ASSEMBLY COMMITTEE ON GOVERNMENT AFFAIRS

MINUTES OF THE meeting

of the

ASSEMBLY Committee on Government Affairs

Seventy-First Session

May 11, 2001

The Committee on Government Affairswas called to order at 8:15 a.m., on Friday, May 11, 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. Dawn Gibbons

Mr. David Humke

Mr. Harry Mortenson

Mr. Roy Neighbors

Ms. Bonnie Parnell

Mr. Bob Price

Mrs. Debbie Smith

Ms. Kathy Von Tobel

Mr. Wendell Williams

COMMITTEE MEMBERS EXCUSED:

Mrs. Vivian Freeman

GUEST LEGISLATORS PRESENT:

Senator Ann O’Connell, Clark County Senatorial District 5

STAFF MEMBERS PRESENT:

Eileen O’Grady, Committee Counsel

Dave Ziegler, Committee Policy Analyst

Glenda Jacques, Committee Secretary

OTHERS PRESENT:

Dr. William Fisher, Vice President, UV Warning, Inc

Renee Lacey, Chief Deputy, Secretary of State

Carole Vilardo, Executive Director, Nevada Taxpayers Association

Janelle Kraft, Lobbyist, City of Las Vegas

Ron Lynn, Assistant Director, Nevada Organization of Building Officials

Thomas Grady, Director, Nevada League of Cities

Madelyn Shipman, Assistant District Attorney, Washoe County

Stephanie Licht, Lobbyist, Elko County

Senate Bill 356: Makes changes regarding filing of documents with secretary of state. (BDR 18-1206)

Senator Ann O’Connell, Clark County Senatorial District 5, explained the bill help prevent corporation theft. She had received letters from constituents explaining their corporations had been taken way from them (Exhibit C). The Secretary of State’s office had told them they were an administrative and not regulatory agency. Nevada needed to protect Nevada’s corporations.

Dr. William Fisher, Vice President, UV Warning, Inc., testified they had conducted business in the summer of 2000 and closed their bank account when their seasonal contract had expired. They tried to reopen the bank account and were told UV Warning had changed ownership. When they explained it had not, the Secretary of State’s office said they could pay another filing fee and “steal” their own company back (Exhibit D). S.B. 356 required the Secretary of State’s office to post a sign saying they were not responsible for the completeness or accuracy of any document filed in the office and advised owners of corporations to make sure their papers were correct. Changing the name of a corporation should require a notarized bill of sale. The bill needed to be stronger than it was.

Mr. Humke asked if anything had happened since he wrote the letter to Senator O’Connell. Mr. Fisher stated they had hired an attorney to sue Laughlin & Associates and the two people who appeared on the Secretary of State’s documents.

Senator O’Connell explained the original bill raised a red flag when any corporation in good standing had their corporate officers changed. Notification would be sent to the existing corporation. She felt it was Nevada’s responsibility to challenge the complete change of corporate officers. The Secretary of State’s Office had strongly opposed the bill and no protection had been provided to Nevada’s corporations.

Mr. Humke asked Dr. Fisher if his attorney had explained that corporate documents were intellectual property and similar in nature to patents. The cornerstone of patent law was the owner must police the marketplace to watch for persons infringing on their patent and proceed civilly to stop them.

Dr. Fisher asked what prevented a stranger from changing the deed to someone’s property and then selling it without his knowledge. Mr. Humke stated corporate documentation was intangible and not like a deed to real property. There was a responsibility to owning property and Nevada could not protect all people.

Dr. Fisher asked what value real estate deeds had. Mr. Humke replied a deed represented an agreement, if recorded, and Nevada had a stake in that contract. The bill did not address real estate deeds. Dr. Fisher felt an amendment should be added to require a bill of sale. Mr. Humke said he sympathized with Dr. Fisher.

Senator O’Connell felt it was inappropriate to not have protection for corporations in the state.

Mr. Price asked why Laughlin & Associates had violated the law to steal their company. Senator O’Connell explained it was permissible and that was why it was done.

Mr. Mortenson asked if the act was done accidentally or intentionally. Dr. Fisher guessed the salesman had initiated the scheme so he could get higher commissions. Laughlin was a resident agent and simply had done what they were paid to do.

Ms. Parnell asked Senator O’Connell if the bill directly or indirectly addressed the issue of nominee shareholders, directors or resident agents in Nevada. Senator O’Connell believed it did, but did not know for sure. Sierra Schools had experience the same situation when a former board member stole the school from its legal owners.

Ms. Parnell applauded the effort to address the problem.

Mr. Lee asked if problems occurred with Internet or counter filings. Senator O’Connell replied the only requirement to change corporate board members was an $85 filing fee and a new list of corporate officers. No questions were asked.

Mr. Lee wondered if tracking numbers could be added to corporate filings. Senator O’Connell replied she had not physically been to the Secretary of State’s Office but anyone could access corporate officer information.

Senator O’Connell explained the Secretary of State’s Office notified the Attorney General of stolen corporations. The Attorney General would investigate the complaints and proceed with prosecution when necessary.

Mr. Lee asked if the reported changes were done face-to-face or by mail. Senator O’Connell replied one case was done by mail and one by the resident agent.

Chairman Bache thought the old and the new owners should sign off for any change of ownership. Senator O’Connell replied the law said nothing had to be done to change ownership except to file a new form and pay a fee.

Mr. Neighbors asked if the bill was strong enough to get the job done. Senator O’Connell replied negatively. The Secretary of State’s Office had opposed the original bill, which was stronger.

Mr. Mortenson questioned what other states had done to address the problem. Senator O’Connell did not know what other states had done.

Mr. Brown asked what procedures were in the original bill. Senator O’Connell replied the original bill asked for legal documentation from the original officers that they agreed to the change.

Mr. Brown felt it would be a simple process to file an affidavit at the time of filing. Senator O’Connell felt it was common sense to address the problem when a change was filed instead of having citizens incur the cost of lawsuits.

Mr. Brown questioned if corporation changes could be done over the phone or if a written request was necessary. Senator O’Connell said most corporations filed written paperwork and did not realize changes had been done until they went to use their papers.

Mr. Brown asked if the original bill contained notification from the Secretary of State to existing corporations. Senator O’Connell replied affirmatively. The current bill was a compromise.

Mr. Brown stated the changes to corporations could not be done over the Internet because forms had to be mailed or delivered to the Secretary of State’s Office. Senator O’Connell replied the Secretary of State’s Office was getting a new computer system that allowed them do filings online.

Mrs. Smith was surprised the practice could be done so easily. A letter had to be present from old officers to change an account at the bank. She felt the Secretary of State should require the same documentation.

Renee Lacey, Chief Deputy Secretary of State, stated Nevada competed with 49 other states for corporate filings and anything that made the requirements more onerous might discourage business in Nevada. Nevada had the same filing requirements as several other states. The list of corporate officers, not ownership of a corporation, was the only thing that could be changed. Their office had received five or six complaints last year about incorrect filings. The change to Mr. Skalkotos’ company (Exhibit C) was due to a clerical error in the Secretary of State’s Office and the mistake was corrected within one day of finding out about it. Many of the complaints were from estranged spouses who filed fraudulent lists. Every fraudulent filing was turned over to the District Attorney’s office for prosecution.

Mr. Humke asked if she felt the original bill’s fiscal note of $1.893 million for the current fiscal year and the following year was correct. Ms. Lacey replied the fiscal note had been reduced with the bill’s revision.

Mr. Humke asked if the fees generated from the Secretary of State’s Office went into the General Fund. Ms. Lacey replied affirmatively, except for expedited services that went into the Special Services Fund. Any excess over $2 million went into the General Fund at the fiscal year’s end.

Mr. Humke asked if the original bill would have affected the state’s budget. Ms. Lacey answered affirmatively.

Mr. Humke asked about the competitive nature of corporate filings within the 50 states. Ms. Lacey stated they competed with other states to attract business and revenues to Nevada. Nevada had marketed itself as a business-friendly environment. An increase of one percent of the market share would generate an additional $1 million to the budget. Delaware had business-friendly laws with courts and case law supporting business. Many states had enacted laws similar to Nevada’s to attract business and become more business-friendly.

Mr. Humke stated corporations had $125 initial filing fees and annual officer listing fees of $85. He asked when the fees had last been increased. Ms. Lacey did not know.

Mr. Humke replied it was the job of the Secretary of State to hold down the cost of filing fees and increase revenue through increased filings. Ms. Lacey replied affirmatively.

Mr. Humke stated Nevada had liberal incorporation statutes and minimal requirements for capital assets. He felt any change to corporate business laws could have tremendous public policy impact.

Mr. Mortenson felt the Secretary of State could attract business if they could guarantee changes to corporations required proof. He agreed with Senator O’Connell the process needed to be changed.

Ms. Berman asked if anyone in the Secretary of State’s Office had researched how Delaware handled similar situations. Ms. Lacey replied the deputy for commercial recording had called several states and found that Delaware had the same procedure as Nevada. Anyone who filed fraudulent filings would be capable of filing other fraudulent documentation.

Ms. Berman asked if other states had experienced similar problems. Ms. Lacey did not know how prevalent it was in other states. Ms. Berman wanted to know if the practice was happening in other states. She questioned whether computer files could show changes done in the previous 30 days. Ms. Lacey did not know if the system was capable of that but would ask the technology administrator. The new system expected by the end of the year would be capable of document imaging and show actual papers filed in the Secretary of State’s Office.

Chairman Bache asked if a simple amendment should be added to authorize the Secretary of State to set up acceptable procedures for document changes. Ms. Lacey did not know what documentation would satisfy the concerns of the public and the competitive nature of Nevada.

Mr. Brown asked what the concerns of the resident agent were. Ms. Lacey replied they did not want to force corporations to go to other states with less stringent requirements.

Mr. Brown felt that any change could be e-mailed to the resident agent and they would be responsible for notifying their clients of changes. He did not feel an affidavit would accomplish anything. They wanted to prevent fraudulently signed documents and more documentation would not solve that.

Mr. Neighbors felt something should be done by regulation. He asked what the $4 million fiscal impact was for. Ms. Lacey recalled an additional staff of eight to ten employees would be needed to review filings and return documentation for correction. Their current staff handled over 180,000 annual lists per year and they would not be able to accomplish the additional responsibilities of the bill.

Mr. Neighbors was disappointed more detail had not been presented to outline where the fiscal impact came from.

Mrs. Smith did not understand why the bill did not address the changing of corporate officers. She suggested the corporation produce a letter of officers to simplify the process. She did not feel it was appropriate for original owners to monitor their corporation and repay fees to get their corporation back.

Ms. Lacey clarified the annual list could change corporate officers. Discrepancies were turned over to the courts to determine who the rightful owners were. Any person who submitted a fraudulent list would also submit fraudulent documentation. It was a felony to fraudulently change an annual list and the general public did not participate in that kind of behavior.

Mrs. Smith did not think a small piece of information added to the annual list made Nevada “unfriendly” to new businesses.

Ms. Parnell supported the Secretary of State’s Office and encouraged additional money to upgrade their computer system. She asked if the original language of S.B. 356 referenced the nomination of shareholders or officeholders. She believed it was wise to put safeguards in place so the business-friendly environment of Nevada was not perceived as being negligent.

Mr. Humke stated he served as a resident agent for several corporations and did not stand to gain or lose monetarily by the bill.

Mr. Brown asked how many corporate officers changed their lists annually. Ms. Lacey did not know but would get the information to him.

Mr. Mortenson felt it would be easy to send notification to the corporations that had changed their annual list filing.

Mrs. Smith was of the opinion that the Secretary of State could monitor corporations that changed names or addresses.

Chairman Bache said it would be simple to enact regulations to monitor changes that were questionable. He did not want to micromanage the Secretary of State but felt giving them authority to enact regulations might address the problem.

Chairman Bache closed the hearing on S.B. 356 and opened the hearing on S.B. 123.

Senate Bill 123: Makes various changes concerning municipal obligations and procedures of debt management commissions. (BDR 30-699)

Carole Vilardo, Executive Director, Nevada Taxpayers Association, stated the bill came from the Committee on the Distribution of Taxes and had two parts. The first part dealt with encroachment. According to property tax statutes, an entity is allowed 106 percent of revenue over the prior year of the maximum allowed revenue. A local government could set up a 70-cent operating rate with a maximum allowed operating rate of 75 cents. The 5-cent difference was reserved for the local government. A county bond issue might result in a 4-cent change and could take the jurisdiction’s reserve money. The bill established a mechanism to notify entities that were having their taxes encroached upon by a party that wanted the operating override. An agreement would be negotiated, signed, and presented to the local Debt Management Committee. The process would be formalized.

The second part allowed the Debt Management Commission to look at all tax rates above the 75 percent cap. Any jurisdiction that needed additional considerations above the cap would be looked at on a priority basis by the commission. The priority issues were school, health and public safety. Capital plans could only be changed twice a year so the Debt Management Commission could make judgment evaluations. The Debt Management Commission had the ability to approve, modify or deny additional taxes.

Mr. Neighbors asked about legislation that had been presented before to allow schools the ability to bond above the cap. Ms. Vilardo replied the White Pine School District was allowed to buy down a property tax rate. The Seventieth Legislative Session changed the provision for non-school entities.

Vice Chairman Lee asked if municipalities would be able to initiate the bill with an effective date of July 1, 2001. Ms. Vilardo stated the effective date was acceptable because currently there were no issues that needed to be approved or disallowed. In July, all capital plans would be presented by the jurisdictions and the Debt Management Commission would set discretion levels. The priorities would be established then.

Vice Chairman Lee asked for definition of the Debt Management Commission. Ms. Vilardo replied the Clark County Debt Management Commission had eleven members, met monthly, and was the largest in the state. Several smaller entities had five members on their commissions. Elected officials were on the commission and represented specific areas. Two public members of the Washoe and Clark commission were required to have public financial administration, accounting, banking, or some specific background that gave them the expertise to evaluate the proposals that came before the commission. Washoe County met quarterly and counties with populations under 100,000 met as needed. Public members served two-year terms and elected officials were appointed annually. When capital reports were received the financial advisor and bond counsel gave input on issues. The Debt Management Commission voted on the viability of each issue and made no value judgment on projects. The commission evaluated money and sources available to pay the debt. The meetings were public noticed meetings and had a public forum for discussion.

Janelle Kraft, Lobbyist, city of Las Vegas, supported the bill and urged its passage.

Vice Chairman Lee closed the hearing in S.B. 123 and opened the hearing on S.B. 163.

Senate Bill 163: Makes various changes to provisions relating to enforcement of building codes by cities and counties. (BDR 22-240)

Ron Lynn, Assistant Director, Nevada Organization of Building Officials, stated the bill provided minimum standards and certification for building officials, plan examiners and inspectors. Inspectors in NRS 645D.100 were excluded. The bill had an effective date of October 2007 so employees could obtain certification or resign. The bill affected counties of 100,000 or more.

Mrs. Smith asked why building inspector was left in Section 16 and the rest of the bill had been changed to building “official.” Mr. Lynn replied the Legislative Counsel Bureau had proposed that to address inspectors of commissions and not building inspectors who regulated construction. The building inspector was an investigative position.

Mr. Lee asked who the person was that checked for shoddy workmanship in Section 13, subsection 2. Mr. Lynn stated the plans inspector notified the building official of violations and the inspector gave the citations. The building official centralized investigations.

Mr. Lee asked who the classified building inspector was in Clark County. Mr. Lynn replied the only building inspector in Clark County was Mr. Weber. Mr. Lee asked if Mr. Weber could delegate his authority if he left the area or retired. Mr. Lynn replied affirmatively.

Ms. Berman asked who paid for continuing education requirements in Section 3, subsection 3(a). Mr. Lynn replied it was up to the local jurisdictions. Clark County paid for the education requirements that were modeled after the national program.

Ms. Berman asked what the minimum educational requirements were to hold the office. Mr. Lynn replied each jurisdiction established the qualifications through their human resources department. Generally, it was a combination of education and contracting experience.

Ms. Berman asked if a contractor’s license was required. Mr. Lynn replied negatively. It might be more appropriate to have an engineer or architect license. A contractor license was sometimes very specific and a building official regulated a wide-range of buildings from high-rise casinos to room additions or swimming pools. The spectrum might require specific education.

Ms. Berman asked if an Associate Degree was acceptable with continuing education. Mr. Lynn replied affirmatively.

Mr. Lee asked if the bill should affect counties experiencing growth but were not at the population threshold. Mr. Lynn replied Section 3, subsection 4, allowed smaller counties to adopt resolutions to address the building issues in their areas. Mr. Lee stated that it was an important issue that needed to be addressed by all counties in Nevada.

Mr. Neighbors liked the permissive language of the bill for the rural counties.

Thomas Grady, Director, Nevada League of Cities, stated smaller counties had objected to the original bill’s diverse building projects. Some smaller counties had only two or three remodeling projects per year and did not employ full-time building inspectors. They were happy with the new changes and the flexibility given them.

Mr. Lee felt smaller counties that had growth influxes needed to increase their knowledge and expertise in building construction.

Mr. Grady was pleased the Department of Buildings was willing to work with rural areas to bring the safety of their structures up to the state’s standards.

Madelyn Shipman, Assistant District Attorney, Washoe County, introduced a proposed amendment (Exhibit E) that stated building officials did not enforce zoning and zoning officials did not have to be certified. The bill required certification of building and plan officials in larger counties.

Stephanie Licht, Lobbyist, Elko County, supported the bill in its revised form and appreciated the future effective date for compliance.

Chairman Bache closed the hearing on S.B. 163 and opened the hearing on S.B. 123.

ASSEMBLYMAN LEE MOVED TO DO PASS S.B. 123.

ASSEMBLYMAN PARNELL SECONDED THE MOTION.

THE MOTION CARRIED UNANIMOUSLY BY THOSE PRESENT.

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Chairman Bache opened the hearing on S.B. 163.

ASSEMBLYMAN LEE MOVED TO AMEND AND DO PASS S.B. 163 WITH THE PROPOSED AMENDMENT FROM MS. SHIPMAN.

ASSEMBLYMAN HUMKE SECONDED THE MOTION.

THE MOTION CARRIED UNANIMOUSLY BY THOSE PRESENT.

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Chairman Bache opened the hearing on S.B. 471.

Senate Bill 471: Makes various changes concerning adjutant general. (BDR 36-1347)

Mrs. Gibbons stated the Adjutant General and the Governor had agreed to delete the three-year state residency requirement. Five states had passed similar legislation and three of them were attempting to remove the requirement.

ASSEMBLYWOMAN GIBBONS MADE A MOTION TO DO PASS S.B. 471.

ASSEMBLYMAN HUMKE AND ASSEMBLYMAN NEIGHBORS SECONDED THE MOTION.

Mr. Mortenson asked if there was a rule for incorrect testimony presented before legislative committees. Chairman Bache replied there were several statutory citations regarding testimony that was part of the standing rules.

Mr. Price stated his wife was a member of the National Guard and he would be voting.

Ms. Parnell would be voting against the bill because she felt the legislation had been brought forward to help a select few individuals.

Mr. Lee replied he was uncomfortable with the bill’s six-year requirement and would be voting no also.

THE MOTION CARRIED BY THOSE PRESENT WITH ASSEMBLYWOMAN PARNELL AND ASSEMBLYMEN LEE AND NEIGHBORS VOTING NAY.

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Chairman Bache opened the hearing on S.B. 61 that provided design-build provisions for public works.

Senate Bill 61: Makes various changes to provisions relating to use of design-build teams on public works projects. (BDR 28-99)

Ms. Parnell explained the bill extended the use of design-build provision to the smaller counties and no one had spoken in opposition to the bill.

Chairman Bache stated two proposed amendments from Nevada Department of Transportation (NDOT) had been proposed and he preferred the seconded one that amended Section 14, subsection 2 with “except as otherwise provided by NRS 338.1389.”

ASSEMBLYMAN BROWN MOVED TO AMEND AND DO PASS S.B. 61.

ASSEMBLYWOMAN PARNELL SECONDED THE MOTION.

THE MOTION CARRIED UNANIMOUSLY BY THOSE PRESENT.

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Chairman Bache opened the hearing on S.B. 63 and reminded the committee there was a contractor’s board amendment presented.

Senate Bill 63: Makes various changes to provisions relating to bidding on and awarding contracts for public works projects. (BDR 28-754)

Dave Ziegler, Committee Policy Analyst, stated the amendment presented by Margi Grein of the State Contractor’s Board changed Sections 2, 4 and 5. Section 2 allowed a specialty contractor to bid on projects where the majority of the work was his specialty. Section 3 was deleted and Section 4 allowed local governments to award contracts to specialty contractors if the majority of work was done in his specialty. Section 5 defined specialty contractors.

Mr. Brown felt the two different definitions of specialty contractor in the bill should be combined for clarification purposes. He was content the existing definition was a good one.

Eileen O’Grady, Committee Counsel, stated the definition in subsection 12 and NRS 624 could be combined in the bill.

ASSEMBLYMAN BROWN MOVED TO AMEND AND DO PASS S.B. 63 WITH MS. O’GRADY’S DEFINITION SUGGESTION.

ASSEMBLYMAN LEE SECONDED THE MOTION.

THE MOTION CARRIED UNANIMOUSLY BY THOSE PRESENT.

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Chairman Bache opened the hearing on S.B. 329 and asked Mr. Zeigler to provide testimony on the bill.

Senate Bill 329: Prohibits certain public bodies from taking action by vote without affirmative vote of majority of entire public body. (BDR 19-640)

Mr. Zeigler stated Assemblyman Parks had asked for clarification whether the bill applied to school boards or Board of Regents. Research had determined the provision was already in the school board statute and the Board of Regents was not addressed in statute. He felt the Board of Regents was a “public body” of Section 1 and was covered by the bill.

ASSEMBLYMAN PRICE MOVED TO AMEND AND DO PASS S.B. 329 WITH THE CONFLICT AMENDMENT.

ASSEMBLYMAN LEE SECONDED THE MOTION.

Mr. Price stated he had recently received a copy of the Board of Regent’s minutes where they stated the “Legislature could not tell them what to do.” He disagreed with them and wanted it on the record.

Chairman Bache explained they had to amend the bill because of the conflict amendment and were not substantially changing the bill.

THE MOTION CARRIED UNANIMOUSLY BY THOSE PRESENT.

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Chairman Bache opened the hearing on S.B. 554 and asked Mr. Zeigler to review the bill.

Senate Bill 554: Makes various changes concerning land use planning. (BDR 22-322)

Mrs. Smith asked about Section 1, subsection 3, and the proposed compensation for Planning Board Commission members. She supported just compensation but was concerned about making their compensation higher than that for school board members. She felt $80 was fair and consistent.

Chairman Bache stated $80 was a standard and he would not have a problem with amending the bill.

Ms. Shipman stated they agreed with the proposed change.

ASSEMBLYWOMAN SMITH MOVED TO AMEND AND DO

PASS S.B. 554 WITH THE $80 COMPENSATION CHANGE.

ASSEMBLYMAN NEIGHBORS SECONDED THE MOTION.

Mr. Zeigler reminded the committee that an amendment had been presented on the day of the hearing from Mike Harper of Washoe County that changed page 2, lines 23 through 25 to read “. . . the governing body may charge a fee for the cost of the appeal . . .” and it referred to frivolous appeals.

Ms. Shipman stated she had spoken to Mr. Harper and they did not want to have the responsibility to decide what appeals were frivolous. They already had the ability to charge fees for filing appeals. She suggested a period be placed after “. . . governing body” and the remainder of the language removed.

Chairman Bache asked Mrs. Smith and Mr. Neighbors if they would agree to the change.

Mrs. Smith and Mr. Neighbors agreed with the change.

THE MOTION CARRIED UNANIMOUSLY BY THOSE PRESENT.

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Chairman Bache seeing no further business adjourned the meeting at 10:38 a.m.

RESPECTFULLY SUBMITTED:

Glenda Jacques

Committee Secretary

APPROVED BY:

Assemblyman Douglas Bache, Chairman

DATE: