The Senate Committee on Government Affairs was called to order by Vice Chairman William J. Raggio, at 2:10 p.m., on Wednesday, March 17, 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:

Harvey Whittemore, Lobbyist, Nevada Resort Association, requested committee introduction of Bill Draft Request (BDR) S-1641.

Mr. Whittemore indicated a provision was left out of BDR S-1641, so an amendment would be proposed. He elaborated, "The stakeholder group, to approve a capital project, was supposed to require a 2/3 majority, and that is not in the bill."

*****

Vice Chairman Raggio opened discussion on BDR 28-517.

Vice Chairman Raggio stated BDR 28-517 was requested by Associated General Contractors (AGC). He requested that a representative from the association review the BDR.

Vice Chairman Raggio opened discussion on BDR 20-554.

Vice Chairman Raggio indicated BDR 20-554 was requested by Washoe County.

Madelyn Shipman, Lobbyist, Washoe County, explained BDR 20-554 was requested by the county’s public administrator. She asserted the BDR does not contain major changes, and she maintained the public administrator believes certain provisions of existing law contain "old" figures which need to be changed. Ms. Shipman elaborated a law may contain a reference to $250 when the public administrator believes that figure should be $500. She noted the value of items and the work of the public administrator have changed since relevant laws were enacted. Ms. Shipman said BDR 20-554 has also been reviewed by Clark County’s public administrator, who has no objections to it.

*****

Vice Chairman Raggio opened discussion on BDR 28-736.

Vice Chairman Raggio pointed out BDR 28-736 was requested by the State Public Works Board. He commented the BDR would allow the board to avoid bidding on contracts under certain circumstances. Vice Chairman Raggio read a statement prepared by Eric Raecke, Manager, State Public Works Board, Department of Administration, as follows:

*****

Vice Chairman Raggio opened discussion on BDR 31-702, BDR 32-705, BDR 30-707, and BDR 17-980, noting these BDRs were requested by the interim committee on distribution of revenue.

Marvin A. Leavitt, Lobbyist, City of Las Vegas, explained BDR 31-702 would address situations in which a local government is in severe financial emergency, and the director of the Department of Taxation believes that government cannot recover for at least 5 years. Mr. Leavitt asserted the voters would decide whether they want to continue with the operation of that local government. He stated if voters wanted the government to continue, additional taxes would be levied.

*****

Mr. Leavitt expressed BDR 32-705 addresses a problem in rural counties where tax rates are at or above the 3.64 cap. He stated:

*****

Mr. Leavitt testified BDR 30-707 would apply to all counties in various forms. He stated the debt management commission has important responsibilities regarding the issuance of general obligation debt. Mr. Leavitt continued the BDR would direct counties to give staff assistance to the debt management commission, and he asserted the county staff would provide technical assistance only. He maintained BDR 30-707 would also set forth qualifications for the members of the debt management commission in order to ensure some level of expertise.

*****

Vice Chairman Raggio summarized BDR 17-980 would require that certain legislative measures include disclosures concerning unfunded mandates. He stated the BDR would also place a monetary limit on programs and services for which a specified source for additional revenue must be authorized.

Mr. Leavitt indicated Vice Chairman Raggio’s description is accurate.

*****

Chairman O’Connell reopened discussion on BDR 28-517 (S.B. 475).

Steve G. Holloway, Lobbyist, Associated General Contractors, Las Vegas Chapter, testified BDR 28-517 would amend NRS chapter 338, which currently provides for a single method of competition for public-works construction projects. He explained BDR 28-517 would add a second method. Mr. Holloway noted under current law, once the design is negotiated, a public body releases that design for bid, and the contractors then bid competitively for the project. He stated BDR 28-517 would provide for an alternate system under which the public body could release for bid both the design and the construction as a "package" for a design-build team consisting of registered engineers, architects, and general contractors.

*****

Carole A. Vilardo, Lobbyist, Nevada Taxpayers Association, offered support for S.B. 194 with amendments. She indicated Senator Rawson supported the proposed amendments, which would be presented in later testimony. She commented a requirement exists regarding the number of funds to be audited and specially accounted. Ms. Vilardo pointed out stabilization funds are already authorized, and authorizing disaster-relief funds would be a "good practice."

Ms. Vilardo raised concerns because S.B. 194 would allow for the creation of four different funds. She expressed local governments with the largest disaster-relief problems would probably also have the largest problems with permissibly setting aside money for such funds. Ms. Vilardo suggested the allowance for the budget-stabilization fund should be expanded, and the fund should be made into a stabilization and disaster-relief fund. She explained local governments could use the fund for disaster relief as well as budget stabilization if conditions for use of monies in the stabilization fund were changed. Ms. Vilardo asserted local governments would ultimately have a larger "pool of money" and would have more flexibility under this proposed system.

Chairman O’Connell asked whether Ms. Vilardo intended to "delete the bill and start over." Ms. Vilardo responded, "Not really." She elaborated the changes could be made through amendments.

Chairman O’Connell asked about the origin of S.B. 194 and about Senator Rawson’s reasons for introducing it. Ms. Vilardo answered the issue came up during an Interim Finance Committee meeting regarding grant money from the State Disaster Relief Fund. She stated a comment was made at that meeting suggesting in addition to the state fund, there should be a mechanism for local governments to set aside funds for disaster relief. Ms. Vilardo expressed S.B. 194 was a result of that discussion.

Senator Porter indicated he had attended that Interim Finance Committee meeting, where he had commented many local governments are forced to come to the state for emergency assistance because they are not allowed to keep emergency monies in their budgets. At that time, he had also suggested that the Legislature consider allowing local governments to establish emergency funds. Senator Porter noted S.B. 194 would allow the creation of such funds.

Ms. Vilardo proposed the Legislature revise permissive language from previous legislation regarding local-government stabilization funds. She stated stabilization funds could be renamed, and more money could be put into them. She emphasized the money could then be used to address either budget stabilization or disaster relief, whichever need was present.

Senator Raggio asked if S.B. 194 addresses local governments only. Ms. Vilardo answered affirmatively, clarifying the bill does not address state funds.

Marvin A. Leavitt, Lobbyist, City of Las Vegas, raised concern that allowing local governments to have too many separate funds would not encourage the best use of available resources. He further expressed concern regarding the unknown timing of natural disasters and the requirement for interest retention in a disaster-relief fund. Mr. Leavitt explained if no natural disasters occur for many years, money which has accumulated in a disaster-relief fund could not be used for more appropriate expenditures. He continued it would be beneficial if a fund could be used for either disaster relief or budget stabilization.

Mr. Leavitt stated NRS 354.6115 allows local governments to establish stabilization funds. He maintained the language in S.B. 194 relating to auditing requirements and the definition of natural disasters could be incorporated into the statute to create one fund for stabilization and disaster relief.

Mr. Leavitt noted NRS 354.6117 allows only 10 percent of General Fund expenditures to be transferred into a stabilization fund. He stated if stabilization and disaster-relief funds are combined, the limitation should be increased to 15 percent or 20 percent since the combined fund would be used for dual purposes. Mr. Leavitt noted a combined fund would allow local governments more money to use for stabilization purposes in times of economic downturn. He added local governments would also have money to use for disaster relief if a natural disaster occurred. He stated the fund could be "built back up" in subsequent years.

Mr. Leavitt contended budget stabilization and disaster relief involve similar economic situations, so setting a fund aside for both purposes would be logical.

Chairman O’Connell clarified no changes would be made to section 1 of S.B. 194 in order to accommodate Ms. Vilardo’s and Mr. Leavitt’s suggestions. Mr. Leavitt explained the changes would occur in section 2 of the bill. He elaborated most of the language in section 2 could be incorporated into NRS 354.6115, which duplicates some of the language in S.B. 194.

Senator Raggio summarized instead of authorizing two specific funds with limits of 10 percent of General Fund expenditures, Mr. Leavitt and Ms. Vilardo proposed having one dual-purpose fund with a 20-percent limitation. Senator Raggio indicated language from the bill should be added to the language in statute regarding the stabilization fund. He asked if the same prerequisites would be maintained for the ability to use such a fund. Mr. Leavitt responded affirmatively.

Senator Neal asked why S.B. 194 cites NRS 353.2715 to define an "eligible project" when local governments are responsible for declaring emergencies as set forth in paragraphs (a) through (f) of subsection 3 of section 2 of the bill.

Mr. Leavitt explained there have to be restrictions on the use of money set aside for specific purposes. He stated stabilization funds currently can only be used in times of economic downturn. He continued if such funds are expanded to include natural-disaster relief, the money should not be available for any use besides those two purposes.

Senator Neal pointed out subsection 4 of section 2 of S.B. 194 addresses that concern, but the bill also includes a definition for "eligible projects." He stated, "After you have set out, through a declaration, what the disaster is, and the local government has declared that, then the local government is obligated to go forward and make those corrections."

Mr. Leavitt responded the language in paragraph (b) of subsection 6 of section 2 of S.B. 194 probably would not have to be in the bill.

Senator Titus commented she signed on to S.B. 194 because during the Sixty-ninth Legislative Session, many local governments had to ask the state for financial help with flood relief. She asserted S.B. 194 would allow local governments to take on some of the responsibility for such situations. Senator Titus recalled previous discussions in opposition to creating a separate disaster-relief fund at the state level, and she asked why it would be beneficial to combine stabilization and disaster-relief funds at the local level only.

Ms. Vilardo asserted, in her opinion, it would be beneficial to combine funds in a similar manner at the state level. She stated in contrast to state provisions, the statutes authorizing stabilization funds at the local level are permissive, not mandated. She indicated some local governments have already set aside money in stabilization funds, so if disaster relief were incorporated into those funds, the governments would be able to use for disaster-relief purposes the money they have already set aside for stabilization.

Senator Raggio commented many differences exist between state and local governments. He noted the Legislature only has the authority to make appropriations during biennial sessions, and the state stabilization fund has been created at a level deemed necessary to deal with an economic downturn. He expressed, in his opinion, it would be "inappropriate" to allow that fund to be "invaded" for any other purpose due to the way the state handles budgeting.

Senator Neal asked how S.B. 194 would work in conjunction with the Division of Emergency Management. Mr. Leavitt replied any monies other than local-government appropriations, including grants for disaster relief, would be limited to the purposes for which such contributions were made. However, he stated there would be a "commingling" of local-government appropriations, which could be used for either stabilization or disaster relief.

Senator Neal said in his understanding, any grant for disaster relief would come through the emergency management division. He asked if local governments could decide to use grant money rather than money from their stabilization and disaster-relief funds. Mr. Leavitt indicated he is unfamiliar with the details of emergency-management procedures. He assumed applications for grants would discuss other monies available for emergency relief, so local governments would list stabilization and disaster-relief funds as assets on such applications.

Senator Neal asked if disasters addressed in S.B. 194 are different than those addressed by emergency management. Ms. Vilardo explained S.B. 194 deals with natural disasters, whereas "non-natural disasters," such as hazardous spills, are addressed by emergency management.

Chairman O’Connell closed the hearing on S.B. 194 and opened the hearing on S.B. 309.

Robert E. Shriver, Executive Director, Division of Economic Development, Commission on Economic Development, stated he and Dan Tom, Director, Department of Business and Industry, would be presenting S.B. 309 in the absence of Senator Rawson. Mr. Shriver asserted Senator Rawson has been committed to finding solutions to the current lack of risk capital for creating new businesses in Nevada.

Mr. Shriver indicated S.B. 309 was modeled "somewhat" after Mississippi legislation. He pointed out the bill does not meet the criteria necessary to "make everyone comfortable." Mr. Shriver said the Commission on Economic Development "firmly believes" a venture-capital fund would be significant for the growth and attraction of technology businesses.

Mr. Shriver raised concern regarding the lack of restraints and qualifying criteria in S.B. 309. He specifically cited questions about the definitions of a "Nevada business" and a "venture-capital fund," as well as questions about how such a fund would be administered. He requested time to prepare proposed amendments for the bill.

Mr. Shriver continued the venture-capital concept of S.B. 309 has evolved over a long period of time.

Larry Struve, Lobbyist, Nevada Technology Council (NTC) c/o Leipper Management Group, testified he was speaking not only on behalf of the NTC, but also "more or less in [his] private capacity." He distributed a packet including a summary of his testimony, a copy of a newspaper article, a copy of a journal article, and a brief history of the NTC (Exhibit C).

Mr. Struve asserted the need exists for a venture-capital fund such as that proposed by S.B. 309. He referenced a report he prepared for a 1996 meeting of the National Association of State Venture Funds (Exhibit D). He maintained more than 40 states have established some form of state-assisted venture funds because they believe governments are responsible for developing programs to establish "linkages" among capitalists, inventors or researchers, and business and industry. Mr. Struve indicated these "linkages" help create a "community of entrepreneurs," which in turn creates jobs and business opportunities.

Mr. Struve asserted the state must take an active role in developing such "linkages" by providing a fund which can partner with other venture funds and with university research programs. He said the fund would provide early-stage financing for entrepreneurial enterprises that develop technologies and products which will be the "base of our economic system" in the future.

Mr. Struve referenced an article which appeared in the Reno Gazette-Journal on July 23, 1998 (Exhibit C). He summarized the article reports Nevada’s "low score" for commercial and industrial lending. He stated he does not believe a capital shortage exists in Nevada, given the state’s economic base. Mr. Struve elaborated casinos and mining companies are able to get capital, and many times they raise their own capital without going to banks. He referred to a newspaper-article quote regarding the Nevada business sector’s high ranking despite the state’s lack of a diverse economy. He asserted the quote presents a "good-news/bad-news situation," noting Nevada has done "exceedingly well" with its current economic base. However, he said the state is challenged to attract a diversified industrial base, such as those in Silicon Valley, Massachusetts’ Highway 28, or Kansas. Mr. Struve commented the state-assisted Kansas Technology Enterprise Corporation "seeds" other venture funds to produce new products and technologies as well as manufacturing centers. He stated Nevada can either retain its reliance on mining and gaming or compete for technology industries.

Mr. Struve mentioned the Department of Business and Industry’s ongoing efforts to provide access to venture capital in Nevada. He referenced the successes and failures of previous legislation regarding this issue, as listed in his summarized testimony (Exhibit C). He noted some proposals have had constitutional problems because Nevadans have not voted to modify the "anti-donation clause."

Mr. Struve concluded Nevada is "stuck in neutral," and he offered his support for legislation which would help the state move forward on this issue.

Chairman O’Connell asked about the effectiveness of the aforementioned legislation in Mississippi. Mr. Shriver responded he did not think the Mississippi program is working very well.

Dan Tom, Director, Department of Business and Industry, explained the Mississippi program and other similar programs have not always been successful due to a lack of direction and regulation. However, Mr. Tom asserted the idea behind these programs is positive. He commented perhaps all the details cannot be delineated in legislation. Mr. Tom maintained successful programs are focused, and Nevada would have to decide whether to focus on high-technology businesses, general businesses, or something else.

Mr. Tom stated he neither supports nor opposes S.B. 309. He pointed out no money has been identified to fund the activity proposed in the bill, and he asserted Mississippi and other states subsidize such activity. Mr. Tom summarized S.B. 309 would set aside $20 million in state bonds and "downstream" the money to an entity which would assist in providing capital to certain businesses. He noted the bill sets forth a mechanism for this entity to protect the principal of the bonds, so it would buy a "zero-coupon bond" to do this. Mr. Tom asserted there would then be about $11 million to use for investment purposes. He commented S.B. 309 does not identify who would pay the interest on the $20 million. He supposed the $11 million would be used to generate a substantial return so that interest on the original $20 million could be paid. Mr. Tom contended S.B. 309 does not indicate the state would subsidize that activity, and he did not recommend the state enter into such a subsidy.

Mr. Tom continued funding for an activity like that proposed in S.B. 309 can be accomplished either through a subsidy or through a willingness to take risk. He indicated statutes may prohibit the state from taking such risk, and he again questioned how the capital would actually be provided.

Chairman O’Connell asked if the Governor has had input on this issue. Mr. Tom said he has not spoken with the Governor, but indicated they would consult in the future. Chairman O’Connell emphasized the Governor should be involved in providing focus. She noted Nevada’s manufacturing sector is growing faster than any other state’s and asked whether economic diversification committees have been involved in ideas like those of S.B. 309.

Mr. Shriver stated the state’s development authorities have a "concerted interest" in establishing a venture-capital fund to help Nevada businesses grow. He added Nevada has trouble attracting new businesses and providing startup capital, but once such businesses are established in the state, they prosper. He noted the startup element is particularly important for technology businesses, which provide the largest percentage of growth in income levels for employees. Mr. Shriver commented the Nevada Development Authority in Las Vegas has written to the Senate Committee on Government Affairs regarding other states’ activities in this area. He maintained the state is interested in providing venture capital, and he, Mr. Tom, and others need to find a way to "make it work."

Mr. Shriver pointed out the anti-donation clause in the Nevada State Constitution complicates the issue and noted that clause is again being addressed during this legislative session. He contended items in S.B. 309 need to be defined more succinctly, and provisions should be written into statute, not left to regulation. Mr. Shriver continued, "We need to develop this ‘corporation for public benefit’ that will allow private investment or someone to help us invest money, in which perhaps it is not directly using state money. Maybe we are strictly the backstop."

Mr. Shriver emphasized venture capital involves risk, and the state needs to decide whether it is "ready to take that leap." He reiterated he would like to try to work out the problems in S.B. 309.

Senator O’Donnell summarized a $20-million bond would be given to a 501(c)(3) corporation. He asked who would make up this corporation.

Mr. Tom answered those details have not yet been addressed. He noted Senator O’Donnell’s question would require much thought to ensure the money is used for its original intentions.

Senator O’Donnell asked why the state should not put the money into a bank and require venture capitalists to use that bank for venture capital. He stated, "You have a reserve requirement at a bank, as you know, and you can take $20 million and make it, what, $116 million, something like that, with the reserve requirement. Do you see what I’m [I am] saying? If you loaned it all out?"

Mr. Tom noted Senator O’Donnell’s comments are from a bank’s perspective and describe how a bank generates capital. Mr. Tom stated the funds would not be an investment in that bank. He added some financial institutions for community development operate in a similar manner.

Senator O’Donnell responded:

Mr. Tom stated Senator O’Donnell’s scenario commands a partnership on the part of the lending institution. He noted similar procedures have been attempted, and he asserted banks deal in "very narrow bands of risk." Mr. Tom contended, "Once you are beyond those bands of risk, there is a lack of understanding there." He maintained S.B. 309 would involve "higher bands of risk."

Senator O’Donnell pointed out higher risks should involve higher returns. Mr. Tom responded:

Senator Titus offered her support for the concept of S.B. 309, though she recognized the bill "needs some work." She commented as Nevada moves into the new millenium, the state should encourage economic development and diversification. With respect to mining, she pointed out gold is a finite resource, and the price of gold is down. She further mentioned gaming is proliferating across the country, so revenues from that industry are uncertain. Senator Titus stated she serves on the Corporation for Solar Technology and Renewable Resources (CSTRR) Board and the Nevada Test Site Development Corporation, both of which involve high-technology enterprises. She asserted both groups would welcome an opportunity for venture capital.

Mr. Tom said the state must decide on a focus, assuming funds are available. He asserted $20 million is "not a great deal of money" for venture-capital purposes. However, he noted greater results can be effected with multiplication and/or leveraging. Mr. Tom reiterated the program should be narrowly focused, and he suggested there may be differing views regarding that focus.

Senator Care noted funds set forth in S.B. 309 could possibly be used for low-income housing, given the definition of "Nevada business." Mr. Shriver agreed and reiterated the bill needs to be narrowed and focused. He expressed the state should explore every option to develop technologies and businesses, and he stated Senator Rawson encouraged him and Mr. Tom to try to make the bill work. Mr. Shriver offered to bring suggestions to the committee by the latter part of the week of March 22, 1999. Chairman O’Connell agreed to this suggestion.

Berlyn D. Miller, Lobbyist, Nevada Contractors Association, indicated he serves on the Executive Committee of the Nevada Development Authority and as the Vice Chairman of the Commission on Economic Development. Mr. Miller offered support for the concept of S.B. 309, noting he has worked for at least 12 years to try to start such a project. He agreed the bill needs changes and said he would work on those with Mr. Tom and Mr. Shriver.

Mr. Miller referred to Chairman O’Connell’s previous statement regarding Nevada’s manufacturing sector. He explained:

Ian F. Burns, Registered Patent Attorney, Ian F. Burns & Associates, stated he serves as Executive Vice President for the Nevada Technology Council (NTC). Mr. Burns asserted the NTC is a statewide organization of professionals, government representatives, and academic representatives who are interested in supporting technology in Nevada. He pointed out the NTC supports the Legislature’s efforts to promote venture-capital resources.

Mr. Burns expressed Nevada is "losing out on tremendous opportunities." He said as a patent attorney, he comes into contact with many individuals, groups, and small companies who have ideas for new businesses, inventions and technology, but such potential entrepreneurs face "hurdles" in Nevada. He explained in order to promote an idea, an entrepreneur must go through significant development work. For example, Mr. Burns maintained the development and promotion of computer and Internet-technology inventions require a large amount of money. He contended the necessary resources are not currently available in Nevada, and thus, many of his clients move out of state. He noted many clients have traditionally moved to California’s Bay Area, where they are at a disadvantage because they must then compete with the many ideas that already exist in that region.

Mr. Burns stated sources of financing are available to companies once they are established and making money, but he indicated he is mostly interested in start-up-level financing. He elaborated someone may have an idea and need help getting started, even though he or she may have no "track record" and may initially lose a lot of money. Mr. Burns emphasized such start-ups need a funding source that is prepared to take the associated risk. He maintained very few sources are currently available.

Mr. Burns commented California’s Proposition 5 might offer "severe competition" to Nevada’s gaming industry, especially in the northern part of the state. Thus, he asserted, "It is ever more important to diversify the economy in Nevada, and to do that, we need to take advantage of these ideas that are here in Nevada." He continued the state needs to encourage people who want to move to Nevada to promote their ideas and inventions.

Bob Goff, Member, Nevada Technology Council, indicated he is also the founding member of the Sierra Angels, a local venture-capital group headquartered in Incline Village. Mr. Goff stated he was testifying primarily as an interested voter. He noted he has much experience creating "high-quality" jobs and increasing the economic base in the private sector by combining risk capital with technology, largely in conjunction with college and university systems.

Mr. Goff explained the economic growth of the United States is being driven by "entrepreneurship." He noted despite a trend toward corporate downsizing, unemployment is low. He added the United States’ leadership position in the global economy is a "technology-driven phenomenon."

Mr. Goff asserted entrepreneurs require three things: good ideas, capital, and management and workers in the college and university system. He expressed Nevada is strong in two of the requirements, but is "well behind" other states in available capital. Mr. Goff contended Nevada is not currently viewed as an "entrepreneurial-friendly" state.

Mr. Goff continued providing a "venture-capital pool" that could be further leveraged by the private sector would accelerate the creation of "high-quality" jobs and would promote economic growth through diversification. He mentioned the Sierra Angels funded seven projects in 1998, two of which attracted mainstream venture-capital groups from the Bay Area to provide more than ten times the amount of money provided by the Sierra Angels. Mr. Goff indicated a state venture-capital fund could be multiplied in a similar manner. He added such a fund would "send a very, very powerful signal" of state-level commitment to support technology and economic growth and diversification.

Mr. Goff raised concern that the absence of a venture-capital fund or some similar measure would cause Nevada to "lose significant ground" relative to other states in the future. Conversely, he expressed if the state "steps up" to such activity, there would be an opportunity for every graduate from the Nevada university system to get a good job within the state.

Senator O’Donnell questioned the effectiveness of S.B. 309 in its present form. He noted a state program provides that Nevada "underwrites" or funds low-income or first-time home buyers. He asked Charles (Chas) L. Horsey III, Administrator, Housing Division, Department of Business and Industry, to explain that program.

Mr. Horsey testified, "The Housing Division is the state’s version of its very own, very large, and very healthy financial institution without the savings accounts." He stated the division’s lendable proceeds come from the sale of millions of dollars of tax-exempt bonds on Wall Street. He commented these proceeds are then used to provide mortgages for first-time home buyers. Mr. Horsey indicated the state has made approximately 17,000 such mortgages, to date. He explained proceeds from the bond sales are also used to finance apartment projects for low- to moderate-income families.

Mr. Horsey expressed Nevada has historically been a "capital-poor" state, but by selling bonds nationally, Nevada has "imported" capital into the state. He maintained this situation is beneficial to Nevada. Mr. Horsey further mentioned neither the state nor the Housing Division guarantees payments on the bonds, so the security for the bond issues comes from the mortgages themselves. He stated when a mortgage is paid off, it redeems outstanding bonds.

Senator O’Donnell asked if a similar process could be used for venture capital, though an amortized loan would take the place of a mortgage. He noted the risk would be high because the loan would not be backed by anything.

Mr. Horsey expressed he believes such a system is the intent of S.B. 309. He commented:

Chairman O’Connell asked all testifiers to work together on amendments for S.B. 309.

Senator Raggio offered his support for the concept of venture capital. He asked Ms. Guinasso about the language in section 1 of S.B. 309. He stated, "We had tried to get something on to amend the Constitution to change Article 8, section 9, and we did that for this purpose. And I was one who supported that and felt that we should have."

Kim Marsh Guinasso, Committee Counsel, Legal Division, Legislative Counsel Bureau, indicated the Legal Division of the Legislative Counsel Bureau could find nothing when it looked into the constitutional background on this issue. She said, "I guess the short answer is we just don’t [do not] know." Ms. Guinasso commented the Constitution of Mississippi, the state after which the proposal in S.B. 309 was loosely modeled, differs from the Constitution of Nevada. She concluded the Legal Division cannot say specifically whether the bill is unconstitutional.

Senator Raggio indicated he just wanted to point out S.B. 309 may not be constitutionally permissible. He expressed in his understanding, the Nevada Constitution has to be amended in order for an activity like that proposed in the bill to go forward. He continued:

Ms. Guinasso reiterated the Legal Division cannot guarantee the constitutional permissibility of S.B. 309.

Senator Neal expressed he believes the bonds would be released through the 501(c)(3) corporation created by the bill. He stated the corporation would then function as the development agency for the project. He questioned whether the director of the economic development department would be the sole owner of the bonds and whether the director could issue bonds as he or she sees fit. Senator Neal maintained he is unsure whether this scenario would comply with section 9 of Article 8 of the Nevada Constitution.

J. Christopher Barrett, Manager, Economic Development, Sierra Pacific Power Company, attended a portion of the meeting. He was unable to testify, but he submitted a copy of his prepared testimony in support of S.B. 309 (Exhibit E), along with an information packet regarding programs Nevada offers to attract new businesses to the state (Exhibit F).

Chairman O’Connell closed the hearing on S.B. 309 and began a work session. She opened discussion on S.B. 91.

Senator Neal indicated the secretary of state and Pamela Crowell, Deputy Secretary of State for Elections, Office of the Secretary of the State, suggested amendments to S.B. 91, as set forth in the work session document (Exhibit G). Senator Neal agreed to all the amendments.

Ms. Crowell testified the proposed amendments would significantly change S.B. 91. She recalled concern regarding the placement of the candidate statement on the sample ballot, and she noted the sample ballot is generally a replica of the voting ballot.

Ms. Crowell stated she had compiled voters handbooks from California, Utah, and Washington (Exhibit H, Exhibit I, Exhibit J, and Exhibit K. Originals are on file in the Research Library.). She distributed these along with two memoranda to Senator Neal from the Secretary of State, Dean Heller. One memorandum outlines suggested amendments to S.B. 91 (Exhibit L), and the other cites voters-handbook statistics from California, Utah, and Washington (Exhibit M).

Ms. Crowell expressed support for the concept of S.B. 91, but maintained the bill, as originally written, did not provide the best means of getting information to voters. She suggested creating a voters guide or a voters pamphlet for the general election in 2000. She noted candidate statements would be included from candidates for the United States Senate, the United States House of Representatives, and any other statewide office.

Ms. Crowell explained candidates would supply statements as delineated in S.B. 91. She proposed an amendment to subsection 4 of section 2 of the bill, as set forth in a memorandum (Exhibit L). She explained NRS 293.202 provides that a candidate may withdraw his or her candidacy within 7 days after the close of filing. Ms. Crowell further noted the withdrawal statement must be in writing and must be delivered personally to the candidate’s filing officer.

Ms. Crowell summarized other proposed amendments as set forth in the memorandum (Exhibit L). She explained much material from S.B. 91 would be deleted because it makes reference to sample ballots, and under the secretary of state’s proposal, candidate statements would not be printed on those publications.

Senator Neal reiterated his support for the proposed changes. He mentioned money would be saved because pamphlets would be sent to households rather than to each registered voter. He continued during the "trial run," S.B. 91 would apply only to statewide offices; then city, county, or district offices could develop the idea.

Senator Raggio supported the concept of S.B. 91. He noted California allows candidates to write their own statements, but Utah provides a more uniform format. He raised concern about allowing candidates to write whatever they choose.

Senator Neal pointed out under S.B. 91, candidates could not write about other candidates, and their statements would have to be truthful. He stated the secretary of state would regulate the provisions of the bill.

Ms. Crowell elaborated subsection 2 of section 2 of S.B. 91 addresses the content of candidate statements.

Senator Raggio asked if the regulations would allow for monitoring candidate statements and for editing them if material violates the provisions of S.B. 91. Ms. Crowell answered she is unsure whether regulations would provide for editing the material or returning it to the candidate with an explanation.

Senator Raggio asserted he would be more comfortable if S.B. 91 provided the authority for the secretary of state to edit or reject any statement that does not conform to the provisions of the bill. Senator Neal indicated he is not opposed to that suggestion. Senator Raggio suggested making an appropriate amendment to address his concerns.

Senator Raggio also expressed concern regarding the costs associated with S.B. 91. Ms. Crowell noted the number of pamphlets printed in Utah is somewhat close to the number that would be printed in Nevada. She indicated a fiscal note for S.B. 91 has not yet been completed. She pointed out Utah does not mail out its voters pamphlets, but disperses them through newspapers. Ms. Crowell noted this method eliminates the bulk-rate carrier cost. She estimated preparation and dissemination of pamphlets in Nevada would cost approximately $110,000 to $125,000. Senator Raggio emphasized the necessity for a fiscal note.

Senator Neal suggested including Senator Raggio’s proposed amendment with the secretary of state’s proposed amendments.

*****

Chairman O’Connell opened discussion on BDR 23-1671.

Scott Scherer, General Counsel, Governor’s Office, testified BDR 23-1671 presents the Governor’s proposal regarding ethics. He summarized the BDR would create a "fast, fair, and tough" process and maintained the Governor had tried to balance fairness for those unjustly accused with toughness on those in violation of the law. Mr. Scherer explained BDR 23-1671 would expand the Commission on Ethics to eight members and would create a screening panel of two members to review complaints for "just and sufficient cause."

Mr. Scherer continued BDR 23-1671 would add new staff, including an executive director and a commission counsel, and would therefore require a fiscal note. He asserted the executive director would oversee investigations and would make recommendations to the panel, and the commission counsel would represent the commission at hearings, provide advice, and write opinions. Mr. Scherer explained having someone dedicated to such tasks full-time would speed up the process.

Mr. Scherer pointed out BDR 23-1671 would create 60-day time limits, including 15 days for the investigation, 15 days for the determination of "just and sufficient cause," and 30 days for the hearing and opinion. He stated the BDR also provides escape clauses so the commission can extend those deadlines for good cause. However, he said the process would last only 5 months "at the absolute outside."

Mr. Scherer concluded BDR 23-1671 would increase penalties, and he noted fines for subsequent violations would be increased to $10,000 for a second willful violation and $25,000 for a third willful violation.

*****

Chairman O’Connell opened discussion on S.B. 144.

Max G. Christiansen, Lobbyist, Sheet Metal and Air-conditioning Contractors National Association (SMACNA) of Southern Nevada, stated he is working with a coalition of contractors on S.B. 144. He indicated interested parties have met twice to discuss the bill.

Richard Peel, Attorney, Peel, Gregory, Spangler & Brown, testified he represents various trade groups which have sponsored S.B. 144. Mr. Peel distributed a letter regarding proposed changes to the bill (Exhibit N), as well as two documents showing redrafts of the bill (Exhibit O and Exhibit P. Originals are on file at the Research Library.). He also distributed a table outlining the reasons trade organizations oppose some proposed changes to S.B. 144
(Exhibit Q).

Mr. Peel indicated trade-group and public-body representatives met on March 4, 1999, to address concerns about S.B. 144. He reported 50 proposed changes had been made to the bill as a result of that meeting. He continued interested parties also met on March 17, 1999.

Mr. Peel stated the requested changes which affect public bodies are included in his letter (Exhibit N), but additional changes would need to be made as set forth in the handwritten notes on that letter. He commented these additional changes affect sections dealing with contractors’ payments to subcontractors and subcontractors’ payments to lower-tiered trades.

Mr. Peel noted several additional amendments have been requested. He indicated one was requested by Madelyn Shipman, Lobbyist, Washoe County (Exhibit R). Mr. Peel indicated another proposed amendment had been addressed before the committee meeting.

Chairman O’Connell recalled she had requested parties to delineate areas of agreement and disagreement so the committee could consider suggested changes.

Ivan R. Ashleman II, Lobbyist, Clark County, distributed a document summarizing four areas of continued disagreement (Exhibit S). He also distributed a summary of local-government positions on S.B. 144 (Exhibit T).

Senator Porter asked which public bodies have been involved in negotiations regarding S.B. 144.

Madelyn Shipman, Lobbyist, Washoe County, stated some small local governments were not involved, but all local governments that "are regularly represented in these [the Legislature’s] halls" were present at one or more negotiation meetings. She added these entities understand certain individuals have been designated to represent them at negotiations.

Mr. Ashleman indicated public entities had agreed upon a joint statement, the signatories of which are listed on page 3 of that statement (Exhibit T). He added representatives from the Clark County School District also took part in some earlier meetings, but they were not available to sign off on the joint statement.

William E. Isaeff, Lobbyist, City of Sparks, stated he represented the Nevada League of Cities and Municipalities in negotiations regarding S.B. 144. He summarized four areas of continuing concern (Exhibit S). He raised concern regarding the exclusive list of reasons for withholding payment, noting some valid reasons are not included in the bill. Mr. Isaeff suggested a related amendment as set forth in Exhibit S.

Senator Porter asked if the City of Henderson was involved in negotiations.

Mr. Ashleman indicated representatives from the City of Henderson were not always available for negotiations. He stated they have been consulted and have received copies of relevant documents "as time permitted."

Elizabeth N. Fretwell, Lobbyist, City of Henderson, indicated she had been involved with and informed about the process. She said the City of Henderson is in concert with the local-government representatives testifying on S.B. 144.

Senator Porter asked about the involvement of the Clark County School District.

Larry L. Spitler, Lobbyist, Clark County School District, indicated the school district was represented at the first meeting regarding S.B. 144. He said, "I have not seen the letter, but I am sure that we have no problem being a part of that letter."

In response to Mr. Isaeff’s concerns regarding the list of reasons for withholding, Mr. Peel stated parties discussed expanding this list during the March 4, 1999, meeting. He asserted he asked the public bodies to suggest additional reasons to add to the list, but the public bodies did not want a list at all. Mr. Peel noted an exhaustive list might not improve contractors’ and subcontractors’ situations because payment could still be withheld for any reason.

Mr. Peel maintained the language suggested by public bodies on this issue (Exhibit S) gives an "open ticket" for them to withhold money for any reason, even though they would have to offer a detailed explanation for the withholding. He contended the intent of S.B. 144 is to get payments passed on as quickly as possible. He commented he has witnessed public bodies withhold thousands of dollars simply because "there wasn’t [was not] a nail nailed in this board or that board." Mr. Peel asserted the list of reasons for withholding should ensure contractors know by what provisions they will be bound. He continued contractors should be able to find out the reasons for withholdings, the actions necessary to correct those problems, and the dates on which associated payment will be forthcoming. Mr. Peel reiterated the list could be expanded, but should not be deleted from the bill.

In response to a question from Chairman O’Connell, Mr. Peel clarified he had not previously seen the document regarding areas of continuing concern (Exhibit S), but the included issues had been discussed. Chairman O’Connell allowed Mr. Peel a few minutes to review the material.

Chairman O’Connell began discussion on BDR 23-641, which deals with the Commission on Ethics.

Ms. Guinasso explained BDR 23-641 was requested by the Commission on Ethics.

Senator O’Donnell suggested holding BDR 23-641 in order to consider conflicts and contrasts between it and aforementioned BDR 23-1671.

Chairman O’Connell asked Ms. Guinasso to look into that issue and stated Bill Draft Request 23-641 would be discussed on Friday, March 19, 1999.

Chairman O’Connell returned the discussion to S.B. 144.

With regard to expanding the list of reasons for withholding payment, Mr. Ashleman indicated he had presented two suggestions: first, that public bodies be able to withhold funds due to contract violation and second, that public bodies be able to withhold funds due to violation of applicable laws or regulations. He indicated those suggestions would not "open up the barn door to anything," but they were still rejected. Mr. Ashleman asserted he did not offer further suggestions to expand the list of reasons.

Mr. Peel responded Mr. Ashleman’s suggestions would expand the list "too much." Mr. Peel contended if a contract sets forth certain reasons for withholding, contractors are "back to square one" because public bodies can withhold money for any reason included in the contract. Mr. Peel added negotiation of contract language does not occur often between contractors and public bodies because "the contract language is what it is."

Senator Raggio asked why it would not be appropriate to include on the list a provision that public bodies must specify the part of the contract with which a contractor is not in compliance. He commented Mr. Ashleman’s suggestion to allow withholding of payment due to contract violation is too broad.

Mr. Peel raised concern that public bodies would then include in the contract more reasons for withholding. Senator Raggio responded contractors do not have to sign the contract.

Mr. Peel agreed there should be a detailed explanation for the notice of withholding, but reiterated legislation should include a list of reasons for withholding. He pointed out Clark County currently includes such a list in its contracts.

Mr. Isaeff noted one of the proposed amendments provides for a detailed explanation of withholdings, to include a reference to the relevant provision in the contract (Exhibit S).

Senator Raggio mentioned the proposed amendment is more specific than Mr. Ashleman’s original proposal.

Mr. Ashleman responded his suggestion was "never nonspecific." He pointed out public bodies had agreed to language stating they must tell contractors what needs to be fixed and must make a reasonable estimate of the associated cost.

Mr. Isaeff stated another point of contention involves section 28 of S.B. 144. He noted this section allows contractors to "leapfrog" immediately into district court if disputes arise over withheld payments. He commented courts in Clark and Washoe counties would be most affected. Mr. Isaeff summarized the reasons for local governments’ objection to this process, as outlined in Exhibit S. He noted arbitration is a preferred remedy and is currently set forth in all public works contracts. He further raised concern regarding whether courts would have time to provide the services outlined in S.B. 144. Mr. Isaeff contended court cases would be complex and would thus require substantial preparation time for attorneys. He added attorneys would likely seek discovery and would "potentially engage in … legal maneuvering," which would further delay payments.

Mr. Isaeff asserted that in negotiations, contractors indicated public bodies had sometimes withheld payment for no reason, though the contractors never gave specific examples of this practice. He stated if payments are withheld for no reason, perhaps contractors should be able to go to court to get an order on an expedited basis. He indicated he had made such a suggestion in negotiations, but it was not accepted. Mr. Isaeff further stated he had suggested including expedited arbitration procedures, but that proposal had also been rejected.

Mr. Peel responded, "The problem with the courts right now isn’t [is not] getting in there on motions such as the one that’s [that is] presented by this bill. It’s [it is] getting a trial date." He commented Clark County currently has a waiting period of about 3 years for a trial date. He pointed out NRS 108.2275 includes a section which is almost identical to section 28 of S.B. 144. He elaborated that statute allows an owner who believes a lien claimant has improperly recorded a mechanic’s lien to go into court on an order to show cause. Mr. Peel continued the owner can seek a removal or reduction of the lien.

Mr. Peel stated if an arbitration clause exists and a claim amount exceeds $50,000, parties must currently wait for an arbitration hearing for about 9 months from the date on which the demand for arbitration is filed. He pointed out whether disputes go to court or arbitration, contractors must wait a substantial amount of time for payment.

Mr. Peel addressed the public bodies’ concern that S.B. 144 violates their right to arbitrate. He noted NRS 338.150 is an enabling statute which allows public bodies to arbitrate disputes. He continued subsection 1 of NRS 338.150 provides that a clause may be included in contract to permit arbitration of a dispute arising between an agency and a contractor. Mr. Peel emphasized the statute does not say that arbitration is mandatory. He indicated contractors are not trying to take away public bodies’ right to arbitration. He asserted if a contract has an arbitration clause, an arbitrator should ultimately hear all of the merits and render a decision and an award. However, Mr. Peel maintained if contractors are not timely paid or do not receive proper notice, they should be able to go into court to seek redress in a "more prompt and efficient manner." He expressed the order-to-show-cause method would accomplish this intention. He emphasized the waiting period for an arbitration or trial date is too long and noted many subcontractors and suppliers have gone bankrupt because they have not received timely payment.

Mr. Peel continued "pay-of-pay" clauses are normally included in subcontract agreements between general contractors, subcontractors, and lower-tiered subcontractors. He explained these clauses state a general contractor will not pay a subcontractor until the general contractor receives payment. Mr. Peel emphasized the subcontractors do not receive payment until any disputed payment to the general contractor is settled.

Mr. Peel reiterated contractors are seeking a "prompt-payment mechanism" in S.B. 144. He commented he asked public bodies to suggest alternatives which would accomplish prompt payment and which would promote dispute resolution. He contended the public bodies had not offered alternatives, but had only indicated their opposition to section 28 of S.B. 144.

Mr. Ashleman argued public bodies did offer alternatives. He suggested if a public body simply refuses to pay its contractor, the matter should go to court. He stated, "That, like a lien, is something that is susceptible of a quick determination by the judge." Mr. Ashleman continued if a public body has not provided a notice explaining its withholding, the contractor should get an order to show cause. However, he maintained cases involving disputed payment amounts will not be decided quickly because of the complexity involved. He noted it would be impractical for contractors to go to the courts every time they disagree with a public body’s opinion regarding the satisfactory progress of a public-works project. Mr. Ashleman commented retention helps address this problem and stated the public bodies will "pay every penny that’s [that is] undisputed." He contended:

Senator O’Donnell asked, "Have you gone through all five of these conditions, or four of these conditions?"

Senator Raggio asked what abuses prompted S.B. 144. Mr. Peel responded three representatives spoke on that issue during the previous hearing before the Senate Committee on Government Affairs.

Mr. Christiansen indicated a contractor currently working on the Clark County airport’s "C" gate is storing job-specific material for duct work at the job site. Mr. Christiansen explained the material cannot be used anywhere else and must be stored on the job site so it is readily accessible. He explained this situation involves Clark County.

Senator Raggio asked if Clark County had refused to pay the contractor.

Mr. Christiansen stated a subcontractor working on gate D of the airport is owed $300,000 for not completing all items on a "punch list," even though none of the items fell under that subcontractor’s duties. Mr. Christiansen expressed the general contractor had not completed the list of items, so the public body withheld all the money, including that owed to the subcontractor which is not at fault.

Senator Raggio summarized Clark County withheld more than was necessary to cover the punch list. Mr. Christiansen asserted such withholdings are a major problem in Clark County, though some public entities in that county are "very good and very punctual" about paying.

Senator Raggio asked if Clark County gave a reason for withholding payment from the aforementioned subcontractor. Mr. Christiansen clarified the airport claimed the punch list was not completed. He pointed out subcontractors have contracts with the general contractor, not with the public entity. He reiterated the punch list was not completed by the general contractor, but the airport withheld payment from both the general contractor and the subcontractors until the list was completed.

Senator Raggio asked if many other examples of such practices exist. Mr. Christiansen answered affirmatively and commented a mechanical contractor working on a Clark County School District project is owed $300,000 to $400,000. Mr. Christiansen said the school has been in use for 2 years, but the mechanical contractor still has not received final payment.

Mr. Christiansen continued S.B. 301 addresses a similar problem and noted the problem is "rampant all over" the state.

Mr. Christiansen maintained contractors want to work with public bodies to ensure the contractors receive payment for their work. He added public bodies should inform contractors about what needs to be done to receive payment when work has not been performed to the public bodies’ satisfaction.

Regarding section 28 of S.B. 144, Senator Care commented a person who sues for breach of contract or nonpayment generally has to wait months or years for a judgment or arbitration award. He stated the bill would allow subcontractors and suppliers to seek relief on an order to show cause, "almost as though they were going to the head of the line." He asked if contracting parties have sought an order to show cause for immediate relief in the past.

Mr. Peel replied affirmatively and noted the mechanics-lien statute contains a similar provision giving an owner the right to seek a lien removal. Mr. Peel stated if the owner has an arbitration clause in his or her contract with the contractor, and if the contractor’s lien is overstated, the owner can go to court and seek a reduction or removal of the lien through an order to show cause. Mr. Peel said, "The argument there could be made as well; if you have an arbitration clause, doesn’t that [does that not] impact or affect the parties’ rights to arbitrate?" He indicated the Legislature had decided to give the owner the ability to seek an order to show cause despite the arbitration question. Mr. Peel expressed the mechanics-lien statute has not been abused and maintained the order-to-show-cause mechanism in S.B. 144 would not be abused either. He contended the mechanism would "keep everybody honest" and would allow a judge to make a determination regarding wrongful withholdings. Mr. Peel elaborated:

Mr. Peel asserted public bodies would still have the ability to go into arbitration.

Senator O’Donnell offered to work with interested parties to come up with a compromise on S.B. 144.

Mr. Peel expressed the parties had already had two meetings and had exchanged correspondence regarding the proposed changes to the bill.

Ms. Shipman elaborated the meetings were lengthy and noted about 400 to 500 hours of local-government time has been contributed to resolving the disputed issues of S.B. 144.

Mr. Ashleman pointed out he and Mr. Christiansen agreed that "if the bill as it exists, which talks about how you only withhold the amount that’s [that is] necessary to fix the problem, had existed, that problem would not go on." Mr. Ashleman indicated:

Senator O’Donnell offered to meet with interested parties on March 18, 1999.

Mr. Christiansen expressed concern that the bill would be "gutted."

Chairman O’Connell invited testimony regarding the remaining two issues of contention.

Mr. Isaeff pointed out S.B. 144 states public bodies can only withhold the amount of money necessary to take care of the associated problem. He asserted public bodies agree that they will pay for satisfactory work, but will withhold payment for unsatisfactory work. He said, "The examples that have been given will be cured by this legislation." Mr. Isaeff noted public bodies and contractors have already agreed to many successful changes to S.B. 144.

Mr. Isaeff addressed the remaining two issues of contention. He maintained if S.B. 144 contains provisions allowing "leapfrogging" into court, local governments believe they should have just as much right to recover their attorney’s fees and costs if they are sued and win the lawsuit. He indicated the bill currently allows only the contractors to be paid for attorney’s fees and costs if they win. Mr. Isaeff expressed taxpayers expect public entities to "guard" tax revenues. He reiterated if a public body wins a court case, it should recover the money it has spent to defend itself. He noted this situation would be fair, since contractors can recover such expenses under S.B. 144. Mr. Isaeff commented the situation could be left up to the current law, which provides that "disputes up to a certain amount, the winning party prevails above that amount, nobody gets it." He indicated he prefers that the bill not address the subject at all rather than give only contractors the right to recover court expenses.

Mr. Isaeff referred to the fourth issue of contention, stating S.B. 144, as currently written, would require public bodies to pay for all supplies and materials as soon as they are brought onto the job site. He claimed the bill would also require public bodies to pay under certain other circumstances that have been added since the bill was drafted. He expressed public bodies should not have to pay for materials and supplies as soon as they are on-site because public bodies take ownership of those items at the time of payment. Mr. Isaeff asserted the government then faces the risk of loss and the responsibility to protect those items, even though the government "may not be in a very good position to do so." He commented materials may come to the site in boxes, and the public body may not even know if the boxes contain correct and functional items. He contended, "It is a very unfair proposition to require that the governments pay for these things. It’s [it is] really paying for a pig in a poke to require us to do it at that particular stage."

Mr. Isaeff indicated contractors have also suggested public bodies should pay for items that are in short supply, though that term is vague, and for items that have been specially manufactured for the project in question. He maintained, "I can see some validity to that particular concept." However, Mr. Isaeff suggested public bodies should be able to negotiate the specific terms of such arrangements through the contract. He expressed he would prefer that none of those requirements be in the law, but he would compromise to the extent that public bodies be required to pay for items as a part of the contract terms, not on the sole discretion of the contractor. Mr. Isaeff concluded, "This is a very big-ticket item, Senator. I cannot overemphasize how important this is to local governments, this particular question of paying for these things like that."

Regarding section 32 of S.B. 144, Mr. Peel pointed out the attorney’s-fees clause addresses those violations of the bill involving public bodies, contractors, and subcontractors not paying monies timely. He explained the intent is to get attorney’s fees paid if monies are wrongfully withheld. In response to Mr. Isaeff’s arguments, Mr. Peel asserted the mechanics-lien statute currently provides attorney’s fees only in favor of a prevailing lien claimant, not a prevailing owner who may ultimately be able to get the lien discharged because it is invalid. Mr. Peel noted the Legislature modified the mechanics-lien statute about 4 years ago by adding an order-to-show-cause provision. He stated an owner is allowed to recover attorney’s fees only under that provision and emphasized an owner is not allowed to recover attorney’s fees for fighting a lien.

Mr. Peel continued, "We believe it will chill subcontractors and contractors from using the bill to try to get their monies if we allow public bodies to recover attorney’s fees as well." He stated contractors do not object to including an attorney’s-fees clause for public bodies in the contract. He suggested inserting additional language into S.B. 144 to clarify that nothing in the bill would prohibit public bodies’ right to include an attorney’s-fees clause in a contract.

Mr. Peel went on to address the conflict over payment for materials upon delivery to the job site. He contended everyone agrees public bodies should pay for materials and equipment that are in short supply or that are specially manufactured for the project in question. He clarified the actual cost of those items should be paid to the contractor. Mr. Peel recalled Mr. Christiansen’s example regarding terminal D at the airport, noting specially-made material had "set on the project for 9 months." Mr. Peel emphasized contractors should be paid for such materials. He offered to remove paragraph (a) of subsection 2 of section 35 of S.B. 144 in an effort to alleviate the public bodies’ concern regarding their reponsibility for security of and payment for all materials upon delivery to the site. Mr. Peel reiterated public bodies should pay for materials that are specially manufactured or in short supply. He added the parties may contract for payment otherwise, so the contract could provide for payment of items to be stored at separate locations.

Senator Neal commented S.B. 144 applies only to public bodies. Mr. Peel maintained that statement is not correct because the bill applies not only to public bodies, but also to contractors, subcontractors, and suppliers. Senator Neal clarified the bill applies to those persons as they relate to a public body. Mr. Peel agreed the bill applies to public-works projects.

Senator Neal asked how issues in S.B. 144 are addressed in private projects. Mr. Peel answered parties negotiate terms in a contract. Senator Neal asked if the contract would be prevailing. Mr. Peel responded affirmatively and noted the main difference between a private project and a public-works project is that lien rights exist for private projects, but public-works projects have payment bonds "which only flow down two tiers." In response to a question from Senator Neal, Mr. Peel clarified in private projects, contractors have lien rights to secure materials they have furnished. Mr. Peel explained in public works, contractors only have a payment bond which flows down two tiers, so lower-tiered contractors have no ability to recover their materials.

Senator Care suggested S.B. 144 could read, "The court may award attorney’s fees," instead of "shall award attorney’s fees." Mr. Peel indicated that option could be considered. He commented NRS 108.237 uses the word "shall," but judges disregard that word and award attorney’s fees only when applicable.

Senator Porter encouraged interested parties to work with Senator O’Donnell to resolve disputed issues in S.B. 144. Senator Porter indicated he is unprepared to act on the bill.

Mr. Isaeff stated the governmental entities would agree to working with Senator O’Donnell.

Senator O’Donnell claimed the issues of S.B. 144 can be resolved.

Chairman O’Connell requested that interested parties come to agreement by March 24, 1999. She stated the committee would vote on the bill at that time, regardless of unresolved issues.

Chairman O’Connell stated the committee had been asked to hold S.B. 252.

Chairman O’Connell opened discussion on S.B. 274.

Senator Neal indicated:

Daniel C. Musgrove, Lobbyist, City of Las Vegas, stated he was unable to get an attorney to speak to the committee on this issue. He distributed a letter from Val Steed, Chief Deputy Attorney, Intergovernmental Affairs, Office of the City Attorney, City of Las Vegas (Exhibit U), and a copy of the ordinance that would be acted upon on March 22, 1999 (Exhibit V). Mr. Musgrove indicated Senator Neal and the City of Las Vegas had agreed on two conditions. First, Mr. Musgrove noted the people of Las Vegas would decide ward expansion, "contingent upon that vote being mandatory upon the council." However, Mr. Musgrove expressed the ballot cannot be a mandatory question, as explained in the letter from Mr. Steed (Exhibit U).

Mr. Musgrove continued:

Senator Neal responded:

Mr. Musgrove clarified a council member would have to ask that an ordinance be passed to repeal the ordinance in question. He expressed if the people voted to expand the council, elected officials would not be likely to go against the people’s wishes. Mr. Musgrove admitted the council membership could change drastically. However, he claimed the media is following the issue, and the council would act based on the vote of the people. He suggested a subsequent council would not likely repeal the ordinance.

Senator O’Donnell commented Senator Neal asked for a similar bill during the Sixty-ninth Legislative Session. Senator O’Donnell indicated many committee members had stated they would not vote for the bill because they believed the city council would accomplish the intent of the bill during the interim. He noted the city council did not, in fact, do this. He asserted the credibility of the council is "not very good" in his view, so he supports putting into statute the same language contained in the proposed ordinance.

Senator Neal agreed with Senator O’Donnell.

Senator Porter supported the statements of Senators O’Donnell and Neal. He emphasized commitments had been made, and the city council should follow through with them.

Mr. Musgrove responded:

Senator Neal commented the City of Las Vegas is proposing to act on the issue after session ends. He expressed concern regarding the city’s sincerity to act. Senator Neal further pointed out the city council has been expanded, and its formation, districting, and wards have been changed. He mentioned the council has demonstrated that it can make such changes, but he asserted it does not want to act on the issue in question. Senator Neal suggested, "I think that we should move forward, and if they want to be satisfied, we could amend what they say in this ordinance into this bill."

Marvin A. Leavitt, Lobbyist, City of Las Vegas, stated he did not know if the city would object to Senator Neal’s suggestion. Mr. Leavitt stated the city council has agreed to follow the voters’ wishes, and he indicated the ordinance proposed by the city attorney "is as far as we can legally go." Mr. Leavitt maintained if the Legislature decides to essentially enact the ordinance requiring the city council to follow the people’s wishes, the city would have no objection.

Senator Neal stated, "We can’t [cannot] do that. We can change it and say you go to six wards. We cannot make that advisory upon the vote of the people."

Mr. Leavitt asked what would happen if the people voted against creating six wards, but legislation to that effect had already been enacted. He commented such a situation would appear to go against the voters’ wishes. Mr. Leavitt asked if the Legislature could provide that the ordinance could not be repealed if approved by the city council. He pointed out if the ordinance was not repealed, it would automatically go into effect.

Senator Neal recalled the Legislature heard the same debate on this issue in 1997. He reiterated if the city had been sincere, it would have addressed the issue by this time. He stated, "I don’t [do not] know anything in your city ordinance that would disallow the people from making that mandatory that they go to six wards."

Mr. Leavitt replied the city council plans to adopt whatever the people vote for, so making such adoption mandatory is unnecessary. He continued the situation is different if the Legislature distrusts the council and believes it might repeal the ordinance.

Senator Titus asked what the standard procedure is for expanding a city government. She further asked if a vote of the people always applies or if a charter change is sufficient.

Mr. Leavitt answered the Las Vegas charter has long provided for a mayor and four members of the council. He explained that charter can be amended by a vote of the people or by the Legislature. He noted during the last session, the Legislature voted to allow the city council to determine the number of council members. Mr. Leavitt indicated the council believed this issue was so important that the people should decide it.

Senator Neal asserted the charter historically could not be changed in terms of wards unless the Legislature acted. Senator Neal reiterated during the 1997 session, the Legislature gave the city council the authority to change the number of wards. He stated the city now wanted to address the issue through a vote of the people. Senator Neal said:

Senator Raggio commented the Legislature generally has not approved changes in city charters unless the city council requested such changes. He asked if the bill could be passed, with a requirement that a vote of the people be held and that the results of that vote be followed.

Mr. Leavitt indicated the City of Las Vegas has no objections to that suggestion. Senator Neal also indicated he has no problem with that suggestion.

Mr. Leavitt pointed out the city charter currently allows Las Vegas to have any number of council members. He asserted that provision is beneficial, and he requested it remain in the city charter. He suggested the voters’ decision on increasing the council to six members would take effect upon the vote, but he contended the ability for the council to expand further should not be restricted for the future.

Senator Raggio expressed the motion would amend S.B. 274 to provide in the charter of the City of Las Vegas that the council retains the authority to divide into as many wards as it deems necessary. However, he continued the city would be directed to put on the ballot for the municipal elections in June, 1999, a question regarding whether the city should be divided into six wards. Senator Raggio added the council would be required to comply with the vote of the people in the event the vote is in favor of expanding the council.

Senator Neal and Mr. Leavitt agreed to such an amendment.

Senator Titus asked if the city would have to get approval by vote of the people for future expansions. Senator Neal answered no and explained the provision would apply only to this particular instance.

Senator Care asked if other people from the City of Las Vegas had planned to testify regarding S.B. 274. Mr. Musgrove replied affirmatively and stated the chairman of the recommending committee which addressed the issue and sent to the council the advisory question had planned to speak on the bill on March 8, 1999. Mr. Musgrove stated the committee believed the council should be expanded to six members. However, Mr. Musgrove said the committee further decided that the people should decide the issue.

Mr. Musgrove pointed out Las Vegas had previously compromised with Senator Neal, so there was not a "full-blown" hearing on S.B. 274. Mr. Musgrove testified the presentation on March 8, 1999, was going to explain that the city wanted the people to make the determination. He indicated the city believed it had achieved its goal through the proposed ordinance. However, he noted Senator Raggio had accomplished the goal through his suggested amendment, and the city would support that amendment.

*****

Chairman O’Connell stated the committee had been asked to hold S.B. 301 until March 19, 1999.

Chairman O’Connell opened discussion on S.B. 311.

Chairman O’Connell summarized S.B. 311 would allow Washoe County commissioners to equalize populations within election districts. She recalled the bill would allow the commissioners to estimate what the populations should be. She further remembered Senator Neal’s comments regarding "one man, one vote." Chairman O’Connell indicated Washoe County representatives testified on S.B. 311, and she noted Clark County testified it did not want to be included under the bill.

Senator Raggio commented S.B. 311 would apply only to Washoe County. He raised concern about using estimates instead of actual counts for reapportionment purposes. He mentioned this issue is currently being argued at the national level. Senator Raggio stated he is reluctant to adopt the principle at the county level because he opposes it at the national level. He asked why the county should not use an actual count for these purposes. He commented distortions exist, but he noted the Legislature is not reapportioned on the basis of estimates.

Madelyn Shipman, Lobbyist, Washoe County, responded all cities currently revise their wards in accordance with their own procedures. She offered the example of Reno, which revises in accordance with registered voters. Ms. Shipman expressed the county expects to have reliable information, as the case law requires, but she commented some ambiguity exists regarding that term. She explained:

Senator Raggio stated no one can ever be absolutely sure that citizens are getting "one man, one vote." He asserted, "To then redraw the line is really some kind of a guesswork, where you draw the line. You know it has to be expanded, but you don’t [do not] know where specifically. I think that’s [that is] the problem." Senator Raggio requested that the committee hold S.B. 311 until he has time to consider it.

Senator Neal agreed with Senator Raggio’s statements and contended the bill could invite lawsuits. Senator Neal continued reapportionment can occur during the interim, but the supporting information must be just as accurate as information from the census. He concluded, "I don’t [do not] know how you can get there without doing a head count."

Ms. Shipman commented S.B. 311 would also allow the county to conduct a special census, so a possible alternative would be reapportionment based on the results of a special census. She stated the county already has the authority to conduct such a census, but the law has not clarified that a special census can be used to adjust boundaries of commissioner districts.

Senator Raggio asked Ms. Shipman to discuss the bill with him later.

Chairman O’Connell opened discussion on S.B. 341.

Chairman O’Connell stated S.B. 341 is a cleanup bill which would update the purchasing act. She recalled there was no controversy on the bill during previous testimony.

*****

Chairman O’Connell opened discussion on A.B. 128.

Chairman O’Connell recalled A.B. 128 was requested by the state treasurer.

Senator Raggio stated he would abstain from the vote because, according to previous testimony, his law firm is somehow involved.

Brian Krolicki, State Treasurer, indicated, "I don’t [do not] think that affects this at all."

Senator Raggio stated because no conflict exists, he would not abstain from the vote. He disclosed that he is a member of a law firm the state treasurer sometimes consults for legal advice in the issuance of bonds and contracts.

*****

Chairman O’Connell adjourned the meeting at 5:30 p.m.

RESPECTFULLY SUBMITTED:

Amelie Welden,

Committee Secretary

APPROVED BY:

Senator Ann O'Connell, Chairman

DATE: