MINUTES OF THE meeting

of the

ASSEMBLY Committee on Ways and Means

 

Seventy-First Session

February 7, 2001

 

 

The Committee on Ways and Meanswas called to order at 7:38 a.m., on Wednesday, February 7, 2001.  Chairman Morse Arberry Jr. presided in Room 3137 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.                     Morse Arberry Jr., Chairman

Ms.                     Chris Giunchigliani, Vice Chairwoman

Mr.                     Bob Beers

Mrs.                     Barbara Cegavske

Mrs.                     Vonne Chowning

Mrs.                     Marcia de Braga

Mr.                     Joseph Dini, Jr.

Mr.                     David Goldwater

Mr.                     Lynn Hettrick

Ms.                     Sheila Leslie

Mr.                     John Marvel

Mr.                     David Parks

Mr.                     Richard D. Perkins

Ms.                     Sandra Tiffany

 

COMMITTEE MEMBERS ABSENT:

 

None

 

STAFF MEMBERS PRESENT:

 

Mark Stevens, Fiscal Analyst

Steve Abba, Principal Deputy Fiscal Analyst

Mike Chapman, Program Analyst

Kathryn Fosnaugh, Committee Secretary

 

 

 

COMMISSION ON ECONOMIC DEVELOPMENT, BUDGET PAGE ECON DEV AND TOURISM - 1

 

Chairman Arberry announced the committee would undertake a review of Budget Account 1526, Commission on Economic Development.

 

Bob Shriver, Executive Director of the Nevada Commission on Economic Development (NCED), identified himself for the record.  He then introduced Karen Baggett, Deputy Director; Margene Stenger, Account Clerk Technician II; Tina Tomasco, Operations and Finance Manager.   He also introduced the representatives from each budget account to be addressed, Charles Geocaris, Director, Nevada Film Office; Audrey Allan, Program Director, Rural Community Development; Roger Tokarz, CCAS, Director, Procurement Outreach Program; and Jeanie Ashe, Marketing Director.

 

Mr. Shriver addressed Budget Account 101-1526, referred the members to Exhibit C and explained the different sections within the NCED which included the following:

                       

·        Business Development and Research Group

·        Rural Community Development

·        Marketing Program

·        Made in Nevada Program

·        Special Projects

·        Global Trade and Investments

 

 

The Business Development and Research Group was responsible for answering questions concerning economic, business and location issues.  Mr. Shriver explained that the department was usually the first department contacted from agencies outside of Nevada, in order to learn about Nevada's regions, cities and communities.  Information offered to the agencies included tax information, labor availability costs, transportation, and quality of life issues. 

 

During the last two years when leads were received about new business recruitment inquiries, the inquiries were forwarded to one of 13 Development Authorities in Nevada. A list of these Development Authorities was provided in Exhibit C.  Some of the counties involved were Clark, Washoe, Churchill, and Lyon.  Most of the Development Authorities were public/private partnerships and they resulted in 12,728 new primary jobs.  The partnerships included 176 new primary companies in Nevada, which received their income outside of their economic region.  Those primary industries were not retail/wholesale, rather they imported new dollars into Nevada. 

 

Mr. Shriver stated that the Business Development and Research Group also collaborated with other state agencies and had acquired an analyst tool, Regional Economic Modeling Inc. (REMI).  REMI was a nationally-known program.  REMI enabled the group to analyze the impact that a company might have on a community.  It was a very successful program, especially for county commissioners and others that had incentive issues about companies that might come into their area. 

 

Mr. Shriver referred to the Biennial Report of Incentive Activity, Exhibit C, andadvised the committee that the Nevada Commission on Economic Development  (NCED) would be testifying February 8, 2000, before the Joint Senate and Assembly Taxation Committees on their entire incentive program. 

 

In summary, Mr. Shriver stated that the Business Development and Research Group handled initial inquiries of new prospects and passed the information to Development Authorities.

           

Mr. Shriver continued his testimony with an explanation of the Rural Community Development program.  He stated that it was more difficult to recruit new businesses in rural Nevada.  Therefore, the focus in the rural areas was with existing businesses and helping them help themselves.  In order to do this a statewide study on rural telecommunications had been initiated.  He felt that telecommunications was critically important for long-term success in connecting the rural companies with the rest of the world as well as enabling residents of rural communities to stay in their community and contribute economically. 

 

Mr. Shriver stated that the group reviewed the Rural Nevada 2000 plan and formed a new plan called Building Prosperity: An Action for Rural Nevada.  Eight workshops were held in different rural areas in Nevada.  The workshops consisted of 125 individuals living in rural communities from around the state.  The workshops culminated in a session held two weeks ago in Carson City.  Ongoing plans and objectives were set.  The workshop had a tremendous turnout and affected various agencies of the federal government, state government, local communities, businesses, utilities, etc. which in turn affected rural Nevada.  The final plan would be completed in FY2001 with a mobilization workshop in order to carry out the goals of the plan.

 

Mr. Shriver then discussed the Marketing Program.  The program “oversees the marketing, advertising, and public relations programs that are designed to promote all elements relating to economic development and diversification efforts."  Advertising and promotional material were produced in various forms including print, radio, and video.  The promotional material was then displayed at domestic and foreign trade shows.  Publications that were very costly were replaced with the NCED's newly developed Web site.  The address to that Web site was www.expand2nevada.com and provided information about all of NCED’s programs as well as providing links to other related agencies.  Some of the agencies linked were the Department of Business and Industry; Department of Employment, Training and Rehabilitation; Secretary of State; and Department of Taxation.  The Web site gave information regarding all aspects of doing business in Nevada, as well as answers to quality of life questions. 

 

Mr. Shriver told about a new marketing strategy which used brochures for each individual NCED program and targeted various industries.  All of the brochures and other printed materials directed readers to the Web site.  Industries targeted included medical manufacturing, electronics, and plastics.  Those industries were targeted mostly at trade shows during the last biennium.  At the trade shows, NCED acted as a host for Nevada.  The state was responsible for making all arrangements for the trade shows, including having representatives from NCED attend as well as inviting regional Development Authorities, and other local private industries.   The trade shows then enabled interested businesses to talk to local businesses for more information and a local viewpoint. 

 

Mr. Shriver introduced a new program, Made in Nevada, which was an extension of the marketing plan.  The program’s purpose was to create a demand for Nevada products and industries.  Another purpose of the program was to create a network between businesses and support services throughout the state.  The network enabled Nevada businesses and support services to help each other grow and prosper.  The program was a partnership between NCED, the Manufacturing Assistance Partnership (MAP) and National Institute of Standards and Technology-Manufacturing Extension Program (NIST-MEP).  During the past two years the Made in Nevada program had expanded from 30 to 40 companies to more than 250 companies and was continuing to grow.  Made in Nevada was listed on the Web site and when clicking the site, the companies involved were listed for the viewer.  Major Nevada newspapers have reported on this program and Nevada radio stations have aired public service spots.

 

Explaining the Special Projects section of NCED, Mr. Shriver said that part of the marketing program included the Governor’s Industry Appreciation lunches.  The lunches were held twice a year, once a year in southern Nevada and once a year in northern Nevada.  Honored at the lunches were new primary industries. In  northern Nevada the mining industries were included.  Also honored were the film industries, exporter of the year, and the inventor of the year.  The lunches reflected what was going on in Nevada during the past year. 

 

Mr. Shriver advised that the Governor also had the Economic Development Conference, which was part of the Special Projects group.  The conference alternated between northern and southern Nevada.  Last year the conference was attended by more than 1,000 people wanting to learn more about helping Nevada grow in diversification as well as economically. 

 

Mr. Shriver shared the last area under NCED called the Global Trade and Investment program.  The program helped Nevada businesses learn about exporting.  The program provided a forum for the exchange of ideas on global trading.  The exchange of those ideas came from seminars, roundtables, and export counseling.  The program also scheduled appointments for foreign trade delegations, business representatives and trade missions, as well as business representatives, buyers, and potential partners.  The program provided assistance and research on business, political, and social issues in other countries and conducted foreign trade shows and trade missions. 

 

Mr. Shriver reported that during the past biennium, the Global Trade and Investment program generated more than $200,000 in federal grant money that helped Nevada companies generate over $5,000,000 in new export sales.  Nevada companies also expanded their economic connections bilaterally through an honorary consulate program.  Mr. Shriver announced there would be a meeting of the consulate group in Carson City on February 21, 2001, at the Legislative Building.  Relationships have also been developed with consulates in San Francisco, California, and Los Angeles, California.  It was Mr. Shriver’s opinion that the consulate program was a great connection, economically as well as for tourism. 

 

Mr. Shriver stated the NCED was not requesting any maintenance funds, only two “small enhancement” requests.  The first request was for $20,000 to maintain and improve their Internet presence.  Mr. Shriver said that the Internet was the gateway to Nevada for many companies, as well as individuals, and the money requested would help keep the Web site updated and fresh. 

 

Mr. Marvel asked Mr. Shriver what the criteria was for tax incentives and if the criteria had been updated.  Mr. Shriver answered that last year the criteria were consolidated to one statute area, Nevada Revised Statutes (NRS) 360.750.  The difference in criteria was primarily between rural and urban areas.  The capital investments for the jobs vary. 

 

Mr. Marvel asked what the hourly minimum wage was to receive a tax incentive.  Mr. Shriver replied that it was $14.61, explaining that the amount was the average wage that a company must pay in order to receive a tax incentive.  It was, however, made clear by the commissioners that this was just an opening wage.

 

Mr. Marvel asked how far out the incentive extended.  Mr. Shriver answered that the tax incentive was basically just offered as part of the original capital equipment investment.  Mr. Shriver added that a personal property tax abatement was offered that extended for ten years.  That was offered only with the concurrence of the affected local government. 

 

Mr. Marvel expressed concern that this incentive program might hurt Storey County due to their major capital investment and the big hits on their ad valorem tax.  Mr. Shriver replied that without the incentives, companies might not be coming to Storey County anyway, so what was given up was fairly minor over a period of time.  Mr. Shriver explained that before a tax incentive was authorized, approval must have been received by the local government. 

 

Mr. Marvel asked Mr. Shriver if he felt that the high-tech centers being built would have a positive effect on economic development.  Mr. Shriver clarified that the high-tech centers mentioned were the collaboration of the community college, and that the answer was yes.  A technological strategic study plan of Nevada had recently been completed and the study showed that one of the most critical issues a company looked for when coming to a state was the work force.  The high-tech centers would help Nevada residents develop a more skilled work force, because of the ability to understand the newer technology. 

 

Mrs. Chowning referred to the performance indicators, specifically in regards to the international programs and businesses.  She stated that although the projection of export trade was 83 businesses for FY2000, in actuality there had been 58 businesses and the projection for FY2001 was for 40 businesses.  She stated correspondence she received had indicated that this projection put our state in a low status statistically along with other states such as Nebraska.  She did not understand why Nevada was not doing a better job in interesting business in the export and trade areas, when it had so much to offer.  Mrs. Chowning stated that with the $125,000 grant and the projected $2.5 million sales to be generated from export it wasn’t clear how Nevada was doing a better job.  She wanted to know how NCED was going to do a better job in promoting international trade. 

 

Mr. Shriver replied that Nevada was not a manufacturing-based state.  He explained that exports were directly related to the amount of manufacturing in a state.  Most of Nevada’s exports were related to its mining industry.  Most of Nevada businesses were family owned and small.  NCED was trying to alleviate small businesses' fears of delving into the export area.  The Made in Nevada program was helpful in this area.  They were helping small businesses to get federal contracts.  The Western United States Agricultural Trade Administration helped get the grants. One grant that was used last year was in the agricultural area and was for food additives.  One grant was given to a business in the Henderson area.  A new request had been submitted for an environmental initiative grant.  Mr. Shriver indicated that he knew of at least six to eight companies that could use the money from this grant and it should open up some markets. 

 

Mr. Shriver admitted that sometimes the ideas put down on performance projections were ambitious, NCED realized that they had to step back and start over.  They recently hired a new global trade director, Alan DiStefano, who had previously worked in private industry in global trade.  He had been on the job, in Nevada, about a year and they were seeing accelerated results; Mr. Shriver was very optimistic.  He explained that Canada and Mexico were key trading partners and he thought that there would be a major initiative in Mexico this year as well as in the Asian markets.  He was hopeful that word would get out to more small businesses of opportunities available to them.  He said a lot of this just required coordination, and with the help of the Made in Nevada program they would see the benefits and more companies would be added. 

 

Mrs. Chowning stated that the actual number of businesses asking for assistance last year was 58 and the projection for FY2001 was 40. She wondered if the 58 businesses were just a fluke and only brand new businesses. 

 

 

Karen Baggett, Deputy Director of NCED, referred to Exhibit C and discussed some of the companies who have worked with the Global Trade Program and have attended overseas trade shows.  She gave as an example, Winnemucca Farms.  She said that she approved a crockpot to enable the company to cook and serve mashed potatoes while at the trade show.  The approval of the $10 investment for a crockpot turned a $200,000 profit for Winnemucca Farms.  She gave as another example New Life Market, a Carson City bakery.  They had attended several trade shows, including one in Singapore, and received $1 million in sales and were projecting $2.5 million in sales in the near future.

 

Mrs. de Braga asked if any of the bans on genetically altered foods had been lifted for European trade.  Mr. Shriver stated that as far as he knew, the answer was no.  The federal government was trying to educate people.   He explained that the people who shipped the exports were aware of the rules and shipped accordingly. 

 

Mrs. de Braga asked if anything was being done to educate the trade market as to which additives were or were not harmful.  Mr. Shriver explained that, to the best of his knowledge, that area was being left up to the United States Department of Agriculture’s (USDA) outreach program.  He said that it was a political issue, not nutritional issue, and had been a frustrating problem. 

 

Mr. Shriver continued to discuss the second enhancement request.  The request was for a State Environmental Initiative Grant (SEI) from the US-Asian Environmental Partnership (USAEP), a unit of the United States Agency for International Development (USAID).  This was a $150,000 matching grant.  Funds to match the grant would be acquired from public and private companies, including the Desert Research Institute (DRI), part of the University and Community College System of Nevada (UCCSN).  The DRI was the lead environmental agency in the United States in air quality.  NCED was requesting that the state contribute $25,000. 

 

Mr. Shriver explained that the USAID had state departments around the country.  He stated that although the NCED had never done much to help Nevada’s environmental companies export, they were hoping to help remedy that with the grant money.  NCED would be able to assist the companies create markets for their products.  Marketing would be pursued in Asia and Southeast Asia where they were in need of safe water and good air quality for their citizens.  This was an opportunity where the federal government had taken the lead. 

 

Mr. Shriver stated that with the partnership of DRI the investment would go a long way.  Once in place, there would be opportunities for companies to promote their clean energy alternatives in countries such as the Philippines, Thailand, and Indonesia.  Those countries had good potential for small businesses to learn about, and begin to export their product.  Any companies that signed up for the grant would participate, as well as pay their own expenses, marketing costs, etc. 

 

Mr. Shriver stated that NCED had knowledge of at least six Nevada companies that they felt would be recruited for the program.  The companies had the technology and the business acumen necessary to carry out the program.  The six companies would be the initial targets, but NCED planned to have more companies recruited in the future. 

 

Chairman Arberry asked Mr. Shriver to add some more information on the performance indicators.  He requested the number of contracts per trade show, the number of new jobs created, the increase in investment per tax dollar, the number of new or existing firms that had expanded due to the efforts of the commission. 

 

Mr. Shriver responded that part of the information Chairman Arberry requested was distributed in Exhibit C.  He told Chairman Arberry that most of the shows are contract-driven for information.  A lot of what the NCED did was to get the idea across to foreign businesses to come to Nevada.  Mr. Shriver stated that he would provide a list of the trade show contracts available, however, some information was not available because it was each individual company’s own information and was not always shared.  Information that NCED did have was provided by the companies involved.  NCED could probably get a good guess, but not all information was shared.  He would gather what information he could and get it to the committee. 

 

Chairman Arberry requested an update on the Train Employees Now (TEN) program.  Mr. Shriver stated that the TEN program was funded by a $500,000 per year appropriation received from the General Fund.  Mr. Shriver felt they had used the money very well.  One of the criteria to receive a TEN application was for the company to work directly with the community college system, which helped to promote the colleges.  NCED provided the money to the community college and the college handled the repayment of training.  They were hopeful that the training received by the individuals could be applied in the future for other companies.  There were a lot of proprietary training requirements and companies liked to retain the information for future use.  One of the main issues NCED looked at was, after completing the training program, employees must receive 80 percent of the statewide average wage, or county wage, where they were located, whichever was less.  The idea behind this was that after training and obtaining higher skills, the wage should be increased accordingly.  Without skills training, companies would not receive the money necessary to be productive.  Mr. Shriver said that the goal was to see the employees got above the statewide average wage. 

 

Mr. Shriver said that NCED did not have a lot of predictability on the number of companies that came before the commission.  He referred to the Biennial Report of Incentive Activity (Exhibit C) and explained that the column on the far right showed the amount of training received. Not all companies received training.  As of February 7, 2001, about $200,000 remained for training this fiscal year.  That money had to last until June 30, 2001.  NCED already had applications where one company alone would exceed $200,000.  One difficulty was to decide how much a company would receive for the TEN program; what was the value of the jobs that would be created.  The company who paid the most would usually get the training dollars.  This would ensure that NCED would get a return on their investment, getting a higher return on their tax dollar.  The person being trained had to be a Nevada resident, which eliminated out-of-state personnel being trained with Nevada money.  The goal of the skills training was to enable a trainee, who desired to leave the company, to be at a higher marketable skill level than prior to training. 

 

Ms. Giunchigliani asked Mr. Shriver if NCED allowed the companies to pay trainees at less than the average state wage because it was her understanding that the 1999 legislature’s Letter of Intent to NCED requested them to raise the minimum wage requirement for companies in order to receive the incentives.  Mr. Shriver replied that to receive the tax incentive companies were required to pay employees at least 80 percent of the average state wage for all the employees.  To receive training monies, when finished training, the trained employee must receive at least 80 percent of the average state wage. 

 

Ms. Giunchigliani asked how this would be an incentive if they didn’t receive the average state wage.  Mr. Shriver responded that the assumption of NCED was that an employee had no skills when starting with a company and that they were making minimum wage or less than the 80 percent of the average state wage.  He explained that 80 percent of the average state wage in Clark County was probably $11 or $12 an hour.  He stated that NCED was giving the employees a skill level that they did not have prior to training, which was a marketable skill.  Mr. Shriver felt that this was one way to help Nevada residents obtain better skills in order to keep up with the changing industrial demands.  After training, an employee had been indoctrinated into the company philosophy, had a higher skill level, and was a greater asset to the company. 

 

Ms. Giunchigliani asked if NCED had a tracking system to see if the employees actually received a higher dollar amount, since Nevada gave an incentive and paid for the training.  Mr. Shriver said that the commission had requested that the companies file reports and the commission would review those reports periodically.  Ms. Giunchigliani requested to see the results of those reports. 

 

Mr. Shriver stated that most companies that applied for the TEN program also filed for the other incentives available.  Ms. Giunchigliani expressed concern that this might be pitting one group against another and that a different standard was being set for different incentives.

 

Mr. Shriver stated that if the companies were required to pay 100 percent of the average state wage, they would not use Nevada’s training programs.  Rather, the companies would choose to train in other states.  He said that Nevada did not have a highly skilled workforce. 

 

Ms. Giunchigliani requested documentation showing, that because of the TEN program, companies were actually locating in Nevada.  She also requested reporting on what companies were doing in regard to hiring Nevadans, ethnic groups, women, etc.  Mr. Shriver answered that they did have tracking, but due to possible employee repeat training with other companies, it was hard to find data to do the tracking. 

 

Ms. Baggett discussed, as an example, a company she talked to the day before. The company’s main reason for coming to Nevada was because Nevada would pay for training.  Ms. Giunchigliani appreciated the comment from Ms. Baggett but reiterated her request for documentation.

 

Ms. Giunchigliani asked if NCED would consider a form of economic development providing incentives for alternative energy sources such as geothermal or wind, or was it just manufacturing industries.  Mr. Shriver answered yes, and said that there was also an incentive that was given by the Department of Taxation.  It was a flat incentive, and if applied for, the incentive was received.  There were no criteria other than the companies had to sell their energy to an existing generation company.  He believed that energy was a critical issue.  NCED had long supported initiatives to encourage generation renewables, and had participated in statewide events related to this issue.  He stated that Nevada could potentially be a great exporter of energy if sources continued to be developed. 

 

Ms. Giunchigliani asked if Nevada had any companies that had been recruited through incentives.  Mr. Shriver responded that there were some small companies, a couple were located in Reno, but the companies had not requested incentives other than the initial incentive that had been provided by the Department of Taxation.   

 

Mrs. de Braga felt that the construction of the energy plants was not where the money was needed, but rather it was more important to concentrate on the testing and permit process.  She felt that Nevada needed to make geothermal and wind more viable industries.  She knew of a number of companies that had let their leases go due to regulation and because of the cost of initial studies. 

 

Mr. Shriver stated that due to the rising costs of energy significant investors were going to be looking into development.  Prior to the cost rising, the industry had to rely on smaller sources within its own communities in order to realize its potential.  In many cases energy was subsidized, receiving a rate significantly more than the actual cost of the power.  With the current rising costs of energy, the subsidized rates would be changing and the issue of how to create new opportunities for people to want to come to Nevada and work to develop new energy sources would be an issue for this legislative session. 

 

Ms. de Braga stated that the cost for generating energy was cheaper in Nevada than in California, thus creating a new opportunity for development.  Mr. Shriver stated that he knew of at least nine companies that had applications before the Nevada Division of Environmental Protection (NDEP) for new generation facilities.  Six or seven were in Clark County and two or three were in northern Nevada.  These included a new company already under construction located east of Reno, an expansion to the existing plant in northern Las Vegas, as well as other developments.  Mr. Shriver said it was unfortunate that a lot of the companies would utilize existing natural gas.  Elko County had a pipeline project, which would bring new natural gas into Nevada, that would be needed.  NCED met last week with a company in regard to solar energy, which had a process developed by McDonald-Douglas and Boeing.  Because of investment reasons the company was now in private hands.  They were looking at the solar radiation potential in Nevada, which was great.  They had the scientific technology to prove that using solar power made sense.  In discussions with the company, different areas of Nevada were being reviewed.  The company would need to be near transmission lines. 

 

Mr. Shriver continued, explaining that combining two different kinds of plants was desirable, for example, solar power would generate during peak times and be combined with a wind generator or a geothermal generator, which would run all the time, and between the two modes companies should create significant kilowatts that could be taken advantage of. 

 

Mr. Dini, in reference to a company Ms. Baggett had mentioned earlier in her testimony, explained that it was his understanding the company might be locating in California, due to California’s training program.  He asked her if a study had been done on how Nevada's training program compared to California’s training program. 

 

Ms. Baggett said she would be talking to the company later in the day to discuss whether or not the company would be locating in Nevada.  She explained that a lot of other states offered a great deal more than Nevada.  Companies did not have to “jump through a lot of hoops as far as training goes” in other states and sometimes land was provided as an incentive, which Nevada did not have the ability to do.  Nevada offered $1,000 per employee for training, but had a limit of $500,000 per year and if a company had 200 employees that would take $200,000 for just that one company.  Therefore, NCED was concerned that the companies that were provided training money were training for the more skilled jobs as well as higher paid jobs, so that the trainees would stay in Nevada. 

 

Chairman Arberry asked what was classified as Nevada residency.  Mr. Shriver answered that requirements included a permanent address, but that it was left up to the community college to qualify the employee.  He said it wasn’t much different than the criteria used for other programs. 

 

Mr. Shriver also wanted to emphasize that the TEN program was not just available to attract new companies, but for existing companies as well.  NCED would like to see more existing companies using this program.  He also explained that NCED partnered with the Department of Employment, Training, and Rehabilitation in a program called the Career Enhancement Program.  The program was previously called the Claimant Employment Program.  The program  served unemployed workers who would receive training in marketable skills.  NCED tried to use this program along with the training incentive program, which actually doubled the $500,000 in training money available.  This was a great selling point.  Mr. Shriver felt that their agency was “small” in the money dedicated to training.  He felt that there was a better way to do this, but was not sure if the General Fund was the answer.  Often, when NCED was dealing with technology-based companies, the companies would look at the skills level of Nevada’s employees and pass Nevada by.  The commission usually went with the companies that paid employees the highest salary, so quite often the 80 percent of the statewide average wage was pretty low on the scale of trainable employees.  He stated that he would get the information requested in regard to the effectiveness of the program, who was using it, etc., back to the committee as best he could. 

 

Mr. Dini asked why high tech industries tended to locate in Idaho instead of Nevada.  Mr. Shriver replied that there were two issues related to that problem.  One issue was water.   Micron, created in Boise by J. R. Simplot, found that in the making of microchips it was possible to use 4.5 million gallons of water a day.  As Boise sits on an aquifer, water usage was not an issue.  However, in Nevada water was a big issue.  Due to concerns about water waste all around the country, technology was changing and companies were working on ways not to waste so much water, i.e., recirculation of water, reinvigorating the water with minerals and injecting it into the ground for reuse.  A second issue was location close to recreational areas.  Hewlett Packard (HP), in the 1970s, had a director who had a vacation home in McCall, Idaho. The director liked the area around Boise, so he thought it would be a great area in which to develop a business.   Mr. Shriver said that one benefit Idaho gained from Hewlett Packard locating in Boise was a state college.  When HP first located in Boise, Boise State College did not exist, it was only a junior college, but because of the Hewlett Packard input, it became a state college.  The University of Idaho operated their engineering program in Boise due to the influence of Hewlett Packard. 

 

Mr. Shriver continued stating that the other state that benefited from jumping over Nevada was Utah.  Utah had significant development, which was primarily homegrown.  Utah worked through the University of Utah Innovation Center in order to create the technology, etc.  Utah had made a significant investment. 

 

Mr. Shriver stated that each small step NCED took, it got better at attracting companies.  More technology companies were being influenced to come to Nevada because of the trainability of Nevadans.  The customer service mentality of Nevada residents also fit right into the new economy.  He expected lots of significant announcements during the next few years as companies chose to come to Nevada.  Mr. Shriver explained that Nevada had always been a small business state and although he did not see that changing, NCED was working toward attracting larger technology companies or brand name companies that might have a significant impact.  That was what helped Idaho, Utah and other states.  The Research Triangle in North Carolina was created due to the influence of IBM.  Mr. Shriver felt that if a company like IBM would make an investment in coming to Nevada, other institutions, as they did in North Carolina, would follow suit.  NCED was working on the situation, but felt that it would take a partnership with the citizens and businesses in Nevada.  NCED was seeing private investment, significant technology groups working very hard, in northern and southern Nevada, doing groundwork, generating investment capital and risk capital to attract companies to Nevada.  The university and community colleges, K-12, etc., were all active in working toward the same goal.  This had to be coordinated and focused toward the ultimate goal of developing the technology to attract more businesses, build a base, and then out of the base, engineers would emerge who wanted to create their own companies.  The same thing was happening all over the country and would continue to happen. 

 

Mr. Dini asked Mr. Shriver what he thought the Tahoe Reno Industrial Center (TRIC) contribution would be to western Nevada.  Mr. Shriver said the TRIC was located eight or nine miles east of Sparks along Interstate 80.   He thought the contribution would be significant because it would allow a lot of larger investment and distribution, etc., to move there.  It would cause companies to reuse, at a higher value, properties in some Reno/Sparks areas.  It would provide larger parcels of property for development.  The same thing was happening in Clark County with APEX.  Heavier industry would be coming in, which meant higher paid jobs and heavier capital investment.  Transportation would be an issue and TRIC in northern Nevada and APEX in southern Nevada were located near railroads, energy passes, and Interstate highways. 

 

Mr. Marvel asked how Nevada ranked in regard to cultural resources, and was it a very important criteria.  Mr. Shriver explained that cultural resources were certainly an important issue for higher wage positions.  The higher the education level of the employee the more important certain aspects of quality of life became, including cultural matters.  The whole package of a community became very important when the employee could go anywhere in the world.  Nevada offered a business-friendly environment as well as cultural amenities.  In Silicon Valley, Los Angeles, the Bay Area, etc., the slowness of commuting to and from work, the cost of housing, the energy issue, etc., had all created an opportunity for Nevada.  In response to Mr. Marvel’s question Mr. Shriver stated that Nevada was indeed competitive. 

 

Chairman Arberry, in reference to the $25,000 requested in decision unit E-250, asked if other partners had been identified and confirmed their commitment to generate the additional $125,000 match that was required for the SEI grant. 

 

Mr. Shriver said yes, some “in kind” match and some matching funds had been generated.  DRI would be a partner in cash as well as “in kind."  If the grant was approved they were cautiously optimistic that the grant would be received.  The state's portion was only a little over 8 percent.  The Global Trade director, Alan DiStefano, was currently in Washington D.C., to meet with people to work on the status of this grant. 

 

Chairman Arberry asked how, if the matching funds were achieved, it was determined that $2.5 million in export sales would be generated.  Mr. Shriver replied that the amount was based on the type of equipment, particularly air pollution equipment, that would likely be purchased.  The Global Trade director felt that this was a conservative estimate.

 

Mr. Dini asked about the Taipei office and whether or not Nevada was doing anything in the Asian market about economic development other than tourism. 

 

Mr. Shriver responded that NCED was actually working with a Taipei/Taiwan- based company who was looking to Nevada to place a technology company for their United States operational center.  Although NCED had not done as much as was possible, Nevada did do some export to Taiwan.  A lot of Nevada companies sold their products in Taiwan and Nevada had reaped rewards due to investment opportunities.  NCED was very comfortable with the people in Taipei and it could be a significant investment.  Mr. Shriver felt that the efforts for Nevada companies should be focused primarily on Canada and Mexico.  These two countries were Nevada's two biggest trading partners, followed by Southeast Asia, which included Taiwan, the Philippines, and Thailand.  China was becoming a major trading partner and that was continuing to develop.  He said NCED did a good job of handling the tension between Taiwan and China.  Nevada companies were learning how to work with those countries and Alan DiStefano, Director, Global Trade and Investments, was very experienced working with both countries and knew the issues well.  The way the trade mission was developed no state money was spent.  The companies that NCED took to the foreign trade shows paid NCED's way.  That did not seem to be a problem with the companies, rather it opened the door for the companies and they returned for more opportunities. 

 

Mr. Dini stated that before the Asian recession, Nevada had been doing very well in the agricultural market, but that now activity had decreased.  He asked if NCED was doing anything about increasing agricultural exports again, in particular, alfalfa. 

 

Mr. Shriver agreed that Nevada had seen a decrease in alfalfa sales.  He explained that one of the things that Mr. DiStefano had planned for next year was a trade mission into China and Asia.  The mission was for, primarily, agricultural products.  He was not sure if other countries, possibly Australia or South American countries were pursuing this export area.

 

Ms. Baggett said that, along with Kenny Benson, of Eureka, and Alan DiStefano, there was an effort to put together a cooperative of the hay growers to make Nevada more competitive as a state rather than individual companies.  Some information that came in recently advised them that there was a co-op grant available through the state trade division and that was being looked into. 

 

Mr. Dini stated that he was glad that NCED was working on the agricultural issue because Nevada's export of hay had really decreased without the world market.  Mr. Shriver said more information about this issue would be provided to the committee. 

 

 

MOTION PICTURES, BUDGET PAGE ECON DEV AND TOURISM PAGE 7

 

Mr. Shriver reintroduced Charles Geocaris, Director, Nevada Film Office, to discuss Budget Account 1527.  Mr. Shriver gave an overview of the Nevada Film Office's functions, which was to promote and support the use of Nevada cities and rural locations, as well as provide services in the production of motion pictures, television, commercials, documentary films, and industrial films.  Commercials entailed not only films but also still photographs.  The office provided services that ranged from scouting and site planning to the publication of the 2001 Nevada Production Directory, Exhibit D.  Also provided was a brochure titled "The Roads Less Known" (Exhibit E), which provided a mail-in form to request additional information about filming in Nevada.  The film office handled inquiries from commercial companies worldwide that were looking for film locations.  The office served as a one-stop shop to assist in obtaining permits, personnel, and services that might be related to a production.  The office had over 4,500 photos highlighting potential film locations in Nevada.  That was a great benefit for companies looking to film in Nevada. 

 

Mr. Shriver continued, explaining that the division was unique for NCED because it was funded 100 percent from the transfer of funds from the Commission on Tourism, specifically, room tax money.  He stated that previous legislatures had approved an allocation of $60,000, later raised to $90,000, to help raise money to produce the 2001 Nevada Production Directory, Exhibit D.  The current directory was completed approximately two weeks prior to the committee hearing.  Advertising enabled them to supplement the budget.  The net profit from the directory was put back into marketing the state, i.e., trade shows in California. 

 

Mr. Shriver stated that the agency would like to change the budget account title from "Motion Pictures" to "Nevada Film Office."  The agency felt that due to changing times, the term "Motion Pictures" was not a complete representation of the office's function. 

 

Mr. Shriver explained that under Mr. Geocaris's leadership the Nevada Film Office had been very successful.  He stated that the final figures for funds generated due to film activity in Nevada in calendar year 2000 totaled $123.5 million, which was a record-breaking amount. 

 

Mr. Geocaris said that Nevada had the best year in history.  Last year was the first year that the office broke the $100 million mark.  The amount of $123.5 million was far better than most states.  He said how Nevada ranked with other states was not yet available, but Nevada was one of the "hottest" places to film.  In Las Vegas, currently, more productions were going on than anywhere outside of Hollywood and New York City.  Some of the productions currently or soon to be produced were "Rush Hour 2"; "America's Sweethearts" with Julia Roberts, John Cusack, and Catherine Zita-Jones, and was being filmed in Las Vegas; "Undisputed," currently being filmed at Indian Springs Prison with Wesley Snipes; "Pearl Harbor," a film shot last summer in Hawaii, did some post- production shots in Nevada, and was expected to be one of the biggest summer releases this year; "View From the Top" with Gwyneth Paltrow was being filmed in Laughlin; "Ocean's 11" would begin filming in March, with George Clooney, Matt Daman, and Julia Roberts, among others, and would most likely be a big release as well.  "Seven Spells" was in preproduction, set to film primarily in Reno, with some Las Vegas shots.  Television productions included "CSI," the number one rated drama series, shown on CBS.  This show, set in Las Vegas, included the hiring of local people.  A western, with James Coburn, "American Gun," was filmed in the Las Vegas area.  The office was scouting for a location for an HBO movie that was looking for a location in southern Nevada. 

 

Mr. Geocaris continued, explaining that the past year saw many productions, including "Get Carter" with Sylvester Stallone; being released in a few weeks was "3000 Miles to Graceland" with Kevin Costner and Kirk Russell;  "The Visitors" and "Duets" with Gwyneth Paltrow;  "Nurse Betty"; "The Pledge" with Jack Nicholson as an ex-detective with the Reno Police Department; and "Pay It Forward," a movie that was released last spring, and used Centennial High School and some of the students as extras.  "Rat Race," filmed in Las Vegas and Ely last summer starred Danny DeVito and Whoopi Goldberg.

 

Mr. Geocaris explained that the Nevada Film Office was trying to recruit productions for the rural areas, not just the Las Vegas and Reno areas.  This was sometimes difficult due to housing issues, etc.  The division was trying to showcase rural areas in their marketing.  He stated that Nevada had missed out on filming that was done in New Mexico or Arizona, because people did not realize the variety of locations and sceneries that could be found in Nevada.  The marketing had focused on the rural areas and Nevada's variety, letting people know that Nevada was not just a "Neon" state.  The marketing had been successful in that campaign. 

 

Mr. Dini expressed his pleasure that the rural areas were being marketed.  He mentioned his concern regarding the economic impact of casinos in California and asked Mr. Geocaris about filming efforts for Virginia City and western Nevada.  Mr. Geocaris explained that the division was trying to push Virginia City and Carson City.  The scripts that were being written were an issue and the areas used must match the scripts.  Every year Nevada was up against other states and the market was very competitive.  The office did not mind being called another state in a production, as long as production companies hired local people and spent their money in Nevada.  One film, "Pay It Forward,” was scripted to be set in Tucson, but when the filmmakers came to Nevada they loved it and rewrote the script to be set in Nevada.  NCED would continue to push the western Nevada areas.  

 

Mrs. Chowning discussed that she appreciated all that was being done to keep the money in the United States.  She asked about productions that were being filmed in Canada.  She wondered if part of the problem was that although companies wanted to come to Nevada, the facilities available for soundstages, etc., were not available. 

 

Mr. Geocaris said that there was progress in regards to this matter.  A new studio just opened in the Las Vegas area and a few more were in development.  He explained that he felt that producers came to Nevada more for the exteriors, however, and that they could film inside anywhere.  It was an added asset that state-of-the-art facilities were available where production companies could build the interior sets, but in his prior experience in Chicago, where he ran the film office for years, he found that filmmakers would come in and use warehouses, tennis facilities, etc.  He gave the example of "Home Alone" where the entire interior of the house was built on the court of an athletic facility.  He felt that if people really needed to find space for interior soundstages, the space could be found, and the division was assisting people in that area.  The real push, however, was to keep the productions in the United States and in Nevada, because Canada, with their exchange rate and with the incentives the government offered, tempted companies to go there.  It had really hurt in terms of jobs and industry. 

 

Mrs. Chowning pointed out that even Mexico was being competitive.  She gave as an example "The Titanic," which was filmed in Rosa Rita Beach.  She said that Mexico was continuing to expand their filmmaking efforts.  Mr. Geocaris agreed, stating that "Free Willy" was filmed there and that Australia was competitive as well.  He reiterated that Nevada was aggressively pursuing companies, not only for major productions, but also for television productions, still photography, and documentaries.  He said that soundstage developments were increasing, but he had cautioned people involved to make sure they were marketing themselves correctly.  New companies were being encouraged to build soundstages, but it was important to make sure that the business would follow. 

 

Mrs. Chowning complimented Mr. Geocaris on the 2001 Nevada Production Directory, Exhibit D, and thanked him for his work. 

 

Mrs. Chowning asked Mr. Geocaris to explain how the final figure of $123.5 million for year 2000 was determined.  He stated that the Nevada Film Office was affiliated with the Association of Film Commissions International (AFCI).  The formula was provided by AFCI.  The formula was a guideline as to the economic impact that a production company spent per day while on locations.  Not every film commission followed this formula, which was why it was difficult to rank one state against another.  He said he knew of one state that  claimed the entire cost of the movie, if that production spent one day in their state filming.  Nevada was very conservative as to the amount of money they knew was being spent locally and the amount was not overstated.  The $123.5 million did not include the amount that was spent when major stars and higher ranked producers and directors came to a town and spent money on retail, restaurants, and entertainment.  This money was outside of what could be determined.  The $123.5 million was based on the averages on the number of days filmed in Nevada per project.

 

Mrs. Chowning, referring to decision unit M-200, asked Mr. Geocaris what in-state travel was to be curtailed since the budget amount requested was a flat amount and due to the increase in out-of-state travel amounts requested.  Mr. Geocaris stated that it was necessary to have a larger presence out of state, where they needed to attend trade shows, festivals, etc. 

 

Ms. Giunchigliani asked what in-state travel activities would be eliminated and what type of activities would be done out of state.  She asked that this information be provided for subcommittee review. 

 

Mr. Beers asked for clarification regarding what was bringing companies to Nevada.  Mr. Geocaris said that he felt it was the visuals and variety of locations that brought companies to Nevada.  In California, soundstages were already available and companies wouldn't come to Las Vegas or Reno to film inside someplace when rent was already being paid in California for soundstages.  However, it was nice to have the soundstages available if needed, when the companies came to Nevada for the exteriors.  It was always a struggle, as one of the factors involved was actors might not want to spend time away from home, so production companies might choose to build their interiors in California. 

 

Ms. Giunchigliani, referring to decision unit E-250, asked Mr. Geocaris what type of training and what results were expected for the $3,880 amount requested.  Mr. Geocaris explained that the money requested was for training staff.  A new digital system for photography was being developed and the division was trying to provide training on Photoshop for the entire staff and on other programs to enable them to produce materials in-house.  This would save money.  Ms. Giunchigliani asked where employees received training.  He replied that they were looking at the Community College and some private firms that might come in.

 

 

RURAL COMMUNITY DEVELOPMENT-BUDGET PAGE ECON DEV AND TOURISM 12

 

Mr. Shriver introduced Audrey Allan, Director, Rural Community Development.  Mr. Shriver explained that the Rural Community Development, Budget Account 1528, consisted of several units, but felt that most would be familiar with the Community Development Block Grant Program (CDBG).  One of the areas the program focused on was how to build prosperity in rural communities.  The CDBG collaborated with various federal and state agencies, as well as local agencies, local businesses, including non-profit and rural programs, to improve living conditions and economic opportunities.  The program also provided the technical assistance needed to support small towns in their diversification efforts and encouraged sustainable development.  He explained that rural communities needed to look at themselves to find out what made them unique, and what opportunities were available.  Sometimes the communities were not aware of what was available that might benefit other people. 

 

Mr. Shriver referred to Exhibit C, which listed funding and how the grants were applied. 

 

Ms. Giunchigliani directed her questions to Ms. Allan and asked why federal reserves for the upcoming biennium were much lower than what actually occurred in FY1999-2000.  She also asked if Ms. Allan had any thoughts on how to reduce General Fund support within this budget. 

 

Ms. Allan answered that the reason she projected a lower amount of projects to be funded was because per state, the average number of grants that was managed by a professional in other states was about 30 and as of the day of the report they had about 140 grants.  They were going into another cycle and were probably going to be awarding another 50 grants, so she had tried to look at the program in a management capacity to keep things stable; they did not want to limit what communities did with the dollars.  She said that while 32 projects were estimated to be administered over the upcoming biennium it may be closer to 50, but she did not want to project too high. 

 

Ms. Leslie disclosed that she had previously administered grants funded from this program, but was no longer associated with the program.  She clarified that what had been projected was 32 projects for FY2001 and 34 projects for FY2002, however, in FY2000, 53 projects actually requested funds.  Ms. Leslie said that the projection for FY2001-02 was not accurate and that at least 50 entities would request funds, and that the performance indicators were not reflecting reality. 

 

Ms. Allan explained that Ms. Leslie was right, and she kept the projection at 32 because that was the figure projected in the past.  The cities and counties in Nevada limited themselves to the number of applications that would be submitted annually.  Since the entities knew that the agency would only get about $2.8 million, applications were usually limited to two public facility applications in the spring, one economic development project and two planning grants annually.  There were 27 eligible entities.  Not all of them applied for grants.  The reason 53 entities requested funds might have been due to the initiation of a fall cycle.  In the event any funds were left over after the spring cycle, the cities and counties decided that, from a planning perspective, they should be able to plan in the fall as well as the spring in order to access other sources of funds. 

 

Ms. Leslie did not agree that the number of requests would go down and was aware of four requests from Washoe County alone, in the next funding cycle.  She felt that the point the committee wanted to make was that money being requested was far more than what was being projected and under reporting it in the performance indicators resulted in the issue being ignored.  She said the program was very important for the rural counties.  Ms. Allan said that she agreed and the performance indicator projections could be increased. 

 

Ms. Giunchigliani explained that performance indicators could be adjusted to reflect more closely what was going on in an agency and that the adjustments would be welcomed when the account was reviewed in subcommittee. 

 

Ms. Allan, in response to Ms. Giunchigliani's question about the federal grant fund reduction, explained that the $3 million figure was based on funds that were carried forward.  The actual amount that was received in FY2000 was $2,842,000, and that was what the budget should have been based on.  She agreed that there was a decrease in 2001 but did not have an explanation.  She anticipated that funding would remain around $2.8 million during the 2001-03 biennium. 

 

Ms. Giunchigliani reviewed the issue more closely and stated that The Executive Budget recommended a 24.22 percent increase in General Fund support and asked why there was more use of General Fund dollars than federal grant money.  She asked if there was a plan to reduce the need for General Fund support within the budget.  She questioned further that the 2000-01 work program indicated a significant increase in the federal funds of $5.7 million. 

 

Ms. Allan explained that the types of projects funded were infrastructure related and usually took longer than one year to complete.  If all the entities expended all their funds in the current year, they would have to have the authority from prior years so that they could draw their money.  To clarify, Ms. Giunchigliani stated that rather than actually being $5.7 million it was, in reality, $2.8 million with $2.9 million budgeted, which allowed for some increase. 

 

In answer to Ms. Giunchigliani's question regarding lowering the usage of the General Fund, Ms. Allan stated that Rural Community Development was on a fixed budget and the federal government only allotted 2 percent plus $100,000 for administration purposes.  Given Nevada's land area, Ms. Allan did not see Nevada's costs going down for administration.  Most of the increases had been for items such as cost of living increases for personnel.  Ms. Giunchigliani asked Ms. Allan to get with the committee staff prior to subcommittee review to work on the numbers to see if less General Fund money could be used for the new budget. 

 

Tina Tomasco, Operations and Finance Manager for Commission on Tourism and Economic Development, introduced herself and explained the M-100 adjustments were budget inflationary costs.  Those were standard costs implemented by the budget office.  This was also the case for decision units M-300, 301, 303, and 305. 

 

Ms. Allan stated that one of the eligible uses of the CDBG was to create revolving loans for businesses.  The loans did not actually represent loans, because by statute the agency was prohibited from providing loans.  These activities were grants to local governments.  When the program started in 1984 only $100,000 was available.  The cities and counties that participated determined that the principal and interest should be repaid to the State to build up a pool of funds to be available for business loans statewide.  The principal and interest was what was paid into the account. 

 

Ms. Giunchigliani asked why General Fund monies were recommended to be funded rather than the HUD money.  Ms. Allan said that it was reflected as General Fund dollars because it was paid into the State Treasurer's account.  The money could not be used for anything other than loans and was not General Fund money, rather repayment money. 

 

Ms. Giunchigliani asked if under M-100, the same circumstance should be applied and that it was not actually General Fund money in regard to the property and contents insurance for Grantee Training.  Ms. Allan agreed that that was correct. 

 

Ms. Giunchigliani referred to E-710, which showed that the agency requested four laptop computers, but was only granted two.  Ms. Allan agreed that they were only granted two.  Ms. Giunchigliani wanted to know if all the computers were being replaced, and Ms. Allan said no, the agency was on a schedule as far as replacement, and that the agency would not request replacement computers out of the General Fund.  Computers were usually paid for out of the Training Technical Assistance category because the equipment was used to train the cities and the counties. 

 

Ms. Giunchigliani commented that the Department of Information Technology (DoIT) had a 25 percent replacement policy for computer updates and that RCD had requested a 50 percent replacement schedule.  Ms. Tomasco added that the replacement was based on a five-year cycle to update equipment.  She said that DoIT had approved the updates.  Ms. Tomasco reiterated that the cost would not be furnished from the General Fund, rather, the Training Technical Assistance category. 

 

Ms. Leslie expressed concern over residents' problems with water quality in Washoe County and asked if money from the Revolving Loan Fund was ever used to help individuals who were having trouble paying for sewer hookups.  Ms. Allan replied that, no, the fund was only used for economic development activities and job creation.  She stated that there were other resources available with other agencies for help with those issues. 

 

Ms. Allan closed her comments stating that RCD was the only state agency that dealt with broad rural issues.  The agency did not have a single focus but dealt with everything that involved community development, from water to waste water, from public land to job creation.  There were not  enough resources to meet their needs, as was the case with other state agencies or their federal partners.  What RCD was trying to do was to "work smarter."  What they wanted to do was to help communities plan better, and to plan better for themselves.  The Rural 2000 Strategic Plan was updated to help them in their goal.  She referred to the workshop mobilization meeting that was held two weeks prior to the hearing and was discussed earlier by Bob Shriver.  She said that the meeting included the participation of over 400 stakeholders and over 100 people attended from public, private, federal, state, and local agencies.  The format was a "roll up your sleeves and figure out what we want to work on."  The participants identified seven issues that were worked on.  Those seven issues were economic diversity, capital availability, infrastructure, housing, workforce, medical and human services, and public lands.  Several tasks were identified and people were assigned to work on those tasks.  Ms. Allan said that they were not looking for money, rather looking for ways to better use the money that was available.  They wanted to align resources at all levels, and have people working together so that issues could be solved. 

 

Ms. Tiffany asked what the state's relationship was in choosing the economic development staff that were hired for the "pioneer" region.  She was particularly concerned with central Nevada, mentioning Nye County and Hawthorne, and her feeling was the quality might have been neglected in that area.  She did not sense a relationship with the state and the directors of those areas.  She did not see a lot of successes. 

 

Ms. Allan said that from an economic development standpoint the agency did work closely with them.  Leadership development was a real issue in the rural areas and something that RCD was very interested in.  The state did not select the people who were going to work in economic development, instead the communities chose the people they felt could work in those areas, then RCD worked on their skills.

 

Ms. Tiffany said that she just had not seen any change in central Nevada in regard to economic development.  She stated that the planners did not agree, made big plans, and nothing seemed to develop.

 

Mr. Shriver agreed with Ms. Tiffany that it was frustrating, and just when they started to get rolling, forces within the communities, in particular the Economic Development for Esmeralda and Nye County (EDEN), was torn between Tonopah and Pahrump issues, etc.  There had been a lot of training, and what the agency wanted in return was realistic plans.  The whole building prosperity format was to get the communities to look internally at what could be realistically achieved.  Often the communities looked for someone else outside of their community to come in and make huge investments, but that did not happen very often.  When the Bullfrog Mine closed in Beatty it impacted the whole valley.  Some opportunities were being developed with the National Forest Service and National Parks regarding locating operations in that area versus Death Valley.  There was slow progress, but it was progress.  The leadership issue was one issue that was being focused on in the Building Prosperity Program.  The frustration was not just for central Nevada, but all over Nevada.  He said Nevada's urban areas seemed to do better because they were more stable, and private funding was available more consistently.  The search for ideas was continuing. 

 

Mr. Dini commented that a developer was needed to make things move.  In Fernley, progress was due to Wade Development being there, investing its own money.  TRIC was going to Storey County because the private sector was investing their money into the development.  In Yerington and Hawthorne, very rural areas, without a private developer things were "flat."  Mr. Dini stated that without private capital none of the areas would go anywhere. 

 

Ms. Giunchigliani agreed with Mr. Dini.  She thanked Mr. Shriver for his presentation on the Revolving Loan Fund.  She stated that the Interim Committee that she chaired on construction for schools liked the format of the Revolving Loan Fund, and that there would be a bill to establish something like that to assist local governments. 

 

PROGRAM OUTREACH PROGRAM-BUDGET PAGE ECON DEV & TOURISM 17

 

Chairman Arberry asked for testimony for the Procurement Outreach Program Budget Account 101-4867.

 

Mr. Shriver reintroduced Roger Tokarz, Director, Procurement Outreach Program (POP).  Mr. Shriver stated that the POP worked to increase the flow of state, local and federal contract dollars to Nevada businesses.  It was a very successful program.  The program was entering its 15^th year, providing services to Nevada's small businesses. 

 

Mr. Shriver explained that the POP did not offer grants to gaming or tourism.  It helped small businesses with training and technical assistance, and primarily taught companies when and how to bid on contracts.  Local, state, and federal contract databases were monitored daily to provide possible opportunities.  The staff went out to the businesses and taught them how to win bids on contracts.  There were extensive reference materials available to the businesses that paid an enrollment fee to belong, as it was not a free service.  Internet access passes were available to get in and learn as well. 

 

Mr. Shriver said that funding for POP came from the U.S. Department of Defense's Defense Logistics Agency (DLA).  The agency provided the majority of the funding but the General Fund also supported the program.  The POP program had been administered by Nevada starting in 1985 and the NCED had overseen the administration of the program since 1989, being previously monitored by Community Services.  Mr. Shriver said that during the past biennium POP increased their client base to 1,185; 700 plus in southern Nevada and 400 plus in northern Nevada.  Last year 613 of the companies received contracts that totaled $130.9 million.  Over 85 procurement training seminars had been sponsored in the last biennium, attended by more than 4,607 business people. 

 

Chairman Arberry asked if the Department of Defense (DOD) grant should be adjusted to reduce the funding to the $300,000 limit.  Mr. Shriver said yes, and referred the response to Margene Stenger, Account Clerk Technician II.  Ms. Stenger said that in regard to E-710, the requested equipment should have come out of the General Fund.  This took the amount over the $300,000 to the total of $318,154 for FY2001-2002 and $13,418 in FY2002-2003, and both exceeded the limit for the DOD grant. 

 

Chairman Arberry expressed his concern for increasing General Fund support due to the DOD grant limitation of $300,000.

 

Jim Manning, Budget Analyst with the Budget Office, addressed this issue.  He said that he had reviewed the budget the day before and that the DOD grant was overstated by $18,000 in the first year and $13,000 the second year.  He said that he realized that the grant money was limited to $300,000 and that either the equipment requested would have to be eliminated or adjustments would have to be made, increasing General Fund support. 

 

Chairman Arberry asked what the recommendation of the Budget Division would be.  He asked if something would be cut out, and when they would advise the committee.  Mr. Manning said that since the problem was only recently discovered, they needed to review and make a decision.  He said the committee would probably have an answer by Monday, February 19, 2001. 

 

Mr. Tokarz stated that the POP program was a "toolbox" that provided many features to the community in order to access the federal, state, local and international procurement opportunities.  That was done by subscribing to various software databases, and then information being provided on a day-to-day basis on the Internet, by e-mail, or by fax, informing them of opportunities.  When the client company was interested in one of the opportunities, the company was assisted so that a bid could be secured. 

 

Mr. Tokarz said that the POP program was very successful.  FY2000 had been their best year.  Over $87 million was awarded to their client companies.  The program concentrated on smaller businesses, with five to six people.  It gave those companies access to opportunities that normally would not be available because they did not have the resources. 

 

Mr. Tokarz explained that the biggest issue was to provide training to the companies in regard to what business plans looked like, what quality programs looked like, and how to be responsive to various kinds of contracts.  They had a revolving client base, when one company graduated another company would sign up.  Around 100 companies were usually active at a time.  They were trying to expand the client base.  POP had a staff of seven employees in the state. 

 

Chairman Arberry asked for an explanation regarding the requested 43 percent increase in General Fund support.  Ms. Baggett responded that with the Softshare program required by DOD, and the contract costs, the expenses increased by $43,000.  She explained that one of the things being considered to reduce General Fund support was to raise the fees from $25 to $50 for each company.  Individuals were also charged for seminars, which had not been done in the past.  That would help increase the funds generated by the program and would decrease the program’s reliance on the General Fund.

 

Chairman Arberry said that he was concerned about this issue because the DOD grant had almost reached the limit of $300,000 for the FY2000-01 but POP costs were increasing.  He said that the budget also showed a 19 percent increase in total funding from $452,589 in FY2001 to $538,835 for FY2002.  Since no new positions were being requested Chairman Arberry questioned the increases. 

 

Ms. Baggett said that there were increased costs that they had no control over, for example, personnel increases.  There were no new projects or programs within POP, just increases that were mandated by the Budget Office, such as personnel increases and cost of inflation.  Chairman Arberry asked if the program could function with less staff. 

 

Nancy Dunn, Business Manager, Nevada Commission on Economic Development, said that one of the things that happened this year was that the Nevada Executive Budget system was technologically driven.  She said some budgets within the agencies did not fit within the technological system.  The limit on the DOD grant authority for the grant in question was $300,000.  She said that yes, they did have inflationary costs that drove the administrative portion up which was supported by the General Fund.  What they tried to do at the agency's request was to reduce the federal program areas in the same amounts that would equal the increase to the General Fund.  Their intention was not to increase the General Fund support.  When the final budgets came in, with the inflationary costs, the system automatically went in and increased the General Fund support.  Adjustments did need to be made in the POP budget and the CDBG budget.  Cutbacks would be implemented in other areas.  She did not feel that the program could get by with less staff, but could possibly cut costs in travel.  Nevada had less staff to run the programs than other states and the positions authorized were needed.  Chairman Arberry thanked Ms. Dunn for her explanation. 

 

COMMISSION ON TOURISM- BUDGET PAGE ECON DEV & TOURISM 21

 

Chairman Arberry requested testimony from the Commission on Tourism, Budget Account 225-1522.

 

Nancy Dunn, Interim Executive Director and Business Manager, Nevada Commission on Tourism (NCOT), indicated that the Lieutenant Governor, Lorraine Hunt, Chairman of the Nevada Commission on Tourism and Nevada Commission on Economic Development, wanted to be present to support the testimony.  Unfortunately, her schedule had not allowed her to be present.  She sent her greetings to the Ways and Means Committee and did support the budgets submitted during this hearing.  Ms. Dunn submitted a written report to the committee from Lieutenant Governor Hunt (Exhibit F).

 

Ms. Dunn continued by reading her testimony, Exhibit G, into the record as follows:

NEVADA COMMISSION ON TOURISM

BUDGET ACCOUNT 1522

ASSEMBLY WAYS AND MEANS BUDGET HEARING

February 7, 2001

 

It's no secret.  Nevada is facing some challenging times.  Californians have consented to developing gambling casinos on Indian land.  Reno is experiencing a decline in air service, and an increase in utility costs is taking a bite out of what discretionary income tourists might have had. 

 

The Nevada Commission on Tourism is acutely aware of these challenges and has been developing a plan of action with guidance from its Chair, Lieutenant Governor Lorraine Hunt, for over a year now. 

 

We are fortunate to have a Commission comprised of many of the most accomplished and innovative minds in the tourism industry.  Commissioners such as Punam Mathur, Vice President, MGM-Mirage; John Marz, Sr. Vice President, Marketing, Mandalay Resort; Claudine Williams, Chair of the Board, Harrah's Las Vegas; Van Heffner, President/CEO NHMA and Nevada Restaurant Association; John Farahi, GM Atlantis Hotel Casino; Ferenc Szony, President and CEO Sands Regency, Reno; Ray Pearson, President Winner's Hotel Winnemucca; Jeff Beckleman, CEO RSCVA; and Manny Cortez, President LVCVA.  It is a commission of men and women, who recognize that Nevada is confronting extraordinary challenges in the coming biennium; challenges unlike any encountered before. 

 

The NCOT also recognizes that travel and tourism is a continually changing dynamic that evolves with changing trends and technologies.  They believe in being proactive, not just reactive.  To that end, the budget subcommittee, encompassing some of the top financial minds in the private sector, met for one full year to construct the budget that was presented to the Governor last August and is now before you for consideration today. 

 

In March of 2000, California voters passed Proposition 1A that legalized the development of casino gaming in Nevada's neighboring state and largest domestic visitor market: a situation that is sending shockwaves through our state's tourism-based economy.  More recently, the deregulation process in California has caused utility bills there, and in other Western states, to soar.  This increase is likely to take a bite out of the expendable income used for vacations and travel. 

 

Wall Street analysts have projected that tourism revenues will decrease 21 percent in Reno and 15 percent in Laughlin over the next four years as California casinos are opened and begin to draw players who otherwise would have traveled to Nevada.  Downtown Las Vegas as well as many areas of rural Nevada is also expected to suffer from gaming competition in California.  The Las Vegas Strip and, perhaps, Lake Tahoe may be somewhat insulated from this competition because of their uniqueness, vitality, and special attractions unmatchable at California casinos. 

 

It has never been more important for Nevada to diversify its tourism base and become less dependent on visitors whose primary reason for visiting Nevada is gaming.  In fact, NCOT was created 18 years ago by progressive Nevada leaders who recognized that the proliferation of legal gambling across the United States (Atlantic City) made it imperative that we develop and promote Nevada's many other attractions and diversify the tourism economy.  The agency has always worked to continuously broaden and strengthen its leadership position in global tourism by seeking, creating, seizing, and employing practical enterprising opportunities to attract new tourism sectors that are more youthful, affluent, multicultural, and recreational. 

 

Over the past 18 years, Nevada has become a leader in regional, national and international travel markets.  The Nevada tourism product has experienced some remarkable changes.  The number of hotel/motel rooms in Nevada has increased by 99.2 percent and room occupancy has been strong, typically considerably higher than the national average.  Las Vegas visitor volume has increased 77 percent.  Statewide gaming revenue has increased 371 percent.  Tourism-related employment has grown by 101 percent and the number of international visitors has increased 219 percent.  While these figures are impressive, maintaining Nevada's position as a leading tourism destination is increasingly challenging.  We must hit head-on the proliferation of gaming throughout the United States, on the Internet and by implementation of Proposition 1A. 

 

Because of the maturity of its programs and policies, the aggressive nature of its marketing campaign, and its rich educational agenda, the Nevada Commission on Tourism is in an excellent position to help guide our state's lifeblood industry into the future. 

 

We must act quickly and in a manner that protects the State's interest and competitive advantage in tourism-related industries.  When California voters passed Proposition 1A, Nevada could not wait twelve months for the next budget cycle so NCOT went before the Interim Finance Committee and asked for an immediate outlay of $1,798,000 from lodging tax revenue generated by the tourism activity in Nevada to mitigate the effects.  The request was unanimously approved and took effect just two weeks after approval on July 1, FY2001. 

 

For the next several years, we will focus our mission on creating, expanding, and enhancing attractions in Nevada that will draw new customers and bring return visitors to mitigate the effects of Proposition 1A.  We will promote our scenic wonders, cultural, historic sites, and our outdoor recreation with new and greater emphasis than ever before.  Nevada is not a hard sell.  We are blessed with a state that has a lot to offer visitors. 

 

The biennial budget we present today continues the initiatives begun last July and proposes even broader endeavors.  The tourism market is changing and so must the programs and marketing efforts of NCOT. 

 

BASE BUDGET

 

The adjusted base budget requests continued funding for nine classified and eleven unclassified positions as well as authorization to continue the mandates and previously acknowledged programs of the NCOT.  Of the total base budget, general operating costs represent 19 percent of the overall base while marketing and advertising efforts represent 63 percent.  The adjusted base budget also continues funding transfers in support of tourism activities provided by the Nevada Film Office of the Commission on Economic Development, the Parks and Wildlife Division of the Department of Conservation and Natural Resources, Museums, Cultural Affairs and the Arts Council of the Department of Libraries, Museums and Arts, and a Washington DC Office representing 18 percent of the total base budget. 

 

SIGNIFICANT CHANGES AND CRITICAL NEED

Maintenance and Enhancements

 

On March 7, 2000 California voters passed Proposition 1A (Indian Gaming), paving the way for expanded, full-scale, casino gambling in Nevada's number-one market.  Competition from casino gaming in California will prove to be a real challenge for most of the state, but particularly Reno and throughout rural Nevada.  A recent Wall Street Journal report predicts a projected 21.6 percent decline in revenue by the year 2004 in the Reno/Sparks area, a 15.4 percent decline in Tahoe, and a 15.8 percent decline in Laughlin if severe corrective measures are not taken to mitigate the effects of Proposition 1A. 

 

It has never before been more important for Nevada to diversify its tourism base and become less dependent on visitors whose primary reason for visiting Nevada is gaming.  NCOT acknowledged the forthcoming challenge at its December, 1999, meeting and called for an aggressive plan of action to immediately counteract and mitigate the effects of Proposition 1A, if passed.  At its March 2000, meeting, NCOT reviewed plans and moved to approach the Legislative Interim Finance Committee for approval of the funding needed to implement new programs.  In June 2000, the Legislative Interim Finance Committee unanimously approved NCOT's programs effective July 1, 2000.  The items included in M-200 represent the continuation of the programs as approved. 

 

The FY01-03 budget we present today is designed to neutralize the effects of a potential downturn in tourism activity through expanded and enhanced marketing strategies and proposals.  Highlights of the effort are as follows:

 

REVENUE:  NCOT complies, monitors, disseminates and analyzes a variety of statistics and market data on travel and tourism in Nevada.  Among the many data collected are visitor volume, room inventory, room occupancy, convention attendance, airport statistics, tourism related employment, traffic counts and room tax receipts.  Competition from casino gaming in California will prove to be a real challenge for most of Nevada, but particularly the Reno-Lake Tahoe area and throughout rural Nevada.  Wall Street analysts have projected a 21.6 percent decline in tourism revenue by the year 2004 in the Reno/Sparks area, a 15.4 percent decline in Tahoe, and a 15.8 percent decline in Laughlin.  Parts of Las Vegas, however, should not be affected; therefore, we anticipate an increase in that area of the state. 

 

Lodging Tax collections reached a remarkable 20 percent in FY2000.  With the anticipated decline in Northern Nevada, we are projecting a conservative 4.5 percent increase  each year of the next biennium. 

 

M-100 adjustments include budget office adjustments to reflect fringe benefit changes, the addition of a "step 9" and 4 percent COLA for classified employees, and a 9 percent, 4 percent salary adjustment for unclassified employees. 

 

M-200 requests the continuation of program enhancements as approved by the June 1999, IFC and are not included in the base budget.  Program expansions include one new unclassified position, associated operating costs, office furniture and equipment, and a computer.  They also provide for increased promotion and advertising and include an expansion in the rural grant program to meet the need for more funding.  In addition, the Department of Museums, Libraries and Art requested an increase in transferred funding to accommodate rising costs of on-going programs.  Programs approved by the June IFC are as follows:

 

·                    Rural RV Promotion – A new incentive-based, innovative, $1 million 3-year marketing campaign designed to draw visitors to rural Nevada with a sweepstakes that will award a $100,000 motor home as first prize each year.  This initiative places a special emphasis on attracting a lucrative travel market with greater intensity than ever before.  Nevada is the only state in the nation to launch such an initiative.  This initiative was officially begun January 20^th at the popular RV annual show in Quartzsite, Arizona.  Our presentation attracted more than 8,000 RV owners and that was just one event of many to follow.  Through our intense marketing efforts we expect to see an increase in rural tourism from 6.8 million to 7 million.  There are 74 participating parks or entry points, including 16 state parks, throughout Nevada excluding urban Las Vegas.  Management of the program will be provided by a new unclassified position.  Promotion and advertising will be developed by the Agency's Advertising agency. 

 

·                    Marketing and Advertising efforts will be enhanced by $500,000 each year with an emphasis on Northern, rural, and parts of Southern Nevada.  One of our strategies is to broaden our tourism base by developing new business and increasing business in non-major markets.  This is a highly competitive industry.  Starting this month, staff will travel to Salt Lake City, Utah; Phoenix, Arizona; Portland, Oregon; and Sacramento, California to participate in focus group discussions that will help gage the effectiveness of our marketing strategies.  It is also essential that we promote our tourism market worldwide.  The broader the market the more secure. 

 

·                    An increase in the Territory Grant Program of $125,000 the first year and $250,000 the second year for a total of $1.5 million by year two, to provide expanded assistance for the marketing efforts of the six rural marketing efforts of the six rural marketing territories in the state.  The rural grant program is an essential contributor that helps sustain the tourism economy of rural communities.  Without this program rural Nevada would loose its ability to promote their events. 

 

·                    An increase in funding transfers requested by the Department of Museums, Libraries and Arts in support of cost increases associated with on-going programs. 

 

Enhancements:  The NCOT evaluated its existing funding levels and reallocated monies to areas of need trying to keep expenditures at or about the same level as FY2001.  Other enhancements include increases in the transfer of funds to other state agencies in support of tourism related activities.  Enhancements are requested as follows:

 

E-175 – A Museums and History request (BA2941) for a transfer of funds associated with startup and operating of the Nevada State Railroad Museum in Boulder City.  The request also includes the addition of three new positions. 

 

E-250 – A realignment of costs measure – Provides for two new unclassified positions, a Development Specialist II and a Development Specialist I as well as associated costs for furniture and equipment.  These two positions will enhance the expanded marketing efforts by reducing contract obligations that can better be used for advertising.  Currently, the NCOT pays approximately $180,550 per year to an advertising agency for interactive marketing services.  In addition, approximately $64,708 per year is paid in research costs to an outside agency to gather statistics to fulfill statutory obligations.  Bringing these activities in-house will reduce contractual obligations by approximately $97,608 in FY2002 and $105,517 in FY2003 allowing NCOT to reallocate these amounts to its advertising campaign.  The cost for the services through an advertising agency exceeds the cost of hiring employees by approximately.

 

Also in an effort to reduce costs, decision unit E-250 supports a request to partner with the Publications Division of NCOT (also known as Nevada Magazine BA1530) for the design and production of NCOT publications currently produced by an advertising agency.  This joint effort will allow NCOT to take full advantage of the in-house graphic and production capabilities of Nevada Magazine and will result in immediate savings.  Presently, NCOT spends approximately $130,000 annually to have a contractor produce the Visitors Guide and Travel Planner.  In the first year of the program, the payment to Nevada Magazine will amount to $116,000 (See also E-806).  In year two and subsequent years, the cost will drop to just $90,000 per year; and immediate savings of $15,000 and $40,000 respectively. 

 

E-350 supports a request from the Department of Museums, Libraries and Arts for a transfer of funds increase to the Cultural Affairs Division (BA2892) to fund an enhanced radio and television promotional component of the current public information program by hiring a contractor to handle the broadcast, secure grants and build partnerships for future funding and growth. 

 

E-710 supports a request to replace a broken pallet jack and ten computers over two years that will reach their maximum usefulness during the biennium.

 

E-720 supports a request to purchase radio equipment currently rented at NCOT produced conferences and meetings.  Average rental cost is approximately $4,700 per event.  The cost to purchase is around $7,500.  NCOT produces two or more events in a year with rental costs running approximately $9,000 per year.  Purchasing the equipment will result in an immediate savings in one year. 

 

E-730 supports a request from State Parks (BA4162) to transfer funds to facilitate maintenance projects for tourism impacted parks and for park improvement programs in BA4164 that are not currently in the executive budget. 

 

E-806 supports a request for a reclassification and increase in pay for unclassified position No. 004, Business Manager, to Deputy Director.  This position is second in command and directs the programs and divisions of the agency in conjunction with the Executive Director.  In addition, the position is responsible for evaluating the productivity and achievements of the entire staff of professionals ranging in pay from $55,996 to $67,760.  The current salary of position 004 is $54,530, considerably less than the pay of those it assesses. 

 

In Conclusion:  Tourism is Nevada's number one industry and the competition we face from other states is more intense than ever before in our history.  This increase in competition requires a broad diversification of our tourism product.  The diversification requires NCOT to open up the eyes of the world to the fact that we have so many other assets in addition to casinos and entertainment.  Nevada has skiing, golf and outdoor recreation and importantly cultural and historic attractions that are an element of tourism that is becoming more and more popular.  It is imperative that Tourism respond to the changing trends.  Funding for tourism efforts is largely generated by the very visitors we seek to reach.  In this industry, we have to spend money to make money.  Money spent on tourism is an investment in Nevada's economic strength.  Thank you for your consideration of this request. 

 

Ms. Dunn explained, in regard to E-710, that the agency was on a five-year equipment replacement schedule and the plan had been submitted to the Department of Information Technology (DoIT).  Their technological environment was Macintosh and DoIT did not specialize in Macintosh, but was IBM based.  DoIT had overseen their requests and had been helpful, but DoIT did not specialize in their system, so they generally just reviewed NCOT's requests and approved the proposal.

 

Mr. Hettrick referred to the performance indicators and said that the indicators showed significant increases in user visits on the Web site and it was predicted that there would be increased influence by advertisements on the Web site.  He said that when reviewing the number of visitors for fiscal years 2000-01, 2000-02, and 2002-03, the projection was that the amount of visitors would remain flat, but the length of stay for visitors was projected to increase by one-tenth of a day.  Mr. Hettrick said he wasn't sure how, with an increase in length of stay, but with the same amount of visitors, revenues would increase, unless prices for lodging were to be raised.  He felt raising lodging rates would decrease the amount of visitors.  He also wondered why inquiries were decreasing in the advertising campaign. 

 

Ms. Dunn said that NCOT was working very hard on their performance indicators and were in the process of developing business plans.  The plans would project the outcomes of each unit of productivity within the Commission on Tourism.  One of the reasons the amount of people visiting Nevada was projected flat was because the Wall Street analysts' projections were predicting a decrease in the visitor count.  One of NCOT's missions was to hold that count steady.  Hopefully the agency would strive to increase the visitor count, but their goal was to maintain the existing level.  Their focus in the next few years would be on rural Nevada and the primary visitor count came from the Las Vegas area. 

 

Mr. Hettrick said that he did not see how, when indicators were flat on visitation, how the revenues were expected to increase.  Ms. Dunn answered that one of the other things they were focusing on was to increase the length of stay for visitors, which should increase revenue in lodging tax.  Mr. Hettrick said that one-tenth of a day would not generate a 4.5 percent increase in lodging tax revenues.  He said the numbers did not come out correctly.  He discussed a budget hearing that took place a few days prior to February 7, 2001, with the Bureau for the Services of the Blind. The agency had gone back and taken their services for several bienniums, calculated, and gave the committee a number that said "per placement of a blind person in a job we spent $4,470 in 1996 and last year it cost us $4,235 and we placed more people."  Mr. Hettrick said those were meaningful performance indicators.  It told how many people were placed as well as how much it cost.  It told that while inflation caused costs to rise, at the same time placements per person were made at a lower cost.  It proved to him that there was efficiency and management of the program.  That was the kind of performance indicator he would like to see.  He said the NCOT was crucial to the committee and they would like to see some meaningful performance indicators.  Ms. Dunn agreed and said that they would comply.

 

Mr. Goldwater asked if NCOT felt that they got benefit from the Washington Office, as part of the support for the office came from the account.  Ms. Dunn said that she felt there was tremendous benefit from the Washington Office.

 

Mr. Goldwater said it seemed like Indian gaming and Internet gaming had a "little chunk of money" in every budget.  He said that he could not understand why the state was promoting room occupancy when multibillion-dollar companies were spending millions of dollars all over the country promoting their own self-interest.  Mr. Goldwater then questioned Ms. Dunn on unit E-250, which requested new positions to help reduce their obligation to advertising agencies.  He asked her if she felt it was it absolutely necessary and what was NCOT trying to accomplish. 

 

Ms. Dunn said that the NCOT was not in the business of advertising or promoting properties or hotels within Nevada.  Their statutory mandate and their mission was to promote the "other side of Nevada" which was its cultural, historic, and recreational side. 

 

Ms. Dunn stated that the two new positions requested under E-250 would free up contract dollars.  The attempt was to not increase their request over the 2001 biennium.  They wanted to reallocate some of the costs and could achieve this by freeing up contract dollars and the focus on a broader advertising campaign.  Rather than asking for new funding, funding was being shifted. 

 

Ms. Dunn, in response to Mr. Goldwater's questions regarding the Indian gaming and Internet gaming, said the NCOT was not looking at the subject as a gaming issue, but as a tourism issue.  Tourists came to Nevada to gamble and the Indian gaming in California would keep some tourists from coming to Nevada.  She gave as an example, going to Magic Mountain, and then wanting to see Disneyland because it was in the area.  Indian gaming in California would pique the public's curiosity and would keep people from coming to Nevada.  The goal was to let people know that there were other things to do in Nevada besides gambling. 

 

Ms. Giunchigliani said she didn't understand why a commission was needed instead of distributing the money to the localities, especially the rural areas.  These funds could be used to create a plan to enhance tourism in rural areas.  She said this would be discussed in subcommittee. 

 

Ms. Giunchigliani then asked if the first RV had been purchased for the sweepstakes and how NCOT felt this would help Nevada compete with California.  Ms. Dunn said no, the RV had not been purchased.  She explained that the focus was on rural Nevada.  The RV program was to attract other areas, including Oregon, Washington, Idaho, Utah and Arizona, because the Indian gaming would have an impact on tourism.  The RV market was huge and would help get tourists to come to rural Nevada.  (See Exhibit H for sweepstakes pamphlet.)

 

Ms. Giunchigliani asked how tickets were purchased, but Ms. Dunn said that there were no tickets.  Visitors would go to one of the 74 entry points around Nevada.  The points were at state parks or RV parks.  Individuals could fill out an entry form and leave the form there.  All visitors were encouraged to sign up, including out-of-state residents and Nevada residents.  The goal was to encourage all visitors to visit the rural areas of Nevada. 

 

Ms. Giunchigliani asked what kind of information NCOT had to show that this might bring people to Nevada, for example, how many RVs were coming into Nevada, and how many visitors were filling out forms.  She wanted to know why NCOT was asking for six RVs when the program was just starting.  Ms. Dunn said that the program just began in January and statistical research had already been initiated on the program.  She said she would get the figures to the committee.  There was a mechanism in place to monitor how many people were filling out entry forms. 

 

Ms. Giunchigliani asked if any of the entry points were in urban areas, or connected to hotels.  Chris Crystal, Media Relations Manager, NCOT, said that the 74 entry points were in 58 RV parks and 16 state parks

 

Ms. Giunchigliani asked if Ms. Dunn would talk about the reserve category.  Mark Stevens, Fiscal Analyst, said that the reserve level in this account was in the $4.8 million range, 40 percent of the annual operating cost.  He said he thought a discussion had taken place last session where the commission indicated that the adequate reserve level was $1 million.  The $4.8 million was a large level and the committee needed to figure out if the reserve level should remain this high or if an adjustment should be made. 

 

Ms. Giunchigliani asked Ms. Dunn to explain why the reserve level was higher than $1 million.

 

Ms. Dunn explained that their budget was set up where revenues were collected and then the budget was built around those revenues.  It was not an appropriation like a General Fund agency would be.  The agency was totally reliant on the revenue that was collected.  Based on their projections, revenue that was being collected was more than the agency needed to spend.  If an emergency occurred, the agency would come before the Interim Finance Committee and ask that the funding be transferred to an expenditure category.  This was what had been done in the June 1999 Interim Finance Committee when $2 million was transferred out of reserve for the RV program and the other expanded program. 

 

Ms. Giunchigliani expressed concern that the reserve might become a slush fund.  She did not feel that it was a wise use of the money, and some of the other budgets heard during the hearing might be able to use some of the money in a better manner for businesses and recruiting businesses and for training employees in Nevada. 

 

Ms. Dunn explained that the statutes for the Nevada Commission on Tourism that established the fund were very specific that the money collected be used for promoting tourism in the state of Nevada.  Ms. Giunchigliani agreed and said that that could be changed. 

 

Mrs. Chowning asked, in reference to the enhancement money for the Railroad Museum in Boulder City, if Ms. Dunn would provide information to the committee as to how all the railroad museums in Nevada were funded, including the museum in Carson City and in Ely.  She wanted to know if one museum was being funded at the expense of another museum.  She wanted to know if the Ely Museum was being adequately funded and what the visitor count was in Ely.  Ms. Dunn said she would try to get that information to the committee, but that this issue should be directed to the Department of Libraries, Museums and Art and the information would have to come from them.  NCOT requested the money to be transferred to them in support of their marketing efforts.  She said she thought that the Ely and Carson City Museums had already received pass-through funding.  The Boulder City funding was a new request.

 

Ms. Giunchigliani asked if there was another way to fund the Boulder City Museum, for example, user fees.  Ms. Dunn said she would check that for her.  

 

Chairman Arberry adjourned the meeting at 10:23 a.m. 

 

 

 

 

RESPECTFULLY SUBMITTED:

 

 

 

     

Kathryn Fosnaugh

Committee Secretary

 

 

APPROVED BY:

 

 

 

                       

Assemblyman Morse Arberry Jr., Chairman

 

 

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