The Senate Committee on Government Affairs was called to order by Chairman Ann O'Connell, at 2:50 p.m., on Friday, April 16, 1999, in Room 2149 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

COMMITTEE MEMBERS PRESENT:

Senator Ann O'Connell, Chairman

Senator William J. Raggio, Vice Chairman

Senator William R. O’Donnell

Senator Joseph M. Neal, Jr.

Senator Dina Titus

Senator Terry Care

COMMITTEE MEMBERS ABSENT:

Senator Jon C. Porter

STAFF MEMBERS PRESENT:

Angela Culbert, Committee Secretary

OTHERS PRESENT:

Chairman O’Connell opened the meeting asking for testimony on Assembly Bill (A.B.) 299.

Carole A. Vilardo, Lobbyist, Nevada Taxpayers Association, testified in support of A.B. 299. She explained the bill would close a "loophole" created in 1993 when short-term obligations were moved from chapter 354 of Nevada Revised Statutes (NRS) to chapter 350. She pointed out changes were made as a result to accurately reflect medium-term obligations rather than short-term obligations. She commented there had originally been a provision within chapter 354 of NRS which allowed the disregard of the vote of the people if there was a public safety or health emergency. Ms. Vilardo pointed out the legislative body at the time decided that due to the definition of medium-term obligations, this provision should be removed. She explained a corresponding provision existed in chapter 354 of NRS that should have been corrected, though was not.

Ms. Vilardo gave an example in which confusion has been caused as a result of these changes. She noted a library bond issue for Nye County Library District passed in the 1998 primary election, but the district was unable to sell the bonds because of a recently established law which allowed bond issues only to be placed on general elections. Ms. Vilardo commented the library district had been advised by the clerk at that time that they could place their bond on the primary election. She pointed out "good-faith and intent" existed on behalf of the library district as they had originally requested the question be placed on the November 1998 ballot; but because of another tax issue, it was suggested that the question instead be placed on the primary ballot. Ms. Vilardo testified the Nye County attorney, addressing the concerns of the library district, discovered the issue did not have to be placed on a ballot at all because of the provision in chapter 354 of NRS which would allow, by resolution, to adopt medium-term financing and establish a set rate.

Ms. Vilardo explained she became aware of the issue when it was brought before the tax commission, noting the Department of Taxation indicated avoiding a vote was not possible due to legislative intent, though they acknowledged the loophole existed. She stated A.B. 299 would close up the loophole, and she drew attention to section 9 of the bill which clarifies the library district can go forward with the sale of bonds. In January, she mentioned, the tax commission ruled statute permitted the sale of these bonds. However, she noted, it was only legal due to the "loophole" left upon changing the original chapters of NRS.

Ms. Vilardo pointed out the bill had been requested of the Assembly Committee on Government Affairs as that committee had inadvertently created the loophole by an amendment to the original proposed legislation in 1993. She noted most of the committee members were still serving and remembered the original intent of the proposal. She stressed bond counsel wanted to ensure section 9 of A.B. 299 was included because even though a ruling had been made by the tax commission, there was a concern, regarding the way the bonds are sold, that there might be some confusion as to the "full weight" of law concerning the ruling.

Ms. Vilardo requested expedient approval of the bill due to the need to process budgets of the districts as the tax rate has to be identified before the final budget is determined. She indicated she was unaware of any opposition to the measure. She pointed out section 2 of the bill would include a statement in chapter 350 of NRS necessitating the local government to identify the revenue source with which to engage in a medium-term obligation. Under existing provisions, she noted, a medium-term obligation would have to be paid from an existing revenue source. Ms. Vilardo pointed out section 2 of A.B. 299 was agreed to by the local government committee on finance.

Senator Neal referenced the changes in section 2 of the bill, asking whether a bond could be issued if the money was not available. Ms. Vilardo explained this was the original intent when the provisions were moved to chapter 350 of NRS. She said medium-term obligations are supposed to be issued only in circumstances where a revenue source is available.

Prompted by Senator Neal, Ms. Vilardo pointed out section 7, subsection 1 of A.B. 299 references the general long-term debt which, in section 7, subsection 2 of the bill, does not include "debt created for medium-term obligations." This language, she pointed out, would close the "loophole" in chapter 354 of NRS. She said references in chapter 354 of NRS to general obligation debt refer to a vote of the people.

With no further questions from the committee, the chairman closed the hearing on A.B. 299. Next, the committee heard A.B. 350.

Terry Sullivan, Concerned Citizen, told the committee Assemblyman Douglas (Doug) A. Bache, Clark County Assembly District No. 11, was unable to attend the meeting. He distributed various pictures and information regarding the colors of the state seal (Exhibit C) and testified a yellow seal was created in the 1970s as shown on page 1 of Exhibit C. He said in 1986 another seal was sent to be put on the U.S.S. Nevada and this seal had been shown in the Legislative Building for many years. He explained a color-specific seal was attempted to be put into statute in 1991 and rather than clutter NRS with descriptive language, a notation was added as exemplified on page 3 of Exhibit C requiring the state librarian to keep a description of seal. Mr. Sullivan emphasized this information had never been transferred to the state librarian. He pointed out the yellow seal on page 1 of Exhibit C had been commonly used and became the official state seal in 1986 when the Legislative Commission adopted it for use in a brochure. Since there was no other designation in the law about the specific colors of the state seal, it became the official seal. He drew attention to a seal which was attempted to be made the official seal in 1997, noting the bill to do so was not heard by the Assembly. He explained, upon the request of Assemblyman Bache, he had developed a new seal as shown on page 2 of Exhibit C, noting it is a combination of the original blue seal and the blue seal proposed in 1997.

Mr. Sullivan stated the seal has been changed many times and explained the intent of the bill was to create a standard seal which could not be changed without the permission of the Legislature. He said they would be able to make a stronger description of the seal by giving exact colors, but suggested it was unnecessary. He noted the proposed seal would replace the Legislative Commission’s standard seal. Mr. Sullivan commented, upon committee request, Assemblyman Bache would appear to offer his support.

The chairman closed the hearing on A.B. 350 and requested testimony on A.B. 374.

Ronald M. James, State Historic Preservation Officer, Office of Historic Preservation, Department of Museums, Library and Arts, explained A.B. 374 makes minor corrections to NRS 233C.200 regarding the relationship of the commission to its interest. The commission, he noted, currently distributes $2 million on the sale of bonds, explaining statutes mandate the interest generated from the sale of bonds to be available for use by the commission with a $2 million cap on what the commission can spend. Therefore, he surmised, the commission cannot gain access to that interest. He told the committee that currently a small part of the interest is used to support the administrative costs of historic preservation, but it is not using the total interest, leaving the commission to face problems of arbitrage fees. He stressed if A.B. 374 is not passed they would have to pay arbitrage fees to the Internal Revenue Service (IRS). He requested the authority to allow the commission to spend a certain amount of money above $2 million so that when the interest is available, it can be returned to the public by way of ensuring projects are funded to the maximum extent possible. Mr. James stated this to be a "win-win" situation, noting the public would obtain access to money that is not being used while the state would avoid paying fines.

Chairman O’Connell questioned the current situation regarding the interest. Mr. James confirmed the interest is accruing with a balance of $580,000. He said the historic preservation office "draws down" a little over $40,000 a year. In the meeting in February, the Commission for Cultural Affairs distributed $2.5 million "in theory;" the $2 million contingent upon the sale of bonds in 1999 and the $.5 million contingent upon the passage of A.B. 374 which would give them the authority to allocate that money. Mr. James commented that "drawing down" a half million dollars off of the interest would eliminate the arbitrage exposure they currently have while allowing enough to remain in the bank to continue the support of the administrative costs of the office. In February 2000, he noted, the commission will reassess the interest and will distribute the money with the interest making up the balance from the $2 million.

Robert A. Ostrovsky, Member, Commission for Cultural Affairs, testified in support of the proposed legislation, stating they are the beneficiaries of good management. The office, he explained, has taken the position that it will not expend the funds, or award the grants until the approved projects have completed the work or show work in progress. He stated they have had a continuing fund of money when the bonds were sold which allowed the commission to collect the referenced interest. Mr. Ostrovsky indicated the commission was not aware, until the most recent funding cycle, that the IRS may begin to question the fact that the money is all tax-exempt. In the most recent meeting the commission allotted the $2 million annually given to projects and then they reviewed the projects a second time for further distribution contingent upon legislative approval of the expenditure of the "extra" money.

A list of grant awards from the Commission for Cultural Affairs for 1999 was submitted for the committee’s review (Exhibit D). Mr. Ostrovsky stressed the money goes to preservation projects which lead to cultural and community centers around the state. He said there is never enough money for projects which need to be done around the state, noting requests for $7 to $9 million are frequently received. He drew attention to the list of grant awards (Exhibit D), and explained it shows both where money is currently allotted as well as the projects to which the additional money would be given upon passage of the legislation. He mentioned the $100,000 for the Children’s Museum would purchase the heating and cooling unit for the building as the current system is failing. All of the buildings, he maintained, are for historic preservation and are based on the fact that these buildings will be used for some cultural purpose in the community. He gave the Brewery Arts Center in Carson City as an example of such a building, stating the funds do not pay for any of the programming as money for programs must be raised by the various nonprofit groups which own the buildings.

Michael Hillerby, Arts and Culture Manager, City of Reno, expressed support for the bill. He said the McKinley Park School has been a long-term project in the City of Reno and is one of the four schools still remaining in the city which were built just after the turn of the century. He noted work crews are approximately 10 to 12 weeks from finishing the project, with the city having spent $1.5 million of its capital improvement projects (CIP) budget to refurbish the building. He pointed out on March 23, 1999, the city council allocated an additional $350,000 to match with the $135,928 from the cultural commission. He said the work crews are at a stopping point awaiting approval of the money, stating the roof is sitting outside in boxes. He encouraged the committee to support the measure in an expedient manner because the day the bill is passed, they will be able to continue work on the project. He projected the project would be completed on July 1 and they would begin moving in the arts and culture division with a $700,000 budget to program the facility.

Senator Care questioned the status of the Railroad Museum in Boulder City. Mr. Ostrovsky said he did not believe there was current funding for the museum itself though there may be funding requests in this legislative session for planning money. He gave further details regarding the status of the proposed museum and indicated he could obtain more information for Senator Care.

Senator Neal questioned whether the commission would be eligible for money provided by Senate Bill (S.B.) 521.

Mr. Ostrovsky indicated he was unsure as to where that money would be spent. He stated he was a member of the Library, Arts and Museums Foundation and said they would be happy to accept the money.

Chairman O’Connell questioned what was being done with the Boulder Dam Hotel. Mr. Ostrovsky explained the most recent grant request received from the hotel conveyed an attempt to restore some of the original hotel rooms, noting the downstairs area has previously been restored. He mentioned the cooperative agreement with the University of Nevada, Las Vegas, hotel program so if the rooms are renovated, the school will operate the hotel.

Mr. James indicated the Boulder Dam Hotel is a good example of how the grants have successfully worked, and pointed out all applicants receive far less than requested. He noted the hotel has succeeded in raising the remaining funds necessary. He stressed the benefit of the grants can be used as seed money to raise additional funding and expressed pride in the program, noting the $2 million often helps raise twice as much in investment in Nevada’s cultural resources.

Further discussion ensued as to the history and specific renovations of the Boulder Dam Hotel.

Senator Neal questioned the progress and the funding of the archeological dig in Virginia City. Mr. James explained the Boston Saloon was the African-American establishment between 1864 and 1875 and is currently an archeological site. He said 70,000 artifacts were found from the current dig at the Piper’s Corner Bar, noting the volunteers have been working diligently to catalog and analyze the artifacts. The project has been a much larger task than anticipated, and, as a result, the Boston Saloon dig will not be started until May or June 2000. He pointed out this would provide more lead time on fundraising.

With no further questions from the committee, Chairman O’Connell closed the hearing on A.B. 374 and opened the hearing on A.B. 375.

Al Kramer, Treasurer, Carson City, explained to the committee that A.B. 375 in its amended form has been reviewed by the state treasurer and treasurers from other entities in Nevada who agree the bill meets with the needs of the various county treasurers.

Prompted by Chairman O’Connell, Mr. Kramer agreed to submit an outline explaining the bill (Exhibit E).

Mr. Kramer noted the bill codifies current practices. He indicated the codification corresponds to collateralization of bank accounts, explaining most counties do this but it is not required. He stressed it makes good sense. He pointed out the bill would allow the treasurers to put county funds in credit unions. He indicated the state is allowed to put their funds into credit unions, and he stated this practice is also being proposed by S.B. 39.

Prompted by Chairman O’Connell, Mr. Kramer confirmed A.B. 375 is not in conflict with S.B. 39, and he explained S.B. 39 provides much more detail regarding this issue.

Mr. Kramer continued explaining the bill, mentioning statute often refers to quarterly tax payments and quarterly installments. He indicated there has been some concern regarding this language, therefore A.B. 375 proposes to leave in "installment" but remove "quarterly." He stressed they do not pay taxes every 3 months rather on a staggering schedule, noting the intent was to have the statutes reflect this payment schedule.

Mr. Kramer drew the committee’s attention to section 17 which refers to a certificate for filing against a property, whose owner has been delinquent in taxes, to give constructive notice. He pointed out some counties have used this certificate as a lien which has to be released when the taxes are paid. Others, he noted, call this a certificate which does not have to be released. He explained the intent was to codify current practices; giving the counties flexibility to handle this differently while allowing for constructive notice without having the certificate released. He indicated a released certificate causes extra work for the treasurer and the recorder while cluttering up the file for research by title companies.

Mr. Kramer indicated there was lack of clarity in the statute, and he gave an example of a parcel in Carson City to which the county had become the trustee. The parcel, he noted, was an apartment building. He stated it was unclear as to whether he could collect the rents on the apartments. Section 18 of the bill, he explained, would clear up the language so that if there is income-producing property, the treasurer could go in as trustee for that property and use the proceeds to pay off the taxes. He indicated this is the alternative to selling the property.

Chairman O’Connell questioned if the treasurer received property in a receivership, whether it would be kept by the county rather than having the property sold. Mr. Kramer stated:

Chairman O’Connell stated, "… So you would have no intention of the county owning it." Mr. Kramer confirmed, "That is correct." Chairman O’Connell said, "So it would stay on the tax roll." Mr. Kramer replied, "That is correct."

Mr. Kramer called attention to sections 19, 20 and 21 of A.B. 375, noting these provisions would bring clarity to current language without making significant change.

Senator Neal questioned section 3, subsection 1, paragraph (a) of the bill regarding advertising the securities for sale in a newspaper of general circulation and asked whether this would have to be advertised in both northern and southern Nevada newspapers. Mr. Kramer indicated the paper should be local. He explained it is required to be posted in a newspaper to which the affected entity would be privy. He stressed if it was posted in a paper in another state, the law would have been broken. He clarified the paper of post should be local and one that those involved would be reasonably expected to read.

Senator Neal questioned if the language was clear enough to provide the proper notification. Mr. Kramer indicated the language was taken from the statute concerning that affecting the state. He explained this provision was included because the counties would be more likely to be invested in a bank that is weak than the state would be; yet currently the counties’ deposits are not collateralized by the bank.

With no further testimony on A.B. 375, the chairman closed the hearing.

Chairman O’Connell suggested the committee take action on A.B. 374 due to the time constraints expressed by the City of Reno regarding the continuation with the McKinley Park School preservation project.

Senator Neal questioned whether the bill would have to be referred to the Senate Committee on Finance. It was agreed the bill did not have to be re-referred.

SENATOR TITUS MOVED TO DO PASS A.B. 374.

SENATOR CARE SECONDED THE MOTION.

With no further business before the committee, Chairman O’Connell adjourned the meeting at 3:34 p.m.

RESPECTFULLY SUBMITTED:

Angela Culbert,

Committee Secretary

APPROVED BY:

Senator Ann O'Connell, Chairman

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