MINUTES OF THE meeting

of the

ASSEMBLY Committee on Government Affairs

 

Seventy-First Session

April 23, 2001

 

 

The Committee on Government Affairswas called to order at 9:00 a.m. on Monday, April 23, 2001.  Chairman Douglas Bache presided in Room 3143 of the Legislative Building, Carson City, Nevada.  Exhibit A is the Agenda.  Exhibit B is the Guest List.  All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

 

 

COMMITTEE MEMBERS PRESENT:

 

Mr.                     Douglas Bache, Chairman

Mr.                     John J. Lee, Vice Chairman

Ms.                     Merle Berman

Mr.                     David Brown

Mrs.                     Vivian Freeman

Mrs.                     Dawn Gibbons

Mr.                     David Humke

Mr.                     Harry Mortenson

Mr.                     Roy Neighbors

Mrs.                     Debbie Smith

Ms.                     Kathy Von Tobel

Mr.                     Wendell Williams

 

COMMITTEE MEMBERS EXCUSED:

 

Ms.                     Bonnie Parnell

Mr.                     Bob Price

Ms.                     Merle Berman

 

STAFF MEMBERS PRESENT:

 

Eileen O’Grady, Committee Counsel

Dave Ziegler, Committee Policy Analyst

Linda Utt, Committee Secretary

 

OTHERS PRESENT:

 

Carole Vilardo, Lobbyist, Nevada Taxpayers Association

Irene Porter, Executive Director, Southern Nevada Homebuilders Association

Marvin Leavitt, Lobbyist, City of Las Vegas

James Chachas, Hobbs Ong & Associates, Southern Nevada Home Builders Association 

 

Senate Bill 164:  Contingently authorizes purchase of municipal and revenue securities by state for improvement, acquisition and construction of facilities for certain public schools. (BDR 30-52)

 

Chairman Bache opened the hearing on S.B. 164.

 

Carole Vilardo, Executive Director, Nevada Taxpayers Association, presented testimony in support of S.B. 164.  Ms. Vilardo commented S.B. 164 enabled legislation for A.J.R. 26 of the Seventieth Session.  Ms. Vilardo explained last year Senator O’Connell and Assemblywoman Giunchigliani introduced a Senate Joint Resolution and an Assembly Joint Resolution that both performed the same function.  Schools could be financed through a state mechanism and would be exempt from state debt limits.  Primarily the resolutions provided financing for the rural area schools that had poor credit ratings and did not have money.  Ms. Vilardo remarked certain ballot questions in the past included interest rates as high as 7 percent in the rural areas; however, in Carson City, Clark or Washoe Counties, the anticipated interest rate might be lower at 5¼ percent.  Because of the sizable increase in the amount of money necessary and the amount of property tax levied, the rural areas had no flexibility with finances.  Through hearings on the bill, plus additional constitutional amendments, both Senator O’Connell and Assemblywoman Giunchigliani agreed only one bill should be processed.  Assemblywoman Giunchigliani’s bill was chosen and Senator O’Connell became a joint sponsor on the bill.

 

According to Ms. Vilardo, several individuals were uncertain as to the intent of A.J.R. 26 of the Seventieth Session.  Ms. Vilardo explained S.B. 164 took the natural resources provision that was exempt in the Nevada Constitution and added schools for the purpose of construction.  Ms. Vilardo felt the average person would not understand the intent of A.J.R. 26 of the Seventieth Session on the general ballot.  Ms. Vilardo pointed out Senator O’Connell felt enabling legislation would make it easier to explain S.B. 164 and its intent. 

 

Ms. Vilardo referred to Section 2, and indicated natural resources was exempted from the state debt limit.  To accommodate the schools, language was added in lines 8 and 9, which stated, “or for the improvement, acquisition or construction of facilities for public and elementary and secondary schools.”  Ms. Vilardo emphasized S.B. 164 would not become effective unless A.J.R. 26 of the Seventieth Session passed by a vote of the people in the November 5, 2001, general election.  Ms. Vilardo maintained with an explanation available, there would be more accurate reference regarding the intent of A.J.R. 26 of the Seventieth Session as part of the ballot explanation.

 

Ms. Vilardo pointed out another bill sponsored by Assemblywoman Giunchigliani addressed a revolving loan fund.  When property tax rates were unavailable, the revolving loan fund could help schools or acquire land for schools to be built.  Ms. Vilardo referred to an issue Mr. Neighbors was involved with in Mineral County.  With voters’ approval, other mechanisms in statute provided funding for schools on longer and favorable terms.  Concluding, Ms. Vilardo urged the committee to support S.B. 164 to accommodate an educational need relative to construction. 

 

Assemblywoman Freeman agreed with the intent of S.B. 164 and asked Ms. Vilardo how the revolving fund worked in statute.  Ms. Vilardo pointed out the revolving fund was not addressed in S.B. 164. 

 

Assemblyman Mortenson remarked he understood the basic intent of the bill accomplished two things.  It allowed the rural counties to exceed the 364 caps, and go through the state for bonding.  Ms. Vilardo responded she believed the municipal bond had a state rating.  In addition, the rural counties wanted a mechanism to make sure no debts were counted against the state cap.  Ms. Vilardo stated the reason for the other mechanism was municipal bond banks carried conditions and provisions that might not be beneficial in all circumstances. 

 

Ms. Vilardo explained the schools anticipated the revolving loan fund would allow them to acquire the lowest possible property tax.  If there was a financial problem with the revolving loan fund, it was possible to give a district another five years while still committed to making loan payments.  S.B. 164 attempted to cover all areas where schools had severe economic impacts.

 

ASSEMBLYWOMAN FREEMAN MOVED TO DO PASS S.B. 164.

 

ASSEMBLYMAN HUMKE SECONDED THE MOTION.

 

THE MOTION CARRIED BY THOSE PRESENT WITH ASSEMBLYWOMEN PARNELL AND BERMAN AND ASSEMBLYMAN PRICE EXCUSED.

 

Senate Bill 60:  Makes various changes concerning limitation on building permit fees charged by local governments. (BDR 31-232)

 

Irene Porter, Executive Director, Southern Nevada Homebuilders Association, represented S.B. 60 for the association.  Laws allowing building departments that had an Enterprise Fund were enacted in the Sixty-Fourth Legislative Session.  The laws resulted from a lack of caps on the amount a building department’s permit fees had increased by on a yearly basis.  Money from building permits was entered into the General Fund and removed from the fund by the building department.  Ms. Porter explained because of caps and money being placed in the General Fund, any excess did not benefit building departments in obtaining adequate amounts of money to hire the inspectors they needed.  Ms. Porter remarked in order to keep up with the increased amount of building permits, new inspectors were needed, particularly in southern Nevada.  In 1987, the Clark County Building Department, in cooperation with other building departments, proposed a bill to allow building permit money be placed in an Enterprise Fund.  The building department was relieved of the cap, resulting in increased building permit fees and the increase in fees allowed the county to hire staff required for the department. 

 

Ms. Porter pointed out the Enterprise Fund was “overhead” for the rest of the local governments because other departments were affected by the issuance of building permits.  The money used to operate the building department only affected the building department because it functioned as a separate entity within the local government. 

 

Ms. Porter mentioned the Clark County Building Department had used the funding method over the years and in the past year more building departments began using the Enterprise Fund method.  Ms. Porter explained when the city of Las Vegas compiled their building department Enterprise Fund several questions arose.  The law stated the Department of Taxation regulated the building department.  However, the Department of Taxation never processed regulations formed in statute during the Sixty-Fourth Session and no regulations were formed to oversee the building department.  The Homebuilders Association began working with local governments and tax people to adopt regulations.  Ms. Porter indicated after processing the regulations, the association determined it was necessary to amend the law with definitions and knowledge of their functions. 

 

Ms. Porter commented the bill had been amended in the Senate as a result of meetings with the association and Marvin Leavitt, who represented the city of Las Vegas.  One change was to the unreserved working capital in the Enterprise Fund.  Originally it had a six-month period but had been compromised to nine months. 

 

Ms. Porter referred to Section 1, page 1, which defined “building permit” and eliminated the prior definition.  Section 1, subsection 4(c), described local government maintenance of the unreserved working capital in the Enterprise Fund.  The enterprise fund could not exceed an amount equal to nine months of operating costs for the program for the issuance of building permits in local government.  Ms. Porter advised page 3 contained provisions for guidelines in relation to the fund.  Additionally, the unreserved working capital in the Enterprise Fund would have sufficient dollars to pay the debt incurred by local government.  Ms. Porter commented the fund provided services associated with issuing building permits and the amount would not exceed the total amount of expenditures for the program.  If the balance was in excess of the amount authorized it remained in an Enterprise Fund created at the close of two consecutive fiscal years.  Ms. Porter remarked local government would reduce the amount of the building permit fees by an amount sufficient to ensure the balance in the Enterprise Fund.  Ms. Porter maintained the Enterprise Fund would not “sit and build up.”  After all items were satisfied and excessive amounts remained in the fund the building, permits would need to be reduced.

 

Assemblywoman Freeman asked if there were prior cases where excessive money was returned by reducing the building permits.  Ms. Porter replied she was not aware of any case where money was returned.  However, there was one building department in which the Enterprise Fund built up a reserve over a period of years and the excess was used to pay for a new inspection division building.  Ms. Freeman questioned how the fund was administered. 

 

Mr. Marvin Leavitt, city of Las Vegas, responded to Mrs. Freeman’s question and stated the fund appeared in a separate fund on the books and was the entity seeking the building permits, regardless if it was the city or county. 

 

Assemblywoman Freeman asked if all parties were in agreement on S.B. 60.  Ms. Porter replied to her knowledge the local governments that testified in the Senate had reached agreement on the bill. 

 

Assemblyman Neighbors referred to Section 1, subsection 7, lines 25 through 32, regarding the language “shall reduce the building permit fees it charges.”  He questioned what would happen if permits were reduced and the fund fell requiring an increase in fees.  Ms. Porter responded the local government would amend the building permit fees and increase fees similar to the private sector.  Ms. Porter asserted large excesses of money in the fund would not be allowed to build up.

 

Mr. Leavitt stated one of the reasons for the nine months of operating costs was so the building department could work for nine months with no revenue.  Mr. Leavitt noted the department could function over a two-year period with lowered permit fees.  If the department recognized a need for a change in fees, the bill in its present form provided the protection of local government. 

 

Ms. Porter emphasized S.B. 60 was not mandatory on any local government.  Local governments would still retain the option of operating their building department funds in a traditional manner or choosing to use the Enterprise Fund.

 

Assemblyman Mortenson questioned the definition of “current assets” on page 2, lines 1 through 4:  “consumed or converted into cash during the next ensuing fiscal year.”  Mr. Leavitt replied an example could be accounts receivable.  If an individual owed someone money and it was anticipated the money would be paid, it would be considered a “liquid asset.”  Mr. Leavitt had suggested amending that portion of the bill to conform closer to the normal accounting definition of an “asset” when the parties proposed amendments during the Senate hearing. 

 

Assemblyman Lee announced he was not aware the Nevada Tax Commission was involved in the process of raising or lowering permit fees and considered it a level of “overview.”  He questioned what transactions would take place between the contractor and the government.  Ms. Porter replied the local government controlled all departments and divisions including the finance department and budgeting process, and was still part of the standard budgeting process.  Ms. Porter maintained it was a different way of accounting since the money in the Enterprise Fund was for accounting purposes and for purposes of budgeting.  Mr. Lee expressed concern on page 2, line 35, which stated, “shall exempt the local government from the limitation on the increase of its building permit basis if . . .” and questioned if they would no longer be responsible for the local government should an Enterprise Fund be created.  Ms. Porter responded the language was written in the original statute in 1987.  She explained the exemption applied to the caps placed on the amount they could annually increase the building permits by.  Mr. Leavitt clarified the building Enterprise Fund clearly showed where all the money was located and at the same time was exempt from the caps.

 

Mr. Lee referred to subsection 7, lines 27 and 28, which stated, “the local government shall reduce the building permit fees” and asked if the county commission would force the reduction on a building department for contractor fees.  In addition, he questioned if the Nevada Tax Commission would process the reduction if the fund grew too large.  Ms. Porter responded it was the local government’s business to reduce the permit fees but only if there was excess money for two consecutive fiscal years. 

 

Ms. Porter pointed out in the last ten to twelve years Clark County’s building associations had worked with industry to control permit costs.  Ms. Porter explained the building associations were not aware of large accumulated reserve fees because they were used to build the inspection department.  Ms. Porter remarked there were times when all of the building departments had no increase in their building permit fees over a period of several years.

 

Assemblywoman Parnell pointed out that subsection 7 referenced “two consecutive years,” which placed a safeguard in the proposal. 

 

Assemblyman Lee asked if the excess money could be used for upgrades in county commission offices to keep rates from decreasing, and how much money could be used to maintain the level to avoid an increase in rates.  Mr. Leavitt emphasized the logic behind the Enterprise Fund was to account for building permit operations.  If permits were issued and the money was placed in the Enterprise Fund, the only charges to the fund could be those related to the operation of the building department.  The salaries of the city council would not be charged to the Enterprise Fund.  The use of the fund was restricted to the charges related to the building department.  Mr. Leavitt explained, “A building permit basis was the combination of the valuation of the building permit times the rate to be charged and could not be increased at a rate greater than the Consumer Price Index (CPI).” 

 

Mr. Leavitt said in lieu of the “building permit basis formula” local governments could establish an Enterprise Fund.  The money received from building permits and inspections was applied against the fund.  The operating expenses were held for nine months over and above the net of the working capital for two consecutive years and if there was an overage the fees would be reduced. 

 

Assemblyman Lee was concerned the parking lot used by contractors would be repaved from money in the Enterprise Fund.  In his opinion, the money collected could be used for any renovation that had to do with contractors. 

 

Ms. Porter pointed out she had been involved with the building association for 35 years and what Mr. Lee stated could happen.  When the money was placed in the General Fund the building departments requested money to adequately operate their divisions.  In the past, Ms. Porter mentioned if building permit fees totaling $5 million had been collected, there was the possibility only $1 million would be used for the building department and the rest would be used in the General Fund.  Ms. Porter stressed the $4 million might be used for parks, police, and fire, or wherever the council allocated the funds.  With the Enterprise Fund they could directly apply the amount of money raised for the operation of the building department.  Ms. Porter indicated it was “true money” that could be used for computers or to purchase vehicles for inspectors but would be designated only to the building department. 

 

James Chachas, Hobbs Ong & Associates representing the Southern Nevada Home Builders Association, spoke in support of S.B. 60.

 

Carole Vilardo, Executive Director, Nevada Taxpayers Association, stated she supported S.B. 60 because it provided clarification that was originally missing.  Ms. Vilardo responded to Assemblyman Lee’s concern over the increase in the building permit fees and explained the percentages began in 1981, with business license and building permit fees and was capped to the amount of the Consumer Price Index (CPI).  In the Sixty-Fifth Session the statute was rewritten and the provisions and permit fees were capped at 80 percent of what the CPI was for each category.  Ms. Vilardo concluded both business license and building permit fees were changed. 

 

Chairman Bache closed the hearing on S.B. 60.

 

ASSEMBLYMAN NEIGHBORS MOVED TO DO PASS S.B. 60.

 

ASSEMBLYMAN HUMKE SECONDED THE MOTION.

 

THE MOTION CARRIED UNANIMOUSLY.

 

Chairman Bache adjourned the meeting at 10:05 a.m.

 

RESPECTFULLY SUBMITTED:

 

 

Linda Utt

Committee Secretary

 

APPROVED BY:

 

 

                       

Assemblyman Douglas Bache, Chairman

 

DATE: