The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 8:00 a.m., on Monday, March 29, 1999, in Room 2135 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

COMMITTEE MEMBERS PRESENT:

Senator Randolph J. Townsend, Chairman

Senator Ann O’Connell, Vice Chairman

Senator Mark Amodei

Senator Dean A. Rhoads

Senator Raymond C. Shaffer

Senator Michael A. (Mike) Schneider

Senator Maggie Carlton

STAFF MEMBERS PRESENT:

Scott Young, Committee Policy Analyst

John L. Meder, Committee Policy Analyst

Beverly Willis, Committee Secretary

OTHERS PRESENT:

Chairman Townsend opened the hearing on Senate Bill (S.B.) 425.

Rick Bennett, Lobbyist, Director, Governmental Relations, University of Nevada, Las Vegas, testified in support of S.B. 425 and submitted an informational packet detailing the function and purpose of the Lied Institute for Real Estate Studies (Exhibit C. Original is on file in the Research Library.). Mr. Bennett said section 7, S.B. 425, establishes a special revenue account for the Lied Institute for Real Estate Studies which is created in the General Fund. He said the monies to be deposited in that fund would be 25 percent of the monies derived from the fee imposed for real estate education, research and recovery pursuant to Nevada Revised Statutes (NRS) 645.830. Mr. Bennett pointed out sections 2 through 6 of the bill establishes the Lied Institute for Real Estate Studies in statute and outlines the responsibilities of the Board of Regents. Mr. Bennett requested amending "board of trustees" to "advisory committee" in section 4, subsection 1 and in section 5, S.B. 425.

Chairman Townsend asked if that was how the institute was currently structured. Mr. Bennett replied yes. Mr. Bennett said since the Board of Regents had already established the institute, he was unsure if the word "shall" on line 5, page 1 of the bill needed to be changed. Chairman Townsend indicated he would check with the bill drafter.

Mr. Bennett requested deletion of section 7, subsection 2, paragraphs (b) and (c), S.B. 425, since the institute was already established and had its own accounts it utilized related to various charges incurred. He furthered the University of Nevada, Las Vegas Foundation also has a separate account for gifts or grants which the institute might receive.

Chairman Townsend said his understanding of S.B. 425 is the portion under section 7, subsection 2, paragraph (a), is in essence the bill. Mr. Bennett replied Chairman Townsend was correct. Mr. Bennett added the Lied Institute for Real Estate Studies is the proper entity to do research related to real estate. Chairman Townsend asked Mr. Bennett if he had discussed this matter with the current licensing board from which the money would be extracted. Mr. Bennett replied yes, but the licensing board is not in support of S.B. 425.

Chairman Townsend inquired how much the portion of money derived from the fee imposed would raise and where the institute would like to put the funds. Mr. Bennett responded the portion of money derived from the fee imposed would raise approximately $175,000 over the biennium and would be used in support of research.

Debra A. March, Director, Lied Institute for Real Estate Studies, University of Nevada, Las Vegas, said the research would focus on statewide needs. She indicated the advisory committee would have input to the types of research which would be undertaken by the institute. Chairman Townsend inquired how much of the $175,000 over a 2-year period would be paid to a researcher. Ms. March responded probably 75 percent of the $175,000 would go to a researcher. She added the institute is also looking at research stipends to professors to do additional research in particular subject areas which have been identified by the advisory committee.

Chairman Townsend said he was not sure hiring a person would be as effective as putting the money towards scholarships. Ms. March stated the hired position would be that of a researcher and then a stipend to the professors who do specific research identified by either the state commission or by the advisory committee. Chairman Townsend stated S.B. 425 indicates the advisory committee would make recommendations on how best to allocate the funds in that they may change their minds about hiring a researcher. Ms. March responded that would be possible, but the goal now is to hire a full-time researcher. Chairman Townsend inquired what was going to be researched. Ms. March stated it would be scholarly and applied research, so it would be both academic and applied, depending upon the need.

Richard J. Morgan, Dean, William S. Boyd School of Law, University of Nevada, Las Vegas, stated the Lied Institute for Real Estate Studies is a very important part of the University of Nevada, Las Vegas. He said the plan for the money is not to hire administrators or to build bureaucracy but to put more researchers into use. He added he hoped this program would have the same kind of impact as applied research programs around the country in terms of helping to develop and diversify the economy.

Senator Rhoads asked if the advisory committee was made up of members statewide or just people from the Las Vegas area. Ms. March replied a lot of the advisory committee members are from southern Nevada and added there are some standing memberships, one of which is the head of the Nevada Association of Realtors. She stated all of the various real estate organizations have standing positions on the advisory committee as well. Senator Rhoads asked Ms. March to provide him with a list of the advisory committee members.

Dean Morgan agreed that in moving forward with the Lied Institute for Real Estate Studies a more geographically diverse advisory board should be considered since its mission is to serve the entire state.

Chairman Townsend asked if there would be some insight into the growth issues and the real estate issues of eastern Nevada. Ms. March said the needs certainly could be identified.

Joan G. Buchanan, Administrator, Real Estate Division, Department of Business and Industry, spoke in opposition to S.B. 425. She stated this fund is the real estate licensees’ fund and was provided for the purpose of consumer protection, not for economic development research. She continued the fund was created in 1967 and its first obligation is to pay recovery claims to the public. Ms. Buchanan furthered there is no way of knowing at the beginning of the year how many claims will be filed. She stated last year 60,000 claims were filed and some years there have been 90,000 claims and other years there have been 30,000 claims. She said the second priority is to utilize the funds for the purpose of assuring real estate education courses for licensure and renewal in order to provide the highest quality education. She stated the real estate education program has been paramount to the Nevada Real Estate Commission.

Senator O’Connell stated her husband is a real estate broker. She asked Ms. Buchanan if she had any background on the establishment of the real estate licensees’ fund, if she knew if information was provided to the general public and if the real estate community voted on how the funds were to be used. Ms. Buchanan replied the fund was created by a statutory provision established in 1967. Senator O’Connell asked if Ms. Buchanan’s organization would have minutes of what transpired leading up to the request of that particular legislation. Ms. Buchanan said she was not here in 1967. Senator O’Connell asked Ms. Buchanan to check her organization’s records prior to the 1967 legislative proposal.

Chairman Townsend stated his wife is also a real estate licensee and a broker. He asked Ms. Buchanan what percentage of the real estate licensing fee is being used for the education portion as opposed to the regulatory function or recovery function. Ms. Buchanan replied a staff of four people provide newsletters to the real estate licensees, conduct research and develop courses for continuing education based upon an analysis of disciplinary problems and new laws. She added about 100 classes are provided a year to the real estate brokers, as well as cosponsoring education courses on fair housing.

Chairman Townsend requested all the people present on the issue of S.B. 425 meet with Ms. Buchanan and her staff to find out if there was any duplication with regard to what they were requesting and what Ms. Buchanan’s staff provides. He further instructed the people involved to find out if there was any common ground that would be helpful to the Lied Institute for Real Estate Studies which would not interfere with Ms. Buchanan’s regulatory authority in protecting the public first, not the licensees.

There being no further testimony, Chairman Townsend closed the hearing on S.B. 425 and opened the hearing on S.B. 452.

Patsy S. Redmond, Lobbyist, Executive Vice President, Nevada Association of Realtors, stated 2 years ago the Nevada Association of Realtors brought forward a bill which would require a lien on personal property if a commission was not paid under a written brokerage agreement. She said a number of people opposed the bill and Chairman Townsend directed the Nevada Association of Realtors to go back to the opponents in an attempt to come up with a compromised bill. She indicated S.B. 452 is the compromised bill.

Chairman Townsend asked how somebody does not get paid if there is an escrow. Ms. Redmond replied in an escrow transaction, the escrow agent acts as a third party whereby the escrow agent takes the instructions from the seller and the buyer. Therefore, Ms. Redmond indicated if the seller says he is not going to pay, the escrow agent will not pay.

Chairman Townsend inquired if the selling party has a contract, is it not the escrow agent’s job to point out the obligations of the contract? Ms. Redmond replied no, it is not the responsibility of the escrow agent to adhere to the seller’s contract. She continued there is no requirement to have any documentation of any agreement outside of the buyer’s and seller’s joint activities. Ms. Redmond indicated in the eastern portion of the United States real estate transactions are done differently because abstracts of title exist and attorneys close the real estate transactions.

Senator O’Connell asked how S.B. 452 varies from the way real estate transactions are presently conducted. Ms. Redmond replied S.B. 452 provides the broker another option rather than going to court. She continued funds could be set aside, which are not now set aside, until a dispute can be resolved.

Ms. Redmond pointed out section 12, subsection 2, S.B. 452, should read "a real estate broker," not "a real estate agent" because this part of the bill deals with real estate brokers, not the individual agents.

Senator O’Connell asked Ms. Redmond if she felt the current listing agreements did not already cover this issue. Ms. Redmond replied the current listing agreements do not already cover this issue. Senator O’Connell asked how many claims of this type Ms. Redmond deals with on an annual basis. Ms. Redmond replied she had not compiled statistics on these claims.

Charles A. Mack, Lobbyist, Nevada Association of Realtors, said a broker has no standing in an escrow. He stated a title company can ask for a broker to sign the agreement to pay commission which is also signed by the seller, but the seller at any time prior to the close of escrow can send a letter to the escrow company revoking the agreement to pay commission. He said it is difficult to track sellers not agreeing to pay commission because people often will not pursue litigation because of the expense involved. Mr. Mack pointed out S.B. 452 provides that under no condition will closing be held up because of a dispute between a seller and a broker.

Chairman Townsend inquired if there are other states with a statute similar to S.B. 452. Ms. Redmond replied most of the legislation contained in S.B. 452 was modeled after the State of Washington’s statute. Chairman Townsend asked if the State of Washington is the only state with this type of statute. Ms. Redmond responded several eastern states have passed a broker-lien law which is something no one would agree to because the lien attaches to real property and it is the buyer who has the real property and may not be a party to this agreement to pay commission.

Chairman Townsend said he thought it was odd that a person could sign a contract agreeing to pay a commission and then later be able to rescind the agreement in writing to pay a commission. He asked if the burden of proof should be on the seller who signed the agreement to state why he has decided not to pay the commission. Ms. Redmond replied it happens because often the seller decides he is not going to pay the commission because he does not think the broker earned the commission.

Mr. Mack interjected the seller is still legally liable for the commission, but if the seller instructs the escrow company not to pay the commission, the escrow company will not pay and then the broker has to litigate the contract.

Chairman Townsend suggested an administrative adjudication mechanism which would be simpler than litigating through the court system. Mr. Mack said he believed S.B. 452 provides the net proceeds be put in a separate account with the escrow company and then if the seller feels he does not owe the money, he can file an action. Mr. Mack added there are provisions in S.B. 452 to prevent brokers from frivolous claims.

Chairman Townsend said he believed if a person enters into a contract to pay for a service that money should be paid unless the person can show a viable legal reason why the money should not be paid. Ms. Redmond said she believed S.B. 452 addressed Chairman Townsend’s concern.

Senator Carlton inquired about the residential units referred to in section 4, S.B. 452. Melody L. Luetkehans, Lobbyist, Nevada Association of Realtors, replied S.B. 452 would not affect a developer of four residential units or less.

Gary E. Milliken, Lobbyist, National Association of Industrial and Office Properties, said he was in agreement with the language of S.B. 452.

There being no further testimony, Chairman Townsend closed the hearing on S.B. 452 and opened the hearing on S.B. 509.

Lawrence P. Matheis, Lobbyist, Nevada State Medical Association, said approximately 1 year ago a number of large group purchasers, managed care plans and provider groups began meeting about electronic data interchange (EDI). He indicated about 2 years after the federal government adopts a uniform claims form and billings form system everybody will be using EDI for electronic claims processing. He furthered the Medicare system is already processing

claims entirely electronically. He pointed out S.B. 509 would give the State of Nevada a head start on electronically processing claims. Mr. Matheis stated several states, including Utah, have already adopted a uniform claims form.

Senator O’Connell asked Mr. Matheis if this bill originated from a model piece of legislation the states are acquiring. Mr. Matheis replied he did not know, but said he thought S.B. 509 was modeled from what Utah adopted 2 years ago.

Alice A. Molasky-Arman, Commissioner of Insurance, Insurance Division, Department of Business and Industry, said she was asked whether the Health Insurance Portability and Accountability Act of 1997 (HIPAA) required standard electronic transmissions and uniform claim forms and whether those requirements would be imposed upon the State of Nevada’s health insurance plan, as well as every other kind of health insurance. She said she learned the requirements arise out of the administrative simplification provisions of Title 2 of HIPAA which covers both administrative simplification as well as fraud provisions. She stated those provisions will not take effect until Congress establishes rules. She pointed out Congress has up until December 31, 1999 to establish those rules and if Congress does not do so the U.S. Department of Health and Human Services will be required to adopt regulations. Ms. Molasky-Arman said a uniform claim form already exists under the insurance laws and it is her understanding all insurers are required to accept the uniform claim forms and all medical providers do use the uniform claim forms. She indicated the Department of Business and Industry is in the process of preparing a fiscal note to S.B. 509, and she is going to ask for the ability to contract with some experts in electronic data processing, as well as medical professionals, to assist in establishing the uniform billing codes.

Senator O’Connell asked Ms. Molasky-Arman if the Department of Business and Industry planned for this issue in its budget. Ms. Molasky-Arman replied no, the Department of Business and Industry did not. Senator O’Connell asked if the Department of Business and Industry’s budget had been approved yet. Ms. Molasky-Arman replied no, the budget had not yet been approved.

Chairman Townsend asked Ms. Molasky-Arman if she would bring up at the Department of Business and Industry’s next budget hearing that there is a bill being considered which might impact its budget. Mr. Matheis said there was a real possibility none of the federal time lines would be met. Mr. Matheis pointed out the federal team working on this matter is also the team working on the Y2K (Year 2000) matter, so the Y2K matter has to be dealt with and resolved before the uniform claim forms can be filed electronically. Mr. Matheis added the intent of S.B. 509 is for the State of Nevada to get its own electronic filing system in place and then when the federal government adopts the regulations on this matter the states will just have to make a few adjustments to their electronic filing systems.

Senator O’Connell asked if an individual identification number was a key component in making this electronic filing system work. Mr. Matheis replied an individual identification number would be a key component for the federal compliance, but not necessarily at the local level.

Sharen Weaver, Chief Insurance Assistant, and Manager, Health Insurance Portability and Accountability Act, Division of Insurance, Department of Business and Industry, stated Congress has until the end of 1999 to act on the administrative simplification. She said a web site has been developed which deals with administrative simplification. She explained once the final rules have been enacted there would be 2 years for health insurers to come into compliance and 3 years for small employers to come into compliance. She clarified a small employer is defined as a business consisting of 50 employees or less. Ms. Weaver pointed out the purpose of S.B. 509 is to eliminate a lot of paperwork and to make this process effective and efficient in the health care industry for all transactions, as well as payment to the providers. She said the language in section 41 of S.B. 544 mirrors the language in S.B. 509.

Senator O’Connell asked if S.B. 544 came out of the interim study. Ms. Molasky-Arman said she believed S.B. 544 was the Governor’s bill proposing changes in the makeup of what was the Committee on Benefits.

Jon Hansen, Tort Claims Manager, Office of the Attorney General, interjected S.B. 544 would be heard before the Senate Committee on Government Affairs. He said the transfer of data electronically would be like using the mail system in that the data is kept in closed envelopes whereby the information being sent electronically is only available to the person receiving the information. He said the idea behind the electronic system is to pay claims faster and at a much lower cost than paper processing. Mr. Hansen said the standards being established are being modeled after the standards used by the Utah health information network.

There being no further testimony, Vice Chairman O’Connell closed the hearing on S.B. 509 and asked for a motion to indefinitely postpone S.B. 509.

*****

Chairman Townsend opened the work session on S.B. 177.

Charles W. Joerg, Lobbyist, Nevada Manufactured Housing Association, referred to Amendment No. 69 to S.B. 177, tab D of the work session document (Exhibit D.). He said the amendment allows a local government to change a plan on a commercial building if it gets permission from the Manufactured Housing Division.

Donald G. Morse, Investigator, Manufactured Housing Division, Department of Business and Industry, said presently the Manufactured Housing Division approves the plans and then each local jurisdiction adds its own specific uniqueness. He stated at the present time the local jurisdictions are not required to notify the Manufactured Housing Division of any changes to the building plans.

Chairman Townsend asked for a motion to amend and do pass S.B. 177.

*****

Dean Morgan reported the results of the previous meeting attended by all parties interested in S.B. 425, as requested by Chairman Townsend. He said all were in agreement not to have the University of Nevada, Las Vegas’ participation in the research function to detract from the education and claims function of the fund. He suggested Ms. March, Ms. Buchanan and Mr. Bennett work with the finance committee on this bill to ensure the funding be directed appropriately.

Senator O’Connell asked Ms. Buchanan how the recovery claims would be paid. Ms. Buchanan said the current formula in S.B. 425 really could not work based upon all of the things which need to be reviewed. Ms. Buchanan suggested a different approach would have to be looked at for some type of research funding.

Chairman Townsend suggested Ms. Buchanan and Mr. Bennett work on this issue with the appropriate entities over the next couple of days and he would bring it back to a later work session. Dean Morgan agreed Ms. Buchanan and Mr. Bennett would work on the financial consequence to ensure education, recovery and research are all served with this funding.

Senator O’Connell requested notification of when S.B. 425 would be brought back before the Senate Committee on Commerce and Labor because she would like clarification of how the researchers called for in the bill will be utilized since there are already people in place working on research.

Chairman Townsend closed the work session on S.B. 425 and opened the work session on S.B. 45.

Alfredo Alonso, Lobbyist, Superpawn, presented the amendment provided by Clark County in which the county came to a compromise with several of the members of the Senate Committee on Commerce and Labor (Exhibit E). Mr. Alonso said he understood Senator Schneider’s issues would be taken care of on a local level. In addition to Wallace Beinfeld’s amendment under tab B of the work session document (Exhibit D), Mr. Alonso submitted an additional amendment to S.B. 45 on behalf of Mr. Beinfeld (Exhibit F).

Stan R. Olsen, Lobbyist, Lieutenant, Las Vegas Metropolitan Police Department, and Nevada Sheriffs and Chiefs Association, said he was in agreement with Clark County’s amendment, but was not in agreement with Mr. Beinfeld’s latest amendment (Exhibit F).

Chairman Townsend pointed out Mr. Alonso and his corporation would be federally exempt because Mr. Alonso has a federal license, but his employees would not necessarily be federally exempt. Lieutenant Olsen said that particular situation would be handled in the same way gun shops are operated. Lieutenant Olsen explained gun shop employees are employees of a corporation and the corporation is licensed.

Robert R. Barengo, Lobbyist, Nevada Collateral Loan Association, said he met with Clark County and he is in agreement with the county’s amendment.

Chairman Townsend referred to Senator Schnieder’s amendment under tab C of the work session document (Exhibit D). Senator Schnieder said he thought his amendment was covered in Clark County’s amendment (Exhibit E). Senator Schneider explained small antique shops would operate under the antique dealer’s license, much like a broker.

Chairman Townsend asked Lieutenant Olsen if he would inform the appropriate Clark County representatives of any problems he might see occurring with

respect to this new statute. Lieutenant Olsen assured Chairman Townsend he would see to it the Clark County representatives were informed immediately of any potential problems.

There being no further testimony, Chairman Townsend closed the hearing on S.B. 45 and asked for a motion to amend and do pass reflecting the most recent Clark County amendment (Exhibit E).

*****

Chairman Townsend turned the gavel over to Senator Schneider as he and Senator O’Connell would both abstain from voting on S.B. 452. Senator Schneider asked for a motion to amend and do pass S.B. 452.

*****

Jon L. Sasser, Lobbyist, Washoe Legal Services, stated Amendment No. 267 (Exhibit G) covers a variety of issues discussed before the Senate Committee on Commerce and Labor as it sets up the process by which the Governor would appoint a board of directors for a charitable corporation which would be set up to receive funds pursuant to S.B. 12. He said the Amendment No. 267 (Exhibit G) deals with an annual audit and creates a preamble as suggested previously by Senator O’Connell. Mr. Sasser said it was his understanding Thomas M. Patton, First Assistant Attorney General, Office of the Attorney General, was in disagreement with the language regarding reimbursement.

Thomas M. Patton, First Assistant Attorney General, Office of the Attorney General, said the attorney general’s main concern is performing its duties under S.B. 12 and the cost associated with performing its duties. He explained S.B. 12 deals with a very specialized type of law for which the attorney general’s office does not currently have a deputy attorney general who is specialized solely in nonprofit corporations. Mr. Patton asked S.B. 12 be amended because two of the bill’s sections provided for the attorney general to charge in advance and to have in an escrow account reasonable costs incurred in exercising the attorney general’s duties. Mr. Patton pointed out NRS 41.03435 provides the attorney general authority to engage outside counsel when it is impracticable to perform legal services in-house. He suggested broadening the proposed amended language of S.B. 12 under section 7, page 4 of Exhibit G, and under section 25, page 9 of Exhibit G, by inserting "and attorneys’ fees" after "and for all reasonable costs" and before "incurred by the attorney general . . . ."

Chairman Townsend clarified Mr. Patton’s request is to remove from the language the rate at which the attorney general charges state agencies for legal services. Mr. Patton concurred and reiterated the language "all reasonable costs and attorneys’ fees" would accomplish removing from the language the rate at which the attorney general charges state agencies for legal services. Mr. Patton declared the attorney general’s office has not yet seen anything convincing that the provisions of S.B. 12 would be unconstitutional or otherwise illegal. He pointed out although some legal challenges may well be made should a conversion of a foreign nonprofit go forward in the future, the attorney general’s office is not convinced those legal challenges would ultimately prevail.

Senator O’Connell asked who would pay if legal challenges came forth. Mr. Patton replied ultimately it would be the taxpayers who would pay the fee of a legal challenge. He said he did not believe the initial litigation, as to whether or not S.B. 12 is constitutional and applicable, would fall under the provisions of the bill where the attorney general could charge for the actual work done to evaluate and hold public hearings regarding a conversion.

Senator O’Connell said it was her understanding Blue Cross Blue Shield did not hold a nonprofit status in Nevada, but paid the same taxes as every other insurance company pays in Nevada. She asked Ms. Molasky-Arman if this was true. Ms. Molasky-Arman nodded yes, that was true. Senator O’Connell asked for an explanation as to Blue Cross Blue Shield paying taxes on the federal level and not having nonprofit status in this state.

Ms. Molasky-Arman clarified Blue Cross and Blue Shield of Nevada was a nonprofit; however, it was not the kind of nonprofit which is exempt from paying taxes. Senator O’Connell interjected yet Blue Cross Blue Shield paid every tax just like every other insurance company paid. Ms. Molasky-Arman said that was correct and furthered she believed Blue Cross Blue Shield was formed under chapter 81 of NRS rather than chapter 82 giving it certain exceptions as a nonprofit.

Senator O’Connell asked if an insurance company is no longer doing business in this state and has been purchased by another company, does the other company also purchase whatever assets were available and if any assets left over would go to the residents of the state.

James L. Wadhams, Lobbyist, Blue Cross and Blue Shield of Nevada, and Attorney, Blue Cross Blue Shield of Colorado, stated the amendment presented at this hearing eliminates any other entity to which S.B. 12 could apply. He read a direct quote of the attorney general, "At no time in its history has Blue Cross and Blue Shield of Nevada held assets in trust, or received any of the tax and other benefits normally enjoyed by charities." Mr. Wadhams submitted for the record the March 5, 1997 letter from the attorney general containing the quote he had just read (Exhibit H). Mr. Wadhams said his witness challenging the constitutionality of S.B. 12 would be the attorney general of the State of Nevada. He stated the preamble added to section 1 of S.B. 12 further illustrates the entire bill is based upon a false premise. Mr. Wadhams stressed Blue Cross Blue Shield has never had a special responsibility different from any other insurer and never had any tax breaks provided by the state. He submitted, for the record, copies of opinions prepared by various state officials (Exhibit I). He pointed out he had highlighted statements in each opinion which absolutely indicated Blue Cross and Blue Shield of Nevada never was a charity and never had tax-exempt status.

Mr. Sasser pointed out Mr. Wadhams’ failure to read the part of the attorney general’s letter (Exhibit H) regarding why the attorney general believes it would be a windfall for the citizens of Colorado to receive all the charitable assets. Mr. Sasser explained it is not a matter of whether these assets will go to a private company or to the citizens of Nevada, but a question of if these assets go to the citizens of Colorado, or the citizens of Nevada. He said he believed S.B. 12 was not an antibusiness bill, but a pro-Nevada bill.

Mr. Wadhams submitted a March 29, 1999 article from the Wall Street Journal (Exhibit J) indicating the reason for the Colorado statute is because Blue Cross of Colorado has favorable tax status in Colorado in that it is exempt from sales tax, premium tax and property tax. He stated once the Nevada business merged with Colorado, Nevada continued to apply tax to the premiums.

Paula Berkley, Lobbyist, Truckee Meadows Human Services Association, declared the national organization of attorneys general has said the key point is not whether the company is a charitable nonprofit or a specific type of nonprofit, but whether the company is a nonprofit company or not. Ms. Berkley pointed out S.B. 12 argues on what is going on today in Colorado. She said 100 percent of the assets in Colorado, including Nevada’s portion, are being currently valuated. She indicated before this legislative session the Truckee Meadows Human Services Association had asked, through the Legislature, the attorney general and the Governor’s Office, that a special valuation be made of Nevada assets. Ms. Berkley pointed out S.B. 12 forces the valuation issue.

Senator O’Connell asked how much a lawsuit of this nature would cost the state. Mr. Patton replied it would entirely depend on the scope of the litigation. Senator O’Connell asked Mr. Sasser and Ms. Berkley if the charitable organizations they represent would be willing to pay for a lawsuit in order to establish whether or not there is any money for Nevada. Ms. Berkley replied she was not authorized to expend any money over $100 per month. Mr. Sasser replied the nonprofit organizations he represents do not have money to reimburse the attorney general for a case lost on behalf of the people of Nevada.

Chairman Townsend pointed out the proposed amendment about recovering costs and hiring outside counsel does not provide how that would be accomplished. He asked if such a lawsuit could be done on a contingency basis. Mr. Patton replied the possibility of undertaking a lawsuit on a contingency could be explored. Mr. Patton pointed out there are provisions in S.B. 12 for collecting the attorney general’s costs and expert consultant fees in doing the asset valuation process. Mr. Patton stated the provisions of S.B. 12 assumes the nonprofit recognizes the applicability of the bill and is proceeding under the terms of the law they are not disputing. Mr. Patton said he did not want to get into a debate about whether the bill would be applicable constitutionally because the attorney general will ultimately and undoubtedly be caught in the middle.

Senator Amodei said he noticed on the initial bill there was no fiscal note and asked Mr. Patton if he was aware of any request for a fiscal note. Mr. Patton said there was some question about whether or not a fiscal note should be submitted. Mr. Patton said a slight amendment was requested so that the attorneys’ fees and expenses would be covered in order to avoid a fiscal note.

Senator Amodei asked Mr. Patton if S.B. 12 were to pass and the attorney general looked at the threshold question in terms of nonconstitutionality; does the attorney general’s office have the existing resources to pursue this matter. Mr. Patton replied it would depend on the extent of the challenge and how much time would be involved. He pointed out again the attorney general’s office does not have an attorney specialized in this area. Mr. Patton stated the attorney general’s office could engage special counsel through NRS chapter 41, with the approval of the State Board of Examiners, and pay for the special counsel out of the attorney general’s litigation budget or general operating budget. Mr. Patton added that perhaps the attorney general’s office could ask for an additional infusion of monies depending on the size of the litigation. Senator Amodei indicated the attorney general’s office has the ability to decide whether the litigation would be something it would dedicate a lot of assets to, a few assets to, or something in between. Mr. Patton concurred with Senator Amodei.

Chairman Townsend asked the committee if it were comfortable making a motion on S.B. 12. Chairman Townsend asked Mr. Patton if it would be possible for the attorney general to participate in the discussions on S.B. 12. Mr. Patton said he did not know if the attorney general would want to directly participate in the discussions on S.B. 12. Mr. Patton said he recognized the confusion on this issue, but stated he knew a determination was made in the attorney general’s office that the provisions of NRS 82.536, which discusses charitable corporations, was not applicable. Mr. Patton said he could see a contest over the applicability issue and reiterated he was not convinced Blue Cross Blue Shield would not fall within the scope of S.B. 12.

Senator O’Connell indicated Ms. Berkley had a list of other states involved in this same issue. Senator O’Connell said she thought the disposition of the licensing of Blue Cross Blue Shield in those states needed to be clarified and whether Blue Cross Blue Shield was a nonprofit, yet paid all the taxes like any other insurance company. She said she also felt it necessary to find out if the attorney general in any of those states has been challenged on this issue and, if so, what was the bottom-line cost.

Mr. Patton said he thought the parties proposing and opposing S.B. 12 were probably in the best position to give Senator O’Connell a detailed work-up. Mr. Wadhams said he would be happy to prepare a matrix of the circumstances in the other states.

Chairman Townsend asked Mr. Wadhams if he could provide the matrix by Friday. Mr. Wadhams replied he thought that would be possible. Chairman Townsend closed the discussion on S.B. 12, to be resumed at a later date.

Chairman Townsend opened the work session on S.B. 441 and S.B. 451 stating he would discuss the two bills together because of their similarity.

Chairman Townsend asked Senator Schneider if there were people qualified to conduct the studies referred to in section 4, subsection 2, S.B. 451. Senator Schneider replied there are qualified people to conduct these studies, and once the developer has provided a person with an initial reserve study that person can update the study over a 10- or 12-year period.

Chairman Townsend stated his wife performs property management services for some of the homeowners’ organizations. Chairman Townsend pointed out an inconsistency in the two bills in that S.B. 451 provides the reserve studies be conducted at least once every 3 years and S.B. 441 provides the reserve studies be conducted at least once every 5 years. Senator Schneider said that was an issue which could be debated, but he said he thought 5 years seemed like quite a while. Senator Schneider said he felt 3 years was a good amount of time to review the situation and make sure the right direction is being taken.

Senator O’Connell asked if an outside audit was required previously. Senator Schneider said he did not recall. Senator O’Connell stated the major concern was there be an accountability of the money and the money go to every homeowner. Senator Schneider stated S.B. 451 provides a financial statement must be made available every year for the homeowners.

Chairman Townsend said he wanted to make sure the homeowner could look at the reserve account issue before buying in a particular area. Chairman Townsend said he believed Senator Schneider’s goal, with section 4 of S.B. 451, was to make sure homeowners have full knowledge of what the homeowners’ association is doing and what the responsibilities are of the homeowners’ association.

Chairman Townsend said he thought the executive board meetings were a crucial issue as opposed to the yearly homeowners’ meetings. He indicated this was changed under S.B. 451 and stressed the integrity of that issue be maintained. Senator Schneider said section 6, subsection 2, paragraph (b), subparagraph (1), S.B. 451, provides the meeting notice be posted. Senator Schneider said, however, that should not be the only notice. Senator Schneider indicated some homeowner associations have a quarterly newsletter in which the meeting notice could be publicized.

Chairman Townsend asked Senator Schneider if it were necessary for the homeowner associations to be registered with the secretary of state. Senator Schneider replied the secretary of state gets involved because most associations are nonprofit corporations. Senator Schneider added the secretary of state does not want to be responsible for collecting these fees any longer, so the Real Estate Division will be taking over that responsibility.

Chairman Townsend pointed out in section 9, subsection 5, S.B. 451, "A civil action based upon such a claim may be commenced . . . " should read "A civil action based upon such a claim may not be commenced . . . ." He said a claim must go through the administrative process before civil action can commence.

Senator O’Connell suggested a penalty-phase provision in S.B. 451 for associations and then it would be up to the ombudsman to enforce the penalty instead of going to court. Pat Coward, Lobbyist, Justice for Home and Condominium Owners, interjected the arbitration process is lengthy. He said the court process provides an immediate resolution and the homeowners are looking for a way to expedite the penalty process. Chairman Townsend stressed an action cannot be taken to court without going through the administrative level process.

Senator Schneider stated another issue of contention by the homeowners is the voting process. He said the homeowners he has met feel strongly about a secret ballot because it is difficult to vote against a neighbor. Mr. Coward said the homeowners were especially sensitive about the voting process for the board of director members.

Senator Schneider commented to be a board member, a person has to be a resident of the State of Nevada and live within the homeowner association they are representing. He said this has been a problem in the Lake Tahoe area because most board members do not live within the association, but just visit on holidays.

Chairman Townsend asked the reasoning for not having people being residents of the association in order to be a board member. He said he was willing to listen to both sides, but was not sure there was any logic present. Ms. Buchanan stated some of the individuals own a number of units within the association.

Larry W. Bennett, Lobbyist, Justice for Home and Condominium Owners, in going back to page 6, line 15, S.B. 451, stated the homeowners wanted "A civil action based upon such a claim may be commenced" language. He explained if a person wants to run for an association office and the request to run for office is not granted by the homeowners or the association, then this person has to go through an arbitration/mediation process which takes 6 to 8 months. By the time the arbitration/mediation process is completed the election is over and this person has missed the opportunity to run for association office. Mr. Bennett stated the association presently has the capability of taking a homeowner to court immediately if it is aggrieved by some action. He said the homeowners are just asking for that same level playing field.

Chairman Townsend told Mr. Bennett he understood his position in wanting equality for both parties.

Ms. Redmond commented she has represented homeowners trying to sell their homes who need the financial information required by law to show the buyers and the associations are not always cooperating in getting the information to the seller in an appropriate amount of time for the seller to retain the buyer. She said it seemed to her if the association had the information, which it should by law, the association should be able to produce the information within a matter of hours.

Mr. Coward said he has received a number of complaints about not only the delay in time, but in the fee the association charges for providing the records. Chairman Townsend pointed out NRS 630.140 contains language which might be used providing a seller can subpoena the required information from the association. Then if the association does not produce the records, the district court can rule on the matter based on any objections the association has in providing the information subpoenaed. Chairman Townsend stated the homeowner can recover any costs or attorney’s fees incurred from the individual, not the association.

Senator O’Connell asked what period of time is involved in the process which Chairman Townsend set forth. Chairman Townsend said if a person fails to comply with a subpoena within 10 days after its issuance, the court may be petitioned. Upon such petition the court shall enter an order directing the subpoenaed person within time to be fixed by the court in its order; the time not more than 10 days after the date of the order. Senator O’Connell concluded the process could probably take a month or more.

Scott Young, Committee Policy Analyst, Research Division, Legislative Counsel Bureau, remarked if the ombudsman were to be empowered with the right to access the records of the association, the ombudsman would make a request; and if the request were refused, the ombudsman could be authorized under statute to issue the subpoena. Mr. Young continued if the subpoena were refused, the homeowner could then file an action in district court, which gives the district court the opportunity to determine whether there is a reasonable basis for the refusal. If the district court determines there is not a reasonable basis for the refusal, it can order the production of the books and records. Mr. Young stated in these types of proceedings the court usually directs the parties to bring the books and records with them to court for the hearing. He said if the court determined there was no good reason for the refusal to give the information, the court could assess the costs and attorney’s fees for the homeowner by requiring the responsible individual for not giving access to the records to pay out of his own pocket.

Chairman Townsend suggested making a laundry list of considerations on this issue and then in the next work session on this issue the committee could vote on what it wants in and out of the bill and have the amendment drafted.

Senator Schneider submitted a March 28, 1999 memorandum from Scott Young regarding the March 27, 1999 subcommittee meeting on S.B. 441 and S.B. 451 (Exhibit K).

Lieutenant Olsen suggested deleting lines 5 and 6, page 1, S.B. 131 and striking the word "separate" from line 8, page 1, S.B. 131. He further suggested adding "if the service is activated by a cash payment and no regular billing occurs" at the end of the sentence on line 9, page 1, S.B. 131. Lieutenant Olsen explained those individuals who are engaging in criminal activity and using the beepers to further their criminal activity are doing cash transactions only.

Alfredo Alonso, Lobbyist, Metro Call, and Page Net, opposed S.B. 131 because cellular telephones are being exempted from the bill. He said pagers are being used less by corporate entities and businesses in general and S.B. 131 singles out people who use pagers presuming they are gang members. Mr. Alonso stated from a business standpoint, a pager cuts down the administrative cost and thus cuts down the cost of doing business. He concluded the passage of S.B. 131 could put people out of business or substantially cut the businesses in half.

Senator Carlton pointed out S.B. 131 just requires basic information on a person, so if a person is a law-abiding citizen he would give the information required. She stressed S.B. 131 has nothing to do with a person’s financial ability.

Mr. Alonso countered section 1, subsection 2, paragraph (1), S.B. 131, requires a complete application be filled out and also requires photographic identification of a person. He reiterated from an administrative cost standpoint, S.B. 131 would raise the cost of doing business.

Lieutenant Olsen stated there is an automatic tracking system on cellular phones and there is not such a tracking system on pagers. He said law enforcement is only after people paying cash because a great number of those people are involved in criminal activity, such as drug transactions.

Senator O’Connell asked Lieutenant Olsen if there was any reason why finger printing was not required. Lieutenant Olsen said S.B. 131 was trying not to put too much of a burden on the poor industries. He stated the problem with a fingerprint is that anyone can send someone else in to pick up their pager.

Chairman Townsend suggested Lieutenant Olsen allow Mr. Alonso to work with the marketing industry on having a 5-day waiting period on pagers. Lieutenant Olsen said he had tried to work with the marketing industry over the past 2 years, to no avail.

Chairman Townsend asked for a motion to amend S.B. 131 with Lieutenant Olsen’s proposed amendments.

Senator Amodei informed Mr. Alonso this action was in no way related to a perception on the beeper industry, but rather to customers who fit a certain

profile. Senator Amodei further stated his position was based on the customer profile and was in no way a reflection on the industry Mr. Alonso represents.

*****

There being no further business, Chairman Townsend adjourned the meeting at noon.

RESPECTFULLY SUBMITTED:

Janice McClure,

Committee Secretary

APPROVED BY:

Senator Randolph J. Townsend, Chairman

DATE: