The Senate Committee on Government Affairs was called to order by Chairman Ann O'Connell, at 2:05 p.m., on Wednesday, February 24, 1999, in Room 2149 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 Ann O'Connell, Chairman

Senator William J. Raggio, Vice Chairman

Senator William R. O’Donnell

Senator Jon C. Porter

Senator Joseph M. Neal, Jr.

Senator Dina Titus

Senator Terry Care

STAFF MEMBERS PRESENT:

Amelie Welden, Committee Secretary

OTHERS PRESENT:

Chairman O’Connell opened the hearing on Senate Bill (S.B.) 144.

Max G. Christiansen, Lobbyist, Sheet Metal and Air Conditioning Contractors’ National Association (SMACNA) of Southern Nevada, indicated over the past 30 years, there has been a consistent problem with payment for public works projects. He noted in most cases, instead of being paid in a timely manner of 30 days, contractors must wait 45 to 60 days or longer for payment. Mr. Christiansen stated this delay in payment causes problems for contractors in meeting payroll, forcing them to borrow money from banks in order to keep up cash flows.

Mr. Christiansen asserted S.B. 144 would require prompt payment from the owner of a public works project to the general contractor, and from the general contractor to the subcontractors and suppliers. He mentioned every contractors association in southern Nevada has been consulted regarding S.B. 144, including the State Contractors Board and the Associations of General Contractors for both northern and southern Nevada. Mr. Christiansen further noted Clark County representatives have been consulted. He stated no problems exist that cannot be overcome by working together.

Richard L. Peel, Attorney, Peel, Spangler & Brown, explained S.B. 144. Mr. Peel stated he has represented many contractors who have experienced prompt payment problems. He commented in some cases, contractors have been waiting for final payment on a completed project for a year or more. He reiterated S.B. 144 would help ensure contractors are paid in a timely fashion. He maintained prompt payment to contractors would reduce overall costs for public works by reducing the carrying costs incurred by subcontractors, suppliers, and contractors. He elaborated as subcontractors and suppliers receive prompt payment, they can in turn pay their subcontractors and suppliers, thus reducing financing costs that would otherwise be incurred.

Mr. Peel said S.B. 144 also attempts to provide protections to contractors, subcontractors, and suppliers by ensuring they have the ability to recover the money. He stated S.B. 144 is intended to amend Nevada Revised Statutes (NRS) 338.010, which is the definition section for the public works statute. He noted S.B. 144 would also amend NRS 338.160 through NRS 338.170 and would add new language thereto. Mr. Peel indicated he has worked closely with the Legislative Counsel Bureau in drafting S.B. 144. He expressed he does not believe S.B. 144 would make a huge imposition on public bodies.

Mr. Peel summarized S.B. 144, stating sections 1-13 are new definitions which would be added to NRS 338.010. He explained for many years, there have been no definitions to define terms such as "contractor," "contract," "subcontractor," and "progress bill."

Mr. Peel continued section 14 deals with the payment of retainage upon occupancy or beneficial use by a public body. He stated this section is really an amendment to or a revised draft of a section in NRS chapter 624. Mr. Peel summarized section 14 of S.B. 144 states that upon a public body’s occupancy of a portion of a public works project, or upon the body’s beneficial use of the project, the body has to pay for the portion they are occupying or using.

Mr. Peel said section 15 of S.B. 144 concerns the reasons that public bodies withhold payment. He maintained this section gives public bodies the ability to withhold monies under certain circumstances. He indicated section 15 also discusses a public body’s requirement to give notice of any withholding to a contractor so the contractor knows why the money is being withheld and what he or she needs to do to correct the problem. Mr. Peel contended in the past, when public bodies have withheld monies, general contractors have in turn withheld monies from subcontractors. In these cases, the subcontractors have not known what they needed to do in order to be paid. Mr. Peel stated section 15 of S.B. 144 provides a mechanism for such information to flow from public bodies to contractors, subcontractors, and so forth. He noted section 15 also requires public bodies to make payment within a certain time period upon the contractors’ correction of the reason for withholding.

Chairman O’Connell presented a hypothetical situation. She supposed one subcontractor has not completed his or her job to a public entity’s satisfaction; and, thus, all subcontractors are not being paid because one part of the job has not been completed satisfactorily. Chairman O’Connell asked if the public body gets involved with the subcontractors at that point.

Mr. Peel answered a public body never deals with the subcontractors. He stated the public body is only required to provide to the contractor a notice and any supporting evidence regarding the reason for withholding. He surmised there could be a material defect in the performance of the subcontractors. Mr. Peel indicated in this situation, the public body would give notice to the contractor, who would then determine who is responsible for the defect and give notice to the appropriate subcontractor.

Mr. Peel stated section 16 of S.B. 144 addresses a public body’s withholding as directed by the labor commissioner. He said currently, subsection 5 of NRS 338.160 allows the labor commissioner to direct a public body to withhold money if laborers are not paid. He indicated section 16 of S.B. 144 does essentially the same thing, but the language has been clarified.

Mr. Peel described section 17 of S.B. 144, which requires contractors to provide public bodies with notice of any withholding from subcontractors. He explained a scenario in which a contractor on a public works project discovers a subcontractor is not performing satisfactorily and decides to withhold a prior payment he or she has received. Mr. Peel explained section 17 would ensure contractors would not be able to take advantage of receiving monies and withholding them from the subcontractors. When a contractor notifies a public body about withholdings from a subcontractor, the public body is informed that it should not pay the contractor any more monies relative to the progress billing for the subcontractor in question.

Mr. Peel summarized section 18 of S.B. 144, which requires that if a public body does not timely pay its contractor or does not timely give notice of a reason for withholding, that public body would be required to pay the full amount of the progress billing plus interest accrued thereon. He noted language in section 18 is specific about situations that may arise.

Mr. Peel stated section 19 of S.B. 144 allows subcontractors and suppliers to request payment information from public bodies. He noted contractors do not always inform subcontractors and suppliers about payments received. Thus, in the past, many subcontractors and suppliers have been unaware about when a public body has paid the general contractor. Mr. Peel commented the provisions of section 19 are important with regard to contractors’ and subcontractors’ opportunities to request from the district court an order to show cause as to why money has not been paid.

Mr. Peel contended section 20 of S.B. 144 addresses a contractor’s obligation to have specific reasons for withholding money from subcontractors or suppliers. He indicated subsection 2 of section 20 requires a contractor to give notice to subcontractors of any amount that the contractor intends to withhold. He continued subsection 3 of section 20 makes provisions for the content of such a notice. Mr. Peel stated, among other items, the contractor must set forth the amount of the progress payment or retainage payment that will be withheld, the reason for this withholding, and the action that must be taken in order for the subcontractor to receive payment. Mr. Peel indicated subsection 4 of section 20 of S.B. 144 deals with a contractor’s payment to a subcontractor upon receipt of monies that were previously withheld by a public body.

Mr. Peel said section 21 of S.B. 144 concerns a contractor’s wrongful delay of payment to subcontractors. Specifically, this section provides if a contractor who has been paid by a public body does not promptly pay a subcontractor, or if a contractor does not pass along to a subcontractor notice that a public body is withholding payment, then the contractor must pay the full amount of the progress billing plus the interest accrued on that payment.

Mr. Peel stated section 22 of S.B. 144 requires contractors to provide upon request to lower-tiered sub-subcontractors and suppliers information regarding previous payments made to subcontractors. He suggested this provision would ensure sub-subcontractors and suppliers would have access to information about subcontractors and would be able to seek an order to show cause as to why they have not been paid.

Mr. Peel continued subsection 1 of section 23 of S.B. 144 provides that subcontractors are obligated to pay to their sub-subcontractors and suppliers money that has been received from a contractor. He indicated subsection 2 of section 23 addresses a subcontractor’s obligation to pay its sub-subcontractors and suppliers for materials which have been delivered to the project or have been approved to be stored at an off-site location. He clarified the subcontractor would be required to pay that portion of the money which has been received from the contractor for that material.

Mr. Peel asserted section 24 of S.B. 144 allows a subcontractor to withhold up to 10 percent of any progress billing as retainage. He added after 50 percent of the project is completed, the subcontractor, like a contractor or a public body, can reduce the retainage amount. Mr. Peel explained subsection 2 of section 24 provides for a subcontractor to pay a portion of earned interest to his or her subcontractors and suppliers.

Mr. Peel stated section 25 of S.B. 144 specifies the reasons a subcontractor can withhold money from his or her subcontractors or suppliers. He indicated subsection 2 of section 25 requires a subcontractor to give notice to his or her subcontractors and suppliers of any amount which has been withheld. He continued subsection 3 of section 25 outlines the content of such notices, and subsection 4 of section 25 deals with a subcontractor’s payment of amounts received.

Mr. Peel indicated section 26 of S.B. 144 deals with a subcontractor’s delay in making payment to his or her subcontractors and suppliers. This section also addresses a subcontractor’s failure to give timely notice of amounts withheld.

Mr. Peel explained section 27 of S.B. 144 requires subcontractors to provide information upon request to lower-tiered subcontractors and suppliers about payments.

Mr. Peel noted section 28 of S.B. 144 allows a contractor, subcontractor, sub-subcontractor, or supplier to request an order from the court to show cause as to why an amount withheld is not justified, or is excessive. He stated currently, NRS 108.2275, known as the mechanics-lien statute, allows an owner to file a motion asking the court to reduce or expunge a mechanics lien. Mr. Peel maintained this statute allows the property owner to file such a motion on an order to show cause, meaning on an expedited basis. He reiterated contractors and subcontractors have faced the problem of not being timely paid. He indicated if they had to go to court, they would have to wait 3 years for a trial date in Clark County or 6 months to 1 year for an arbitration hearing date with the American Arbitration Association. Mr. Peel noted a contractor or subcontractor could go that entire time without being paid. He asserted the only way to keep public bodies, contractors, or subcontractors "honest" is to allow a process by which they bring their argument before a court judge. Mr. Peel stated S.B. 144 does not intend for the Legislature or the court to interfere with contractual remedies, such as arbitration or mediation, but emphasized there should be an expedited format for finding out whether the withholding of monies is justified.

Mr. Peel explained section 29 of S.B. 144 addresses the proper method for notices.

Mr. Peel stated section 30 of S.B. 144 prevents a contractor or subcontractor from waiving, by contract or otherwise, any rights or obligations contained in the bill. He indicated this provision was an attempt to prevent a situation like that surrounding NRS 338.160 through NRS 338.170. Mr. Peel said nothing prevents the waiving of rights or allowances provided in those statutes. He commented section 30 of S.B. 144 attempts to ensure compliance with the bill.

Mr. Peel maintained section 31 of S.B. 144 concerns method of payment to contractors, subcontractors, and lower-tiered trades.

Mr. Peel continued section 32 of S.B. 144 deals with attorney’s fees and recoverable costs in the event that payment is not properly made to a contractor, subcontractor, or lower-tiered subcontractor or supplier.

Mr. Peel indicated section 33 of S.B. 144 provides that the bill is not the only remedy which contractors and subcontractors have. He explained they would still have breach of contract, unjust enrichment, and other remedies which may be provided in common law but are not specified in S.B. 144. He pointed out similar language is included in NRS chapter 108, which does not limit a subcontractor’s remedy to a mechanics lien, but allows him or her to pursue civil action in state court.

Mr. Peel explained section 34 of S.B. 144 presents NRS 338.160 through NRS 338.170 as amended so that these sections will conform to the new language. He indicated paragraph (c) of subsection 5 of section 34 of S.B. 144 defines as a public work any private property which is leased to a public body for the public body’s use and which has a cost of more than $20,000. Mr. Peel provided the example of a Veteran’s Administration ambulatory center in Clark County. He indicated the federal government made a deal with the City of Las Vegas in which the city brought in a private buyer for the land and the federal government leased the property from that buyer. Mr. Peel noted even though the project is essentially a federal works, one can argue it is not subject to federal requirements. He stated paragraph (c) of subsection 5 of S.B. 144 attempts to prevent that kind of situation by declaring private property leased by a public body to be a public work.

Mr. Peel explained paragraph (d) of subsection 5 of section 34 of S.B. 144 requires if a public body leases property to a private party, that property is considered a public work. He offered the example of the North Las Vegas airport, at which individual parcels have been leased out to private entities like Scenic Airlines. He questioned whether or not that property is a public work. He asked if the property would be subject to mechanics liens. Mr. Peel stated Clark County has argued the Scenic Airlines project is neither a public works nor a private project and asked how a subcontractor secures the value of materials and work in that situation.

Mr. Peel said section 35 of S.B. 144 deals with a public body’s payment to contractors. He indicated subsection 2 of section 35 addresses a public body’s payment for materials, and subsection 3 of section 35 concerns a public body’s payment of interest.

Mr. Peel explained section 36 of S.B. 144 addresses a contractor’s payment to subcontractors and suppliers. He said subsection 2 of section 36 deals with a contractor’s payment for materials.

Mr. Peel stated section 37 of S.B. 144 concerns a contractor’s withholding and/or payment of interest.

Senator Care noted Mr. Christiansen had testified contractors were not being paid within 30 days. He pointed out S.B. 144 contains a time frame of 20 days for payment and asked why that time frame was chosen.

Mr. Peel answered currently NRS 338.160 does not define a time period for payment, but provides that a public body will authorize payment to be made on a monthly basis. Mr. Peel asserted after payment has been authorized, it may take 30 days or much longer to get that payment to the contractor. He stated on some public works in Clark County, contractors are experiencing more than a year’s delay between completion and payment. Mr. Peel said bill drafters felt the time period of 20 days set forth in S.B. 144 was appropriate in order to get money from the public body to the contractor, the subcontractor, and lower-tiered trades. He reminded the committee when a contractor submits a payment application, it includes money owed to all lower-tiered trades. He commented it could be 30 or more days before the lower-tiered trades receive payment. Mr. Peel emphasized the goal of S.B. 144 is to get money to lower-tiered trades as quickly as possible.

Mr. Peel mentioned New Jersey experimented to see whether paying money promptly to contractors would lower the costs of public works. He said the state attempted to build schools on a "fast-track" basis and found that prompt payment did in fact lower the costs of those projects. Mr. Peel repeated the costs for public works in Nevada could decrease as a result of prompt payment.

Senator Care asked what explanation a public entity ordinarily gives for failure to timely pay. Mr. Peel responded various explanations are given, ranging from detailed to vague and sometimes offering no direction as to what the contractor needs to do in order to receive payment. He stated if a public entity withholds payment, the amount withheld should be limited to a reasonable amount for correcting the problem. He asserted the public body should not withhold the entire progress payment.

Chairman O’Connell noted in 1989 she met with 25 to 30 contractors who identified a prompt-payment problem. She stated she agrees the overall price of construction will decrease if payments are timely made because she learned at the 1989 meeting that contractors build into their bids a factor for nonpayment. She said this extra "built-in amount" occurs because when contractors work with public entities, they assume they will not be timely paid or will have to go to court.

Robert W. Potter, President, Affordable Concepts, Inc., indicated he is a licensed general contractor in southern Nevada. Mr. Potter stated he is also a member of the Las Vegas Chapter of Associated General Contractors (AGC). He offered his support for S.B. 144 and attested to the payment difficulties encountered in the construction industry. He indicated prompt payment can make the difference between success and failure for many construction companies and workers. Mr. Potter admitted payment disputes will inevitably arise, but explained S.B. 144 seems to adequately address a resolution for this issue. However, he suggested inserting the word "reasonable" in front of "attorney’s fees" wherever such fees are provided for in the bill.

Mr. Potter expressed his belief that the only entities who would oppose S.B. 144 would be those "under the government umbrella." He stated if S.B. 144 passes, public entities would have to be more diligent in performing their duties and providing prompt payment to contractors. He suggested the market makes timely payment especially important for small contractors, subcontractors, and vendors. Mr. Potter pointed out his company is currently working on a public works project, and the relevant public body lost two of the first three invoices it received, thus delaying payment. He asked the committee to consider the "fairness" which S.B. 144 tries to achieve and concluded the bill would help eliminate undue hardship on all parties involved.

Senator Raggio questioned why the Legislature should adopt S.B. 144 as a policy that applies only to public works projects. He asked if the same arguments can be made about contracts for private works. Mr. Peel indicated the Nevada State Assembly has pending legislation regarding prompt payment for private works.

Mr. Peel stated S.B. 144 and BDR 52-990 are independent documents, but they have similar content and form. He emphasized contractors would like prompt-pay requirements to apply to both public and private works.

Senator Raggio asked if New Jersey has a law similar to S.B. 144. Mr. Peel clarified New Jersey does not have such a law; that state simply experimented with payment to trades on a "fast-track" basis in order to see if such payment would lower carrying costs. He stated New Jersey experienced a resulting decrease of about 30 percent in the costs of the schools it was building.

Senator Raggio asked if S.B. 144 is a unique law which has not been taken from another jurisdiction. Mr. Peel replied many states have prompt-pay legislation and commented Nevada currently has a prompt-pay statute in NRS 338.160 to NRS 338.170. Mr. Peel expressed there are differences in the extent of the laws in various states. He indicated California has a detailed prompt-pay law as well as "stop-notice" legislation, which works in conjunction with prompt payment. He said approximately 30 states have prompt-pay laws.

Senator Raggio asked Mr. Peel if he thought S.B. 144 would create an onerous burden on public entities. He pointed out the bill involves many notices and much reporting and record keeping. Mr. Peel explained when a public body received a progress bill from a contractor, it would have 20 days to either pay the contractor or give notice of withholding. He continued during that 20-day period, the public body would talk to the architects and project administrators to determine whether there are justified reasons for withholding. Mr. Peel stated if there are justified reasons, the public body would send to the contractor an affidavit, along with any documentary evidence, and would identify the problem and what corrections need to be made. Mr. Peel said the contractor would then have 10 days in which to forward that information, along with his or her affidavit, to the subcontractors who are responsible for the withholding. He indicated the subcontractors would then have 10 days to forward the information to their subcontractors.

Mr. Peel suggested the costs of requiring notice from public bodies to contractors and from contractors to subcontractors are small compared to the costs that lower-tiered trades are incurring. He stated some lower-tiered trades are forced to borrow money in order to pay their employees and pay for materials. He said carrying costs can run at about 15-percent interest on the borrowed money. Mr. Peel reiterated that factor must be added into bids.

Senator Raggio expressed carrying costs and resulting bid increases are compelling reasons to consider S.B. 144. He added contractors should not have to wait unjustifiably for payment. He indicated apparently, S.B. 144 deals with the common reasons for retainage. Senator Raggio asked if interest is paid when retainage is determined to be appropriate.

Mr. Peel explained interest on retainage currently accrues by statute. Senator Raggio indicated interest accrues from the date that notice is given, or the date that payment is actually withheld. Mr. Peel said that statement was correct. Senator Raggio again asked whether, under S.B. 144, interest would accrue from the date retainage occurred if the retainage were appropriate and the contractor were ultimately paid. Mr. Peel stated S.B. 144 has two separate facets. One deals with retainage and the other with withholding. Mr. Peel indicated sometimes retainage may be withheld for a justifiable reason, or sometimes part of a progress bill may be withheld. He said if there is any sort of justifiable withholding, interest would begin to accrue when monies were due. Mr. Peel suggested one argument would be that monies were due when the public body dispersed them. He expressed a court or an arbitrator would be the determining factor in that type of situation.

Senator Porter indicated he grew up in a family of contractors, and prompt payment was always an issue. He questioned whether 20 days is a reasonable amount of time for a public body to provide payment or notice to its contractor. He asserted that time frame should be discussed and pointed out in his experience, private sector businesses are generally allowed about 30 days to pay for supplies. Senator Porter asked if the 20-day time period was a starting point or a definite time frame.

Mr. Peel maintained the time frame does not have to be 20 days. However, he noted 20 days for the public body could mean 40 to 60 days before lower-tiered trades receive payment.

Senator Porter agreed a prompt-payment problem exists, but expressed a certain period of time must be allotted in order to comply with certain checks and balances. Mr. Peel maintained 20 days is a feasible and reasonable time period for payment, but reiterated there is room for discussion on that point.

Senator Care asked why a mechanics lien would not offer the remedy sought by proponents of S.B. 144. He stated the relevant law provides that the court shall allow attorney’s fees for the prevailing party when someone attempts to enforce or expunge a mechanics lien.

Mr. Peel answered a mechanics lien cannot be recorded against publicly-owned property, so such a lien is not a relevant remedy. He stated under the current statutory system, the remedy is to seek a claim against a payment bond which would be posted by a general contractor who has submitted a bid in excess of $20,000 for the project. He commented that figure may have been increased to $35,000. Mr. Peel indicated under this current system, lower-tiered trades have no claim against the general contractor’s payment bond. He continued if the general contractor or its subcontractor goes bankrupt, lower-tiered trades will not be paid. Mr. Peel stated S.B. 144 tries to ensure that payments are "funneled down" more quickly and that if there is a reason for withholding, a public body does not release relevant payments until that reason is corrected. Mr. Peel said S.B. 144 also allows lower-tiered trades to find out information about what money has been paid so that they can perform their duties prior to the date a contractor or subcontractor goes bankrupt.

Mr. Peel affirmed the mechanics-lien statute allows for attorney’s fees. He indicated S.B. 144 is different because it addresses public works, not private projects. He stated S.B. 144 is intended to provide for attorney’s fees in two scenarios. One scenario would provide attorney’s fees for an entity which is the prevailing party in an arbitration or in a trial before a district court judge. He explained the second scenario would provide attorney’s fees for the prevailing party when an entity has gone forward under the motion for an order to show cause as to why monies have not been paid. Mr. Peel stated the relevant language in S.B. 144 "mirrors" the language set forth in NRS 108.2275.

Senator Neal asked how many lawsuits presently exist involving prompt payment. Mr. Peel answered, relative to the current growth in Clark County, a large number of lawsuits have been filed relating to payment on public works projects.

Senator Neal asked if progress payments as included in S.B. 144 refer to payment schedules which are included in contracts. Mr. Peel answered no and stated progress payments are usually paid upon receipt of a progress bill. He stated progress bills are generally given monthly to owners, or public bodies in the case of S.B. 144. Mr. Peel stated a progress bill could come anytime, depending upon the contract and the manner in which the public body has arranged for payment.

Senator Neal asked if an interest rate would apply when a public body decided to retain payment upon receipt of a progress bill. Mr. Peel answered an interest rate would apply at that point if the withholding of the money were wrongful. Senator Neal asked who would decide whether the withholding were unjustified. Mr. Peel replied if the parties cannot resolve their dispute, they would go before a court or an arbitrator.

Senator Neal asked if public bodies normally issue contracts without specifications. Mr. Peel responded no. Senator Neal questioned whether such contracts contain specifications for the contractor to follow in case of a dispute. Mr. Peel answered affirmatively. Senator Neal stated S.B. 144 would, in his understanding, "shortcut" the dispute resolution process and allow for an immediate decision as to whether payments would be made. Mr. Peel responded S.B. 144 would not "shortcut" the dispute resolution process. He added the bill does not take away the public body’s right to withhold money for justified reasons. He explained if the amount withheld is excessive or if the withholding is not factually based, S.B. 144 would allow the contractor or subcontractor to inform a court that notice was not timely given or that a withholding was excessive. Mr. Peel pointed out the contractor or subcontractor could then ask the court to direct the public body to reduce the amount of its withholding or to pay the money it was withholding because it did not follow statutory procedures.

Senator Neal maintained, since someone must make a determination on payment issues, S.B. 144 would not necessarily keep public bodies or contractors out of court.

Senator Neal stated:

Mr. Peel answered, "If the monies were wrongfully withheld, then interest would be applicable; that is correct."

Senator Neal continued, "So if the court decides that the money was not wrongfully withheld, you collect nothing."

Mr. Peel stated, "You would collect whatever amount that the court found that you were due. If interest was applicable, then that would apply. If not, then you would not get your interest; that is correct."

Senator Neal said:

Mr. Peel stated, "With several other exceptions." Senator Neal asked, "What are they?"

Mr. Peel explained:

Senator Neal asked what the relevant interest rate would be for provisions of S.B. 144. Mr. Peel answered the relevant interest rate is defined in section 35 of the bill. Senator O’Donnell interjected the rate would be "prime plus 2 percent," or the lowest of three banks’ rates plus 2 percent. Senator Neal asserted the bill does not define a specific rate. Mr. Peel explained S.B. 144 would not change the interest rate a public body pays. He stated currently, the interest rate a public body is responsible for paying under NRS 338.160 is the same as that outlined in S.B. 144.

Senator Neal pointed out interest payments from public bodies could be substantial.

Mr. Peel stated:

Senator Neal clarified the main issue for him is whether or not S.B. 144 would keep disputants out of court. He indicated he does not believe it would. He contended S.B. 144 would only provide for prompt payment.

Mr. Peel emphasized the two goals of S.B. 144. He stated one is timely payment, and the other is access to knowledge of the reasons for withholdings.

Senator Neal asserted in order to receive timely payment, parties must have a designated schedule provided by law or written into a contract. He stated if a dispute arises and a designated schedule is included in the contract, the parties would have to go to court anyway. Mr. Peel disagreed with Senator Neal’s statement.

Senator O’Donnell indicated if S.B. 144 were not passed, the benefactor would be public bodies. He said the most affected parties involved in this issue are laborers. He added if a bank denies a loan to a contractor who has not been paid, he or she cannot make payroll and will likely go bankrupt, meaning no one gets paid. Senator O’Donnell commented he is currently involved in a construction project, and subcontractors are constantly asking for payment. He asserted payment should be made as long as the subcontractors are doing their jobs. He expressed he could not understand why a public body would not make timely payments. Senator O’Donnell maintained required payment of accrued interest would be a remedy.

Senator O’Donnell continued:

Mr. Peel emphasized S.B. 144 would open up the communication lines between public bodies, contractors, and subcontractors, so all these entities would be aware of problems and of steps that must be taken in order to correct those problems. He suggested currently, contractors and subcontractors do not believe they receive adequate information regarding problems. He added monies are being withheld for the wrong reasons in some instances.

Stephen P. Quinn, President, Precision Construction, Inc., offered his support for S.B. 144. He addressed the withholding of monies. Mr. Quinn maintained interest payments would require public bodies to "keep their noses to the grindstone."

Mr. Quinn stated sometimes public bodies withhold payment at the last minute despite previous opportunities to tell contractors about a problem. He further indicated some public bodies continually change their lists of requirements, thus delaying final payments. Mr. Quinn addressed carrying costs, noting he factors such costs into his bids. He indicated relevant figures can be hundreds of thousands to millions of dollars.

Mr. Quinn stated sometimes public entities delay payment by making it almost impossible to complete closeout documents because some included items cannot be accomplished. He continued often the documents for final payment require notice of completion to be filed by the owner. He said sometimes 3 or 4 months pass before a public owner files that notice. Mr. Quinn pointed out on the private side, a general contractor can file the notice of completion.

Mr. Quinn said sometimes contract documents fail to state that the contract has to go before a board for approval, even after amounts are approved by the contract administrator. He asserted this situation sometimes causes delays because the contract "misses the cutoff" to go before a certain board. Mr. Quinn maintained sometimes a board denies the schedule of values, which presents a line-by-line account of costs, often because just one board member does not approve.

Kevin Spilsbury, Quality Mechanical Contractors, Inc., indicated about 98 percent of that company’s work is for the private sector because Quality Mechanical has encountered payment problems with public works projects. He expressed the company is interested in pursuing public works, such as school projects in Clark County.

Mr. Spilsbury estimated Quality Mechanical Contractors places an approximate 5-percent markup on bids for public works. He explained this markup is to cover the costs of attorney’s fees or extended delays in recapturing money.

Senator Titus asked the testifiers for a commitment on the record that if Senate Bill 144 passes, they will stop marking up their bids for public works. Mr. Quinn answered the marketplace would determine that issue. Mr. Spilsbury agreed and asserted contractors just want to be timely paid so they can pay their subcontractors without borrowing money at an interest rate. Senator Titus stated if contractors are not willing to commit to lowering bids on public works, S.B. 144 will likely lower the cost of public works.

Senator O’Donnell commented in his current construction project, he is going through a loan, and he has construction control. He said he made an agreement with subcontractors, stating if they would take 4 to 5 percent off of their bids, he would pay them directly when they were finished with the job out of a fund he set up. He continued he would turn in the request to construction control and wait the 30 days to receive payment. Senator O’Donnell indicated subcontractors agreed to take 4 to 5 percent off of their bids so they could pay their subcontractors and staff. He suggested this approach works very well.

Mr. Quinn mentioned currently, he is the construction manager for a large project. He said when prices came in, he went back to every subcontractor and asked what discount he would get if he offered early pay, with a turnaround of 2 weeks, 3 weeks, or 4 weeks. He stated the discounts could be enough to pay for a bond so that he could ensure he would not have financial problems with the subcontractors during or after the course of the project. Mr. Quinn asserted he could save 4 to 5 percent by paying quickly, depending upon the time period involved.

Senator Neal suggested when parties enter into a contract, a completion date is probably specified. He asked whether public entities give contractors money up front to start a project.

Mr. Quinn answered no and explained:

Senator Neal asked whether a contractor could complete a project and submit one bill if he or she could afford it. Mr. Quinn answered yes, but stated that situation would be unlikely.

Senator Porter noted most businesses are lucky to have a net return of 2 or 3 percent, and that amount can be "eaten up" in time lost and in interest lost in having to borrow money to pay for outstanding responsibilities. He said he may not agree with everything in S.B. 144, but he conceptually agrees contractors face substantial challenges. He commented in his experience, the government was comparatively slow to pay. Senator Porter emphasized this delay in payment is especially important with respect to small businesses that do not have the wherewithal to find additional monies to pay their employees. He encouraged consideration of at least portions of S.B. 144.

Senator Care commented he had received 96 faxes from general contractors and subcontractors in support of S.B. 144.

Mark P. Sullivan, Lobbyist, Nevada Association of Mechanical Contractors, indicated the president of that association had to leave the hearing early, but left some information for the committee with Mr. Sullivan. Mr. Sullivan noted the president’s company is not large and pays about $7 million in wages and $9 million in material costs per year. He pointed out sales tax on materials is due in 30 days, and there is an associated interest charge. Mr. Sullivan mentioned such costs are already being borne by the end user because the contractor must include them in bids. He indicated the president of the association currently goes through a 58-day cycle; thus, on $9 million worth of business, he carries $50,000 to $60,000 annually. Mr. Sullivan concluded the Nevada Association of Mechanical Contractors supports S.B. 144.

John E. Jeffrey, Lobbyist, Southern Nevada Building and Construction Trades Council, informed the committee he is also on retainer with the contractors associations that are involved in S.B. 144. Mr. Jeffrey stated the building trades support S.B. 144. He indicated contractors have gone bankrupt because of the high cost of borrowing money. Mr. Jeffrey said start-up contractors have been especially affected because they do not have vast resources. He noted three electrical contractors have gone bankrupt in the last year. Mr. Jeffrey asserted prompt payment would reduce costs, though the amounts of such reductions cannot be specified due to the fluid nature of the construction business.

Cheryl C. Blomstrom, Lobbyist, Nevada Chapter of Associated General Contractors (AGC), conveyed that organization’s strong support for S.B. 144 and stated the organization was involved in the preparation of the bill.

Steve G. Holloway, Lobbyist, Executive Vice President, Associated General Contractors (AGC), Las Vegas Chapter, stated that organization represents about 450 general contractors, subcontractors, and suppliers. He offered Las Vegas AGC’s support for S.B. 144. Mr. Holloway maintained S.B. 144 would place a heavier burden on general contractors than on public entities.

Jesse C. Paulk, Lobbyist, Associated General Contractors, Las Vegas Chapter, conveyed support for S.B. 144 and indicated in his experience, most public agencies have paid satisfactorily, though they have sometimes missed a progress payment without justification. He contended all parties have agreed payment was due, but it has been "lost on somebody’s desk." He stated the overdue amount often gets paid with the next progress payment. Mr. Paulk asserted the missed payment often amounts to several million dollars.

Mr. Paulk continued:

Mr. Paulk commented he gets a 2-percent discount for paying material billings within 10 days after the end of the month. He asserted if a public body is withholding payment for a month or more, his cash flow is adversely affected.

Robert S. Hadfield, Lobbyist, Nevada Association of Counties, testified regarding that organization’s comments and concerns about S.B. 144. He acknowledged proponents of S.B. 144 have put a lot of thought into the bill. Mr. Hadfield indicated the Nevada Association of Counties will work with the committee and with members of the construction industry to address the concerns raised in S.B. 144. He clarified Nevada counties share the goal of constructing good public works without disputes and with fair prices. Mr. Hadfield stated finding a way to achieve this goal brings up a question of equity among relevant entities. He noted entities have different capacities and construction needs. He said local governments have concerns regarding the far-reaching scope of S.B. 144.

Michael R. Alastuey, Lobbyist, Clark County Government, and Assistant County Manager, Clark County, voiced concerns regarding S.B. 144. He recognized the effort that went into creating the bill, but stated some issues need to be resolved before action can move forward. Mr. Alastuey pointed out the goal of S.B. 144 is to encourage the execution of "well-done" public works at a fair price to the taxpayers and a fair compensation for contractors. He indicated because of growth, Clark County relies on privatized construction in order to avoid bureaucracy, entanglement, and the addition of "large structures of public employees that would have to be redeployed [or] dismantled… as the need for construction of public works grows and changes."

Mr. Alastuey contended privatization is a "clean, clear way" to get the public a complete product at a predetermined price by engaging a single contractor. He continued a single-contractor relationship is easy to administer, specific to a job, and specific as to price and product.

Mr. Alastuey raised concerns that S.B. 144 could create a more complex "web of relationships" as a result of relationship problems among subcontractors, between subcontractors and suppliers, and between subcontractors and general contractors. He acknowledged previous testimony by proponents was generally accurate, but mentioned according to section 19 of S.B. 144, any subcontractor can request information on payment or retainage. Mr. Alastuey indicated this section is the beginning of additional correspondence or relationships which could have legal consequence for the public owner. He stated rather than corresponding with and relating to only a single contractor, who is solely legally responsible, a public entity would engage in many other relationships and correspondence under S.B. 144. He added public entities and general contractors are probably not accustomed to developing, disseminating, or administering information in the manner provided under S.B. 144.

Mr. Alastuey expressed concern that other provisions of S.B. 144 also affect public bodies and the efficiency of their operations. He stated the 20-day payment process would be onerous and probably "out of reach" for most public entities. He indicated according to the comptroller’s office in Clark County, typical turnaround time to examine invoices for technical completeness and to gauge the accuracy of invoices relative to construction progress is about 2 weeks. He said beyond that 2-week time period, the county usually has about a 2-week turnaround within the comptroller’s office. Mr. Alastuey maintained Clark County’s typical overall turnaround is about 30 days. He asked why public entities should give favorable consideration to the construction industry when most other industries operate on the 30-day time frame. He further questioned why only public works, and thus projects funded by taxpayers, should be addressed, though he acknowledged BDR 52-990 addresses private projects.

Mr. Alastuey asserted the provisions regarding disputed amounts in S.B. 144 are not clear. He stated disputes could go into arbitration. He questioned at what point interest accrues if a progress billing is disputed and later corrected. Mr. Alastuey noted the language in S.B. 144, "is required to be paid," may indicate different points in time for the owner and the contractor.

Mr. Alastuey contended other provisions in S.B. 144 could provide for direct payment and resolution of labor disputes. He added the bill’s requirements for justifications and notarized affidavits regarding withholdings raise questions about how this process would be accomplished. He presented a scenario in which delivery of products from several suppliers were essential to one phase of a project. Mr. Alastuey asked what would happen if the public owner does not recognize the identities of the individual subcontractors, with whom there is no contractual relationship, and only says that certain payment is withheld to the general contractor because of an incomplete phase of the project. Mr. Alastuey stated the public owner has given notice which may be found incomplete relative to the resolution process. He pointed out someone would have to determine which subcontractor was at fault, and the public owner would be "in the fray." Mr. Alastuey contended this situation could give rise to a three-party relationship, as opposed to a two-party relationship, thus making government dealings more complex.

Mr. Alastuey addressed financing costs relative to S.B. 144, noting such costs would be a major diversion of cash flows benefiting a single industry and affecting only one customer. He stated throughout his many years of public service, he has never known about a situation in which a public entity was choosing a date of payment based on its cash flow advantage. He commented a 20-day payment cycle would result in "a lot of free financing."

Mr. Alastuey asked if the provisions of S.B. 144 put government in the "wrong role" and maintained the bill presents a regulatory issue. He added there is a much greater multiplicity of payment among the general contractors, the subcontractors, and the suppliers, than from the public owner to the general contractor. He stated because there would be more relationships among these entities under S.B. 144, there would be more opportunities for misunderstandings, shortfalls, and late payments within the construction sector itself. Mr. Alastuey submitted that situation should be governed by the private marketplace and by those bodies that supervise the construction trades.

Mr. Alastuey concluded Clark County will help work through problems associated with S.B. 144.

Senator Porter asked Mr. Alastuey if he believes there is currently a problem with payments to contractors. Mr. Alastuey responded a problem is sometimes perceived by the payee. He stated Clark County has not been the major impetus for continued pursuit of legislation like S.B. 144. Senator Porter asked if Mr. Alastuey thinks some things could be done better. Mr. Alastuey replied things could be done better by both Clark County and the contractors.

Senator Porter asked if Mr. Alastuey has any suggestions to change S.B. 144. Mr. Alastuey suggested instead of singling out public owners, the committee could look for statutory relief in the area of the law which governs the construction industry itself.

Senator Porter maintained public entities probably try to make payments as quickly and efficiently as possible. However, he commented legitimate complaints have been raised on this issue. He asked if the committee should look at legislation to help construction businesses be timely paid.

Ivan R. Ashleman II, Lobbyist, Clark County, pointed out he also lobbies for one of the proponents for S.B. 144. He stated problems with the payment bond for subcontractors and suppliers should be fixed. He added a date of payment time frame could be appropriate, though details would have to be discussed. Mr. Ashleman indicated Clark County would be comfortable with a 45-day payment time frame. He noted the time frame depends on whether a bill is considered ready for payment when the contractor sends the bill or when the public entity approves it. He stated allowing for inspection and verification probably makes the time frame longer than 30 days.

Mr. Ashleman continued proponents had previously told him S.B. 144 would eliminate arbitration. He distributed a copy of a United States Supreme Court Decision regarding arbitration (Exhibit C). He further cited the United States Arbitration Act, which under the Federal Supremacy Clause says parties cannot be limited from going into arbitration. Mr. Ashleman indicated proponents of S.B. 144 had since told him they believed arbitration would be possible under the bill. However, he expressed his disagreement because under section 28 of S.B. 144, anytime a contractor believes the amount withheld is not justified or is excessive, he or she can go to court for an order. Mr. Ashleman indicated going to the court would interfere with the arbitration process. He commented parties cannot put an arbitration together on 3-days notice, and they will be in front of the district court in 10 to 20 days. He mentioned various arbitration systems exist, including systems in which parties meet daily, at the end of the process, or on a quarterly basis. Mr. Ashleman said in order to prevent interference with arbitration, a sentence could be added to S.B. 144 stating something like, "Nothing in this act interferes with the parties’ rights to enter into arbitration."

Mr. Ashleman pointed out parties with complaints like those addressed in S.B. 144 generally go to arbitration rather than bring lawsuits. He stated in the major areas of Clark County he investigated, there may be two or three arbitrations pending, all involving quality of work rather than prompt payment. He offered to get more detailed information to the committee. Mr. Ashleman indicated there is not much controversy over these matters relative to the number of contracts for public works in Clark County.

Senator O’Donnell recalled Mr. Alastuey’s statement that Clark County likes to privatize construction projects. He asked why the county does not rely on private contractors for construction control. Mr. Alastuey answered a public body cannot delegate or contract away its fiduciary responsibility; thus, a comptroller or other financial officer will always have to be finally responsible for disbursement. He stated construction management or construction control has succeeded in some instances and has been disputed in others. Mr. Alastuey noted Clark County has a Public Works Department which handles hundreds of millions of dollars in road contracts. He related in one instance regarding a large northern segment of Clark County’s beltway, the county has engaged some construction management in an attempt to accelerate coordinating activities. He commented many other projects which are built in increments do not lend themselves well to construction management. He concluded construction management can feasibly apply only to some projects.

Senator O’Donnell pointed out the payment issue involves delays of up to a year, not just 30 or 45 days. He stated in business, if an entity orders a project, that entity pays for it.

Mr. Alastuey clarified he never stated public entities want to hold payment, and he has never witnessed such a situation.

Senator O’Donnell asked about the term "free financing," which had been used in earlier testimony. Mr. Alastuey indicated he had made reference to a substantial change in cash flows. He explained his point was to show that the construction industry is being discussed on a stand-alone basis.

Senator O’Donnell asked if public bodies would have an economic advantage if they held on to money as long as possible. Mr. Alastuey replied he did not think so. Senator O’Donnell commented if that were true, Mr. Alastuey’s previous argument would not be feasible. Mr. Alastuey responded because of the spreads involved, he would hold with his previous point.

Senator Neal stated he did not understand Mr. Alastuey’s objection to section 19 of S.B. 144. He asserted when a general contractor retains payment to a subcontractor, the subcontractor should ask the owner questions like those outlined in section 19. He asked how that section puts public bodies in "legal jeopardy."

Mr. Alastuey stated his concerns are only speculations on the practical outcome of the provisions of section 19 of S.B. 144. He clarified in previous testimony, he had attempted to draw contrasts between the single-correspondent relationship between a public entity and a general contractor and the multiple-correspondent relationships proposed by S.B. 144. Mr. Alastuey stated he was not raising an objection, but merely speculating about possible outcomes.

Senator Neal noted S.B. 144 would only obligate public entities to provide such information as is normally required upon request. He stated he did not believe the requirements in S.B. 144 would affect the single relationship between a public entity and a general contractor.

Mr. Alastuey explained section 19 of S.B. 144 would not cause "pain" for public entities. He agreed the provisions of section 19 refer to public information and could occur without statutory provision.

Regarding arbitration, Senator Care asked Mr. Ashleman if construction contracts typically include arbitration provisions. He further asked if such provisions would apply to any dispute regarding withheld payments.

Mr. Ashleman answered with a "qualified yes." He surmised a majority of contracts contain arbitration clauses and maintained some government entities in Nevada use a clause which states, "Both sides may, if they wish, invoke arbitration." He expressed his understanding that prompt payment could be an issue for arbitration. Mr. Ashleman pointed out S.B. 144 addresses several issues, including prompt payment without disputes over amounts and prompt payment between owners, general contractors, subcontractors, and suppliers. He commented in all these situations, problems could arise regarding whether full payment is justified or whether additional payment could be required. Mr. Ashleman concluded in general, arbitration clauses would cover all of these issues. He stated the least clear case would be when nobody disputes the fact that payment is due; he indicated that matter would not be "arbitrable." He commented such cases would be worthy of going straight to court.

Chairman O’Connell questioned how much information addressed in S.B. 144 is public. Mr. Alastuey expressed everything in S.B. 144, including payments from public treasuries, would be public information. He added certain features of payment or related correspondence could be considered a legal matter.

Chairman O’Connell asked if subcontractors could refer to posted information regarding payments. Mr. Alastuey responded such information could be posted.

Senator Neal asked if paragraph (c) of subsection 5 of section 28 of S.B. 144 means court costs would be paid regardless of who won the case. Mr. Ashleman stated proponents have indicated they would like to change that paragraph to read "reasonable attorney’s fees" rather than "…without limitation, his attorney’s fees." He noted paragraph (c) of subsection 5 of section 28 of S.B. 144 addresses only the petitioner, though discussion of the prevailing party exists elsewhere in the bill. Mr. Ashleman contended S.B. 144 thus contains conflicts and contradictions which would need to be clarified.

In response to a question from Chairman O’Connell, multiple city, county and state government representatives in the audience indicated they were concerned regarding language in S.B. 144. Chairman O’Connell stated that upon completion of Mr. Ashleman’s testimony, she would direct a subcommittee to discuss S.B. 144. She emphasized timely payment for goods and/or services "is not a revolutionary idea," and reiterated the issue needs to be addressed.

Mr. Ashleman raised concerns regarding paragraph (c) of subsection 5 of section 34 of S.B. 144. He stated this paragraph seems to add two potentially large categories to items that are covered by the prevailing-wage statute. He indicated he may have philosophical objections to the prevailing-wage statute covering "private property that is leased to a public body whose cost as a whole exceeds $20,000." Mr. Ashleman raised concerns regarding the meaning and scope of the paragraph in question, asking whether it refers to acreage or completed buildings and whether it would be retroactively applied. He also voiced concerns regarding whether the prevailing-wage statute would cover issues of public property that is leased to someone for construction.

Mr. Ashleman commented the debate over interest is of considerable concern because it involves billions of dollars statewide. He referred to paragraph (b) of subsection 2 of section 31 of S.B. 144, noting that paragraph deems someone to be paid when the bank pays the check. He stated even if a public body has issued a check, the bank determines when that check is paid. Mr. Ashleman asserted this situation could give rise to problems regarding interest claims.

Chairman O’Connell indicated a subcommittee would be formed on Friday, February 26, 1999, if parties could not come to an agreement regarding S.B. 144 by that date. She requested resolution on the issue by Wednesday, March 3, 1999.

William E. Isaeff, Lobbyist, Deputy City Manager, City of Sparks, stated the Nevada League of Cities requested him to be its representative on S.B. 144.

Chairman O’Connell asked Mr. Hadfield and Mr. Christiansen to lead a group to discuss S.B. 144. She also asked Mr. Alastuey and Mr. Ashleman to help coordinate the group. Mr. Peel indicated he would be able to meet with the group after the committee hearing. Chairman O’Connell directed interested parties to meet upon closure of the hearing on S.B. 144.

Chairman O’Connell closed the hearing on S.B. 144 and opened the hearing on S.B. 191.

Senator Alice Costandina (Dina) Titus, Clark County Senatorial District No. 7, stated S.B. 191 is a "smart growth bill" which would benefit taxpayers, local government, and developers through better growth management. She indicated S.B. 191 does not create new bureaucracy, "hamstring" local governments by placing state constraints on planning and zoning decisions, require regional conformity across local governments, impose undue hardships upon developers, raise the cost of affordable housing, mandate specific mitigation, or threaten the economy of southern Nevada. Senator Titus asserted arguments to the contrary are "inappropriate, inaccurate, and invalid" criticisms of S.B. 191.

Senator Titus explained S.B. 191 would codify a process which already occurs to varying degrees at the local level. She indicated the bill standardizes infrastructure impact statements and thus ensures local governments make more informed decisions about development and implement more rational mitigation policies.

Senator Titus maintained S.B. 191 would benefit developers because it would inform them at the outset about what is expected of them. She indicated the bill would also treat everyone equally and would eliminate capricious mitigation requirements, thereby making it easier to project costs and raise investment capital. Senator Titus continued S.B. 191 would "level the playing field" by adding mid-sized residential developments and commercial and industrial projects to the list of projects already required to provide infrastructure information.

Senator Titus said S.B. 191 would require a person who proposes to develop a project of significant impact within the Las Vegas urban growth zone to submit an infrastructure impact statement to the appropriate local government prior to consideration of a project. She pointed out projects of significant impact are defined in subsection 6 of section 1 of S.B. 191. She stated this definition is similar to the one used in NRS chapter 278, which defines projects of regional significance in Washoe County. Senator Titus indicated the definition for a project of significant impact was developed during the Sixty-ninth Legislative Session, with input from various groups covered by the definition. She expressed the Southern Nevada Homebuilders Association would like to increase the size of the planned-unit developments referenced in paragraph (a) of subsection 6 of section 1 of S.B. 191 from 300 houses to 600 houses. She suggested that number is negotiable.

Senator Titus stated the urban growth zone referenced in S.B. 191 is the area inside the Bureau of Land Management’s land exchange boundary, delineated in the Southern Nevada Public Land Management Act of 1997 passed by the United States Congress in 1998. She pointed out the land exchange boundary was included in Nevada statutes when Senator Mark James’ "neighborhood casino bill" was passed during the Sixty-ninth Legislative Session.

Senator Titus explained the infrastructure impact statement required under S.B. 191 would contain the information outlined in subsection 2 of section 1 of the bill. She continued subsections 3 and 4 of section 1 of S.B. 191 clarify no "complex, cumbersome" Environmental Impact Statement (EIS) would be required as it is in California. She stated the bill requires simply a compilation of information that is readily available.

Senator Titus asserted upon receiving the infrastructure impact statement, local governments would determine whether or not sufficient infrastructure exists to support the proposed development. She emphasized this decision would be a strictly local one. She added local governments would define what is sufficient and would have the power to approve or reject the project accordingly. Senator Titus pointed out local governments would also have the option of requiring appropriate mitigation to bring the infrastructure up to a sufficient level before a project could proceed.

Senator Titus explained section 2 of S.B. 191 provides for enforcement of the requirement for impact statements. She noted because no state or regional planning body exists to oversee and enforce this provision, it must be enforced in courts. She stated under S.B. 191, any individual who disputes a local decision could appeal to the attorney general to bring a complaint in district court. Senator Titus commented she agrees with criticism that this provision is broad. She indicated she would support an amendment which would give standing to aggrieved parties only, rather than to just anybody who is dissatisfied with a decision.

Senator Titus summarized S.B. 191 would guarantee informed decision-making, standardize an existing procedure, "level the playing field" for developers, leave zoning in the hands of local government, and help accomplish the goals of protecting the quality of life in southern Nevada and making Las Vegas a more "liveable" community. She noted S.B. 191 provides an approach for managing growth, not limiting, controlling, or stopping it.

Chairman O’Connell asked if S.B. 191 was patterned after any other region besides Washoe County. Senator Titus indicated the definition in S.B. 191 was "lifted pretty closely" from the Washoe County definition of a "project of regional significance." She added regional planning statutes exist in many states, but in Nevada only Washoe County has one. She continued, "The fact that this is valley-wide means you want a project of considerable significance, and so that is why we used that as a model." Senator Titus stated the Washoe County definition did not exactly "fit" southern Nevada, so the National Association of Industrial and Office Parks (NAIOP) came up with a definition which would be appropriate for commercial or industrial space.

Chairman O’Connell asked how closely current processes in Las Vegas and Clark County mirror the process set forth in S.B. 191. Senator Titus indicated in her understanding those local governments follow a similar process to that outlined in the bill. Senator Titus noted Clark County began following such a process after the "ring around the valley" bill was introduced in the sixty-ninth session.

Senator Titus stated after that time, when the "Olympic project" came before the county, the county requested an infrastructure impact study. Senator Titus pointed out the process is performed mostly with regard to large planned communities as opposed to industrial or commercial development. She noted S.B. 191 would standardize the practice to include such development.

Chairman O’Connell asked about relevant timelines. Senator Titus answered an infrastructure impact statement would be submitted at the time the project is submitted for consideration. She commented any project which is currently "in the works" or has already been submitted or approved would not be subject to S.B. 191.

Senator Neal asked what the consequences would be if the issues in S.B. 191 were not addressed. Senator Titus responded existing southern Nevada development is evidence that in the past, sometimes nothing was done and sometimes different requirements were put into place for different projects. She expressed perhaps these requirements were based on political reasons rather than "good policy" reasons. Senator Titus stated projects are approved without all the information regarding their impacts on infrastructure. She continued infrastructure must then be built to accommodate those projects. Senator Titus contended if infrastructure information were provided before approval, "then you get things in the right order."

Chairman O’Connell asked if the ideas contained in S.B. 191 had been presented to the Southern Nevada Strategic Planning Authority (SNSPA). Senator Titus indicated she had not formally presented the plan, but had met with Senator Porter; Bruce Woodbury, Board of Commissioners, Clark County; Elizabeth N. Fretwell, Lobbyist, City of Henderson; and James J. Spinello, Lobbyist, Clark County. She stated they had not put their "seal of approval" on the plan, but had indicated to her it was "something they could work with," considering the changes she had previously mentioned regarding narrowing the standing for filing complaints and studying the number of units in the thresholds. Senator Titus added the SNSPA started with only four recommendations and narrowed that number to two. She said the group should not just "settle with" those two without considering other possibilities.

Senator Porter commented his intent in supporting the creation of the SNSPA was to avoid unnecessary legislation. He stated, "My intent was to create inter-local agreements without the state mandating specific means of regional planning." He said S.B. 383 of the Sixty-ninth Session required the SNSPA to present a strategic plan for southern Nevada by April 1, 1999.

Senator Porter explained that presentation would be made at the Joint Hearing of the Senate and Assembly Committees on Government Affairs on February 25, 1999. He noted Senator Titus’ concerns could be addressed at that hearing. He further mentioned the SNSPA is still working on possible legislation.

Louise Bayard-de-Volo, Lobbyist, Sierra Club, conveyed that group’s support for S.B. 191. She said the bill would not only standardize practices and give governmental entities the information they need to make decisions, but also ensure that information would be available to citizens. Ms. Bayard-de-Volo expressed it would be helpful if citizens could have the information before the hearing rather than on the hearing date. She further asserted information pertaining to previous approvals and other phases of the project should be referenced in the infrastructure impact statement. She explained such information would help citizens become informed.

Ms. Bayard-de-Volo proposed two amendments (Exhibit D) to S.B. 191 which would address her aforementioned suggestions. She stated the provisions of section 2 of S.B. 191 would help ensure compliance with the bill.

Larry L. Spitler, Lobbyist, Clark County School District, emphasized the importance of including school districts in growth planning. Regarding paragraph (b) of section 1 of S.B. 191, Mr. Spitler indicated the Clark County School District most effectively estimates the number of additional students per level (elementary, middle school, and high school) rather than per grade. He asked the committee to consider changing paragraph (b) of section 1 of S.B. 191 to reflect that practice.

Mr. Spitler also suggested changing paragraph (g) of section 1 of S.B. 191 to read "… must be obtained from the appropriate entity or local provider …." He explained the party which collects the relevant information may be better able to provide details for an impact statement.

Mr. Spitler supported section 6 of S.B. 191 because the definition of a "project of significant impact" encourages involved parties to look at growth in a positive way and to better manage growth.

Senator Porter commented he would not want to imply that S.B. 191 or S.B. 383 of the Sixty-ninth Session was the "end all" to regional planning and cooperation. He noted growth is a "fluid process" and pointed out southern Nevada had, in about 16 months, moved from "inter-local bickering" to "inter-local cooperation." Senator Porter continued southern Nevada has looked at the successes and failures of Washoe County and other communities across the United States. He expressed growth planning will continue to be an issue.

Mr. Spitler stated he had attended many SNSPA meetings, where "wonderful" suggestions had been made regarding education. He elaborated the SNSPA began to identify long-term funding. Mr. Spitler noted out of many items the SNSPA studied regarding education, the Clark County School District only disagreed with one. He stated the document produced by the SNSPA is an "excellent guide to where we are beginning to be." He concluded in addition to SNSPA suggestions, southern Nevada needs suggestions like those brought forth by Senator Titus.

Senator Neal commented all cities should follow the provisions of S.B. 191 because growth must be managed.

Bristol Ellington, Assistant Director of Community Development, City of Henderson, stated that city would support S.B. 191 with amendments. He expressed requiring analysis of infrastructure impacts prior to approval of new development is a "sound planning principle." Mr. Ellington noted such a requirement would be a philosophical and procedural change. He stated the City of Henderson believes its current development review process complies with the intent of S.B. 191.

Mr. Ellington pointed out the City of Henderson has been successful in partnering with the development community to set aside sites for schools, fire stations, and parks. He added the city has succeeded in having developers oversize their utility extensions in order to accommodate future growth. He stated the City of Henderson believes some of its current provisions are stricter than those set forth in S.B. 191. Mr. Ellington said the city wants to ensure it would have the ability to continue its current practices.

Mr. Ellington indicated he was pleased with Senator Titus’ attempt to narrow the scope regarding who could appeal decisions under S.B. 191. He voiced concern that an individual could file complaints to the attorney general’s office. Mr. Ellington stated the City of Henderson would like to delete the relevant portion of S.B. 191, noting the current process is a sufficient avenue for legal redress.

Mr. Ellington supported the requirement for schools to keep up with growth, but pointed out the school board is an autonomous entity. He reiterated the City of Henderson has succeeded in having developers identify school sites. However, he pointed out the city has no control over if or when the school board will decide to develop on those sites. Mr. Ellington stated the city can only require the school board to provide a "will service" letter. He expressed concern about possible appeals based on an insufficient number of schools within a developing area.

Chairman O’Connell asked if the school district currently takes advantage of developers’ plans when they are first filed with the City of Henderson. Mr. Ellington stated at present, the city has 13 vacant sites available for the construction of schools. He mentioned those sites have been dedicated by developers and exist within the city’s "master plan communities." Mr. Ellington did not know whether schools will be constructed on those sites.

Chairman O’Connell raised concern that school districts do not take full advantage of information regarding such sites. She stated the districts do not follow through until the price of the land becomes expensive. Mr. Ellington responded the City of Henderson has developers dedicate sites so that, in most cases, the school board is not required to pay for the land, but only for its "off-sites."

Chairman O’Connell stated the construction of infrastructure around schools is expensive. She would like to see the school board take advantage of information earlier so developers, as opposed to the school, would construct some of that infrastructure. Mr. Ellington indicated he was unsure whether the school board has much concern with the City of Henderson. He stated, in his understanding, schools in other districts must sometimes purchase land in addition to paying for "off-sites." He added in some cases, developers in Henderson have dedicated "off-sites" as well as land.

Senator Titus stated she has heard complaints that little planning coordination exists between the school district and other entities. She hoped if all the relevant information were put together before the project began, it would force more information-sharing and coordination.

Mr. Ellington agreed, but reiterated his concern that Henderson would be required to determine whether there will be sufficient schools despite the city’s lack of control over that issue. He asked what would happen to the city if someone appealed such a decision.

Mr. Ellington further expressed concern with the 350-employee threshold in paragraph (c) of subsection 6 of section 1 of S.B. 191. He stated no one knows what the impact of this untested provision would be on economic development and diversification.

Mr. Ellington offered to work with Senator Titus and the committee to draft revisions to S.B. 191.

In response to a question from Chairman O’Connell, Mr. Ellington stated he would provide her a written copy of his comments at a later date.

Marta Golding Brown, Lobbyist, City of North Las Vegas, offered support for S.B. 191 with amendments. She stated the City of North Las Vegas has a Land Development Task Force which looks at projects and works with developers early in the design phase to address functions and facilities such as water, sewer, fire, and police.

Ms. Brown said the Planning Department of the City of North Las Vegas suggested amendments to section 2 of S.B. 191. She indicated Senator Titus’ earlier suggestion regarding this section would probably be acceptable, but she could not attest to that before bringing it before the Planning Department. Ms. Brown stated the department commented S.B. 191 "promotes sound land-use decisions," but in its present form, the bill could keep decisions away from local governments. She added the department wants to ensure local decision-making abilities regarding land use are retained.

Phil Rosenquist, Assistant Planning Manager for Regional Planning, Department of Comprehensive Planning, Clark County, stated the county supports the intent of S.B. 191. However, he indicated the county has some concerns.

Regarding subsection 2 of section 1 of S.B. 191, Mr. Rosenquist expressed planning departments can "tie" development to the availability of public services in many ways. He pointed out Clark County accomplishes this task through the adoption of master plans and through the urban growth boundary established by the community district element of the county’s comprehensive plan. Mr. Rosenquist indicated areas currently available for urban development have been determined to have service availability, while areas outside the boundary, in Community District 3, do not currently have services available. He added within Community District 3, the county requires a comprehensive assessment of impacts; he presented a few examples of impact reports (Exhibits E, F, and G. Originals are on file in the Research Library.).

Mr. Rosenquist also raised concerns regarding the thresholds set forth in subsection 6 of section 1 of S.B. 191. He stated impact statements, reports, and mitigations are currently required for a variety of projects with much lower thresholds. Mr. Rosenquist asked, "At what level of threshold does a project get kicked into a public forum for a different sort of review procedure than occurs today?"

Mr. Rosenquist went on to voice concerns regarding section 2 of S.B. 191 which addresses a person’s ability to file objections based on the belief that local boards are not following impact-study recommendations. He elaborated a situation could arise in which an aggrieved party turns out to be a competitor of a developer. He further contended the court system could become the "ultimate arbitor and land-use planner for southern Nevada." Mr. Rosenquist added section 2 of S.B. 191 could change the way the court system currently reviews challenges to local land use decision-making. He explained currently, courts review such decisions on the criteria of "arbitrariness and capriciousness," studying whether a reasonable decision was made in accordance with adopted comprehensive plans. Mr. Rosenquist stated Clark County would like to help change the language in S.B. 191 to ensure the role of the court system remains similar to its current role.

Mr. Rosenquist concluded Clark County has pledged to work with other jurisdictions in southern Nevada through the Southern Nevada Regional Planning Coalition. He offered to work with the Senate Committee on Government Affairs to address growth issues as well.

Steve G. Holloway, Lobbyist, Executive Vice President, Associated General Contractors (AGC), Las Vegas Chapter, indicated he had originally intended to oppose S.B. 191, but his concerns regarding the bill had been addressed. He stated the Las Vegas Chapter of AGC "feels sympathetic" to the intent of S.B. 191.

Mr. Holloway asserted the Las Vegas Chapter of AGC is concerned about section 2 of S.B. 191 and would like that section to be amended. He contended the group is also concerned about the threshold amounts contained in subsection 6 of section 1 of the bill. Mr. Holloway indicated the group would like the 300-unit threshold to be increased. He also stated the Las Vegas Chapter of AGC is concerned because no one knows the impact of the 350-employee thresholds.

Senator Titus agreed to work on amendments to S.B. 191 and bring them back to the committee.

Chairman O’Connell closed the hearing on S.B. 191 and adjourned the meeting at 4:52 p.m.

RESPECTFULLY SUBMITTED:

Amelie Welden,

Committee Secretary

APPROVED BY:

Senator Ann O'Connell, Chairman

DATE: