The Senate Committee on Government Affairs was called to order by Chairman Ann O'Connell, at 2:14 p.m. on Wednesday, March 24, 1999, in Room 2149 of the Legislative Building, Carson City, Nevada. This meeting was videoconferenced to the Grant Sawyer State Office Building, Room 4412, Las Vegas, 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

GUEST LEGISLATORS PRESENT:

Senator Mark E. Amodei, Capital Senatorial District

STAFF MEMBERS PRESENT:

Julie Burdette, Committee Secretary

OTHERS PRESENT:

Senator Mark E. Amodei, Capital Senatorial District, stated that he wanted to give the committee a brief explanation of why he had become involved with manufactured housing. He would then turn the testimony over to the industry representatives.

Two years ago, Senator Amodei recounted, as a member of the Assembly Committee on Government Affairs, he held the same stereotypes that he believes many hold today regarding manufactured housing. Those stereotypes were reinforced by industry standards of the 1950s, 1960s and 1970s. At the conclusion of that Assembly committee hearing, Senator Amodei stated he saw how the industry had evolved. The evolution of the industry differed greatly from his preconceived stereotypes. Senator Amodei suggested the committee members look in the Nevada Revised Statutes (NRS) chapter 278, entitled Planning and Zoning, and he noted this chapter dealt with land usage.

Simply put, Senator Amodei continued, the stereotype of the manufactured housing industry of 20 – 30 years ago is neither accurate nor fair. As a planning and zoning issue, in single-family neighborhoods, the land uses are identical; whether it is a stick-built home or a manufactured home. Senator Amodei commented that the committee would probably hear, as he had 2 years ago, the same testimony concerning "alphabet soup." Many acronyms would be used; for example, United States Department of Housing and Urban Development (HUD), Uniform Building Code (UBC), etc. Senator Amodei stressed that Nevada was not the first state asked to pass legislation regarding manufactured housing. In fact, many of those states surround Nevada. Senator Amodei further stated:

Senator O’Donnell prefaced his questions saying they would be very simple so that the person responding could answer in a succinct fashion. Senator O’Donnell then asked if Senator Amodei saw this as solving any of the issues of rent control. Senator Amodei replied that he did not see any relationship because the types of lots addressed in this bill would not be in mobile home parks, but rather in areas zoned as single-family residential. Senator Amodei elaborated using his subdivision, built in 1993, as an example. He gave a scenario where a resident’s home burned down and the owner wanted the option to choose a manufactured home to replace the original home, S.B. 323 would allow them to do so. This bill is directed at single-family residential lots that are owned and not in a mobile home park setting.

The Chairman asked if there were any further questions for Senator Amodei. There were none.

Charles W. Joerg, Lobbyist, Nevada Manufactured Housing Association, stated that he had several comments and then the experts would present the bill. Mr. Joerg pointed to a drafting problem in line 10 on page 1; the language says "notwithstanding the provisions of subsection 1, a governing body may adopt standards for the construction and placement." Mr. Joerg stressed that local governments have no authority regarding the construction of a manufactured home. He emphasized that the federal government under HUD code preempted this; therefore, the language would need to be removed. He offered one other comment in response to the question raised by Senator O’Donnell; saying that this bill could, in fact, have some rent control aspects because people currently living in mobile home parks have no other options. They are locked in and cannot move their home to any other place except another mobile home park. If they met the criteria set forth in S.B. 323, and were permitted to move their home to a single-family residential lot, and many would like this option, a level of competition would be added to the mobile home park lot rents. It is possible that with the competitive forces there could be some effect on the rent increase problems, particularly in Clark County.

Chairman O’Connell asked Mr. Joerg if there were any age limitations that would determine if the mobile home could be moved or not. Mr. Joerg replied that individual parks might have restrictions; but as far as he was aware, there is no statute, code or ordinance. Senator O’Connell said the issue of age had been brought up in the past and it poses a real dilemma for people because of the expense involved in moving a home.

Mr. Joerg responded that Carson City had that situation recently, but said that if S.B. 323 were to pass, the older units could not be placed on a single-family residential lot because they could never meet the criteria imposed in this bill.

Chairman O’Connell asked if there was any prohibition as far as age was concerned. He replied that the federal government in mid-1976 adopted the HUD code. Mr. Joerg said that would be the starting point; however, the compatibility standards of this bill would, as a practical matter, involve much newer homes. It was his thought that the very first HUD-coded homes could not meet the compatibility standards in this bill.

Mr. Joerg introduced Gub Mix, Executive Director, Nevada Manufactured Housing Association, to the committee. Mr. Joerg also told the chairman that slides would be shown so that the committee could see what type of product was being discussed.

Mr. Mix stated that S.B. 323 specifically describes what a manufactured home is for purposes of residential siting. It is a multi-sectional unit, meaning more than one section, must be 960 square feet or more, must be compatible in the product use of exterior and roofing materials. The manufactured housing must be "ground set;" meaning the foundation system is excavated and the home is set at ground level. Local governments may require a garage or carport as part of the zoning requirements.

Mr. Mix explained to the committee that the slides would show specific examples of the product today; not the stereotypes mentioned by Senator Amodei. Mr. Mix pointed to a slide, showing what a multi-sectional home might look like in a residential setting; garage built in front with concrete driveway. He continued, saying the units are delivered to the site in two or three sections and set on a prepared foundation, similar to what was being shown on the slide. The garage was site-built, and added to the home with matching roof and siding in order to complete the home.

Mr. Mix noted for the committee that the slides would show homes in California, Nevada and Arizona. Mr. Mix declared that he was here asking for the committee’s support of S.B. 323, and that this bill was the best vehicle to provide reasonably-priced, quality housing for Nevada’s citizens without getting involved with any form of government subsidies. If passed, S.B. 323 would allow Nevada to join with six other western states, which have already legislatively approved manufactured housing zoning laws in making them equal to site-built homes. These states are California, Oregon, Idaho, Utah, New Mexico, and Montana. He pointed out the importance of understanding what the bill proposed. Mr. Mix stressed that they were not talking about a ‘mobile home.’ A mobile home is defined very clearly, in both Nevada law and by federal statutes, manufactured homes are built to the HUD code, which is the only national building code in this country. Site-built homes here in Nevada and other western states are built to the Uniform Building Code (UBC). Mr. Mix explained that UBC was a model code, basically western in nature and without national stature. Throughout the country other codes are used as well, the technical provisions of which can vary widely.

Mr. Mix asserted that most knowledgeable engineers would say that the HUD code is one of the toughest codes in the housing industry. He stressed that HUD-code homes must meet the same performance standards as mandated by the Uniform Building Code. In addition, these homes have to be transported to the site, and he did not believe most site-built homes could survive that stress.

S.B. 323 would allow manufactured homes in residential zones in Nevada by including them in the definition of a "single-family residence." In addressing the competitive pricing of manufactured homes, Mr. Mix stated that when sited on permanent foundations on residential lots, including garages or carports, these homes typically sell for 20 to 40 percent less than comparable site-built homes. Mr. Mix projected that this savings could allow as many as 100,000 families in Nevada to enjoy the benefits of home ownership. He declared that S.B. 323 would do nothing to disturb existing or future deed restrictions that accompany the sale of land. Mr. Mix asked that the chairman and committee members consider the increased property tax revenues for local governments. This would provide a more stable tax base for needed services as the manufactured homes would be taxed as real property; exactly the same as their site-built counterparts.

Mr. Mix commented that the myths associated with manufactured housing were just that, myths. He noted that the placement of manufactured housing in residential areas would not lower property values. Studies on the subject indicated that manufactured housing is no different than site-built homes when discussing appreciation in value. The principal factor is always location and the current housing demand of the area. Mr. Mix went on to quote from several recent surveys (Exhibit C). These surveys and resulting studies were, to name a few, conducted by the Massachusetts Institute of Technology – Harvard Joint Center for Urban Studies, and the College of Architecture and Urban Planning, University of Michigan. Mr. Mix told the committee that the results of the studies, in all cases, concluded that there was no negative effect on surrounding property values.

Mr. Mix pointed out that in Nevada, the housing needs of middle- to high-income families were being met, but that was not the case for families who fall below the middle income range. Mr. Mix asserted that nearly one-third of all new homes sold in this country are HUD-code manufactured homes. Because of current zoning practices in Nevada, that figure is less than 8 percent; nearly one-fourth of the national average. That statistic indicates to him that families who cannot afford a $130,000 site-built home really have no other option than to rent and that rental will probably not meet their needs. Mr. Mix stressed that passage of S.B. 323 would help meet the needs of these families and not just those in higher income brackets.

A side benefit, Mr. Mix emphasized in response to both Senator O’Donnell and the Chairman’s concerns, would be a reduction in landlord-tenant conflicts. The passage of S.B. 323 would enable buyers a choice that would ease the tension and conflicts. Mr. Mix reiterated that the majority of western states had recognized the inequities in access to residentially zoned land to owners of manufactured homes, and had passed legislation similar to that before the committee today.

In summary, Mr. Mix added that in May 1997, HUD published in the Federal Register the following language 3 months after the Nevada Supreme Court ruled against the Manufactured Housing Association lawsuit against Clark County. Mr. Mix read:

A law was passed several years ago that required local governments to accept a factory-built building, Mr. Mix proffered, a modular structure or a manufactured home, whichever term you might prefer, built to the Uniform Building Code (UBC), just as they would accept a site-built house. Mr. Mix reiterated that every local government must accept a factory-built building or manufactured home built to the Uniform Building Code, and HUD has said that if you do that, you have to accept houses built to the federal code. That took effect in 1997; unfortunately, after the Nevada Supreme Court ruling.

Senator Neal noted that from testimony, Mr. Mix had a great deal of experience in this area. The Senator asked for clarification, giving as an example a city’s master plan that did not include this type of housing, if the city would have legal grounds to prohibit the manufactured homes from being placed. Mr. Mix responded that if S.B. 323 were passed by the Legislature; those local governments would be required to amend their master plan, as well as amending the zoning ordinances, to include manufactured housing as described in the statute. This was the case in California, Oregon, Idaho, Utah, and all the states previously mentioned.

Senator Neal stated, if he understood Mr. Mix correctly, that in order to prevent local governments from disallowing such housing, there must be a state statute to do that. Mr. Mix replied to the committee saying that their product was a nationally regulated product, built in factories in a number of states, shipped across state lines; therefore, the Interstate Commerce Commission (ICC) was involved and the industry functions under federal laws in that respect. The industry is at the mercy of local governments regarding zoning. The industry has tried to take the lead in creating an acceptable program offering a product that meets the states’ residential zoning requirements; ensuring that the product is compatible with existing neighborhoods, and, therefore, should be considered the same as any other house.

It is the Nevada Manufactured Housing Association’s opinion that the current ordinances are in violation of the federal regulation as published by HUD in May 1997.

Senator Care questioned the decision of the Nevada Supreme Court in the dismissal of the appeal in the "Dura Built" case. The court wrote that over 90 percent of Clark County is already zoned for manufactured housing. The Senator stated that made it sound as though a manufactured home could be placed just about anywhere. But he gathered that was not the case as Clark County had given the committee a handout (Exhibit D) referencing a single application being denied because it was a small lot surrounded by existing homes. Senator Care’s direct question was where could a manufactured home currently be placed in southern Nevada. Senator Care disclosed for the record that his mother-in-law has lived in a manufactured house for 10 years.

Mr. Mix responded, that as the committee knew, much of Clark County was uninhabited and uninhabitable. Clark County officials had persisted in saying that all of that area was available for manufactured housing. However, there is no infrastructure to support inhabitants. Manufactured housing is zoned out of the areas that have infrastructure, or where it might be available in the future. The only choices available are in some very rural areas, such as Overton and Sandy Valley. The option would be placing the manufactured home in a mobile home park or in designated manufactured housing-only subdivisions. Mr. Mix asserted that there are no residential areas in Clark County, the more urbanized area of the county, where a manufactured home could be sited.

Chairman O’Connell questioned whether there was anything that prohibited the manufactured housing industry currently from developing a subdivision. The Chairman had noticed during the presentation that Mr. Mix had used the term "subdivision" a number of times. Chairman O’Connell stressed it was her understanding that this had been a stumbling block in the past; that the developer/builder put in the infrastructure and paid the taxes, etc. for developing the area. The Chairman clarified that it was her understanding that Mr. Mix wanted the ability to go into those areas already developed with the infrastructure and site manufactured homes. The Chairman queried whether any manufacturers had specifically developed an area as a subdivision in any the western states mentioned by Mr. Mix.

Mr. Mix replied no, the manufacturers had not attempted to go into those areas. He remarked that Nevada was somewhat unique in the western states; specifically, the manner in which site-built development had occurred. Development had primarily occurred around the already populated/developed areas. He explained this was due in part to zoning discrimination. Mr. Mix stated he was referring more to homes being sited on land that people may own. Obviously, development will occur. He continued saying if you went to a state like Utah, Idaho or Oregon, most of the development occurred more randomly. It had not occurred behind walls or in developments. Basically, the

manufactured housing industry was doing what site-builders do. Clark County is different because most development occurs within a walled complex. Mr. Mix expounded that the industry would like to move in the direction of development. He pointed out that there are also the people who own land today, but who cannot afford to site-build. These are the property owners who have not been given the right to put a manufactured house on their land. Mr. Mix stressed that the deed restrictions in these communities may preclude the industry from ever going into these communities, and the industry would not contest this issue. Mr. Mix emphasized the manufactured housing industry was asking for an equal opportunity from a general zoning standpoint to participate as long as the home met the standards established in S.B. 323.

Senator Neal questioned whether HUD permitted these homes to be built in terms of HUD funding. Mr. Mix asked Senator Neal if he was speaking in reference to financing. Senator Neal replied yes. Mr. Mix responded that the manufactured housing industry dealt with a regulatory entity within HUD; the code, the enforcement of the code, and construction of the homes. That was a separate and different entity than Senator Neal had described. Mr. Mix stated that there were financing programs available for their product.

Mr. Mix elaborated saying that all HUD financing programs and the Federal Housing Administration (FHA), were available to manufactured housing. Mr. Mix thought the committee was most familiar with was Title II, which finances site-built home mortgages. Mr. Mix stated that there is a Title I program, which allows the financing of personal property homes; meaning the person, does not buy the land, just the home itself. That is a different HUD program than the purchasers of manufactured housing have available.

David A. Dahmen, Pacific Consulting Engineers, noted that he had been a licensed engineer in the State of Nevada since June 1970. He explained that he would be speaking on the technical aspects of structural design for manufactured homes. Mr. Dahmen drew attention to his handout (Exhibit E.) and pointed out that his engineering qualifications and background were on page 1. Mr. Dahmen included information on structural design services he had provided to 23 different manufacturers over a 28-year period.

Mr. Dahmen explained that he would give a brief comparison of the construction requirements for manufactured and site-built homes. The model code as previously discussed for manufactured homes are the HUD requirements for construction of manufactured homes, adopted in 1975, and implemented in June 1976. Site-constructed homes fall under the Uniform Building Code (UBC).

He referred the committee members to the outline. Mr. Dahmen began to elaborate on the comparable designs of manufactured homes and UBC site-built homes. The floor is the same for both types of houses, that is 40 pounds (lbs) per square foot (psf). The roof load for both is 20 lbs psf minimum. Mr. Dahmen remarked that if a HUD house were going into an area where the snow load was higher, the house must meet the requirements of that area. Mr. Dahmen explained that wind loading is somewhat different in that HUD, as a national standard, classified the country into Wind Zones I, II and III. Nevada is classified as Wind Zone I, with a minimum design load of 15 lbs psf. The UBC utilized a published design for wind speed and exposure. For example, downtown Carson City would fall into Exposure B, where there are obstructions to slow the ground speed down. Exposure C would be an area where there are no obstructions other than the terrain. Mr. Dahmen explained, further stating that wind loads for 85 miles per hour (mph) Exposure B (which had been recorded in Carson City), produced a design pressure of 15 lbs psf and equaled the HUD code specifications. There are some differences in other areas, Exposure C might have wind loads where the design pressure could be as high as 25.6 lbs psf. There are many safety factors and redundant features in site-built homes and HUD homes. The real concern with design of single-family homes are the projecting eaves and cornices. HUD has taken note of that and requires the design of eaves on any HUD home to meet a net uplift pressure of 2.5 times the design wind load. That would be 15 lbs times 2.5 with an eave designed for a net uplift of 40-plus lbs. Particular attention would be paid to strapping the eaves down to prevent them from blowing off. In all the studies done by the American Society of Civil Engineers (ASCE), it has been found the most prevalent cause of single-family home damage in wind storms was due to the roofs coming off, starting with the loosening of the eaves.

Mr. Dahmen continued with the structural design of a load-carrying system for a manufactured home, noting that every part of the home had to be scrutinized. The wood components, nuts, bolts, staples, screws, and any other materials that would be used were examined by an architect or engineer. This is a performance-type approach. The UBC also requires an engineer design or performance design for a house. Mr. Dahmen noted that the HUD and UBC standards for the structural design were in the handout. The materials used in the construction of manufactured homes are the same materials used in the construction of UBC homes. All lumber has to be grade stamped; metal is listed by minimum values; and nails are the same published values as for site-built homes. Mr. Dahmen stressed that one of the tests for a manufactured home or any home for that matter, was the reaction to design wind and earthquake simulations. He referred to a manufactured housing subdivision in Santa Clarita, California, located close to the Northridge epicenter, and pointed out to the committee that those homes suffered no damage from the earthquake shocks. The only house that did move was the one in the process of being set, it had not been fastened down.

Mr. Dahmen explained that he would speak to fire-safety standards of manufactured homes. He mentioned the dislike of many for the old mobile homes; metal siding and thin panel interiors. Mr. Dahmen stated that 5/32 inch thick wood paneling had not been used in the industry since the early 1980s for any interior wall or ceiling sheathing. The manufacturers were using gypsum board, the same as used in site-built houses. Flame-spread for gypsum board is the same in HUD-code homes and UBC homes. Smoke detectors are required in all bedrooms and hallways in manufactured homes. There is a difference in where they are fixed; the HUD code allows placement high up on the wall, and the UBC requires they be fixed on the ceiling. Separate exits from all bedrooms other than a door, are required for HUD-code homes as well as UBC homes. All gas burning appliances must be protected; that is, the water heater or furnace compartment, sheathing on that wall and behind a gas stove, for example, must be made of a noncombustible material. Electrical wiring, wire sizes, and electrical calculations are all the same for HUD and UBC. Although there are some differences in the grounding of the panel boxes.

In summary, design loads for HUD-code houses and UBC, with the exception of wind loading, are the same and the materials used in these units are the same. The HUD design is a performance design. There is no alternate for a prescriptive design. In the UBC there is the provision for a prescriptive design.

Mr. Dahmen noted that in the construction of manufactured homes, consideration is given to weight. For example, a 2 x 4 would be used for a UBC house. A 14’ truss would typically weigh 53 lbs. Lighter weight materials are acceptable for the HUD code. The same truss under the HUD code would weigh 28 lbs. This is the judicious use of weight in regard to the allowances given (the HUD code as well as UBC allows for the test of assemblies).

Mr. Dahmen also referred to information he had included on foundation design for manufactured housing. The design was done to the Uniform Building Code specifications. Local jurisdictions would have control over that. Essentially the foundation for a manufactured home is a perimeter foundation, post and beam; only the beams are metal beams, the chassis is beamed to the house rather than the wood beams, as done in a site-built house.

Senator Raggio clarified that in reading section 2, the requirement was that the term single-family residence includes a manufactured home. So, in the senator’s understanding, wherever an ordinance referred to a single-family residence, a manufactured home would be included. However, in subsection 2 of section 3, Senator Raggio stressed that in his understanding, S.B. 323 would not mandate the local governing body to adopt the standards that have been referred to (having more than 1 section, and at least 960 square feet, placed on a foundation, etc.), but rather the language sounded permissive to him. The Senator continued reading, saying notwithstanding, the provisions of subsection 1, a governing body "may" adopt standards for the construction and placement of the home. Senator Raggio asked if his understanding was correct.

Mr. Joerg responded to Senator Raggio stating that was correct. Mr. Joerg clarified that he had referred to the language in section 10, where the word "construction," should be deleted because local governments have no jurisdiction over the construction of a manufactured home. Mr. Joerg explained that was a drafting error.

Senator Raggio questioned why the bill did not require the ordinance adopt those standards, instead of the permissive language. If that were the case the local governing bodies would be mandated to treat the manufactured housing as single-family residences. Senator Raggio’s thought was that this would be the kind of protection issue the industry would wish to address in S.B. 323 and require the local governing bodies to adopt these standards.

Mr. Joerg agreed that Senator Raggio was reading the section correctly. The reason S.B. 323 had been drafted that way, permissive rather than a mandate, was that some of Nevada’s counties and local jurisdictions, primarily rural areas, may not wish to have all these standards in place. Some do not now, and Mr. Joerg thought that was a policy matter and left to the committee.

Senator Raggio continued, pointing out lines 24 and 25 on page 2, where the language states that the governing body may adopt standards that are less restrictive. The Senator believed the previous testimony was an attempt to address the concerns regarding adjacent property values. Senator Raggio thought if these requirements were in place then that would mitigate any reduction in value. But if, for example, there were only 1 section less than 960 square feet, Senator Raggio stated then there would be a concern. Senator Raggio stated he thought there were problems with the bill drafting.

Mr. Joerg agreed that was a point well taken and did not disagree with Senator Raggio. Mr. Joerg explained that changing the language to make the compatibility standards mandatory was understandable from Senator Raggio’s perspective. Senator Raggio stressed that he thought it went to the point. The Senator emphasized concerns of a property owner in a neighborhood with custom, site-built homes would arise if the amenities shown in the slides were absent. Mr. Joerg repeated that the attempt in writing a bill for all of the jurisdictions in the State of Nevada with the abundant diversity was difficult. Mr. Jeorg reiterated the bill drafters had tried to make the language permissive. For example, Tonopah may want to adopt less restrictive standards than Washoe County. Mr. Joerg explained they thought the language would provide the opportunity for each jurisdiction to adopt standards suited to their needs. Mr. Joerge said again that was a policy issue for the Legislature. The Manufactured Housing Association would not have a problem addressing Senator Raggio’s point.

Chairman O’Connell reminded those testifying in favor of S.B. 323 the time allotted was nearly over.

Ken Rosevelt, General Sales Manager, Western Homes Corporation, Silvercrest, Woodland Division, California, stated that he would be brief. Mr. Rosevelt explained to the committee that Western Homes Corporation manufactured HUD code and UBC manufactured housing for Nevada at the Woodland Division facility and that 800 homes had been built at that facility in 1998. Mr. Rosevelt stated that Silvercrest was a fully-owned subsidiary of Champion Enterprises, the nation’s largest builder of manufactured homes, building over 70,000 homes last year.

Mr. Rosevelt stated that he had been in the industry for 35 years, and at the Woodlands Division facility for 8 years. He explained some of the operations at that facility. Mr. Rosevelt commented that HUD code and UBC homes had been built at the facility since 1974. He went on to say Silvercrest built custom homes that just happened to be built in a manufacturing facility. It was their belief that this is the most cost-efficient method of building. The homes are built in a controlled environment, using the highest quality standard building materials. Tests for moisture content are conducted on kiln-dried materials. There is no weather damage at all during the building process. Mr. Rosevelt pointed out how weather conditions, especially winter weather, impacts building materials at site-built homes. That issue does not arise in the controlled environment. Mr. Rosevelt went on, stating it was his belief that the HUD code was the only "uniform building code," because it is the only code that required like standards for every single house they built. The HUD code allows Silvercrest to employ a performance code that is superior, in Mr. Rosevelt’s opinion, in many cases to what would be found in site-built or UBC manufactured housing. The HUD-code homes are built under intense quality control standards and inspection procedures.

The houses are inspected by a design-approval and inspection agency that reports only to HUD and controls the certification of every home built. Mr. Rosevelt pointed out that there is a third-party inspector at the facility who examines each home to certify the inspection and quality of the products in conjunction with the quality control managers. He stressed that no home would be shipped to the consumer or developer without the HUD certification tags attached.

Mr. Rosevelt stated the homes are built to engineering and structural HUD guidelines for the market where the home will be placed. For example, Nevada is a thermal zone 3; insulation values must be increased to meet those criteria (thermal guidelines). The large area of a specific market is considered and housing is designed to "worst-case" scenarios. Many homes are designed in excess of what is specified in terms of thermal calculations, wind load and other engineering calculations.

Mr. Rosevelt asserted each module’s electrical, plumbing, and heating systems are tested and approved to ensure the home is ready for habitation prior to shipment from the factory. It was Mr. Rosevelt’s opinion that HUD is the housing alternative for affordable housing for the State of Nevada. Building costs are reduced at least 25 percent compared to site-building. This reduction is created by volume purchasing of material components, reduced labor costs, and reduced building time. Mr. Rosevelt stated that as a corporation, $1.9 billion in housing had been manufactured in 1998. That equated to $1.2 billion in volume purchases of materials. There is a fixed 12-percent labor charge, compared to as much as one-third of the total cost of a site-built home for labor. The average time for construction of a finished home delivered on-site is 45-60 days. There are no serious overruns in costs in manufactured housing because cost is guaranteed by the manufacturer and not dependent on weather or subcontractors, etc.

Mr. Rosevelt explained to the committee that their experience in many cases, especially in California, HUD-manufactured homes added to in-fill lots and existing communities have been an upgrade to the streetscape.

Mr. Rosevelt stated that in Nevada a typical UBC-manufactured home would take approximately 60 days to go through the design and approval process, and an additional period of up to 60 days may occur for local approval permits; many projects are delayed up to 6 months and Mr. Rosevelt stressed that a high percentage were never completed.

Mr. Rosevelt summarized by stating that if HUD-manufactured housing were used as a standard, then it was his belief that developers would accept the product and use the product in subdivisions and other markets. Mr. Rosevelt reiterated that the HUD-manufactured housing could be available to consumers in Nevada and he urged the committee members to vote in favor of S.B. 323.

Senator Neal recognized Mr. Rosevelt’s experience, but questioned what portion of the homes are prefabricated and what portion are built on-site. Mr. Rosevelt replied that under the HUD code guidelines Silvercrest was required to ship a completed, habitable home to the site. That meant that everything would be finished in the home; i.e., plumbing, electrical, heating, etc. The sections are simply put together and no modification is allowed to that product beyond that point in the field. Mr. Rosevelt added that some of the amenities seen in the slides had been added by the developer. The field additions to the homes are handled under a separate criteria, by alteration permits and/or preapproved engineering to support the intent to build a custom manufactured house, using a HUD-code home as a part of that.

Senator Neal stated that Mr. Rosevelt’s response did not answer his question. The Senator then asked if the prefabrication was done prior to knowledge of where the house would be located or after the location was known.

Mr. Rosevelt replied that it was done in both circumstances, because there are specific sets of HUD-preapproved house plans that any consumer or developer could purchase. The models are in place; but in addition to that there is the engineering capacity that allows for the design of HUD-code homes that will meet the wants, needs and criteria of the developer or individual consumer.

Senator Neal continued, stating that in Las Vegas, houses are mostly built on foundations that are flat on the ground. Mr. Rosevelt interjected with the term, "slab-on-grade." Senator Neal pointed out that many homes in the Carson City area were built above the ground, and he assumed that was because of the weather. Senator Neal queried again whether it was necessary to know the location where the house would be sited.

Mr. Rosevelt replied that based on the HUD code, they have design criteria for specific zones. Therefore, Silvercrest could predesign a house that would meet the criteria for Nevada, HUD code, zone 3. Senator Neal queried the term "zone," and if they were speaking of the whole state as being one zone. Mr. Rosevelt said that was correct. Senator Neal asserted that when he spoke of the state in terms of weather, he was speaking of Carson City as being much colder than Las Vegas. Mr. Rosevelt agreed that he understood that, but the HUD code did not provide for temperature variations. The entire State of Nevada is included in zone 3. If the house was going to be placed in Las Vegas rather than Carson City, it would still have to meet the criteria for zone 3 and could very well be overbuilt. In answer to Senator Neal’s other question, Mr. Rosevelt pointed out that the type of house manufactured by Silvercrest seen in Carson City or Las Vegas is pier and beam, above grade, on a permanent foundation because the house will be transported from their manufacturing facility to the site. Mr. Rosevelt digressed, saying the industry is developing slab-on-grade housing that will be located on flatter terrain such as in the Las Vegas area.

Senator Neal said as he understood the HUD building code permitted builders to build-out to what is called the minimum property standards (mps) which meant that the floor was set, but the builder cannot go beyond that point. Senator Neal questioned whether Mr. Rosevelt was stating that his prefabricated houses only met that particular minimum.

Mr. Rosevelt replied no, that was not what he said. Mr. Rosevelt stated that he was saying Western Homes Corporation/Silvercrest has an approved performance structural package that meets the criteria HUD establishes. Mr. Mix interjected that Senator Neal was into the other part of HUD again, that it was the financing entity that refers to minimum property standards (mps). It did not apply to the manufactured housing. Silvercrest has a specific code, and that code is only changed by regional location as Mr. Rosevelt had described. If a home is built for Nevada it is built to the extreme Nevada condition which would be related to the weather in the northern part of the state. The homes delivered to the Las Vegas area would be overbuilt from a thermal-standard basis. Silvercrest does not have a choice, because HUD has defined the State of Nevada as being one area.

Senator Care questioned the appreciation of resale values. The Senator asked whether manufactured homes do as well as traditional site-built homes. Mr. Mix referred to the studies mentioned previously. He elaborated that when the manufactured homes are compared to similar site-built homes they perform the same. Once again, Mr. Mix stressed it is the location and the demand for homes in that area that drive the market.

Senator Neal questioned the interpretation of page 4, section 8, of the bill. Mr. Mix explained that was existing language. The only thing added was the exception and that was bill-drafting language. That was not part of the bill other than the bill drafting to make the language consistent with the section. Senator Neal asked if Mr. Mix was saying that the language did not exempt manufactured housing from the local building codes. Mr. Mix replied not anymore than it already did.

Senator Raggio emphasized that the present law exempted manufactured homes from the building codes; if they were of this type then they would not be exempt. Mr. Mix responded they would not be exempt to the extent of the provisions contained in section 3 of this bill.

Karl Braun, President, Nevada Association of Manufactured Homeowners, stated that he was in favor of S.B. 323 for a number of reasons. He stressed that he would like the option of moving his home onto his property if he wished to do so. For the record, Mr. Braun indicated he had owned two homes in Michigan; two homes in California; one in Arizona; and his current home, a manufactured house in Las Vegas. He stated that he was not an engineer or a builder. However, his test for the quality of his home dealt with the smooth operation of doors and windows, cracks in walls and ceilings, level floor, heating and air-conditioning functioning properly and the restriction of outside noises. Surprisingly, Mr. Braun commented, his manufactured home performs as well or better than his previous homes.

Mr. Braun continued, stating that he had moved into Boulder-Cascade in May 1995. His rent at that time was $403. His rent is currently $445 and he expected the rent to increase by an additional 4 percent. The rising cost of leasing is his motivation for moving his home to private land. He informed the committee that he had not been aware of the rapid increase in space rents when he moved to the area and purchased his home.

Chairman O’Connell asked if there were any questions for Mr. Braun. The Chairman asked those in opposition to S.B. 323 to come forward to testify. Senator O’Connell asked if the local governments’ representatives were present.

Lesa M. Coder, Lobbyist, Clark County, introduced herself to the committee, indicating that she was the Assistant Director of Comprehensive Planning for Clark County, and noted that she had a dual role in that she was the designated zoning administrator. Ms. Coder emphasized that she wished to speak in opposition to S.B. 323, and that Clark County was opposed to this bill for several reasons (Exhibit F). First, the bill is contrary to the intent of zoning laws as established by Nevada Revised Statutes (NRS) chapter 278. Secondly, Clark County believes it would be unfair to property owners who have relied on established law in making substantial investments in property. Third, they believe this legislation is unnecessary because Clark County had provided more property for manufactured housing than the market could absorb according to their statistics.

Ms. Coder elaborated saying that one of the principle purposes of zoning law is to promote the general health, safety and welfare of present and future inhabitants of the state. Further, she pointed out that NRS 278.253 required zoning regulations be adopted with reasonable consideration to the character of the area and its particular suitability for practical uses, and with a view to conserving the value of buildings and encouraging the most appropriate use of land throughout the city, county or region. S.B. 323 would require the approval of manufactured homes wherever single-family homes are permitted without regard to the different configuration, design and mass of the many assorted site-built homes which may exist within a neighborhood. Ms. Coder continued noting that the requirement for design standards for all housing types would not necessarily guarantee housing compatibility. In Ms. Coder’s opinion, citizens buy homes and property with the expectation that established regulations will be applied fairly to current and future owners. Significant investments in homes are made based on this presumption. The Legislature has mandated the disclosure of zoning on adjacent properties to buyers of homes because of financial implications of zoning decisions for the home buyer.

S.B. 323 would change development rules, Ms. Coder averred, which have a significant financial impact for every homeowner in the state without notifying them of the change or giving them the opportunity to effectively sanction or oppose such a change. Ms. Coder reiterated, stating that Clark County had provided more property for the establishment of manufactured housing than the market could absorb. She continued, stressing that manufactured housing is permitted throughout the vast majority of the county. The limited area, where manufactured homes are not currently permitted could be amended by reclassification or rezoning of property. This has been a common practice. Almost all development is occurring outside zoning districts, which allow for such development. This means that almost anyone wishing to develop must reclassify the property first. Ms. Coder emphasized that Comprehensive Planning and the Planning Division believe that it would be just as easy to ask for a zoning district that would allow for manufactured homes as it would be to ask for one that would not.

Ms. Coder went on to remark that the land-use guides adopted by the county to assist development did not distinguish between housing types. Therefore, an application for manufactured housing that conforms to the density restrictions in an area would receive the same recommendation for approval that any other application would receive. The record of zone changes approved in Clark County over the years substantiates this statement. More than 81 percent of the applications for manufactured housing developments have been approved. Of those approved only about 50 percent have been developed. That indicated to Ms. Coder that the ability of manufactured housing developers to sell their product had more of an impact on public demand for such units than did zoning restrictions.

Ms. Coder referred to the Nevada Supreme Court decision (Exhibit D) of 1997 in which a lawsuit brought against Clark County was dismissed. This lawsuit sought to invalidate the provisions of the county’s zoning ordinance restricting manufactured housing. The court found on the facts presented that restrictions are a valid and rational exercise of its police powers. Ms. Coder stated that she would like to address some previous testimony. The HUD study, approved in May 1997 after the court’s decision, in her opinion, did not diminish the significant facts she had presented to the committee today. In addition, Clark County, as stated, has unbuildable areas within outlying areas for manufactured housing. Clark County believes that there is as much viable interest in providing and developing services for manufactured homes as any stick-built home. Ms. Coder continued, pointing out that no one had stopped a manufactured housing interest from rezoning the properties, sinking a well, or providing for a septic sewer system. For the record, Ms. Coder said she strongly disagreed with comments made to the contrary.

Ms. Coder addressed Mr. Braun explaining that it was her understanding the Clark County ordinance, as stated, did not prohibit relocation of manufactured housing, with sufficient notice to property owners. She elaborated, at least during her tenure in Clark County, there had been several cases that had received rezoning. Based on that, Clark County was comfortable that zoning regulations were adequate to address the topic.

Ms. Coder read the comments to the committee as presented by the Clark County Building Department concerning S.B. 323 (Exhibit F).

Ms. Coder addressed the chairman saying that she would like to address a comment made earlier in reference to a funding mechanism for design reviews. Ms. Coder explained that the fee structure was set so that Clark County recoups about 50 percent of the actual cost of those particular applications and the fee is nominal. In terms of design review, Clark County did not believe that was an issue. The issues as Ms. Coder presented them to the committee, she believed, are significantly critical and should be scrutinized with care.

At the chairman’s request for any questions, Senator Care queried whether Clark County had ever looked into how other western states with large metropolitan areas, Phoenix, (Maricopa County) Arizona, for example, address this issue.

Ms. Coder replied that a study had not been done recently. She elucidated by saying Clark County had been in the process of rewriting the entire zoning code during the past year. As new and different issues arise Clark County does look at other western states with large metropolitan areas in terms of compatibility of the size of the county, the population, what similar jurisdictions are doing and then nationally to ensure that all factors are considered. It was her understanding that there are other states that have taken a separate and distinct posture on this issue. Clark County, after taking this issue all the way to the Nevada Supreme Court, believes that its concerns are well founded.

Senator Care emphasized that because of the conflicting testimony on what constitutes an outlying area in Clark County, he would like a list of the 18 locations where the applications had been approved. Ms. Coder replied that she would provide the information as soon as possible.

Robert F. Joiner, Lobbyist, Nevada Chapter of American Planning Association, remarked the association represents all the professional planners in the state as well as many lay-member planning commissioners and other interested parties. Mr. Joiner stressed their opposition to S.B. 323 and pointed out that the bill was similar to a bill introduced in the 1997 session. The same issues arose at that time, and that would be the UBC as opposed to HUD code standards and the differences that lie within.

Mr. Joiner referred to his handout (Exhibit G), the Carson City master housing plan. The plan speaks to the issue of affordable housing; how Carson City addresses that specifically; and the availability for manufactured housing both HUD code and UBC in Carson City. Mr. Joiner continued, saying that Carson City has three zoning districts that allow mobile homes, and manufactured HUD-standard subdivisions. There is also mobile home park zoning. Carson City has planned-unit developments which also could be applied. Mr. Joiner stated that a week ago, the board of supervisors had approved a new manufactured housing subdivision. One interesting fact is that in 1990, Carson City had 17.6 percent of the housing stock in manufactured housing. That would be the HUD-standard manufactured housing. In 1996, Carson City had 14 percent. Mr. Joiner remarked that it was his belief that the difference was made up in the increase of UBC standard manufacture which Carson City classifies under single-family, attached or detached housing. He stated that Carson City was a rapidly growing community, as was most of Nevada. Mr. Joiner commented that Carson City provided many opportunities for all levels of stick-built or manufactured housing, as affordable housing.

Mr. Joiner referred to Ms. Coder’s comments on the issue of CC&Rs, saying that developers usually put the CC&Rs into place, so that a standard is maintained. In Mr. Joiner’s opinion, it is uncommon for homeowners to organize and keep the CC&Rs in place. Mr. Joiner gave a personal example regarding a community in Reno, where the residents felt protected; however, when the residents opposed a chain-link fence and took it before an administrative judge, they were told the CC&Rs could not be enforced because they (the homeowners) had not enforced the CC&Rs when a homeowner replaced a shake roof with a shingled roof. Mr. Joiner asserted that CC&Rs are not upheld unless they are enforced to the letter consistently. This gives a false sense of security to homeowners who believe that different types of housing can be restricted by CC&Rs.

Mr. Joiner noted that he disagreed with Senator Amodei in characterizing the zoning as a trailer overlay. It is not that, but rather it is subdivision zoning.

Mr. Joiner recalled the industry representatives speaking to the committee regarding pre-1970 codes versus the codes of today. Mr. Joiner emphasized that the slides shown to the members are very likely not what would be seen on a case-by-case basis. And as Mr. Braun, in Las Vegas, pointed out to the committee, he would like to move his home. There is no control over what the home looked like. Mr. Joiner drew attention to page 2, line 5, in which the bill specifically restricts having a roof slope not exceeding 3 feet in a 12 foot width. Mr. Joiner noted that a common pitch is 2 feet in a 12 foot width. He questioned why the manufactured housing industry cannot provide a 2 and 12. Why is it, as testimony shows year after year, the industry cannot guarantee a common eave overhang. The performance standards, in his opinion, were very weak in that the industry in stating they will adopt any performance standards, but yet they are very specific to what they restrict those standards.

Mr. Joiner introduced Phil Herrington, Building Official, City of Carson City; and stated that Mr. Herrington would speak to issues involved with add-ons to manufactured housing and the restrictions the state imposes. Mr. Herrington called attention to the problem of owners who add-on illegally and the resulting code violations. Mr. Herrington stated that his inspectors are not familiar with the HUD-code standards but are versed in UBC standards. Mr. Joiner’s question was why is it that the UBC-manufactured housing is not sufficient. It was his belief that it is sufficient in Carson City and has been in order to provide the type of housing available today.

Mr. Joiner indicated that as the industry representatives themselves had said, you cannot tell the difference.

Mr. Joiner asked why not give the planners the code with which they are familiar in dealing with local government; that is not out of a factory where we cannot go back and appeal an issue or change an item on a case-by-case basis. He brought the committee’s attention to Carson City’s housing plan, and thought that with review, the members would find that Carson City did a very good job of planning. Mr. Joiner said finally, Carson City would like to keep these issues at the local level rather than the state level.

John T. Doughty, Planning and Economic Development Manager, Douglas County; and Dan Holler, County Manager, Douglas County, pointed out that they had submitted written testimony (Exhibit H.)

Mr. Doughty brought up an issue that Senator Neal had questioned and that was the difference between the HUD and the UBC standards. Of grave concern to Douglas County is the fact that the HUD standard was developed in Washington, D.C., and has no relationship to Douglas County, and no relationship to Reno or Las Vegas, etc. The units are built in different areas across the country. But the basic issue, in his opinion, was that the local jurisdictions retain the authority and the responsibility to identify and address their Uniform Building Code and their building code standards. In Mr. Doughty’s opinion what HUD provided was "one size fits all."

Mr. Doughty continued saying that Douglas County has had problems specifically in the Lake Tahoe area. There is a 150-pound snow-load requirement above 6000 feet in the Lake Tahoe area. Mr. Doughty remarked during the past winter, two units had collapsed under the snow load. This is a serious problem because Douglas County cannot get a HUD standard that meets the 150-pound snow-load requirement; because, as testified previously, all of Nevada is defined as one zone under the HUD standard. That might be fine for Las Vegas or Carson City and the Carson Valley. This standard does not work for the Douglas County portion of Lake Tahoe or the Incline Village portion of Lake Tahoe.

Mr. Doughty explained further that Douglas County had concerns because the HUD standards did not allow them to go in to modify, inspect and work. In other words, they cannot touch those facilities. Over the years, as people want to make changes to their homes, this forces them to go through the Manufactured Housing Division of the Department of Business and Industry. Mr. Doughty suggested speaking with the administrator of the Manufactured Housing Division to determine the costs before decisions are made regarding S.B. 323. It was his opinion that local folks depend upon their local government, elected and appointed officials, in regard to the enforcement of building codes.

Mr. Doughty also expressed concerns for Nevada jobs. Testimony had been heard from manufacturers in California. S.B. 323 would take away jobs from the construction industry; that is to say, Nevada residents, Douglas County residents, Carson City residents and Las Vegas residents. Those were issues he believed should be considered.

Mr. Doughty reiterated that Douglas County was in opposition to S.B. 323.

Senator Raggio stated that Mr. Joiner had indicated in the written statement that he would have no opposition to the bill if it required conformance with the Uniform Building Code (UBC). What were the major differences between the UBC and the HUD code that seemed to cause the principal objections.

Phil Herrington, Building Official, City of Carson City, thought that one concern would be the local amendments. The very high snow load in the upper elevations had already been referenced. There is a wind zone here that does eliminate Wind Zone B, and the HUD requirements are more uniform across the country. In previous testimony the industry representative spoke to a more uniform standard rather than the local standards.

Mr. Herrington stressed that previous testimony would ask you to believe that every manufactured unit is put on a permanent foundation, a concrete foundation. That is not true. A permanent foundation to convert the manufactured unit to real property can be piers and tie-downs and skirting. That is a big difference from the Uniform Building Code. The requirements for light and ventilation in the windows, the minimum room size in a manufactured unit versus the UBC. Emergency egress from a bedroom; there is concern with the minimum-sized windows to provide a second exit out of a UBC home versus a HUD-manufactured home.

Mr. Herrington pointed out that those were a few issues that were of concern. But he digressed, saying he would like to speak to the "real world" issues. Homeowners of manufactured housing make application for an addition to their home. There is no way they can add a room onto the manufactured unit the way one can be added to a stick-built house. The room that they want to add might be a UBC room and it cannot be attached to the manufactured housing unit unless it specifically allows for that type of modification. Getting those kinds of modifications from HUD is very difficult. The national, federal standard as promulgated by the federal government, permits those at the local level to have very little input.

Chairman O’Connell asked if there were any questions. The Chairman queried whether Renee Diamond in Las Vegas, had anything to add to the testimony

Renee Diamond, Administrator, Manufactured Housing Division, Department of Business and Industry, stated that in terms of the division and the idea that a manufactured home cannot be added-on; there are standards for adding-on to homes which cannot be attached directly to the home; and ways to put free-standing additions onto a factory-built, manufactured home (support, electrical system and roof line extended to cover up the fact that the addition is not directly hung onto the manufactured home.).

Ms. Diamond did not see any particular impact S.B. 323 would have on the division. She thought this strictly involved the question of where to place the manufactured housing. Ms. Diamond pointed out that since they were a fee-based agency, self-funded; the fact that more homes would be installed and converted means there would be more fees collected for the agency.

Another item had occurred to Ms. Diamond, during testimony, in answer to Senator Neal. Ms. Diamond emphasized that HUD has the total jurisdiction from the frame, including everything in the home up to the utility connection. What is done on the local level is the placement and installation of the home and the utility connections to the utility source. That is not under HUD. The installations are done to the engineering specifications in a manual provided with the home, along with all the disclosures on the home. That is where the manufacturer’s construction standards end with the frame, and base and chassis of that home, out to the connection and down to where the installation would start. In her opinion, the Manufactured Housing Division did not view the issue of local building as having a major impact on the local building industry. They viewed this as "in addition" to that. Ms. Diamond referenced people in apartments and other rental units that might afford homes if S.B. 323 were passed.

Chairman O’Connell asked if there were any further questions; there were none. The Chairman closed the hearing on S.B. 323 and opened the hearing on S.B. 348.

C. Joseph Guild, Lobbyist, Don Schulz, introduced himself for the record, and indicated he was representing Kate Schulz and Don Schulz in urging committee support for S.B. 348.

Kate Schulz, Concerned Citizen, identified herself as one of the owners of the land and water referred to in S.B. 348. Ms. Schulz recounted that Mr. Schulz’ grandfather had come to the property in 1870 and homesteaded, receiving his Homestead Deed in 1880. She continued giving some background information, noting that their maternal grandparents came to Virginia City in the 1860s. Ms. Schulz explained that her uncle, Walter Cox, had been a member of the Nevada Senate for many years. Mr. Schulz’ father had been an agronomist with the University of Nevada, Reno, and through him they became interested in the land and its resources. Ms. Schulz said that when the estate had been settled they came into the ownership of the two parcels. The Schulz’ had not subdivided as many others had. Ms. Schulz asserted she and Mr. Schulz understood the value of the water to the people of the State of Nevada.

It was the hope of Mr. and Ms. Schulz that by bringing this bill forward the Legislature would be encouraged to take a broader look at the water needs of the citizens. Ms. Schulz stressed the fact that right now there are 50,000 people in Carson City; and Carson City has a water yield that is "maxed-out." She mentioned the projected figure of 85,000 people living in Carson City soon. It was her belief that a better planning mechanism needed to be in place. In research, they had realized the Clear Creek Watershed is much more productive than originally thought. Road construction and diversions that have not been accounted for are diminishing some of the true flow.

Ms. Schulz pointed out that the state owns 51 percent of the Clear Creek Watershed. If the state took the full management view of that water resource, and looked at the potential use of the Schulz groundwater well, dating from 1850, in conjunction with the Clear Creek water, the State of Nevada could address the fact that in the near future Nevada will have more people than water. It was her strong belief that the citizens need the Legislature to look at providing water leadership and this would be a good starting point in her opinion.

Chairman O’Connell remarked that the state has been doing a water study for the last 4 years. If the state believed this water was needed, they would be the ones approaching the Schulz’ to obtain the water, rather than going through the Senate government affairs committee to ask that the state buy the water.

Ms. Schulz replied that the state had owned 51 percent of this resource for many years. The Schulz-Dangberg Ranch is now the prison ranch and a separate parcel, with the John R. Schulz Home Ranch nearby. But all were essentially Clear Creek Ranch properties. The state has a lot of water rights, but by enhancing those water rights, the state would be in the position to protect its own needs. The Schulz property is right at the juncture of the Carson Valley and Eagle Valley aquifers (similar to basins). Technically, the Schulz property is classed as being in the hydrographic basin of Carson Valley; but the property exists within the political subdivision of Carson City. There are city water distribution lines in the vicinity. Ms. Schulz believed that this was not a Carson City issue, not a Douglas County issue, but rather a state issue; whereby, the state could protect and enhance its existing water rights on the Clear Creek Watershed. It was Ms. Schulz’ belief that the water rights are more abundant and valuable than realized.

Ms. Schulz continued, saying that the water rights appurtenant to their land would allow the state to initiate a recharge program with the aquifer that is under the Schulz property. Ms. Schulz referred to the Water Resources Investigations Report 97-4191 (Exhibit I. Original is on file in the Research Library.), which they had submitted to the committee.

Senator O’Connell queried whether Ms. Schulz had been aware the state was conducting a water study before they had undertaken their study. Ms. Schulz replied that they had followed the study only insofar as the general press on water studies. She also mentioned blue-ribbon commissions before that. Her thought was that studies are fine, but actions are better. She reiterated that they hoped to protect the resources that, as citizens of the State of Nevada, they expect the state to protect. It was also her belief that many do not think that the state-owned 51 percent of the Clear Creek was being adequately protected or used.

Mr. Guild addressed the question the chairman posed regarding the water study and briefly told the committee what the bill would accomplish. One of the purposes Ms. Schulz mentioned, would be for the state to recharge the basin and the state water plan did specifically address that as a potential for enhancing the state’s resources. The state’s plan, of course, encompasses the state, but here is a water plan that is available on which the state’s plan also depended. This is an unusual bill, as the Chairman pointed out. Section 1 of the bill directs the State of Nevada to acquire this land. Section 2 sets forth a manner by which valuation can occur. Section 3 speaks to the State Board of Finance in conjunction with capital projects approved by this legislative session, in regard to the issuance of general obligation bonds. Section 4 addresses a technicality where such an issuance would comply with the Nevada State Constitution. He continued, stating that the idea that water rights are so valuable that sale of the water eventually would satisfy the obligation of the bonds. Mr. Guild stated that Mr. Schulz would speak briefly regarding the hydrological basin and why it is unique in this specific area of the Clear Creek, Eagle Valley and Carson Valley.

Don Schulz, Concerned Citizen an owner of the property known as RS 321, explained that their groundwater dated from 1855 and is located in the Carson Valley hydrographic area, but borders on the Eagle Valley hydrographic area. Mr. Schulz referred to extensive well research and pumping tests conducted by Kleinfelders Inc. (Exhibit I). The reports were reviewed by John Bird, Ph.D., hydrologist, and his recommendations are also included. The aquifer is there and the water-quality reports meet federal and state requirements for municipal use. The same water quality is not found in adjacent properties. Mr. Schulz continued, saying that they owned 2 percent of the surface water and had given the certificates for both groundwater and surface water from the state engineer to Mr. Guild so that there would be no dispute as to ownership according to the state engineer.

Mr. Schulz stated the surface water dated to 1863, prior to statehood, and the surface water of the Clear Creek is a Class A stream. The management plan would take the surface water along with the groundwater and begin a recharge program. By recharge it is meant the induction of surface water into the groundwater. This could be done by putting in the French method of ceramic perforated tile and allow the water to drop into the aquifer and recharge through a series of channels. He continued, the recharge system would be in conjunction with the pumping system. The land should be acquired to support the deed which gives all of the water appurtenant to the land. The Eagle Valley hydrographic basin, using the state engineer’s water planning reports, show that there is 9000 acre-feet of water per year yield. They show committed resources as 9259 acre-feet, so they have overcommitted the resources that they have.

Mr. Schulz pointed out the report indicates that there are between 12,000-15,000 acre-feet of water when using the subsurface flow to indicate a higher water capacity. Mr. Schulz remarked that the United States Geological Survey (USGS) report (Exhibit I) states that there are 5050 acre-feet of water as a high maximum of recharge. However, a footnote disclosed that 2300 acre-feet of that figure is not certain; therefore, the figure of 600 acre-feet should be introduced in place of that. Then the figure should be 3050 acre-feet for a maximum of 12,350 acre-feet as the upper acre-feet quantity of recharge and subsurface flow that Carson City has. Mr. Schulz pointed out if the 50,000 population is taken into consideration with the 9500 or 9259 acre-feet that they are consuming, he arrived at a ratio of 19 percent of water needed. He continued saying, if you take 85,000 people times 19 percent, you come up with 16,200 acre-feet of water that is going to be needed in the future and where is Carson City going to get it. Where is the state going to get it for its buildings. It is not going to be available. So, a solution to this problem is for the state to acquire these early decreed and known rights by U.S. Patent Deed, and transfer them into the Carson City pipelines that are adjoining the property.

Senator Raggio clarified that the property being discussed was 34 1/2 acres and water rights; what was the estimate of value. Mr. Schulz replied that his estimate was based on the sale of an acre at $65,000, 2 years ago, that was improved with roadways, but without septic tanks. The Schulz property is zoned single-family 1 acre, but shown in the master plan as 3 units per acre. Mr. Schulz said he would estimate the value of the real estate, unimproved, to be $50,000 per acre.

Senator Raggio clarified again stating that was 34-35 acres. The Senator noted that Mr. Schulz had done the figures and queried the total. Mr. Schulz replied approximately $3 million. Senator Raggio queried whether that included the water rights; Mr. Schulz said "no." Senator Raggio then asked the estimated total cost upon purchase by the state.

Mr. Schulz responded:

Senator Raggio pointed out that if you multiplied that what would the total be.

Mr. Guild replied that he thought Mr. Schulz was saying between $3 million and $5 million for the total package.

Senator Raggio emphasized he did not know if the state had an interest. One of the problems would be that the capital improvements projects in the executive budget were already "maxed-out" at the level at which the state stays, which is essentially a 15-cent rate; therefore, if they tried to add another $3 million and $5 million, they would go beyond the agreed upon rate that the state would bond for in any biennial period. Senator Raggio stated there would be no place in the budget unless something were dropped from the capital improvement program in the same amount.

Senator O’Donnell queried the figures. He clarified $50,000 per acre, saying there are 35 acres, Mr. Schulz replied that was correct. Senator O’Donnell asked Mr. Schulz how he had arrived at $3 million. Mr. Schulz responded saying he had made an error, it would $1.5 million. Senator O’Donnell asked again, what made it $3 million.

Mr. Guild replied that it was the water. There were two values being looked at. One was the valuation of the real estate itself, and the other was the water rights associated with that. So when Mr. Schulz said $1.5 million for roughly 34 acres, that would be for just the property without the water rights. Then there was the separate valuation of the surface water for Clear Creek which is appurtenant to the property and for which Mr. Schulz and the family members have the water rights and the groundwater rights. Mr. Guild noted an historical duty associated with the groundwater rights, and earlier right. The well on this property was used by the early pioneers. They actually dug a well on this property by hand in the early 1850s and perfected a right to that well on the Immigrant Trail. This is one of the earliest dug wells in the State of Nevada. It has been in continuous use since that time.

Ms. Schulz referred to the Master Plan of Carson City, which designated the property at 3 units per acre; so if each unit were sold for $33,000, then the cost would be $100,000 per acre. If they went with the Master Plan rather than the zoning, the value would increase substantially and would be at the $3 million level.

Pamela B. Wilcox, Administrator and State Land Registrar, Division of State Lands, State Department of Conservation and Natural Resources, indicated that the division had not been made aware this bill was being introduced. The state has not identified any need for land acquisitions or water acquisitions in this area.

The Chairman asked if there were any further questions or testimony on S.B. 348.

Pete Bachstadt, Concerned Citizen, pointed out that he had signed in as opposing S.B. 348, but that was because there was not a column for "undecided." Mr. Bachstadt provided written testimony for the record (Exhibit J).

Mr. Bachstadt continued saying that he had a vested interest in the land and water rights mentioned in the bill, he was inquiring what the state intended to do with those water rights and the use of the land. There was also the question of maintaining the Schulz’ ditch which traverses the property and delivers his water interest. Mr. Bachstadt explained that the Schulz water came from Clear Creek of which the state already owned a portion along with the Washoe Tribe, Carson City, the prison and perhaps others. To his knowledge, there were no other water rights associated with the Schulz property other than the ditch right adjudicated in 1874 by court decree. This decree predates the state water resources division by approximately 30 years and the first use predates the division by approximately 50 years. The right enjoys no support from that entity outside of the courts. Mr. Bachstadt stated that he had bought approximately 6 acres of the Schulz Ranch property in October, 1983, and he noted that he was the fourth titleholder since the original ranch was patented.

Mr. Bachstadt emphasized :

Chairman O’Connell restated for Mr. Bachstadt that as Senator Raggio had emphasized the money was not available and as he, Mr. Bachstadt, had heard Ms. Wilcox say there was presently no state interest. Chairman O’Connell thanked Mr. Bachstadt for coming forward to testify. The Chairman asked if there were any further questions or testimony on S.B. 348. There were none. The Chairman closed the hearing on S.B. 348 and opened the hearing on Senate Joint Resolution (S.J.R.) 16.

Senator Joseph M. Neal, Jr., Clark County Senatorial District No. 4, began by stating he was cosponsor of S.J.R. 16, a resolution to amend the Nevada Constitution in order to permit the establishment of a state bank.

Senator Neal emphasized that one of the reasons for bringing the bill before the committee was the trend regarding large interstate financial institutions offering incentives for buyouts to the locally established banks resulting in Nevada’s cash deposits; i.e., purchasing power being controlled by outside financial entities. It was Senator Neal’s belief that the State of Nevada and its citizens needed to be in a position to oppose this trend. Senator Neal stated the Nevada Constitution did not presently allow the state to establish a bank; but S.J.R. 16 would allow the state, at some time in the future, to establish a state bank.

Senator Neal clarified that since amending the constitution required a number of years for the process, he thought it was necessary to bring the resolution forward and begin the process. Thereby placing the State of Nevada in a favorable position for the establishment of a state bank if the need arose.

Senator Neal referred to a handout (Exhibit K. Original is on file in the Research Library.), for the members of the committee, that reflects the investments of the State of Nevada in national institutions.

Senator Neal stressed that S.J.R. 16 would not affect anything at the present time. The Legislature would have within its control the establishment of a state bank if or when the Legislature deemed it was appropriate.

The Chairman asked those in favor of S.J.R. 16 to come forward to give their testimony.

David Horton, Lobbyist, Committee to Restore the Constitution, expressed appreciation to both Senator Joseph M. Neal, Jr., Clark County Senatorial District No. 4; and Senator Lawrence E. Jacobsen, Western Nevada Senatorial District, for bringing this idea forward. Mr. Horton stressed the import of S.J.R. 16 in reference to the stability and growth of Nevada’s economy. He referred to materials distributed to the members of the committee (Exhibit L) on state banks, with an overview of the state Bank of North Dakota; including history, functions, organization, relationships with existing banks, stability, access to outside credit, expertise afforded community banks, and a point stressed by Senator Neal, profitability and possible functions useful to Nevada.

Mr. Horton directed attention to line 9 of S.J.R. 16 and the language that would be amended. The language that would be modified by S.J.R 16 is "The State shall not donate or loan money or its credit, or …." That language has been represented as the language which prohibits Nevada from forming a state bank.

Mr. Horton invited the committee’s attention to two points. Number one, that Nevada had started a state bank in the form of a state municipal bond bank. Mr. Horton noted that this had been profitable to the state and pointed to another issue that Senator Neal referred to; and that was investments held by the state in national institutions. Mr. Horton emphasized that those are "loans." He continued, commenting that with the state already lending its money or credit, in this case, to other banks; it would appear that there should be no constitutional impediment, and hence no need for an amendment. But, Mr. Horton added that S.J.R. 16 would be a good vehicle for some of the other reasons Senator Neal mentioned.

In terms of the chronic problems regarding the control of Nevada credit (80 to 90 percent) by out-of-state banking corporations. These institutions do not service the Nevada economy. Nevada’s bank credit is exported into other markets. Mr. Horton also referred to Barron’s magazine description of Nevada as one of five banking "colonies" in the United States. He referred the committee to the handout on Nevada’s bank-loan portfolios. Mr. Horton stressed that the interests of Nevada would not be the priority of an institution based in another state. It was his belief that these issues need to be addressed and will continue to expose Nevada to rapid and severe economic contraction.

Mr. Horton pointed to the concept of community banks, whereby deposits are kept within the community and create markets in response to community demands through loans, investments, etc. A state bank could expand upon its reserves and capital; in other words, by using the fractional banking power of a commercial bank, 5 to 6 times the amount of purchasing power could be generated from deposits. Mr. Horton continued that Nevada would be remiss in not looking at the possibility of using state credit to create state loans in the state economy for the purpose not only of servicing the economy, but of making non-tax dollars. Mr. Horton pointed out the state Bank of North Dakota, founded in 1919, which had over $10 million profit in non-tax revenue.

Mr. Horton stated that he believed the idea was interesting from many perspectives and the approach of using the mechanism of a constitutional amendment was a good initial step. The amendment would, in fact, offer an opportunity to the State of Nevada to utilize this type of innovation, if needed. Mr. Horton referred to the 1992 contraction when Nevada bank deposits collapsed by 26 percent. If Nevada had a state bank that was not all "loaned up," for example, the same dollar had been loaned 3 times instead of 5 or 6 times; credit started to contract. The state bank could deal with existing commercial banks in the State of Nevada to keep them from having to contract their loans; in other words, withdrawing the operating capital from a business, protecting the credit base a little, but destroying the market. That market compression would mean that all of the loans are more shaky than they would be with a vibrant economy, in which the state, as the local banker, was making loans into the economy.

Senator O’Donnell emphasized that he had opposed the state bank concept for a long time. The reason he had opposed this was exactly what Mr. Horton had said in reference to the contraction and expansion of bank loans. Senator O’Donnell commented that in Nevada, in certain rural counties, the citizens can not get loans because the banking system basically had "redlined" Nevada, and Nevadans have to get loans from out of state. The point the senator was trying to make, was the cost of money is an international phenomenon. It is not a borderline issue. Senator O’Donnell used the example of the introduction of the "Euro" and that there had been a decline in United States interest rates because of that. Also, there is the Federal Reserve System, with rules and regulations that determine the money supply. If the state bank did not follow the rules and regulations of the Federal Deposit Insurance Corporation (FDIC), it was his assumption that the state would operate outside of the FDIC. The result would be banks that are outside the money supply and the federal government could not control them.

Mr. Horton replied that the bank would be a member bank of the Federal Reserve System, and the type of regulation the senator referred to had to do with the gross volume of bank credit made available. The manner in which that would be infused into the economy, however, would depend on the basis of banking that can make safe and profitable loans. He continued saying that by merely adopting a policy of lending our accumulated tax dollars in the State of Nevada, the revenue advantage obtained by lending in the state would make up for any loss in interest by 3 or 4 times. It would be that type of increment that would be available to Nevadans if we had control of our bank credit.

Mr. Horton explained that there is a difference in having to bid for available bank credit that may be in Utah and being able to create new bank credit here in Nevada. If we used the fractional reserve to create new credit, Nevada would get all the interest on that. Mr. Horton gave the example of the Public Employees’ Retirement System (PERS) deposits. Senator O’Donnell asked where they were deposited presently. Mr. Horton responded that he believed over 85 percent was deposited out of state. That would mean that there is approximately $8 billion of accumulated tax dollars that are being loaned and these dollars can only be loaned once. Suppose this amount was in a state bank and that bank could lend the dollar 3 times. If it was being loaned into the Nevada economy that would mean interest on $24 billion dollars instead of $8 billion dollars.

Senator O’Donnell commented that he understood Mr. Horton’s argument. The other side of the argument pointed out, is that we are getting about 17 percent return on our money in PERS because it is invested out of the state. That is a huge return.

Senator Neal interjected, saying he would address Senator O’Donnell’s question, and elaborated by pointing to the state Bank of North Dakota. Senator Neal explained that the North Dakota bank did not suffer the ebb and flow of the national or international economy. That bank had been in operation since 1919. Senator Neal used the stock market of August 1998 as an example. The Senator referred to the investment of derivatives in foreign countries. Particularly noting that Russia, after some capitalistic endeavors, decided it would not pay the International Monetary Fund (IMF) 11 cents on the dollar and froze the derivatives. When that occurred, a national bank in Nevada had a loss of $300,000 billion. Some of Nevada’s state funds were on deposit and that was in the Bank of America. Senator Neal stated the point he was trying to make was that if there is not a mechanism in place, whereby the citizens are protected, then Nevada runs the risk of subservience to the actions of those who do not have Nevada’s best interest in mind.

Senator Neal stressed the necessity of having the vision to put the mechanism of a state bank in place so that the people of Nevada would be protected financially if the need arose. Senator Neal emphasized the need to study the state Bank of North Dakota as a model.

Senator O’Donnell questioned where the state bank would invest their funds. Senator Neal replied the state bank could invest its funds within Nevada. Again, Senator Neal used North Dakota as an example, noting that they receive almost 100 percent return on their student loans. They invest in their farm programs, and the urban housing programs. They receive almost 100 percent return on their funds. Senator O’Donnell replied that if the state took money out of the PERS funds and put it into a state bank, the state would not receive the same rate of return currently enjoyed. Senator Neal said that he was not saying that; the state bank would build up to a level where the PERS-fund investors would want to invest in the State of Nevada bank.

Mr. Horton commented that the state bank would be in the position to operate as a commercial bank; for example, taking $100 million dollars of PERS funds and lending it 3 or 4 times. Obviously, a state bank could make more profit lending the funds that way than PERS could make lending it once. The fractional reserve capability of a commercial bank is very important when dealing with international upheavals. A state bank would act as a buffer for our economy. Properly organized and integrated into the Nevada economy it would protect the people of the state. Mr. Horton went on to cite the IMF encouraging the ‘mega’ banks to make loans of billions of dollars outside the American economy and guaranteeing the return with a high rate of interest because it is high risk; then American capital is leaving the United States. When the loans default, it will be the next generation that will have to pay for it, because the IMF rescues the country that defaults. Those incidents cause economic upheaval everywhere. A state bank would provide the capability of a buffer to the impact of those incidents.

Chairman O’Connell stated, for the record, that her husband is a chairman of a bank. The Chairman clarified that this bill had been heard before the Senate Committee on Commerce and Labor in 1985 or 1987, and the chairman questioned the number of states that currently have state banks. Senator Neal replied that North Dakota was the only state he was aware of having a state bank, but California had considered the idea at one time. He reiterated that Nevada appeared to be more exposed than many other states and that was the reason for bringing the measure before the committee. Chairman O’Connell queried Senator Neal’s opinion as to why no other states had adopted this same idea. Senator Neal replied that in many other states, the large minority populations had resulted in federal intervention and the lending practices of institutions were carefully monitored. Senator Neal referred to a situation in which a segment of the population was depositing approximately $65 million with a financial institution and only receiving approximately $250,000 in loans back into the community from that same institution. The Community Reinvestment Act of 1977 (CRA) was put into place at that time. That is not as strong a remedy as the state having its own institution.

Mr. Horton stated that another answer to the chairman’s inquiry had to do with the "redlining" taking place in Nevada. For example, Mr. Horton had inquired of a local branch manager in his community how she was doing with her loans, and she was proud that she had built the loans up to $2 million. Mr. Horton had then asked what the deposits were, and the branch manager’s reply was $7.5 million. In his view, one of the reasons other states have not explored this idea is that there are only four other states in approximately the same situation, so far as being banking "colonies." Mr. Horton’s belief is that if Nevada took the lead, other states would follow. Nevada would be able to service our economy better, and lift the tax burden because non-tax revenue would be produced.

Janine Hansen, Lobbyist, Nevada Eagle Forum, wished to mention that Merritt K. (Ike) Yochum, Lobbyist, and Carson City Chairman, Independent American Party, had asked Ms. Hansen to make several remarks as he was unable to be present. Mr. Yochum had stated that the endorsement and promotion of this idea had been, for many years, a part of the state platform of the Independent American Party. Further, Mr. Yochum had mentioned that idea had been well received as part of a campaign while he was running in an election. Ms. Hansen reiterated that in her opinion, this is a good time to look at something that would help insulate Nevada and its citizens from the economic problems throughout the world.

In the Nevada Family’s Voter Guide, Eagle Forum had asked a question in reference to a state bank, Ms. Hansen elaborated, noting that the State of North Dakota had for many years employed the means of a state bank to insulate its economy from outside influences and to promote commerce and industry while increasing the availability of banking capital. The state Bank of North Dakota is a source of non-tax revenue which relieves its taxpayers of financial burdens.

Ms. Hansen made reference to an August 1, 1994 issue of Barron’s financial magazine, in which Nevada was classified as one of the top five banking "colonies." The creation of a Nevada state bank, using the North Dakota state bank as a model, would improve the economy of Nevada, keeping Nevada money in the state and creating non-tax revenue. The Nevada Eagle Forum had supported the concept of a state bank in the past, and would urge the committee to look forward toward the future and help bring these benefits to the State of Nevada. Nevada Eagle Forum encourages the passage of this resolution.

Mr. Horton reiterated, to the committee, that this was not something that had to be built at one time. A gradual start similar to the beginnings of the state municipal bond bank and perhaps eventually Nevada would have a state bank in place comparable to that of North Dakota.

The Chairman asked for any other questions from the committee and then asked if there was anyone else to address S.J.R. 16. There was no one, and Senator O’Connell remarked that the treasurer had some concerns also. The Senator closed the hearing on S.J.R. 16.

Senator O’Connell then inquired if anyone was there to testify regarding S.J.R. 15.

Although Ms. Hansen indicated she did wish to give testimony regarding S.J.R. 15, she had no objection to the Chairman’s suggestion that testimony on S.J.R. 15 be postponed until Tuesday, March 30, 1999.

The Chairman closed the hearing on S.J.R. 15 and opened the work session, citing that the people involved in negotiation on S.B. 144 had reached an agreement and would be speaking with Kim Marsh Guinasso, Committee Counsel, Legal Division, Legislative Counsel Bureau, tomorrow morning, Thursday, March 25, at 9:00 a.m.

The Chairman opened discussion on S.B. 366 and stated she understood there was compromise language prepared.

Mary E. Henderson, Lobbyist, City of Reno, and Nevada Association of Counties, indicated she was representing the three local governments in Northern Nevada. The testimony today was that the local governments think that the language adequately reflects the compromise that was reached with the industry last week. The bill itself was fairly simple; it removed the "sunset" provision. Ms. Henderson remarked they had labored with how to write that language but believed it was better in the hands of the bill drafters, at this point, to do the amendments. Ms. Henderson commented that she would briefly explain what had been proposed (Exhibit M) and to what had been testified on Friday, March 19, 1999, with cellular industry present. That was the "sunset" provision on the surcharge would be extended for 2 years, until December 31, 2001. However, if the Phase I system implementation from mobile telephone service is completed in advance of that date the surcharge for mobile telephone service will sunset; for the land lines it would remain in place.

Senator Neal asked Ms. Henderson to clarify the statement regarding the mobile sunset. She answered that if the Phase I implementation, the equipment, the installation, everything that would be necessary to do the first phase for the cellular industry within this time period, in advance of the 2-year sunset, then it would sunset only for the cellulars; for the mobile telephone providers. It would remain in place until 2001 for the land lines.

Senator Neal asked if that was the amendment. Ms. Henderson replied yes, and as they stated last week the surcharge again will not exceed 25 cents. There is still a provision in law that would allow if the fund balance goes over $500,000, that the local governments will reduce the surcharge during that period. In effect, all the provisions of Assembly Bill (A.B.) 173 of the Sixty-ninth Session from last Session would remain in place. In addition, the three local governments have committed to the industry, and commit to you today, that they would implement Phase I for the cellular industry within the next 2 years. The projected estimated budget (Exhibit N) had been included at the request of the industry that the budget be part of the legislative record. We agreed to work with them over the next 2 years to develop permanent funding sources for ongoing costs and to work together on a joint plan for implementation.

Senator Neal asked who was protecting the public in these discussions.

Pat Coward, Lobbyist, Washoe County, responded to Senator Neal saying that local government viewed this as a public service that is an enhancement. Law enforcement was actively involved in this; they might not have testified but they were there in force. Mr. Coward stated that the Senate Committee on Commerce and Labor would be hearing another bill that dealt with whole issue. Mr. Coward explained that the parties involved were comfortable at this point in going forward with the first option on wireless, which will identify the number on the cell side, but when option two is studied that the FCC has defined, that is full enhanced service for wireless. It could be very expensive; in fact the technology and the cost have not yet been defined in many areas. It really requires time before they can move into this area. The wireless industry has said it might be too expensive to even move forward in this area. All parties are aware of the importance of permanent funding on an ongoing basis.

Senator Neal asked about the 2 years that Mr. Coward spoke of for Phase I, if that is the next 2 years after 2001.

Ms. Henderson replied to Senator Neal, stating that the current statute sunsets on December 31, 1999, so it would be a 2-year extension beyond that; therefore, it would be December 31, 2001. During that 2-year period the surcharge would continue and Phase I would be completed. Senator Neal stated, for clarification, that the surcharge would sunset for the cellular in December 2001. Ms. Henderson replied that whole surcharge would sunset December 31, 2001. If the cellular Phase I were completed first then the surcharge would be reduced; actually the surcharge would go away for the cellular customers.

Senator O’Donnell commented that he had concerns that this issue would be back before the committee in 2001. He wanted to know if this question was going to be definitively answered, that no additional monies would be requested in 2001.

Ms. Henderson replied that in all likelihood a representative for the local governments would appear before the committee. One of the agreements that was reached with the industry was to find a permanent funding source as there are very expensive ongoing costs. Currently, it runs $500,000 to $600,000 per annum ongoing costs, now that the equipment had been purchased for the land lines. The industry agreed to work to identify that permanent funding source so that they do not have to come back to extend sunsets over and over again. She wished to make it very clear that the intent is, of course, to have that permanent funding source.

Senator O’Donnell commented that the answer to his question was that they would be back. Ms. Henderson replied, that in some fashion, yes they probably would.

Senator Titus clarified that this was paid for with property taxes in Clark County. Ms. Henderson replied that the system in Clark County was put into place in 1988. Both the basic 911, which Washoe County had, and the enhanced that was paid for with property tax. One of the reasons Washoe County chose the surcharge 4 years ago was based on work with the industry, where Washoe County was in terms of the property tax cap and thinking that the surcharge was a good mechanism. Ms. Henderson said she did not think there had been a public outcry in this regard.

Senator Titus reiterated that the surcharge was 25 cents per month and what had not been mentioned during this entire discussion was the service of 911; the value of having 911; to be able to call in an emergency. Senator Titus exclaimed let us not forget what we are getting for 25 cents per month. The Senator said she thought there would be public outcry if there was not some kind of surcharge. Ms. Henderson said that the basic 911 in northern Nevada was funded through property tax or local government revenues; whatever goes into that general fund, and that is already embedded. Ms. Henderson said it was important to note who protects the public and that this is a tremendous service to the community.

Senator O’Donnell commented in light of what had just been said that he believed people did really appreciate the fact that they can dial 911, but the point he wished to make was there enough money to put the system in and operate it with the amount of money collected with the 25-cent tax. If so, will that be an ongoing expenditure or is the system already in and you will not need any more money.

Ms. Henderson stated that with the land line system, right now it is in place. There are capital costs that go with the system. There are also ongoing costs of $500,000 to $600,000, that are paid out primarily to Nevada Bell. If Phase I is completed for the cellular industry, then we might even be able to come back at some point and, if the surcharge were the choice, perhaps reduce that 25 cent surcharge. There are many things that can be worked with over the next 2 years. There is a need to keep that flexibility and have the industry in partnership with the local governments, so that the service can continue and the investment is not lost.

Senator O’Donnell said that he did not want the 911 feature lost and he also believed people really appreciate that. At the same time, if the money is needed, why are we deluding ourselves. Whether it is 2001, 2003, 2005, just institute it as a tax and tell the public for what it is intended.

Mr. Coward stated he thought what was needed was some time to explore the full, enhanced service for the wireless phase, and make that the identification as to whether that actually should be a part of the enhanced system. At that point, identify what that one-time cost, as well as the ongoing cost, will be. This bill allows the industry and the local governments to determine what is best as a permanent single-source funding.

Senator O’Connell requested that the committee vote on S.B. 366.

SENATOR TITUS MOVED TO AMEND AND DO PASS S.B. 366.

SENATOR NEAL SECONDED THE MOTION.

THE MOTION CARRIED. (SENATOR RAGGIO WAS ABSENT FOR THE VOTE).

*****

The Chairman asked if there were any questions. Senator Neal asked why not have the 25-cent surcharge for the cellular customers. Ms. Henderson stated that was currently being done. Both land lines and mobile lines had the 25-cent surcharge; that was part of the original bill 4 years ago. The concern of the cellular industry had been the direct benefit their customers receive. Ms. Henderson reiterated that Phase I was important and that it had taken a lot of work to arrive at a point where the commitment could be made that Phase I would be completed.

Senator Neal said that it seemed that there was a separation in charges. Ms. Henderson said that was correct. It was being separated on the sunset end, not on the front end. That will continue as it is right now. What they were saying is that when Phase I is completed, then they will sunset the cellular piece for the enhanced service.

Chairman O’Connell drew attention to S.B. 414.

Senator O’Connell pointed out that the testimony of those in favor of the bill wanted an automatic annual increase of 2 percent on July 1 of each year.

SENATOR PORTER MOVED TO INDEFINITELY POSTPONE S.B. 414.

SENATOR TITUS SECONDED THE MOTION.

*****

Chairman O’Connell brought S.B. 454 to committee attention.

SENATOR NEAL MOVED TO DO PASS S.B. 454.

SENATOR PORTER SECONDED THE MOTION.

*****

The chairman opened the work session discussion on S.B. 456.

SENATOR NEAL MOVED TO DO PASS S.B. 456.

SENATOR TITUS SECONDED THE MOTION.

*****

The Chairman opened discussion on S.J.R. 19.

SENATOR NEAL MOVED TO DO PASS S.J.R. 19.

SENATOR TITUS SECONDED THE MOTION.

Chairman O’Connell adjourned the meeting at 5:40 p.m.

RESPECTFULLY SUBMITTED:

Julie Burdette,

Committee Secretary

APPROVED BY:

Senator Ann O’Connell, Chairman

DATE: