The Senate Committee on Government Affairs was called to order by Chairman Ann O'Connell, at 1:50 p.m., on Tuesday, May 4, 1999, in Room 2149 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

COMMITTEE MEMBERS PRESENT:

Senator Ann O'Connell, Chairman

Senator William J. Raggio, Vice Chairman

Senator William R. O’Donnell

Senator Jon C. Porter

Senator Joseph M. Neal, Jr.

Senator Terry Care

COMMITTEE MEMBERS ABSENT:

Senator Dina Titus (Excused)

GUEST LEGISLATORS PRESENT:

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

STAFF MEMBERS PRESENT:

Amelie Welden, Committee Secretary

OTHERS PRESENT:

Assemblywoman Barbara E. Buckley, Clark County Assembly District No. 8, explained A.B. 318 concerns affordable housing. She asserted the bill addresses some technical issues pertaining to A.B. 74 of the Sixty-ninth Session.

Assemblywoman Buckley expressed A.B. 74 of the Sixty-ninth Session allows local governments to donate surplus land to nonprofit organizations for affordable housing. She noted priority is given to senior-citizen projects and projects which benefit individuals with disabilities.

Assemblywoman Buckley stated a couple of technical difficulties arose in attempts to implement A.B. 74 of the Sixty-ninth Session. She indicated banks identified these difficulties, which were not foreseen by local governments, nonprofit organizations, or the Legislature during the last session. Assemblywoman Buckley elaborated Clark County issued a request for proposals pursuant to A.B. 74 of the Sixty-ninth Session, and Catholic Charities responded by proposing a small senior-citizen housing development of 48 units. She continued the U.S. Department of Housing and Urban Development (HUD) provided some "202 funding" (U.S. Public Law (P.L.) 86-372 section 202) for the project. Assemblywoman Buckley expressed, "The problem then became, if Clark County donated them land, the bank wanted the ability to have the county’s interest subordinated to any loan that they might make to cover the difference." She maintained A.B. 318 would clarify that issue.

Assemblywoman Buckley introduced Michael J. Pawlak, Senior Management Analyst, Community Resources Management, Clark County, who had discussed the issue with the bank in question.

Mr. Pawlak reiterated technical problems with A.B. 74 of the Sixty-ninth Session have impeded Clark County’s ability to implement that legislation. He maintained the primary problem involves a "reverter clause," which was intended to ensure that donated land would continue to be used for affordable housing. Mr. Pawlak explained the clause is an "automatic reverter," which means if the property ever ceased to be used for affordable housing, it would automatically revert to the county. He contended such an idea is good in principle, but does not work in practice.

Mr. Pawlak expressed the land is "the minor part of the financing mechanism" when a unit is being built on a property. He noted HUD and other lenders finance the construction of affordable housing. He maintained HUD and the other lenders "had a problem with their security interest in anything that required an automatic reversion to the county." Mr. Pawlak pointed out A.B. 318 would correct that problem.

Mr. Pawlak continued another technical problem with A.B. 74 of the Sixty-ninth Session involves the requirement for submission of a proposal to the planning commission prior to conveyance of the land. He contended this requirement is a good principle, but it requires submittal at an inappropriate time. He elaborated the planning commission usually considers a proposal after the land is conveyed and after the nonprofit organization secures its financing. Mr. Pawlak added the nonprofit organization does its architectural and engineering plans, and if the land then has inappropriate zoning or needs a use variance, the planning commission has to review and approve the proposal. He emphasized the requirement for submission of the proposal to the planning commission is "simply misplaced" in A.B. 74 of the Sixty-ninth Session. He noted the requirement for approval by the planning commission would still exist for cases of nonconforming land use or zoning if A.B. 318 passed. Mr. Pawlak further pointed out the public-hearing and resident-notification processes would be retained under A.B. 318.

Chairman O’Connell referred to a similar bill regarding Washoe County, and she contended that bill came before the Senate Committee on Taxation. Senator Neal responded he does not remember that bill, but remembers a bill dealing with Boulder City and a nonprofit corporation. Chairman O’Connell asked Kim Guinasso, Committee Counsel, Legal Division, Legislative Counsel Bureau, to look for a bill similar to A.B. 318 that was heard by the Senate Committee on Taxation. Chairman O’Connell explained she wanted to find out where that bill is in the legislative process.

Assemblywoman Buckley reiterated banks have been unwilling to provide loans due to the automatic-reverter clause in A.B. 74 of the Sixty-ninth Session. She emphasized the relevant land should be used for affordable housing, and the banks would require that a provision to that effect be included in contracts and deed restrictions. She stated subsection 5 of section 1 of A.B. 318 addresses the issue by requiring that the land be used for affordable housing for 50 years. Assemblywoman Buckley noted that time frame was recommended by the Legal Division of the Legislative Counsel Bureau as a way to capture the bill’s intent and resolve the banks’ concerns.

Senator Neal asked why the banks would have a problem, considering subsection 9 of section 1 of A.B. 318. He pointed out this subsection would allow a county commission to subordinate the county’s interest to a first or subsequent holder of a mortgage on the property.

Assemblywoman Buckley noted the banks requested that language, which "meets their needs completely" for resolving one of the technical problems with A.B. 74 of the Sixty-ninth Session. She reiterated the second technical problem involves the automatic reverter. She expressed the lawyers for the banking industry wanted to ensure there would be no problems with the automatic reverter. Assemblywoman Buckley stated:

Chairman O’Connell asked if nonprofit organizations have to meet certain criteria to be considered for processes outlined in A.B. 318. She further asked if the organizations must have a history of similar projects before the banks will lend them money.

Assemblywoman Buckley answered affirmatively and elaborated the nonprofit groups must have "some organizational capacity." She explained they have to be 501(c)(3) (Internal Revenue Code) organizations, and they have to be audited. She added the organizations must have prior experience with similar situations. Assemblywoman Buckley indicated nonprofit organizations like Catholic Charities and Accessible Space usually start with a few small projects and then "build up their track record." She stressed the organizations must have a track record before banks will lend to them.

Assemblywoman Buckley stated Assemblyman Lynn C. Hettrick, Carson City and Douglas counties Assembly District No. 39, asked her if A.B. 318 could be used as a vehicle for a proposed amendment. She stated she has no objection to his request.

Assemblyman Hettrick distributed a proposed amendment to A.B. 318 (Exhibit C). He stated, "This was actually A.B. 264 on our side."

Assemblyman Hettrick indicated A.B. 264 was heard, amended, and "proposed to pass." He maintained he does not know of any opposition to the bill, and he noted, "There was intent to amend it into another bill." Assemblyman Hettrick asserted, "At the last minute, as we got down to the deadlines, it didn’t [did not] get into the other bill. … It got missed, and it ended up not getting passed."

Assemblyman Hettrick pointed out A.B. 318 addresses both sections of law addressed in his proposed amendment. He noted A.B. 318 also addresses governments donating to nonprofit organizations, so his proposed amendment would "fit perfectly."

Assemblyman Hettrick explained his proposed amendment to A.B. 318 would allow boards of county commissioners to donate personal property to private, nonprofit organizations, as long as the donations would benefit the inhabitants of the county. He stated, "It was totally agreed to." Assemblyman Hettrick emphasized the amendment would allow counties to give excess equipment to nonprofit organizations.

Assemblyman Hettrick stated section 1 of the proposed amendment comprised A.B. 264. He continued section 2 of the proposed amendment was suggested by the Nevada League of Cities and Municipalities, which requested that cities be allowed "to do the same things that counties can do in terms of expending money for purposes to nonprofits, grants, … donations, and so on." Assemblyman Hettrick expressed the League of Cities and Municipalities’ suggestion was accepted by the Assembly Committee on Government Affairs.

Chairman O’Connell asked what currently prevents governments from making such donations and grants. Assemblyman Hettrick replied he received an opinion from the Douglas County district attorney claiming a government cannot participate in such activities unless expressly allowed to do so. Assemblyman Hettrick said, "If it doesn’t [does not] say ‘you may’ [or] ‘you can,’ literally, you cannot."

Senator Neal asked for clarification regarding the difference between a grant and a donation. Assemblyman Hettrick answered he believes "grant" refers to money, and "donation" may refer to equipment.

Mary C. Walker, Lobbyist, Carson City, Lyon County, and Douglas County, conveyed those counties’ support for A.B. 318 and for Assemblyman Hettrick’s proposed amendment. She offered an example of a personal-property donation, noting A.B. 318 with the proposed amendment would allow counties to donate old fire trucks to volunteer fire departments, which are nonprofit organizations.

Ms. Walker suggested the addition of "or a governmental entity" to subsection 2 of section 1 of the proposed amendment. She stated the amendment would then read, " … may donate personal property that is owned by the county but no longer needed to a private organization or a governmental entity … ." Ms. Walker asserted this change would allow local governments to donate old computers to schools or to other governmental entities. She maintained such a donation currently can only be done through "very cumbersome interlocal government agreements." Ms. Walker suggested a similar change be made to subsection 2 of section 2 of the proposed amendment. She noted this change would allow cities to donate property not only to private, nonprofit organizations, but also to governmental entities.

Ms. Walker indicated the City of Reno asked her to convey its support for the proposed amendment to A.B. 318.

Eileen Piekarz, Affordable Housing Resource Council, stated that council is a nonprofit agency which provides technical assistance to developers of affordable housing. She expressed the Affordable Housing Resource Council supports A.B. 318, and she contended the new language would make the current law "much more workable." Ms. Piekarz noted most affordable housing uses a "blend" of public financing and conventional private financing. She asserted, "It’s [It is] critical to allow the option of subordination to a city or county so that the project could secure that conventional financing."

In response to a question from Senator Neal, Ms. Piekarz stated she was referring to subsection 9 of section 1 of A.B. 318, which would give the board of county commissioners an option to subordinate the interest of the county.

Joseph L. Johnson, Lobbyist, Nevada Housing Coalition, read from prepared testimony in support of A.B. 318 and distributed a handout showing the coalition’s membership (Exhibit D). He expressed the coalition is a not-for-profit organization that advocates policies to expand affordable housing in Nevada. He indicated the coalition is comprised of advocates, financial institutions, local-government agencies, and nonprofit and for-profit developers. Mr. Johnson maintained the coalition voted unanimously to support A.B. 318.

Chairman O’Connell closed the hearing on A.B. 318 and opened the hearing on A.B. 484.

Assemblywoman Gene Wines Segerblom, Clark County Assembly District No. 22, testified A.B. 484 would update existing statutes to clarify the conditions under which housing authorities may participate in low- and moderate-income housing. She continued the bill would clarify housing authorities’ ability to carry out programs in partnership with nonprofit corporations and private persons. Assemblywoman Segerblom asserted A.B. 484 would also set forth specific, objective standards for financing by housing authorities. She added the bill would prohibit housing authorities from financing owner-occupied single-family housing with private-activity bonds. She concluded A.B. 484 would assure adequate credit quality for any financial instruments offered by housing authorities. Assemblywoman Segerblom indicated A.B. 484 was requested by the head of HUD in Las Vegas.

David C. Morton, Executive Director, Housing Authority of the City of Reno, expressed A.B. 484 would update some "World War II" legislation regarding housing authorities. He maintained existing statutes give housing authorities "fairly extensive powers," but many changes have occurred since the original provisions were put into law. He explained A.B. 484 would take care of some inconsistencies and "make sure that we can do the normal things that housing authorities would be doing today."

Mr. Morton stated Clark County has encountered problems with existing statutes. He elaborated the county has not been able to do certain bond issues which "would have been clearly in the interest of low-income people in Clark County." He maintained the county contacted the Housing Development Law Institute (HDLI), a national organization that works to update housing legislation. Mr. Morton noted HDLI has model legislation which has been adopted in Louisiana and a few other states.

Mr. Morton commented legal services and interest groups have been consulted regarding A.B. 484. He contended, "We realized pretty quickly that to try to overhaul the entire legislation was too much at this point," due to the shortened session. He asserted A.B. 484 focuses on bonding and on housing authorities’ ability to work with mixed-income complexes. Mr. Morton maintained he was not comfortable using the national model legislation, so local bond counsel was consulted. He indicated bond counsel has made sure A.B. 484 is consistent with state law. Mr. Morton noted the Housing Division was also consulted regarding the bill, and their concerns were resolved. He mentioned the Housing Division now supports A.B. 484.

Mr. Morton contended, "I think at this point, we have a piece of legislation that should be satisfying to all concerns. In other words, we have the basic powers now; it just clarifies those." He added A.B. 484 would limit some powers of housing authorities in order to satisfy the Housing Division. Mr. Morton elaborated A.B. 484 would require housing authorities to take certain bond issues before the state finance board, and he pointed out this process is currently not required. He further stated A.B. 484 would provide that housing authorities only do bond issues that require at least an investment-grade quality.

Mr. Morton concluded, "We feel like what we’ve [we have] done is address any of the issues that had been raised and give us an updated section of legislation so that we can provided much-needed affordable housing in our communities."

Chairman O’Connell asked if the relevant statutes have not been updated since the 1940s. Mr. Morton answered affirmatively. He mentioned some changes have been made in other parts of those statutes, but he does not think the provisions affected by A.B. 484 have been changed.

Chairman O’Connell commented the bill would affect Nevada Revised Statutes (NRS) chapter 315.

John O. Swendseid, Lobbyist, City of Las Vegas, and Bond Counsel, Swendseid and Stern, testified he was representing the Reno Housing Authority, also. He distributed a handout with a section-by-section outline of A.B. 484 (Exhibit E), and he stated the bill is based on model legislation that has been "tailored to fit our needs in Nevada."

Chairman O’Connell asked where the model legislation originated. Mr. Swendseid reiterated the model legislation came from HDLI. Mr. Morton added, "The original legislation that we have was based on federal legislation. So in other words, all we’re [we are] doing is really narrowing federal legislation."

Mr. Swendseid clarified NRS chapter 315 was originally modeled after federal legislation, and most states enacted similar laws after World War II. He contended most states have done more modernization than Nevada has since then. He stressed A.B. 484 would modernize Nevada’s statutes.

Mr. Swendseid commented section 19 of A.B. 484 would give housing authorities the specific authority to act as a "conduit financer." He explained housing authorities could borrow money on the bond market or through a bank and then loan that money to someone else.

Mr. Swendseid continued section 25 of A.B. 484 would allow housing authorities to do bond-anticipation financing. He elaborated, "Maybe during your period of construction you want to do a construction note that you’d [you would] later take out with a bond issue."

Mr. Swendseid asserted many sections summarized on page 2 of his handout (Exhibit E) provide specific authority to take certain actions to provide security for bondholders. He indicated A.B. 484 would authorize public-private partnerships with both controlled and uncontrolled affiliates. He explained a controlled affiliate "would be a nonprofit corporation where the housing authority appoints the board of directors," and an uncontrolled affiliate "would be another nonprofit association or a for-profit company." Mr. Swendseid expressed A.B. 484 would allow housing authorities to participate with those entities in projects. He noted housing-authority projects are currently exempt from taxation, and only the interest of the housing authorities would be exempt from taxation in public-private partnerships, as proposed by A.B. 484. He emphasized the interest of the private party in a public-private partnership would not be exempt from taxation.

Mr. Swendseid continued sections 43 through 45 of A.B. 484 contain details about bonds. He pointed out these sections provide that housing authorities could not issue bonds on the public bond market unless they get an investment-grade rating. He further noted, "We can do bank loans without getting a rating, but basically that would have to be just a private placement. In other words, it’s [it is] an investment-grade rating." Mr. Swendseid added A.B. 484 would allow housing authorities to give their chief financial officers the right to set the final interest rate on bonds. Mr. Swendseid indicated state and local governments have similar authority.

Mr. Swendseid maintained many of the other changes proposed by A.B. 484 are conforming amendments to correct cross-references.

In response to a question from Chairman O’Connell, Mr. Swendseid stated he believes most of the substantive changes proposed by A.B. 484 are included in the sections he specifically referenced. He summarized the substantive changes include public-private partnerships, the authority to do "conduits," and provisions on how to handle taxation of public-private partnerships. He added another substantive change would provide that uncontrolled affiliates would not be subject to rules that apply to government, while controlled affiliates would be subject to such rules, including open-meeting laws.

Senator Care mentioned section 19 of A.B. 484 would allow housing authorities to lend money, and section 20 addresses forgiveness of debt and forbearance from collecting or enforcing debt. He asked for clarification on these issues, especially with regard to how a housing authority would determine whether or not to proceed against a debt.

Mr. Swendseid replied if a housing authority loaned money to an individual or to a very small apartment building, and if the borrower could not make a payment, sections 19 and 20 of A.B. 484 would provide flexibility for the housing authority to help with the payment.

Senator Neal asked if housing authorities presently have the power of eminent domain. Mr. Morton answered affirmatively. Senator Neal commented, "So that is not new." Mr. Morton responded, "No, sir."

Senator Neal asked if A.B. 484 would allow housing authorities to set up credit unions within a housing complex. Mr. Swendseid clarified the bill would not allow housing authorities to "get into the business of becoming a credit authority." He elaborated A.B. 484 would allow for mixed-use apartment buildings which might include other things in addition to dwelling units. For example, he explained, commercial activities or a credit union might be located in a mixed-use apartment building. Mr. Swendseid emphasized, "The bill does not allow the housing authority … to get into the business of being a credit union. It just allows them to provide space in their building to credit unions."

Senator Neal asked if a housing authority could operate a housing facility built by another housing authority. Mr. Swendseid answered affirmatively. Senator Neal asked if that provision would apply to housing authorities outside the State of Nevada. Mr. Morton indicated:

Senator Neal referred to subsection 1 of section 22 of A.B. 484. He asserted this subsection would allow out-of-state housing authorities to build complexes in Nevada and to then have Nevada housing authorities operate those complexes. Mr. Swendseid responded it is not unusual for a housing authority to operate a building for another governmental unit. For example, he pointed out the Las Vegas housing authority managed a building owned by the City of Las Vegas. He suggested A.B. 484 is intended to authorize those kinds of activities.

Mr. Morton commented Clark County has three housing authorities, which currently have multiple cooperation agreements. He offered the example of a section-8 program under which the housing authorities "interchange" so they do not have to formally force people from one program to another. He indicated this situation is "much more convenient" for clients.

Regarding section 21 of A.B. 484, Senator Neal asked if loans for housing could be accepted from any source. Mr. Swendseid responded the bill does not limit sources from which housing authorities can accept loans. In response to a comment from Senator Neal, Mr. Swendseid expressed housing authorities would "use their good judgment" in determining sources for loans.

Chairman O’Connell asked for clarification regarding section 25 of A.B. 484. Mr. Swendseid replied an entity often has two different lenders, one during the construction period and one after the project is complete. He indicated the risks are different for these lenders because completion lenders do not have to worry about a completion risk. He maintained the construction lender is willing to take that completion risk. Mr. Swendseid continued public finance often involves an anticipation note or a construction financing, under which a housing authority borrows money to construct a project and agrees to pay back the loan with the proceeds of a bond issue that will be issued after construction is complete.

Chairman O’Connell asked if bond issues are liens against the credit of the county. Mr. Swendseid answered no and explained bond issues for public-housing projects can be liens against the credit of the housing authority. However, he noted bond issues for "conduit" projects involving private parties are not liens against the credit of the housing authority. Mr. Swendseid emphasized such bond issues are never liens against the credit of a city or county.

Chairman O’Connell asked a question regarding the extent of the housing authority’s credit. Mr. Morton responded:

Chairman O’Connell asked, "What does the bond counsel usually look for as far as the repayment of those bonds? … What kind of credit do you look for from the group, collateral?" Mr. Swendseid answered bond counsel would consider the appraised value of the building or project. He clarified bond counsel uses appraisals as well as revenue pledges, such as projected rents. He added bond counsel considers how projected rents compare to the cost of debt service and the costs of operating and maintaining the building.

Lon DeWeese, Chief Financial Officer, Housing Division, Department of Business and Industry, testified, "Conceptually, … we support this bill because it does expand the opportunities for building affordable housing." He commented the Housing Division was initially reluctant to support A.B. 484 due to the "rather open-ended" nature of some of its clauses.

Mr. DeWeese indicated the state uses private-activity bonds almost exclusively for its financing mechanism on affordable housing. He asserted the Housing Division believed A.B. 484, as originally written, needed to contain additional controls regarding such bonds. He stated the division worked with Assemblywoman Segerblom and proponents of the bill to address this problem with amendments. Mr. DeWeese contended:

Chairman O’Connell asked what the average monthly rent is for low-income housing. Mr. Morton answered the rent varies. He indicated "deep-subsidy" housing accommodates people with little or no income, and such housing is usually "deeply subsidized" by the federal government. Mr. Morton elaborated the federal government gives housing authorities money for deep-subsidy housing, and most of the authorities’ traditional housing falls into that category. He continued the section-8 program is a popular rental-assistance program under which people can live in a private apartment complex with assistance from a housing authority. Mr. Morton asserted this program is also a deep-subsidy program under which the housing authority makes up the difference in rent if a participant has no income.

Mr. Morton stated, "The kinds of programs we’re [we are] looking at here are not going to be the very deep-subsidy [programs] because it just wouldn’t [would not] work." He explained if a housing authority did a bond issue for a project, the authority would need to have money to pay off that bond issue. Thus, he asserted, relevant projects would have "below-market" rents rather than "deep-subsidy" rents. Mr. Morton elaborated a person would have to have some ability to pay rent in order to live in a complex with below-market rents. He stated the exact amount of the rent would vary depending on the structure of the program. For example, he noted, a lot of housing has been built under the tax-credit program, which does not apply to deep-subsidy rents.

In response to a question from Chairman O’Connell, Mr. Morton claimed:

Chairman O’Connell asked if all housing-authority projects go through the planning department in the relevant county. Mr. Morton answered affirmatively.

Senator Neal asked why subsection 4 of section 30 is included in A.B. 484. Mr. Swendseid explained the bill authorizes public-private partnerships in which a housing authority and a nonprofit or for-profit corporation cooperate to do a project. He stated:

Senator Neal asked if those rules would apply even if the corporation is using public money. Mr. Swendseid answered they would apply if the corporation is participating in a public-private partnership.

Senator Neal pointed out section 42 of A.B. 484 addresses bonds, and section 43 concerns bonds "and other instruments." He continued section 44 refers to bonds "and other obligations." He asked what other instruments and obligations are being addressed.

Mr. Swendseid indicated other obligations could include bond-anticipation notes. He added the bill also authorizes certificates of participation, which are evidences of borrowing used in lease financing. He summarized the bill addresses bonds, notes, and certificates of participation.

Senator Neal asked for clarification regarding certificates of participation. Mr. Swendseid reiterated certificates of participation are used in connection with lease financing. He elaborated a housing authority might lease a building on a lease-purchase basis, whereby the authority would take ownership of the building at the end of the term of the lease.

Senator Neal asked if Mr. Swendseid was referring to a situation in which someone else could build a building for the housing authority, and then the housing authority could lease the building for a certain number of years. Mr. Swendseid answered yes and noted that type of financing would be authorized by A.B. 484. He stated the protections mentioned by Mr. DeWeese would apply to those obligations as well as to regular bonds.

Senator Neal asked where the bill contains a limit on interest rates. Mr. Swendseid replied a limit on interest rates is included in subsection 4 of section 42 of A.B. 484. He clarified the interest rate on bonds "must not exceed by more than 3 percent the Index of Revenue Bonds that was most recently published … ." Mr. Swendseid explained the Index of Revenue Bonds is used for all state- and local-government financings that are revenue-based. He indicated the index is published weekly by The Bond Buyer, and it reflects the average interest rate on 20-year, A-rated revenue bonds across the United States.

Senator Neal asked what that rate would have been on the previous day. Mr. DeWeese answered the rate was 4.95 percent. Mr. Swendseid pointed out housing authorities could go three points above that rate according to A.B. 484. Senator Neal commented that would be 7.95 percent. In response to a question from Senator Neal, Mr. Swendseid clarified the housing authority could always use a rate lower than the one published in the Index of Revenue Bonds.

Senator Neal mentioned housing authorities are created by local governments. He asked who has responsibility if there is a default. Mr. Swendseid responded cities and counties have no legal responsibility for housing authorities. He stated one housing authority in Nevada has experienced financial difficulties and has worked those out with the federal government, which was the source of most of the difficulties. He emphasized the housing authority itself worked out the problems, not the city that appointed the authority’s board. Mr. Swendseid asserted Nevada does not have a procedure for housing authorities to file for bankruptcy protections, so the authorities have to work out their problems.

Senator Neal said, "Then you’re [you are] telling this committee that it would not enjoy the full faith and credit of the state in terms of this obligation."

Mr. Swendseid replied, "I am telling you that. That is correct."

Chairman O’Connell asked if the housing authority normally issues 20-year bonds. Mr. Swendseid answered, "I don’t [do not] think there is a norm for them." He elaborated the time frames can be anywhere from 2 to 30 years.

Chairman O’Connell closed the hearing on A.B. 484 and opened the hearing on A.B. 554.

John P. Sande III, Lobbyist, Reno-Sparks Convention and Visitors Authority (RSCVA), testified A.B. 554 is a "companion bill" to a recently heard bill which would allow an increase in the room tax in Washoe County in order to fund an expansion of the convention center, another project, and some peripheral matters.

Mr. Sande stated A.B. 554 would "extend the life of the RSCVA to the same as the Las Vegas Convention and Visitors Authority [LVCVA]." He asserted, "Namely, it would stay as long as there are bonds to be paid, and the tax would be paid as long as that was necessary." He noted if A.B. 554 does not pass, the RSCVA would expire in 2010, and the expansion of the convention center could not be accomplished.

Jennifer Stern, Swendseid and Stern, testified she is bond counsel to the RSCVA. She distributed a summary of A.B. 554 (Exhibit F). Ms. Stern asserted sections 1 and 4 of the bill would reduce a population requirement from 400,000 to 100,000. She claimed this change would "put RSCVA in a parity division with LVCVA with respect to room tax that is being collected by Washoe County and the cities of Reno and Sparks and pledged to bonds." She expressed that tax "must continue to be levied, collected, and transmitted to the RSCVA as long as bonds issued pursuant to the provisions of the fair-and-recreation-board act remain outstanding and unpaid."

Ms. Stern continued sections 2 and 3 of A.B. 554 would allow a county fair and recreation board to issue revenue bonds secured by room taxes. She maintained this provision would allow the RSCVA and other convention and visitors authorities to pledge room taxes to revenue bonds without encumbering the full faith and credit of the county. She commented room taxes can currently be pledged to bonds through an additional general-obligation pledge of the county. Ms. Stern emphasized A.B. 554 would allow convention and visitors authorities an alternative.

Ms. Stern indicated section 2 of A.B. 554 would also clarify that a contract for the prepayment of rent does not constitute indebtedness. She mentioned that provision was requested by the LVCVA when the bill was heard in the Assembly. She noted section 2 of A.B. 554 would additionally delete outdated language regarding returns of the election boards, which is addressed in NRS chapter 293.

Ms. Stern pointed out section 5 of A.B. 554 provides that the act is effective upon passage and approval.

Senator Neal asked, "Are we talking about bonds that have been passed by the local-government entities and not those bonds which have been voted upon by the people?" Ms. Stern answered bonds can be issued in different ways.

Senator Neal clarified he was asking which bonds are addressed, not how they are issued. Ms. Stern replied the bonds previously issued by the RSCVA and by the LVCVA are general-obligation bonds, additionally secured by pledged revenues. She stated these bonds are not voted upon by the people unless a petition to request such a vote is filed within a specified period. She noted bonds that are voted upon by the people are secured by property taxes, and entities that go to a vote of the people are requesting that the people increase their property taxes in order to pay for debt service. Ms. Stern emphasized bonds addressed in A.B. 554 are paid for by room taxes and are not voted upon by the people.

Senator Neal commented, "So if they’re [they are] assuming that somewhere down the line, if we’re [we are] talking about extending these bonds based upon revenue coming from the room taxes to pay for them; do I understand that to be correct?" Ms. Stern answered, "That’s [That is] correct."

Senator Neal asked who would be responsible for the bonds if the room tax drastically decreased. Ms. Stern responded the bonds that are already outstanding are additionally secured by the full faith and credit of the county.

Senator Neal asked, "When we’re [we are] talking about the county, we’re [we are] talking about the people, are we not?"

Ms. Stern replied, "That’s [That is] correct, with an additional property tax." She contended A.B. 554 would allow the issuance of bonds that would not be secured by property taxes.

Senator Neal asked who would be responsible for paying the bonds if room-tax revenues could not pay for them. Ms. Stern responded, "That’s [That is] why it’s [it is] important to keep levying the room tax, so that the property tax, then, would not have to be additionally securing it."

Senator O’Donnell reiterated Senator Neal’s question regarding responsibility for payment of the bonds. He asked, "Is it not the bondholder that ultimately is the loser if there is a … default?"

Ms. Stern answered, "That’s [That is] correct. If they don’t [do not] get repaid, then they are the people [who] suffer that loss." She reiterated the bonds currently outstanding are general-obligation bonds, additionally secured by pledged revenues, and the revenues need to be sufficient to cover debt service. She stated if room-tax revenues fell below the necessary amount, payment could be made from the General Fund of the authority, the General Fund of the county, and finally, property taxes. Ms. Stern commented, "But it is subject to the overlapping limitations on property-tax rates, the $3.64 limit."

Senator O’Donnell clarified the outstanding bonds are general-obligation bonds. Ms. Stern emphasized they are general-obligation bonds, additionally secured by pledged revenues.

Senator O’Donnell noted the bondholder is the ultimate person responsible in the case of strictly revenue bonds. He elaborated the bondholder’s bond is worthless if the bond is not repaid. Ms. Stern expressed the only security for revenue bonds would be room taxes or any facilities revenues that are pledged for the repayment of the bonds.

Senator O’Donnell commented:

Ms. Stern suggested an additional factor needs to be considered because interest rates are lower on general-obligation bonds. She stated:

J. Philip Keene III, President and Chief Executive Officer, Reno-Sparks Convention and Visitors Authority, testified A.B. 554 would be a "vital change" to bring the RSCVA into parity with the LVCVA. He emphasized the bill would allow the RSCVA to extend its strategic plan into the future and to build facilities that would serve the community for the next 25 years. Mr. Keene noted if A.B. 554 does not pass, the RSCVA would have to limit any financing instruments to a decade. He expressed if the companion bill to A.B. 554 passes, the RSCVA would embark upon a $105-million expansion of the existing convention center. He concluded A.B. 554 would be pertinent to that project.

Senator Neal commented:

Harvey Whittemore, Lobbyist, Nevada Resort Association, testified that association supports A.B. 554. He indicated the association believes the bill, along with its companion legislation, would allow association members to meet continuing needs for revitalization of the RSCVA, which is "a very important component of a very fragile tourist market." Mr. Whittemore stated the association believes the proposed facility expansion is necessary.

Tom R. Skancke, Lobbyist, Las Vegas Convention and Visitors Authority, offered the LVCVA’s support for A.B. 554. He asserted the bill would help the RSCVA and the LVCVA with expansion programs. He noted the LVCVA is beginning a $100-million project to add 1 million square feet of facility space in Las Vegas. Mr. Skancke indicated A.B. 554 would assist the LVCVA with funding for that facility.

Senator Neal asked if A.B. 554 would affect any bond issue previously created by voters in the Las Vegas area. Mr. Skancke responded existing bonds were not created by a vote of the people, but by the LVCVA’s bonding capabilities through Clark County. In response to another question from Senator Neal, Mr. Skancke indicated the bonds were issued by the county commissioners and secured by the room tax. He reiterated no vote of the people was involved.

Chairman O’Connell asked how the size of Las Vegas’ convention facilities will compare with that of convention facilities in other cities after the 1-million-square-foot addition. Mr. Skancke answered, "We’ll [We will] be the largest convention facility in the world." In response to another question from Chairman O’Connell, Mr. Skancke maintained Las Vegas is currently about 1 million square feet short of being the largest facility. He stated he is unsure what city currently has the largest convention facilities, but he suggested it might be Atlanta, Georgia.

Senator Neal asked Mr. Skancke, "What’s [What is] happening to the school money?" Mr. Skancke replied that money is "staying where it was committed to 2 years ago." Senator Neal asked if the money is going to the schools, and Mr. Skancke answered affirmatively.

Chairman O’Connell mentioned the Clark County School District will soon float a bond on the money in question. Mr. Skancke agreed and noted:

Senator Neal asked, "That will include, also, this additional extension that you are speaking of here? The school district will get a portion of that?"

Mr. Skancke requested clarification.

Senator Neal stated, "I understand that this bill would be extending the bonds in terms of being able to take care of the growth and other things. So my question to you [is], does that mean that the school district will be getting 5/8 of that additional money?"

Mr. Skancke answered no and explained, "The 5/8 that was committed in the 1997 session was the [Senate Bill] S.B. 170 [of the Sixty-second Session] money that was created, I believe, in [the] 1987 [or 19]89 session, which was for the special-events tax."

Mr. Skancke continued:

Chairman O’Connell commented the fund in question did not have anything to do with repaying bond issues. She noted it was set aside especially for creating special events for the convention authority.

Chairman O’Connell closed the hearing on A.B. 554 and opened the hearing on A.B. 599.

Mr. Whittemore testified in support of A.B. 599. He asserted A.B. 599 is the result of "a significant level of discussion" regarding the appointment process for the county fair and recreation board in Clark County. He explained section 1 of the bill would increase the size of that board from 12 to 13 members. Mr. Whittemore noted the additional member would be appointed from a list of nominees submitted by "the association of gaming establishments whose membership in that county pays the most gross revenues." He indicated that language refers to the Nevada Resort Association.

Mr. Whittemore stated under prior law, three of the five member-appointed representatives on the county fair and recreation board were chosen from a list submitted by the Nevada Resort Association. He maintained the Las Vegas Chamber of Commerce objected to this appointment process, so the chamber and the Nevada Resort Association reached an agreement to increase the number of board-appointed members from five to six, three of whom would be recommended by the chamber of commerce and three of whom would be recommended by the Nevada Resort Association. He suggested, "There is sound public policy in support of this compromise legislation."

Mr. Whittemore pointed out:

Mr. Whittemore noted section 2 of A.B. 599 would provide a mechanism for transition into the proposed appointment process. He concluded, "We are here today to present this bill, quite frankly, in response to levels of concerns which were expressed over a very serious issue for the economic vitality of our community."

Samuel P. McMullen, Lobbyist, Las Vegas Chamber of Commerce, testified the chamber supports A.B. 599. He asserted the bill "has worked out to be a very acceptable piece of legislation."

Senator Neal commented, "In looking at section 1, [paragraphs] (a) through (e) would select six members." Mr. Whittemore agreed and noted those paragraphs are in existing law. Senator Neal asked if all members of the county fair and recreation board have equal voting powers. Mr. Whittemore clarified the seven members set forth in paragraphs (a) through (e), subsection1, of section 1 of A.B. 599 appoint six nonpublic members to the board. He continued each member of the board has the same vote after the nonpublic members are chosen.

Senator Neal stated, "So the public members, and I assume that all [paragraphs] (a) through (e) are the public members, [are] required to appoint members to the board that have equal power in terms of voting that they have." Mr. Whittemore agreed and noted A.B. 599 would direct the public members to appoint six members instead of five. He summarized, "Instead of having 7 appoint 5, we’re [we are] recommending that 7 appoint 6, and the total expansion goes from 12 to 13 as a result of [that change]."

Senator Neal asked if subparagraph (2), paragraph (f), subsection 1, of section 1 of A.B. 599 refers to three of the six nonpublic members. Mr. Whittemore answered affirmatively and expressed:

Senator Neal asked why the language says, " … whose membership in the county collectively paid the most gross revenue fees." Mr. Whittemore responded that language is consistent with prior language addressing this issue and with appointing language in other statutes that address county fair and recreation boards.

Senator Neal asked, "The point is, why are you restating it?"

Mr. Whittemore replied:

Senator Neal commented, "And you’re [you are] saying that this does not designate certain houses within the resort association."

Mr. Whittemore responded, "It does not, sir. It just means that you’re [you are] a member of that establishment. It does not designate specific seats to specific institutions." He added the Nevada Resort Association has generally rotated board seats among its members in a manner deemed appropriate by those members. Mr. Whittemore noted the public board members can always choose to disregard the association’s recommendations, but there have not been problems with nominee approval in the past.

Mr. McMullen commented, "That’s [That is] the bill drafters’ language to, in a very general way, which is what’s [what is] required in statute as you well know, to figure out how to categorize a group of gaming facilities all together in one association."

Mr. Whittemore reiterated the language was taken from other sections of law regarding recommendations to appointing bodies from the Nevada Resort Association. He asserted the RSCVA has similar language for counties with populations between 100,000 and 400,000. He offered to look up the language, but Senator Neal indicated that would not be necessary.

Senator Neal asked James F. Mulhall Jr., Lobbyist, Nevada Resort Association, "Has our school district got [gotten] the check yet?" Mr. Mulhall replied the convention authority could answer that question. He commented, "We have taken the … position of staying out of the fight."

Senator O’Donnell mentioned A.B. 599 would expand the county fair and recreation board to 13 members, but would also require that the board-appointed members come from gaming institutions. He pointed out the gaming institutions develop recommendation lists for membership.

Mr. Whittemore responded, "Yes. … On lines 13 through 21, [page 2], what we have done is provide recommendations which are consistent with the earlier language which was reflected in all the prior appointments made since this language was developed back in the early [19]80s."

Senator O’Donnell asked, "Why was the initial bill put in?" Mr. Mulhall answered an informal practice had developed in which three of the five private-enterprise board members were informally selected by the Nevada Resort Association and forwarded to the chamber of commerce, which acted in an "almost ministerial" function to pass along the selections. Mr. Mulhall maintained a dispute developed regarding one of those appointments, when someone had to resign from the board. He contended that occurrence led to "protracted discussions" between the Nevada Resort Association and the chamber of commerce prior to the Seventieth Legislative Session. He indicated those discussions continued after the session began, and the parties agreed to the solution offered in A.B. 599.

Mr. McMullen added A.B. 599 would codify a practical process that has existed since the original appointment structure was created. Referring to Senator Neal’s question regarding the bill’s language, Mr. McMullen explained that language is "the mechanism by which you statutorily define that." Mr. McMullen continued the Nevada Resort Association has broad membership, but not all properties are members of that association. He expressed, "We had a working anomaly, which was that we had a long-standing tradition of appointing people out of the NRA [Nevada Resort Association], but that did not necessarily reflect all of the possible appointees." Mr. McMullen asserted A.B. 599 would clarify that issue and would allow "full representation across the board."

Mr. Whittemore commented the language previously mentioned by Senator Neal is included in subparagraph (5), subsection 1, of NRS 244A.601. From that statute, he read, "Three members who are representatives of the association of gaming establishments whose membership collectively paid the most gross revenue fees to the state pursuant to NRS 463.370 in the county in the preceding year." Mr. Whittemore pointed out similar language is used in subparagraph (2), paragraph (f), subsection 1, of section 1, of A.B. 599.

Senator Care noted seven publicly-elected officials determine the remaining membership of the board. He asked if board-appointed members must be approved unanimously and if the deliberations are public. Mr. Whittemore replied he thinks that appointments require a majority vote and that deliberations are public.

Referring to line 14 on page 2 of A.B. 599, Senator Care asked how many "associations of gaming establishments" exist. He recalled an organization called the Downtown Progress Alliance or the Downtown Progress Association.

Mr. Whittemore answered:

Senator Care stated he was not speaking on behalf of the Henderson Chamber of Commerce. He pointed out the population of Henderson is approaching that of Las Vegas, so the Henderson Chamber of Commerce could someday be the chamber from the largest city in Clark County. He commented, "Right now, it’s [it is] three members to zip. I wonder if there was any consideration to making it two to one, one for Henderson."

Mr. Mulhall responded the disagreement between the Las Vegas Chamber of Commerce and the Nevada Resort Association was a dispute between private parties, and the dispute has been resolved. He suggested the relevant political entities could discuss the issue raised by Senator Care, and they could "try to work out the future membership of the public side of that equation."

Senator Porter mentioned discussions have been held with regard to providing a full-time seat for Mesquite on the board. He commented Mesquite has substantial gaming interests, and its gaming and resort industry helps support the state. Senator Porter continued Mesquite has considered starting its own fair and recreation board, and based on discussions with relevant parties, he believes no one would oppose considering that option. He noted the LVCVA’s board would have to be involved in the discussion. He concluded, "At this time, I believe [Mesquite is] not interested in changing the seat that currently is in rotation, but in looking at [its] own facility in the future."

Mr. Whittemore asserted the Nevada Resort Association concurred with Senator Porter’s comments.

Senator Neal pointed out A.B. 599 would provide that three of the six board-appointed members be selected from a list of nominees provided by the chamber of commerce of the largest incorporated city in the county. He asked if that city is Las Vegas. Mr. Whittemore answered affirmatively and added the chamber’s recommendations are not geographically limited.

Senator Neal asked:

Mr. McMullen answered affirmatively and expressed:

Senator Neal asked, "Is it not true, then, that the effect of the language could give the hotel industry five members?" Mr. McMullen replied that statement is true and commented, "I think that’s [that is] the clear intent is that [it] would be tourism. Now whether those end up being all hotel, I think, will be a function of our interest in making sure that it’s [it is] diversely composed."

Senator Neal commented, "Even though you give the chamber the authority to select three members, … the qualification of those members goes to a specific interest." Mr. McMullen responded, "We were trying to make sure that, to the extent that we have a category of large tourism interests, that those also felt that they had a shot at a seat directly through the chamber."

Senator Neal asked if the chamber agreed to this situation. Mr. Whittemore answered affirmatively and stated the chamber wanted to make sure it could recommend that the board include members from resort institutions such as the MGM Grand Hotel/Casino (MGM), which is not a member of the Nevada Resort Association.

Senator Neal asked if the MGM is a member of the chamber of commerce. Mr. Whittemore replied the MGM is a member of the chamber, but is not a member of the Nevada Resort Association.

Senator Care commented the three representatives recommended by the Nevada Resort Association could also be members of the chamber of commerce. He asked, "When you become a member of the board, who are you speaking for? Do the chamber members speak for the chamber? It seems to me that, ultimately, the chamber and [the] gaming association are one and the same in many aspects."

Mr. Mulhall responded:

Mr. McMullen confirmed that statement and indicated there are "no strings attached" to board appointments. He added the board appoints knowledgeable and capable people and "[lets] them do the best thing on that board that they can."

Chairman O’Connell commented the chamber and the convention authority both work to bring people to Nevada. She emphasized the two groups have the same interest, so they usually "sing from the same sheet of paper."

Senator Porter stated:

Senator Neal indicated the convention authority was created by the chamber of commerce to bring in tourism. He asserted the Fremont Street area in downtown Las Vegas was the tourism focus when the authority was created. Senator Neal maintained:

Senator Neal continued the downtown area in Las Vegas now suffers as a result of the "mega-resort" hotels, and the Legislature will have to consider this issue in the future. He asserted the convention authority receives room-tax proceeds, but "the business interest is not feeling all of this wealth in terms of increased participation [and] in terms of customers."

Chairman O’Connell asked, "How many times does the dollar now turn in that area? … Is it still seven?" Mr. McMullen responded, "I’ve [I have] heard as low as five, but the usual standard is seven times. … An incoming dollar into the community, … its effect is multiplied seven times."

Chairman O’Connell commented tourists probably comprise about one-quarter of the business at her bookstore.

Senator Care noted section 2 of A.B. 599 would provide for staggered terms that expire on June 30, 2000 or June 30, 2001. He asked, "Without coming back to the Legislature, what happens after June 30, 2000? A term expires. You can reappoint, but what’s [what is] the expiration date for that term?"

Mr. McMullen replied the existing statute provides for 2-year terms. He explained:

Senator Care asked if it will be necessary for the Legislature to change the language again after the terms have expired according to the dates contained in the statute. Mr. McMullen answered no and expressed:

Warren B. Hardy II, Lobbyist, City of Mesquite, indicated Mesquite’s representation on the LVCVA board has been an important issue since he began working with Mesquite, in 1991. He stated the city has approached the board about receiving a full-time seat, but the board did not want to consider that issue. Mr. Hardy emphasized Mesquite has not felt mistreated by the convention and visitors authority. He expressed the city has been a "good member" of the board and has enjoyed mutual benefits from its involvement.

Mr. Hardy raised concern that the City of Mesquite does not have full representation on the board in question. He elaborated the mayor of Mesquite serves on the board "every 2 years," and the city shares an alternating seat with Boulder City. Mr. Hardy commented, "It troubles us somewhat when there comes a request to put another member on the board from the private industry and to have Mesquite once again overlooked in that process."

Mr. Hardy stated Mesquite proposed an amendment to A.B. 599 when it was heard in the Assembly. He explained the amendment would have increased the number of board members to 14, and he maintained a 14-member board would have provided full representation for every incorporated city that provides funds to the board. Mr. Hardy added a 14-member board would preserve the balance between elected-official and private-entity members. He commented, "It wasn’t [was not] a friendly amendment," and he noted proponents of the bill raised significant opposition.

Mr. Hardy continued the City of Mesquite subsequently held meetings with the convention and visitors authority, the chamber of commerce, and the Nevada Resort Association. He contended "there is a consensus feeling" that Mesquite’s interests would be best served by creating a Mesquite Convention and Visitors Authority. He indicated the city is proceeding in that direction, and the LVCVA will be hearing a resolution to that effect on Tuesday, May 11, 1999. Mr. Hardy stated:

Senator Neal asked how long the committee could hold A.B. 599. Chairman O’Connell answered the committee could hold the bill until Friday, May 14, 1999.

Chairman O’Connell asked how much Mesquite contributes to the convention and visitors authority. Mr. Hardy responded the city contributes about $900,000 per year. He expressed Mesquite was contributing more than North Las Vegas, Henderson, and Boulder City combined, up until a few years ago. However, he pointed out North Las Vegas and Henderson had seats on the board, while Mesquite did not.

In response to a comment from Chairman O’Connell, Mr. Hardy noted the amendment Mesquite proposed in the Assembly would have created a full-time seat for Boulder City. He added Boulder City would also have a full-time seat on the board if Mesquite creates its own convention and visitors authority. Mr. Hardy indicated Mesquite does not wish to take Boulder City’s seat on the board.

Mr. Skancke, reiterated the LVCVA would consider Mesquite’s proposed resolution on Tuesday, May 11, 1999. He stated participation on the convention and visitors authority board is not based on contribution amounts, but on population. He asserted that method of determining participation has existed since the creation of fair and recreation boards. Mr. Skancke commented, "If you wanted to base it on gaming-revenue contributions, Las Vegas Boulevard would have all the … seats."

Mr. Skancke mentioned Mesquite contributes "a significant amount of room-tax dollars and gaming dollars to southern Nevada." He indicated Mesquite contributed about $800,000 to the convention and visitors authority in 1997 or 1998 and received $2.5 million back from the authority. He contended Mesquite and the LVCVA have enjoyed a "good working relationship."

Mr. Hardy emphasized Mesquite has never advocated that seats on the board be distributed based on revenue contributed. He maintained Mesquite appreciates the recreation grant it received from the LVCVA.

Senator Porter noted Boulder City, a non-gaming community, "encourages the cooperation we’re [we are] seeing here this morning and the continued success of the southern Nevada community."

Chairman O’Connell closed the hearing on A.B. 599 and adjourned the meeting at 3:40 p.m.

RESPECTFULLY SUBMITTED:

Amelie Welden,

Committee Secretary

APPROVED BY:

Senator Ann O'Connell, Chairman

DATE: