The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 8:15 a.m., on Wednesday, April 28, 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

GUEST LEGISLATORS PRESENT:

Assemblyman John J. Lee, Clark County Assembly District No. 3

Assemblywoman Barbara E. Buckley, Clark County Assembly District No. 8

STAFF MEMBERS PRESENT:

Scott Young, Committee Policy Analyst

Kathryn Lawrence, Committee Secretary

OTHERS PRESENT:

Assemblyman John J. Lee, Clark County Assembly District No. 3, stated this bill is a continuation of legislation from 1997. He explained the contractors’ board had made some good changes in 1992 introducing a consumer education program. He stressed the program was done in order to educate the public with contractors and the risks involved by hiring an unlicensed contractor. He stated the program was also expanded to educate consumers on how to protect themselves before hiring a contractor. He pointed out section 2, subsection 1, of the bill addresses reasonable bylaws, rules and regulations to carry out provisions effectively. He stressed section 3, subsection 2 refers to the board submitting a report to the Governor and the Legislature every 2 years. He noted section 4 states selecting members including general contractors who have a broad perspective of dealing with problems brought before the board.

Assemblyman Lee noted section 6 was to facilitate the complaints. He stated he or the Governor would like to prospectively appoint the board, with term limits of time served, so changes can be made if need be. Chairman Townsend noted in section 2, subsection 2, the wording, "good-faith effort to mail to each person licensed," he stated the mailings could become very expensive. Senator Rhoads declared he did not agree with the term limits listed in section 8, subsection 4 of the bill. Assemblyman Lee repeated he had no problems with the term limits. Senator O’Connell questioned section 7, subsection 2, paragraph (c), the wording "timely manner," asking what those words meant; she suggested more precise wording. Assemblyman Lee answered the board should respond to any complaints within a reasonable time period.

Irene E. Porter, Lobbyist, Southern Nevada Home Builders Association, stated she was in support of the bill.

Danny L. Thompson, Lobbyist, State AFL-CIO, stated he agreed with the bill. He stated the term limits were a good idea because it brought new ideas and experience. He noted the requirements to serve on the board are good.

John D. Madole, Jr., Lobbyist, Chapter of Associated General Contractors, stated he opposed the bill. He disagreed with the costs of the mailings feeling it would be too expensive. He disagreed with the Governor appointing the board, and stated people who are interested and participating should be given the opportunity to continue to serve. He explained a person gains very valuable experience in serving on the board. He stated an architect or engineer should not necessarily be considered to serve on the board.

Dennis Haney, Attorney, State Contractors’ Board, submitted a list (Exhibit C) of the State Contractors’ Board members, as of 1999. He remarked the two members whose time had expired in October 1998 are still serving on the board; but the other five members’ reappointment dates will occur within the next 2 years. He stated he opposed this bill. Chairman Townsend asked to what he was opposed. Mr. Haney answered he was opposed to the concept everyone would be terminated immediately unless the Governor appoints them.

Kim W. Gregory, Chairman, State Contractors’ Board, stated if a board member is doing a good job, they are not going to be eliminated. He explained it takes a period of time to fully understand how the board operates, especially in terms of the board’s regulations. He disagreed with the concept of general contractors having a great deal of knowledge; he stated they are basically construction managers.

Margi A. Grein, Lobbyist, Executive Officer, State Contractors’ Board, stated the board has had some difficult times. She stressed this it is not the time to change the board members. Chairman Townsend disagreed and stated there are a number of agencies that appear for testimony before the committee that need to not work harder, but smarter. He stated the committee is looking more for implementation and action than hard work. Chairman Townsend inquired if the board knew how many licenses were for subcontractors, as opposed to general contractors. Mr. Gregory answered most licenses are obtained by the subcontractors. He stated it is paramount to understand the board is effective with whatever regulation the committee administers only if the contractor deems his license is precious to him. He explained if a contractor no longer cares to be in business, the ultimate penalty the board can administer is to revoke their license. He declared the general public does not understand that concept. Mr. Haney stated requiring the contractors to obtain more bonds may help, especially with residential homes. Mr. Gregory declared the contractor board’s right to ask for a financial statement has helped determine whether or not a contractor should be allowed to have a license. He noted the board currently has a more stringent financial review at the time of licensing, as opposed to 5 years ago. Mr. Haney commented it is still important to give the contractor a chance to grow in his business.

Mr. Gregory stated board members need time to learn the specifics of contracting and changing board members every 2 years would be a mistake. He defined the board does not make the laws, they only follow them. He concluded that once a contractor files bankruptcy, the board can no longer enforce any of the regulations.

Senator Amodei questioned why none of these cases are turned over to the Office of the Attorney General. Mr. Haney stated the board has referred six cases to the District Attorney, in southern Nevada, in the last 7 years; none has been prosecuted. He stated, in the past, the board had turned over 500 cases to the district attorney in southern Nevada, and had not received any response. Chairman Townsend suggested, in the future, contacting one of the board members and they will personally call the district attorney.

Dennis K. Johnson, State Contractors’ Board, stated most of their problems deal with residential homes. He noted the board receives complaints against contractors and subcontractors. He stated the board needs the expertise of plumbers and electricians on the board for questions and referrals. He clarified many times the homeowner will seek out an unlicensed contractor because they may build their home for a cheaper price, but then the consumer will complain to the board when there are problems. Mr. Gregory stated if a consumer deals with an unlicensed contractor, that contract is void.

Mr. Haney concurred the board has made an effort to educate the public. He acknowledged if a consumer has a complaint against an unlicensed contractor, they refer it to the district attorney. He noted in a court case, the judge will rule in favor of the consumer not paying the contractor if the contractor is unlicensed.

Ms. Grein stated the board has budgeted approximately $200,000 for their education program to allow consumers to make an informed decision. Chairman Townsend urged that the members of the committee would like to consult with the board in determining how they are going to spend the funds for the education program.

Chairman Townsend closed the hearing on A.B. 259 and opened the hearing on A.B. 636.

Assemblywoman Barbara E. Buckley, Clark County Assembly District No. 8, stated she supported this bill and introduced Nick Wooldridge, her intern.

Nick Wooldridge, Intern, Assemblywoman Barbara E. Buckley, stated it is extremely frustrating to have a home built and the roof is collapsing. He insisted this was only the beginning of the problem. He explained if a contractor is not willing to make the necessary repairs, the next step is to go to court or to the contractors’ board. He justified if the contractor loses his license, the consumer may be able to seek compensation from the surety loan.

Mr. Wooldridge stated this bill addresses the bonding process. He gave an example of an elderly gentlemen who decided to have his roof repaired. He outlined the consumer chose a licensed contractor; the contractor performed the repair and was paid. He stressed that two weeks later, the roof collapsed from faulty workmanship. He noted the consumer did not have the money to contact an attorney and felt the contractor should have reimbursed him for the roof. Mr. Wooldridge urged that the consumer file a complaint with the board, and the contractor lost his license. He clarified the consumer filed against the surety bond, but since there were others trying to collect on the bond, the funds were depleted and the consumer received no compensation. He urged that legislation needs to be passed to protect the consumer and with the provisions of the recovery fund, only the homeowner would be able to collect reimbursement. Mr. Wooldridge claimed the consumer would be able to collect up to $30,000 in actual damages, but the claim would have to be filed up to 2 years after damages or a court proceeding relating to the incident. He justified upon receiving a complaint, the contractors’ board would hold public hearings on the matter to ensure access and participation of both parties. Mr. Wooldridge remarked the board would make the final judgement. He acknowledged funding of the recovery fund would be obtained by charging an annual fee to contractors based on the monetary limit of their license. He emphasized for those contractors with a monetary limit of not more than $1 million, the fee would be $100 a year. He maintained for contractors with a license of more than $1 million, but constricted by a limited license, the fee would be $250 a year. He concluded that for contractors with an unlimited monetary limit, the fee would be $500 a year. He reiterated the recovery fund is an improved remedy for the consumers who have been victimized.

Mr. Wooldridge stated:

Senator O’Connell inquired how this process would help the person whose roof had collapsed. Mr. Wooldridge replied there needs to be time for an investigation. Senator O’Connell stated the board would only need to make a house call to determine if the claim was legitimate. Assemblywoman Buckley explained this particular person whose roof collapsed still had not been reimbursed, even though the incident happened over 2 years ago. She noted that with passage of this bill, the victim could collect the funds. She submitted a proposal (Exhibit D) and a memo of support from Dennis Hayward (Exhibit E).

Ms. Porter stated this bill would pertain to all contractors working on residential homes whether they are roofs, plumbing, or tile. She suggested the contractors’ board set up an advisory committee to establish this fund. She agreed the reputable contractors are always willing to fix whatever problems the consumers have. She clarified this bill represents the consumers who are being victimized and having to pay for the damages done by the contractors.

Robert Canter, Concerned Citizen, stated this bill is a good first-step, but it needs to apply to anybody who buys a speculative home. He insisted the bill does not apply to any second purchaser of the home unless they buy it within the 120-day limit after the work has been completed. Vice Chairwoman O‘Connell stated those concerns would all be addressed when the committee has the chance to review this amendment.

David T. Pursiano, Lobbyist, Nevada Trial Lawyers’ Association, stated this bill is a good practical solution to medium-sized problems. His clarified his understanding of the bill was a speculative builder would be covered as long as they are licensed in the state. He explained the court does not award attorney fees; they are discretionary. He concluded that the verdict determines the damage costs awarded by the jury.

Peter D. Krueger, Lobbyist, Roofing Contractors Association of Nevada, stated section 15 of the bill suggested using an amount that would limit the liability of contractors. He insisted for the regulation process, the language needs to be broadened to include all specialty contractors that have anything to do with residential construction, so there is a very broad base in which to contribute to the fund. He suggested using language that would prevent this fund from being raided by the Executive Branch or the Legislative Branch so the funds could not be used for anything else.

Clark (Danny) Lee, Lobbyist, National Swimming Pool Institute, stated they support this concept. He concurred the pool contractors should be included.

Vice Chairwoman O’Connell closed the hearing on A.B. 636 and opened the hearing on A.B. 633.

Ms. Porter submitted her proposal to the committee (Exhibit F. Original is on file in Research Library). Ms. Grein stated section 2 establishes a process where the contractors’ board can issue an expedited license and charge a fee. Chairman Townsend asked why the contractors’ board could not currently issue an expedited license. Mr. Gregory stated this would pertain if a contractor were from out of state and not licensed in Nevada.

Ms. Grein explained section 4 refers to developing an inactive status for licensees. She stated section 5 pertains to a contractor who misuses the board seal. She asserted section 6 clarifies the monetary license limit and how a contractor applies for a license. She testified section 7 requires an applicant or licensed contractor to reveal experience; subsection 5 lists the qualifications required before a contractor can be licensed. Ms. Grein recognized section 8 requires the contractor to have a background investigation on their character.

Mr. Haney stated, in section 9, when a contractor in court posts a bond, the bonding company could be reimbursed for their costs, but not the attorney fees.

Ms. Grein stated section 10 explains reporting requirements. She clarified section 11 addresses the maximum cap the contractors’ board may charge. She noted in section 12 there is a cost for disciplinary action if the contractor’s license is currently on inactive status. She concluded section 13 is notification of a hearing if the board refuses to renew a license. She submitted her amendment to the committee (Exhibit G).

George J. Lyford, Lobbyist, State Contractors’ Board, explained the board had an unlicensed contractor who took the state seal of the contractors’ board and superimposed it on all his contracts. He explained the contractor was using these contracts and told his customers the contractors’ board had approved it. He expounded the contractor had used other company names and logos on his contracts, and the contractor had thought it was a good sales technique.

Chairman Townsend closed the hearing on A.B. 633 and opened the hearing on A.B. 634.

Ms. Grien stated section 1 establishes a special investigative unit separating the criminal investigations from the compliance investigations. She explained section 1 also requires the board to adopt regulations for qualifications for investigators who are unemployed. She stated section 2, subsection 2, defines what a criminal investigator is, and that their duties are restricted. She noted in section 3, subsection 1, paragraphs (a) through (c), there is a procedure if the board receives a complaint, the board will notify the licensee and the person making the complaint. Chairman Townsend questioned why this language had to be in the statute if this is currently the procedure of the board. Mr. Gregory stated it is for establishing a procedure for cases that may go to litigation.

Ms. Grein testified:

Senator O’Connell asked for an explanation of the fees to be included in the report, such as how much the board has raised, and how they will be used.

Ms. Grein urged section 9 should be deleted. She maintained section 10 defined causes for disciplinary action. She explained section 11 established a time limit for when a complaint can be filed against a contractor. She declared section 12 defines it is a misdemeanor if a contractor falsely takes an exam, or takes an exam for someone else. Mr. Lyford stated section 13 refers to conducting investigations for violations.

Ms. Grein pointed out:

James L. Wadhams, Lobbyist, Southern Nevada Homebuilders Association, stated, for the record, some bills conflict with S.B. 32, which was carefully crafted. He summarized he had some questions with conflicting statutes and limitations between A.B. 636 and A.B. 634. Chairman Townsend stated the committee would deal with any problems at a later date.

Chairman Townsend adjourned the meeting at 11:00 a.m.

RESPECTFULLY SUBMITTED:

Kathryn Lawrence,

Committee Secretary

APPROVED BY:

Senator Randolph J. Townsend, Chairman

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