers had been moved under the category of police/fire and received corresponding benefits. Mr. Johnson felt the state would benefit from the monitoring of the health and fitness of its capitol police officers. The legislation would also assist in recruitment and provide capitol police officers with closer parity to other law enforcement agencies. He said the fiscal note attached to the bill amounted to $7,800, $600 of which would be for the two officers supported by the Supreme Court Budget and the remaining $7,200 would be processed through the budget of State Buildings & Grounds. The figures were derived from costs supplied by the Risk Management Division at an average of $300 per officer per year. Exhibit I provided a breakdown of the various required screening panels according to age. He said there were only three capitol police officers under the age of 40.

The Chair asked if the calculations in the fiscal note were accurate and
Mr. Johnson replied they were.

The Chair recognized Ms. Giunchigliani who asked if capitol police officers had held former law enforcement positions. Mr. Johnson said the majority of its officers had come from employment with other police agencies. There was currently one officer in the academy with no prior police experience, however, that officer had a bachelor’s degree in police administration and justice. Ms. Giunchigliani asked if those officers with prior police officer experience had existing heart and lung coverage. Mr. Johnson explained the coverage corresponded only with an officer’s current employment.

The Chair recognized Bob Gagnier, Executive Director, State of Nevada Employee’s Association (SNEA). Mr. Gagnier advised committee members SNEA was in support of A.B. 532.

The Chair asked if there was further testimony in opposition to, or in favor of, the legislation. There being none, the chair declared the hearing on A.B. 532 closed.

The Chair recognized Assemblyman David Goldwater, District # 10, who explained A.B. 64 was a product of the Legislative Commission’s subcommittee to investigate the regulation of mortgage committees. The subcommittee was comprised of himself as Chair, Assemblymen Barbara Cegavske and Tom Collins, and Senators Bill O’Donnell, Randolph Townsend, and Raymond Shaffer. The subcommittee had developed recommendations during the interim and had presented those recommendations to the Assembly Committee on Commerce and Labor. The bill had been heard three times in committee and worked over in great detail. Mr. Goldwater advised A.B. 64 was a very clean, pro-consumer bill.

He referred committee members to Exhibit J, and provided the following verbatim testimony regarding staffing of regulatory agencies:

Mr. Goldwater broke from verbatim testimony to advise the
$333,379 figure would be reduced based on permissive language that had been changed in the bill from "may" to "shall." He continued with verbatim testimony:

Mr. Goldwater told committee members the state’s current regulatory process did not always provide sufficient staff or proper direction from the statute. He said A.B. 64 attempted to direct, by statute, the regulation of the mortgage investment industry. It was the Legislature’s obligation to its citizens to ensure the mortgage industry was properly regulated and that the Attorney General’s office be provided the resources to accomplish that obligation.

Mr. Goldwater relayed a situation that resulted from testimony in subcommittee regarding the Harley Harmon fiasco in Las Vegas. There were questions as to criminal behavior and civil liability on behalf of Harley Harmon. Certain people felt their signatures had been forged and they had been lied to. The Las Vegas Metropolitan Police Department (LVMPD) began an investigation and Mr. Goldwater was contacted. After discussions with the white collar crime division of LVMPD, he said it was evident they did not have an understanding of the basic concepts surrounding the case. At that time, LVMPD and Mr. Goldwater turned to the district attorney who would not prosecute without an investigation from LVMPD. The parties then turned to the Attorney General’s office that was uncertain of its jurisdiction. He said the Attorney General’s office subsequently testified in subcommittee that it did not know who had jurisdiction.

Mr. Goldwater explained A.B. 64 clearly identified the Attorney General as having both criminal and civil jurisdiction in the mortgage investment industry. He said the question of whether or not a price tag was attached to that jurisdiction remained unknown. If it was determined the Attorney General’s office already possessed that jurisdiction there would be no price tag. If, however, they did not have that jurisdiction before, there would be a price tag.

The Chair recognized Mr. Marvel who asked for the subcommittee’s feeling regarding the jurisdiction of the Attorney General’s office. Mr. Goldwater explained A.B. 64 very clearly stated the Attorney General had primary jurisdiction in those matters. Mr. Marvel pointed out if the Attorney General’s office already had the jurisdiction, there would be no fiscal impact. Mr. Goldwater responded that issue was considered a "gray" area. He said it was possible the Attorney General’s office did have that jurisdiction but the authority was vague in statute. If it was determined the authority did not exist, it was possible the Attorney General's office would need additional staff to support that regulatory process.

The Chair again recognized Mr. Marvel who asked if the subcommittee had uncovered other situations like that of Harley Harmon and Mr. Goldwater replied there was another huge case in Las Vegas where the company was teetering on solvency and its financial practices warranted its closure. He said the subcommittee had discovered those two cases were just the tip of the iceberg.

The Chair recognized Mrs. Chowning who apologized for not having had the opportunity to review the bill in it’s entirety. She referred committee members to Section 12 and said she was a licensed realtor and was proud for having that license and its consumer representation. Mrs. Chowning explained there was an avenue for fines, complaints, etc. for those individuals who did not act in the manner they should with consumers. She said heretofore the same level of consumer protection did not exist. She dealt with mortgage folks who purported to be mortgage agents and, in many cases, did not even have the basic knowledge of how to develop a cost sheet. She was aware of many instances when a mortgage agent did not notify buyers of their transfer from one company to another. She was very much in favor of Section 12 of the bill that would identify consumer protections.

Mrs. Chowning wanted to know the cost and other requirements of licensing.
Mr. Goldwater said A.B. 64 was the biggest consumer-protection bill he was aware of and required the licensing of mortgage agents. Mortgage agents handled delicate financial matters and, heretofore, had never been licensed. The bill required very basic licensure requirements for mortgage agents. While the bill did not require continuing education for mortgage agents, it was Mr. Goldwater’s hope to bring that issue before the legislature in the near future.

The Chair recognized Mr. Price who referred committee members to page 16, line 15 of the bill (Section 24), which charged the Attorney General’s office with the enforcement of the chapter. A constituent who had been involved in the Harley Harmon case provided Mr. Price with the following testimony that he asked be entered into the written record:

The Chair recognized Anne Cathcart, Special Assistant Attorney General, Office of the Attorney General, who in turn introduced Senior Deputy Attorney General
Doug Walther, and Chief Deputy Attorney General Jonathan Andrews.
Ms. Cathcart provided the following verbatim testimony:

The Chair interrupted Ms. Cathcart’s testimony and said the merits of the bill had been thoroughly discussed in the Committee on Commerce and Labor and the Committee on Ways and Means wanted to focus on dollars.

Ms. Cathcart told committee members she wanted to discuss Exhibit K, the amended fiscal note that the Attorney General’s office had submitted shortly after the introduction of the bill. When initially introduced, the bill placed many mandatory functions within the Attorney General’s office and created entirely new criminal and civil jurisdictions. Primarily, the bill took away a prosecutor’s discretion to decide what matters and to what extent cases should be investigated and/or prosecuted. She said the effect was no matter how minor or questionable some sort of an allegation of a violation might have been, the Attorney General’s office was still obligated to take certain steps.

The Chair asked how much the bill would cost. Ms. Cathcart said a fiscal note in the amount of $491,603 had been submitted as a result of the amended version of the bill giving the Attorney General’s office discretionary authority. The amount would cover one deputy position, one investigator, and one legal secretary for the criminal aspect, and one deputy attorney general for the civil matters contemplated under the bill. She said the Attorney General’s office felt the bill would help consumers and create an environment that encouraged responsible mortgage investment companies. Ms. Cathcart said the Attorney General’s office supported the bill and would appreciate the committee’s favorable consideration.

The Chair recognized Chief Deputy Jonathan Andrews who responded to
Mr. Marvel’s earlier question and clarified the Attorney General’s office had only specific criminal jurisdiction identified by statute. He said during the interim meetings, the committee’s legal counsel concurred the Attorney General’s office did not have criminal jurisdiction. A.B. 64 would provide the Attorney General’s office with criminal jurisdiction and the fiscal note was designed to provide the supporting resources. Mr. Marvel asked if the Attorney General’s office had prior civil jurisdiction and Mr. Andrews said they had limited civil jurisdiction and the bill provided additional civil requirements that would also be addressed in the fiscal note. Mr. Marvel felt it had been clearly determined the Attorney General’s office already possessed full criminal and civil jurisdiction. Mr. Goldwater replied his response to Mr. Marvel’s question had been there was some ambiguity regarding jurisdiction. Mr. Marvel asked why the Financial Institutions Division (FID) could not accept those responsibilities and if a deputy attorney general was assigned to the division. The Chair recognized Doug Walther, Senior Deputy Attorney General, who told committee members he represented the Financial Institutions Division, Civil Division. Mr. Walther assisted FID with its legal actions. He said Chapter 645B created criminal liability but it was clear the primary jurisdiction was not created in the Attorney General’s office to enforce those provisions. Like most criminal provisions found in state regulatory laws, the intent was for the primary criminal jurisdiction to take place at the local level, i.e., the District Attorney’s office.

Mr. Walther explained his role was to represent FID’s enforcement of its regulatory civil provisions. Mr. Marvel asked if the District Attorney’s office was notified when a violation was discovered and Mr. Walther said yes. Mr. Marvel then asked if the District Attorney’s office would prosecute the case and Mr. Walther said that it would. If that were the case, Mr. Marvel questioned the involvement of the Attorney General’s office. Mr. Walther said it was his understanding the subcommittee believed the Attorney General’s office would have the expertise to provide jurisdiction over the very technical and document-intensive area of white collar crime in the most efficient manner. He said there had been reluctance to perform those functions and provide resources at the local level.

The Chair recognized Mr. Goldwater who said he understood Mr. Walther’s explanation but that scenario had not played out. He said there had been overwhelming testimony in the subcommittee that alluded to the existence of criminal activity in the real estate mortgage industry.

The Chair asked the anticipated caseload and what basis had been used to request the additional positions. Mr. Walther explained the criminal and civil areas needed to be kept separate in the Attorney General’s office because of constitutional and ethical concerns. Because the regulatory area was a privileged profession, the Attorney General’s office would have access to information that certain other criminal agencies would not. He felt if the functions were mixed, the effectiveness of criminal enforcement would be jeopardized. The Chair said committee members were trying to assess workload and were not interested in over-appropriating for the program. In addition to his own experience, Mr. Walther said he had discussed the issue with other deputies who were currently exercising criminal jurisdiction. The cases were very complex and time-consuming. During the time the Attorney General’s office had worked on the Harley Harmon case it had amassed two file cabinets full of associated documentation. Fortunately, he said, those cases were pretty few and far between. When they did arise, however, the resources outlined in the fiscal note would be taxed to their limit. He anticipated the criminal deputy would receive unlicensed activity referrals on a regular basis. Another issue would be exempt companies performing beyond the limits of their exemptions that would result in prosecutions. He said there was also a consistent problem in the area of advanced fees. A.B. 64 would allow the Attorney General’s office to become more aggressive in that area. Mr. Walther felt there would be enough ongoing work, and hopefully occasional large industry failure, to justify the need for the positions outlined in the fiscal note.

The Chair recognized Ms. Giunchigliani who asked what fees would be charged and how those fees might offset the potential fiscal note. Mr. Walther referred the response to Mr. Scott Walshaw, Commissioner, Financial Institutions Division (FID). Mr. Walshaw explained A.B. 64 outlined two new fee provisions that would fall under FID’s jurisdiction. The first dealt with the creation of a new chapter in the statutes to regulate mortgage banking concerns. The majority of those entities were currently exempt from licensing under a provision of the existing Mortgage Company Act. As it was currently written, A.B. 64 mirrored those fees required of existing licensed mortgage companies, i.e., a $1,500 non-refundable application fee which, by statute, was deposited in Budget Account 3805 designated specifically to reimburse the costs associated with the performance of a background investigation. Those background investigations were conducted by an agent of the Investigations Division of the Gaming Control Board who had been assigned to FID through an inter-agency agreement. There was also an initial licensing fee of $1,000 that was deposited into the General Fund and was used, in part, to reimburse the FID’s General Fund appropriation. Thereafter, on an annual basis, the companies would be charged $500 to renew their license. That annual fee would also be used, in part, to reimburse the agency’s General Fund appropriation.

Mr. Walshaw explained the second part of the bill dealt with the licensing of mortgage agents. That new area of licensing mortgage loan agents and mortgage brokers would be included in licensing Chapter 645B. He said the fiscal note was attributable to the impact of the two new fees. There would be a $500 investigative fee that would be deposited in the investigative account for the purposes mentioned earlier, and the second fee would be an annual licensing fee of $250. The Chair asked if that information had been provided in writing and Mr. Walshaw responded that information had been delivered to Kevin Welsh’s office in the Fiscal Analysis Division of the Legislative Counsel Bureau on April 14, 1999.

The Chair recognized Ms. Giunchigliani who clarified the $500 investigative and $250 annual licensing fees were associated with loan agents only and
Mr. Walshaw said that was correct. He said the mortgage loan broker licensee was subject to fees outlined in existing statute. Ms. Giunchigliani asked if those fees were comparable and Mr. Walshaw responded they were exactly the same as those he had mentioned for mortgage banking licenses. Ms. Giunchigliani asked if the number of banking concerns that would be charged the initial $1,500 fee was known. Mr. Walshaw explained the fiscal note anticipated 300 exempt companies that would be subject to converting from an "exempt" to "license" status. Mrs. Giunchigliani questioned the number of loan agents and Mr. Walshaw said FID was anticipating three loan agents for each existing licensed mortgage brokerage firm, for a total of approximately 1,500 mortgage loan licensees.

The Chair asked Mr. Walshaw for the bottom line. Mr. Walshaw reminded committee members there were two parts to the revenue equation. A portion of the revenue would be deposited to the investigative account which had been earmarked for performing investigations, and to defray the expenses associated with the performance of special investigations, handling liquidations and receiverships, and conservatorships. FID estimated the mortgage bankers application fees would generate $75,000 in each year of the upcoming biennium. Mortgage loan application fees would generate $771,000 in the first year of the biennium, and $871,000 in the second year of the biennium. It was anticipated total application fees being deposited in Budget Account 3805 would be $846,000 in the first year of the biennium and $946,000 in the second year of the biennium. The Chair asked if those dollars were anticipated to be generated by provisions in the bill. Mr. Walshaw responded they were, but would be deposited into revolving Budget Account # 3805. He said that budget account was not technically a General Fund budget account.

The Chair recognized Ms. Giunchigliani who wanted to know if the new application fees would be sufficient to offset FID’s costs. Before answering that question, Mr. Walshaw told committee members he wanted to finish his testimony on the revenue question. He explained the total licensing fees projected from both mortgage bankers and the licensing of mortgage loan agents were anticipated to total $785,500 in the first year of the biennium and $710,500 in the second year of the biennium. As committee members were aware, FID’s budget had already been closed. In the process of that closing FID had requested eight new examiner positions. FID believed that budget would cover the need to increase its examination of all financial institutions, including mortgage companies. Mr. Walshaw wanted committee members to keep in mind the bill, as currently constructed, did not have any kind of examination requirements on an ongoing basis of mortgage loan agents. The process was merely an annual licensing requirement. Theoretically, he said, FID would have the ability to pull a license through the regulatory process, while the examination function was already being performed through the examination of the company the agent worked for.

Mr. Walshaw told committee members the budget had been closed with four new positions in each year of the biennium. Staffing needs to support the administration of the licensing program associated with the licensing of mortgage bankers, a separate issue from the licensing of mortgage agents, would consist of one Administrative Aid position and one Program Assistant II position. He said one reason FID did not require a substantial increase in personnel as because the 300 companies he had mentioned were currently exempt and received exemption certificates each year. Under the new program, those exemption certificates would be converted to license events using the same staff. Mr. Walshaw said the two new positions and associated support/office equipment would total $66,269 in the first year of the biennium, and $58,399 in the second year of the biennium.

Mr. Walshaw explained to new committee members that by statute and regulation, FID’s budget was, in effect, a loan from the General Fund based on its approved expenditures. During the course of the year, through a combination of licensing fees and examination fees, it was incumbent on FID to raise enough money to repay its General Fund appropriation expenditures. He told committee members FID had either matched or exceeded its repayment of the appropriation during the last ten years. The perception of revenue was based on FID’s full expenditure of its General Fund appropriation.

The Chair told Mr. Walshaw committee members wanted to know what FID’s expenditures would be, how much revenue would be generated, and if there was a possibility of offset to absorb expenditures in the Attorney General’s office or any other office impacted by the legislation. While Mr. Walshaw said he understood the Chair’s question, he wanted to be sure committee members understood his office’s responsibilities as far as placement of funds and accountability for those funds. He reiterated while the bulk of application fees would be deposited to the investigative fee account, that account was earmarked as a contingency fund to pay for extraordinary events. The fund had worked very well over the years.

The Chair asked Mr. Walshaw if all the arithmetic had been worked out in the document FID had submitted to Legislative Counsel Bureau, Fiscal Analysis Division staff, and if those figures took into consideration the expenditures of other agencies. With the exception of the comment he had made earlier regarding the Gaming Control Board agent, the document contained information relative solely to FID.

Mr. Walshaw wanted to make it clear to committee members that if any change occurred in the bill regarding the responsibilities of FID as they related to the licensing of mortgage loan agents, there would be a commensurate fiscal impact up to and including the need to hire an additional Gaming Control Board agent.

The Chair asked Mr. Hataway to provide the bottom-line revenue and expenditure figures for the program outlined in the bill and Mr. Hataway responded that information would be provided.

The Chair recognized Mrs. Chowning and asked how many mortgage agents had been estimated per office and Mr. Walshaw responded three-per-office.
Mrs. Chowning then asked how that figure was derived and Mr. Walshaw said FID had determined there would be three mortgage agents per existing license and multiplied that number times the number of licenses for a total of 1,540 plus.

Mrs. Chowning referred committee members to language on page 25 of the bill that referred to a $25 transfer fee for moving from one primary office to another and asked if that fee had been included in the calculations. Mr. Walshaw told committee members he had no way of determining that amount because there were no statistics to show movement of the agents. He commented the
$25 transfer fee was miniscule in the scheme of things. Mrs. Chowning felt the revenue would be far greater than estimated because there were many more than three people per company who were purporting to be mortgage agents.

The Vice Chair recognized Chairman Arberry who asked how the $25 transfer fee was managed in view of agents moving from office-to-office on a continual basis. Mr. Walshaw said it was his understanding the license stayed with the entity the agent worked for. If the agent moved to another licensee, they essentially lost their certificate and a new one would be issued by the next licensee.

The Chair recognized Mr. Marvel who asked the balance in FID’s investigative fund and Mr. Walshaw replied approximately $500,000. Mr. Marvel asked if the Criminal History Repository was used in FID’s background checks and Mr. Walshaw replied the investigation was conducted by the Gaming Control Board agent.

Mr. Walshaw explained FID used a modified Gaming Control Board licensing application and a certified public accountant (CPA) in their office examined the financial portions of the report.

The Chair asked if there was further testimony in opposition to, or in favor of, the legislation. There being none, the chair declared the hearing on A.B. 64 closed.

Vice Chair Evans returned the gavel to Chairman Arberry.

There being no further business, the meeting was adjourned at 10:46 a.m.

RESPECTFULLY SUBMITTED:

Debbie Zuspan,

Committee Secretary

APPROVED BY:

Assemblyman Morse Arberry Jr., Chairman

DATE: