ASSEMBLY COMMITTEE ON WAYS AND MEANS

MINUTES OF THE meeting

of the

ASSEMBLY committee on Ways and Means and

senate committee on finance

joint subcommittee on higher education/capital improvements

Seventy-First Session

April 5, 2001

The Joint Subcommittee on Higher Education/Capital Improvements was called to order at 8:15 a.m. on Thursday, April 5, 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.

ASSEMBLY SUBCOMMITTEE MEMBERS PRESENT:

Mr. Morse Arberry Jr., Chairman

Mr. Joseph Dini, Jr.

Ms. Chris Giunchigliani

Mr. John Marvel

Mr. Richard D. Perkins

SUBCOMMITTEE MEMBERS ABSENT:

Senator Raymond D. Rawson, Excused

Mr. Lynn Hettrick, Excused

SENATE SUBCOMMITTEE MEMBERS PRESENT:

Senator William J. Raggio

Senator Bob Coffin

Senator Bernice Mathews

STAFF MEMBERS PRESENT:

Gary Ghiggeri, Senate Fiscal Analyst

Steve Abba, Principal Deputy Fiscal Analyst

Rick Combs, Program Analyst

Connie Davis, Committee Secretary

Chairman Arberry advised that the first item on the agenda, Bond Interest & Redemption, Budget Account 395-1082, would be delayed pending the arrival of Senator Raggio.

CAPITAL IMPROVEMENT PROJECTS DETAIL BY PROJECT

DEPARTMENT OF EMPLOYMENT, TRAINING & REHABILITATION, NEW OFFICE BUILDING, LAS VEGAS (CIP 01-E1)

Chairman Arberry recognized Ward Patrick. Ward Patrick, Deputy Manager, Professional Services, Public Works Board (PWB), identified himself for the record. Mr. Patrick identified CIP 01-E1 as a recommendation for the construction of a 40,000-square-foot facility in Las Vegas for the Employment Security Division of the Department of Employment Training and Rehabilitation (DETR). Mr. Patrick discussed a 1999 CIP proposal for a 60,000-square‑foot facility that had been planned to house non-General Fund agencies. The facility was reduced in size to 40,000-square-feet because of funding problems. Mr. Patrick pointed out that while a number of references were made to a particular site in the current project description, the actual site had not yet been determined; however, DETR representatives were working on it.

Chairman Arberry recognized Birgit Baker. Birgit Baker, Administrator of the Employment Security Division, identified herself for the record and advised that CIP 01-E1 was a recommendation for a new administrative building in Las Vegas to centralize and consolidate the unemployment insurance operations in southern Nevada. It was proposed to move 150 staff who provided those services and who were currently located in four separate, leased facilities throughout southern Nevada. Ms. Baker advised that the new facility would replace the Eighth Street office that closed in 1997.

Chairman Arberry requested a list of the Department of Employment, Training and Rehabilitation agencies that would move into the building. Ms. Baker responded that the agencies targeted for the new facility included the Unemployment Insurance Operations under which were the Appeals office, the Telephone Claims Center, Adjudication office, Field Audit staff, Benefit Payment Control and Quality Control programs, as well as ESD and DETR administrative functions.

Senator Coffin pointed out that the proposed site of the new building appeared to be in a remote area of west Sahara Avenue and questioned the availability of public transportation to the site for clients who used the services. Ms. Baker responded that the property identified in the project was not the property that would be utilized. Ms. Baker explained that the site identified in the project was in a rather distant residential area and that the DETR was working with the Bureau of Land Management (BLM) and State Lands Division on locating an alternate site. Senator Coffin questioned whether BLM involvement meant another remote site. Ms. Baker responded that some of the larger pieces of land were located on the outskirts of town; however, there were other areas and redevelopment locations that were potential sites. Senator Coffin encouraged placing the facility in an area accessible to public transportation. Ms. Baker further advised that unemployment claims were filed solely by telephone and claimants had the option of going to local offices, throughout the city, to file on a bank of phones where assistance could be provided. Additionally, Ms. Baker advised that eligibility determination claims were also filed strictly by telephone. Ms. Baker explained that approximately 40 percent of claimants filed appeals and appeals claimants would be the only traffic the building should experience. Senator Coffin commented that those individuals in the appeals process were probably those "in the most desperate straits" and again urged consideration of a site accessible to public transportation.

Chairman Arberry requested information on the term of the bonds that would be issued. Ms. Baker advised that $8,252,451 was recommended for the facility, of which $4 million would be paid with non-state funds which were broken down as:

$1 million - U.S. Department of Labor Reed Act funds;
$1 million from the proceeds of the sale of department-owned property in Las Vegas and Reno; and
$2 million from the department's Penalty and Interest account funds.

The balance of $4.3 million to be paid over a period of five years at $900,000 per year, $600,000 from the Penalty and Interest account and $300,000 from the savings in rent payments.

Chairman Arberry asked whether the bond counsel had reviewed and approved the proposed bond issuance for the project. Robin Reedy, Director of Debt Management, Office of the State Treasurer, identified herself for the record and advised that approval on issuing bonds with the pledged revenues had been received from the bond counsel.

Mr. Marvel questioned whether appraisals had been performed on the property being sold. Ms. Baker responded that while several appraisals had been performed, the property could not be sold until the CIP was approved since funds had to be obligated within one year. Ms. Baker added that the combined value of the properties exceeded $1 million. In response to a question from Mr. Marvel, Ms. Baker indicated uncertainty on whether there were any potential buyers.

Chairman Arberry commented that the location of the facility was separated by the proposed extension of Pioneer Way and questioned how the facility would be designed to compensate for the fact that Pioneer Way might be extended between the two parcels of land. Mr. Patrick advised that the facility, most likely, would be built on an alternate site and not the site proposed in the CIP. Mr. Patrick explained that some of the difficulty with the current site was that residential development and zoning had occurred within the area that prohibited government or commercial use. Additionally, Mr. Patrick advised that determination on the use of the property had been based on required hearings and a past history of objections that were considered valid whether or not they were substantiated.

Senator Mathews asked if the projected cost for the facility was based on the proposed site in the CIP. Mr. Patrick responded that the projected cost for the facility was based on the fact that the utilities were within a reasonable distance. In response to a question from Senator Mathews concerning the fact that the cost of the building could change, Mr. Patrick advised that while the building cost would essentially remain the same, the off-site costs could increase or decrease depending on the site.

Chairman Arberry asked for information on alternate site acquisition costs. Mr. Patrick responded that the department was looking at a site with a similar acquisition cost of $10 per acre for BLM land. However, Mr. Patrick reiterated that the off-site costs might change based on the proximity of utilities. In reference to Senator Coffin's concern that the site should be internal to urban areas, Mr. Patrick indicated it was likely utilities would be reasonably close.

Birgit Baker advised that the cost of the alternate site properties being investigated was the same as the cost of the current site. Ms. Baker also advised that the department's special projects manager had been working with Henderson and North Las Vegas representatives on redevelopment areas and a large increase in the cost of the project was not anticipated.

In response to a question from Senator Mathews on whether the state held any property that could be used for the project, Mr. Patrick discussed the east Sahara complex that, while not state owned, was held in trust for schools. The members of the subcommittee were advised of a requirement that the property could only be sold at market rates.

Mr. Marvel asked when the subcommittee would have the answers to the questions discussed during the hearing. Ms. Baker discussed the sale of a piece of land, that was under review, to a developer within the next month and advised that the department would "get back" to the members of the subcommittee concerning the questions asked during the meeting.

BOND INTEREST & REDEMPTION ACCOUNT - BUDGET ACCOUNT 395-1082, BUDGET PAGE - ELECTED-107

The Chairman recognized Mr. Comeaux. Perry Comeaux, Director, Department of Administration, identified himself for the record and addressed the "Debt Capacity Report" (Exhibit C) previously distributed to the members of the subcommittee. Mr. Comeaux reported that the "Debt Capacity Report" covered the proposed financing for the capital improvement program. In a review of the report, Mr. Comeaux reported:

Total recommended capital improvement program costs - $306,502,316;
Proposed state funds - $221,203,753;
Federal funds - $5,292,803;
UCCSN funds - $66,500,000;
Highway Funds - $1,560,937;
Employment Security Funds -$8,252,451;
Insurance Settlement - $662,391;
Fees - $3,029,981.

The second section of the report on resources presented a breakdown of the state funds recommended:

Proposed reallocations from current projects - $3,000,000;

One-time cash appropriation recommended in the budget - $18,000,000; and,

Proposed bonds for CIP issued over three years - $200,203,753.

Chairman Arberry questioned whether the proposal to issue bonds in the amount of $200,203,753 over a period of three years was "out of the norm." Mr. Comeaux responded that the proposal differed from what had occurred in the past. Normally the capital improvement program was financed with available cash in addition to bonds issued within the state's debt limit and tax rate during the two years of the biennium, even though many of the projects took longer than two years to complete and did not require the cash over the two-year period of time.

Mr. Comeaux advised that the proposed recommendation was based on a cash‑flow method. In considering the projects requested by the various entities, the PWB was asked to look at those projects that would most likely be recommended by the Governor and to develop a plan for how they would "attack" the projects and their cash‑flow requirements to meet the plan. The "Debt Capacity Report" (Exhibit C) was the result of that request.

Mr. Comeaux addressed the proposed capital improvement bill and advised that language had been provided to Gary Ghiggeri, Senate Fiscal Analyst, that listed all of the projects that would be constructed using state funds and that authorized the issuance of $200,000,000 in bonds and additionally provided for the appropriation and reallocations. Basically, Mr. Comeaux advised that the combined funding would be used to finance the various programs.

Mr. Comeaux explained the advantage was that the available cash could be used to pay the "up front costs" for the projects. Additionally, Mr. Comeaux advised of a provision in the language of the bill that permitted an advance from the General Fund until the bonds were sold. Mr. Comeaux advised that the available cash and advance from the General Fund would provide maximum flexibility in the timing and size of issuing the bonds, which would allow the state to try and obtain a balance between issuing as few bonds "dollar wise" as possible but at the same time making the issue large enough so that the issuance costs were not prohibitive. Mr. Comeaux explained that the suggested language provided a way to handle the reversion problem. Mr. Comeaux suggested that the percent of state funds represented by bonds and cash be stated in a reversion clause which provided that for every dollar reverted from a project, 90 percent would go to the Bond Interest and Redemption Fund and the remainder back to the General Fund which was about the percent that the funding represented.

It was Senator Raggio's understanding that the plan, as outlined, was that the state would issue approximately $75 million in General Obligation Bonds in FY2004 and appropriate $18 million in cash from the General Fund. Senator Raggio questioned what assurance would be provided that the projects approved would actually be funded and worked on. Senator Raggio expressed concern that the $18 million was "in the form of an appropriation without any specification" and that there was no assurance that the funding would be utilized in the manner identified. Additionally, Senator Raggio indicated concern that the PWB would be provided "complete flexibility" to decide which projects would be worked on without priority. Mr. Comeaux responded that a cash-flow statement by project had been prepared, however, was not provided in the "Debt Capacity Report" (Exhibit C). Mr. Comeaux indicated that a cash‑flow statement by project would be provided to the subcommittee's staff. However, Mr. Comeaux explained that the PWB would be bound by the scope of the project so that if a project for $25 million was approved that contained certain components, the Interim Finance Committee would have to be approached for approval to deviate from the scope. Senator Raggio asked if specificity should be provided concerning utilization of the $18 million. Mr. Comeaux explained that the concept behind being provided flexibility was in the timing of the sale of the bonds and any specification on how the funding was utilized would take away that flexibility. Senator Raggio expressed concern that the funding would be overused on a project leaving no funding available for other projects. Mr. Comeaux advised that many of the projects would be funded 100 percent with bond proceeds since there was only $18 million in cash, which meant that bonds would have to be issued immediately. While Senator Raggio agreed that it was prudent not to issue bonds and incur the debt service until it was "absolutely necessary," he reiterated concern that some of the projects could be moved around to where they eventually "fell out of the mix." Mr. Comeaux agreed that while the possibility existed, it was the Department of Administration and the PWB's intention to follow the plan as close to the timing as possible and within the costs approved by the legislature.

Mr. Marvel questioned whether the $18 million appropriation from the General Fund preserved the integrity of the $0.15 ad valorem tax levy. Mr. Comeaux responded that the recommended plan utilized the issuance of bonds to the maximum within the $0.15 ad valorem tax levy. In response to a question from Mr. Marvel, Mr. Comeaux indicated the department was looking into reducing the General Fund commitment.

Senator Raggio recalled a chart he had seen that indicated approval of the bonding and the cost associated with retiring the issued bonds would limit the state's bonding capacity within a few years. Mr. Comeaux indicated the state's bonding capacity would be addressed during his presentation.

Mr. Comeaux addressed the last section of page 1 of the "Debt Capacity Report" (Exhibit C) and pointed out the bonds previously authorized by the legislature included:

The Tahoe Environmental Improvement;
Water Systems (serviced with $0.15 tax rate); and
Cultural Affairs.

Mr. Comeaux advised that the previously authorized bonds and the bonds recommended to fund the capital improvement program over the three years proposed a total bond issuance of $240,703,753 over the next three years:

$ 44,081,929 for FY2001-02;
$107,796,480 for FY2002-03; and
$ 88,825,344 for FY2003-04.

Mr. Comeaux moved to page 2 of the report, which provided an inventory of the assumptions made in constructing the "Debt Capacity Report" (Exhibit C) and called attention to the growth in assessed valuation on which the report was based:

8.4 percent for FY2001;
7.88 percent for FY2002; and
9.28 percent for FY2003.

Mr. Comeaux advised that the projections for growth in assessed valuation were provided by the Department of Taxation in November 2000, and the department had recently produced their "Segregation of the Role" report provided for local governments each year to assist them in estimating property tax revenues and setting their tax rates for the coming year. Mr. Comeaux explained that the Department of Taxation only provided an estimate for the next fiscal year and the estimate for FY2002 was lower than the 7.88 percent used for the state's purposes and was around 6.5 percent. Mr. Comeaux advised that he and the Executive Director of the Department of Taxation were confident that 7.88 percent was a good estimate to use. Mr. Comeaux reiterated that the "Segregation of the Role" report was prepared to assist the local governments in estimating their property tax revenues and setting their tax rate and pointed out those estimates were provided for a different purpose than the state's purpose. Additionally, Mr. Comeaux explained that the Department of Taxation, by agreement with local governments, had traditionally used an averaged assumed growth rate of the unsecured role, and historically, the estimate used in the "Segregation of the Role" report was much lower than the actual growth in the unsecured role every year. For example, Mr. Comeaux advised that the difference was about 11 percent in Clark County and about 7.5 percent in Washoe County. Mr. Comeaux turned to page 3 of the "Debt Capacity Report" (Exhibit C), which included the historic (actual) growth in assessed valuations for the past six years and the forecast for FY2002 and FY2003. Mr. Comeaux pointed out that forecasts for FY2002 and FY2003 were not "even close to being out of line."

Mr. Comeaux returned to page 2 to complete his presentation on assumptions and pointed out the assumptions for assessed value growth rate were:

FY2004 through FY2012 - 7 percent annually;
FY 2013 through FY2020 - 4 percent; and
Thereafter – 0 percent;

The second assumption was that the state's tax rate would remain at $0.15;

The third assumption was that the earnings in the Consolidated Bond Interest and Redemption Fund would be 5 percent;

The fourth assumption was that the practice of maintaining the balance of the fund at the end of any fiscal year would be continued in an amount sufficient to cover half of the debt service for the following year (part of the state's debt management policy);

The fifth assumption was that the state's borrowing cost would be at 6 percent;

The sixth assumption was that the issuance costs would be 1 percent of the total bond issue; and

The seventh assumption ensured that in any given fiscal year the state would not exceed its debt limit of 2 percent of assessed value.

Page 3 of the "Debt Capacity Report" (Exhibit C) had previously been reviewed, and Mr. Comeaux moved to page 4. Page 4 illustrated the Debt Repayment Summary by fiscal year; the effect the growth rate being assumed would have on the assessed valuation; the estimated property tax revenues that would be generated by the assumed $0.15 tax rate; the total existing debt service; future debt service being proposed; and, the estimated debt service fund. Mr. Comeaux explained that the amounts shown in the last column reflected the amounts added to or withdrawn from the Consolidated Bond Interest and Redemption Fund.

Mr. Comeaux moved to page 5 of the report, which reflected the existing general obligation debt paid with property tax. The chart also illustrated the debt service of the bonds that had actually been issued and the debt service on the Tahoe bonds that the Treasurer's Office was in the process of issuing.

Mr. Comeaux moved to page 6 of the report, which displayed the activity that would occur in the Consolidated Bond Interest and Redemption Debt Service Fund if the bonds, proposed to be issued, were issued. The schedule illustrated the beginning balance in the fund; interest earnings at the assumed 5 percent rate; deposits and draw downs, and the ending balance. Mr. Comeaux advised that the schedule reflected that the ending balance would be consistent with the State's Debt Management Policy except in FY2003 and FY2007 when the state was below the ending fund balance equal to 100 percent of the next six months' debt service. In FY2003, Mr. Comeaux pointed out the ending balance was 99.5 percent of the next six months' debt service and in FY2007 the ending balance was 99.98 percent of the next six months' debt service.

Mr. Comeaux moved to page 7 of the report, which reflected the future bonding capacity with the $0.15 tax rate and the projected debt capacity by fiscal year through FY2010. Mr. Comeaux pointed out that a "dip" in the state's capacity was reflected in FY2005 and FY2006 and would "show up" whether or not a capital improvement program, that required three years worth of bonding, was approved. Mr. Comeaux explained that a reduction in the amount in any of the early years increased the amount available in another year. Mr. Comeaux pointed out that the display on the left-hand side of the page reflected the debt service on the bonds proposed to be issued both for the capital improvements and for the previously authorized bonds. Mr. Comeaux pointed out another chart on page 16 of the report reflected the state's constitutional debt capacity.

Senator Raggio questioned why the "dip" in the state's bonding capacity for FY2005 and FY2006 was so low if a 7 percent growth in assessed value was projected in the early years. Mr. Comeaux attributed the "dip" to the 7 percent growth rate assumption of assessed value in the early years based on historically conservative estimates.

Senator Raggio asked for comments concerning the state's bonding capacity and the practical limit that should not be exceeded in order that the state's rating for the issuance of bonds would not be impacted. Robin Reedy, Director of Debt Management, Office of the State Treasurer, identified herself for the record and responded that it was always recommended not to maximize the bonding capacity. However, Ms. Reedy was not aware of a particular number with which the credit rating agencies were concerned. Senator Raggio recalled that a specific line in past years should not be exceeded. Ms. Reedy advised that the state's line was 2 percent along with the $0.15 tax rate; however, Ms. Reedy advised that credit rating agencies looked at flexibility. Senator Raggio reiterated that there was an arbitrary line that should not be exceeded because of the impact on the bond rating. Ms. Reedy advised that while she was unfamiliar with the specific line not to be exceeded, she would make some inquiries. Ms. Reedy indicated there had been discussion with the credit rating agencies concerning the proposal and their perception was more positive than negative which was attributed to the state's "low parameters," conservatism, and planning further out into the future than had been done in the past. Senator Raggio asked whether the unusual nature of bonding maintenance projects made any difference. Ms. Reedy indicated that while it was unusual to bond maintenance projects, bond counsel had been consulted and "everything" in the proposal was "currently acceptable."

In response to a question from Mr. Marvel, Ms. Reedy advised that the state's bond rating was AA. Mr. Marvel questioned how the state would maintain the AA rating and further questioned whether the schedules took refinancing into account. Ms. Reedy responded that the schedules did not take refinancing into account; however, advised that the Treasurer's Office had been "very cautious" as had the Department of Administration, and, on an informal basis, had questioned the credit rating agencies concerning those issues. Ms. Reedy advised that because everything appeared to be conservative in nature, the credit rating agencies were unconcerned.

In response to a question from Senator Coffin concerning whether the recent interest rate cuts affected the state, Ms. Reedy responded that the lower interest rates would have an effect and the Treasurer was looking at 5.5 or 5.25 percent, but that in planning out ten years, 6 percent was considered a safe assumption.

Insofar as the state's bonding ability, Senator Coffin questioned whether the Treasurer's Office used a benchmark figure in considering each half-point rate change in the prevailing tax-exempt market. Ms. Reedy advised that the Treasurer's Office traditionally bonded what they had been given authority for in a previous session, and while the timing of bonds was affected, the issuance of bonds was not necessarily increased. However, Ms. Reedy further advised that the interest rates did affect refinancing, and a benchmark was used to determine whether it was time to refinance, the amount of money that could be saved, and whether the costs of refinancing made the effort worthwhile. Concerning the new issuances, Senator Coffin questioned whether the state actually had more bonding ability available simply because the state's money would go further. Ms. Reedy responded that if a determination was made from the current point in time, bonding ability probably would be increased; however, over a period of ten years and considering rate changes, the Treasurer's Office preferred to remain conservative. Senator Coffin noted, however, that once the rate was fixed on a bond it would not change. Ms. Reedy agreed; however, pointed out that what was issued in four or five months could be different.

Continuing his presentation, Mr. Comeaux referred to pages 8 through 15 in the "Debt Capacity Report" (Exhibit C), which displayed the debt service by fiscal year for the Capital Improvement bonds, the Tahoe Environmental Improvement bonds, the Water Systems bonds, and the Cultural Affairs bonds. Mr. Comeaux said that pages 8, 9, 10, and 11 pertained to FY2002 and pages 12 through 15 pertained to FY2003. Page 16 reflected the constitutional debt capacity calculation, which provided that the assumed assessed value calculated the debt limit and displayed the outstanding proposed and future debt and showed that if the proposals were approved, "a fairly significant amount of debt capacity under the 2 percent constitutional limit" remained. Pages 18 and 19 reflected material supplied by the Treasurer's Office and covered the state's AA credit rating and the factors that affected the state's rating. Mr. Comeaux advised that the state's debt/management was a factor rating agencies considered a strong point. In response to a comment from Senator Raggio, Mr. Comeaux agreed that rating agencies were also impressed with the state's stabilization fund. Mr. Comeaux advised that while the Treasurer had attempted, during the last several years, to "sell" the rating agencies on increasing the state's credit rating from AA to AA+ or AAA, Nevada's reliance on gaming taxes prevented the state from achieving a higher rating.

Mr. Marvel questioned what the difference in the interest rate would be if the state moved from an AA to AAA rating. Ms. Reedy responded that the difference would be smaller today than it would have been two years ago, however, since the state had an AA rating she had not researched the higher rating and would get back to the subcommittee with the information. Mr. Marvel questioned whether the downturn in the stock market increased the rates that were being offered. Ms. Reedy advised that the theory existed that those investors fleeing the stock market moved to the municipal market, which would create a decrease in rates.

Mr. Comeaux continued his presentation and moved to the last page of the "Debt Capacity Report" (Exhibit C) and the chart titled, "Recommended Financing for Future CIP's," which he said was for display purposes only." Mr. Comeaux described the chart as a "what if" scenario, and advised that its sole purpose was to demonstrate the difference between recommended and traditional financing. Mr. Comeaux advised that, in effect, the recommendation was to borrow $75 million in bonding capacity from the FY2003-05 biennium of which a portion would be returned in that biennium limiting the state to bonding of $25 million to be followed by a gain and return in following biennia. Mr. Comeaux advised that if the recommendation was approved and that approach continued into the future, the state would have essentially borrowed aone-time year's worth of bonding capacity. The advantage would allow the state to begin work more quickly on projects that were identified as necessary. Mr. Comeaux discussed a downside to the recommendation and advised the members that if the state's requirements became volatile at some point in the future, the bonding commitment was for three years out rather than two years. However, Mr. Comeaux was of the opinion that the state's requirements were not volatile, and that the problem was more one of not being able to afford to do everything that needed to be done. Mr. Comeaux explained that if financing was approached in the traditional manner in which a capital improvement program was approved and financed with available cash and bonds that could be issued in the two years of the next biennium, the capital improvement program would have to be decreased by about $75 million.

Chairman Arberry questioned whether the FY2003 legislative body would be limited in their approval of capital improvement projects if the method of financing, under discussion, was approved. Mr. Comeaux advised that the following legislative body would be limited; however, because of the dip in bonding capacity in FY2005 and FY2006, the amount that could be borrowed in the next biennium from the following biennium would be reduced. Assuming the assumptions were correct, Mr. Comeaux advised that the state would have a capital improvement program in FY2003 funded with state funds totaling about $44 million partly in cash and partly in bonds.

In response to a question from Chairman Arberry on the length of time before the legislature would have a large capacity for projects and bonding, Mr. Comeaux referred to the chart on the last page of the "Debt Capacity Report," (Exhibit C) and pointed out that in FY2005, the recommended spending increased to approximately $183,300,000. Mr. Comeaux explained that the increase resulted as a function of the state being able to borrow bonding capacity from the FY2007 biennium when the capacity increased again. In response to a question from Chairman Arberry on the traditional versus the recommended manner of financing, Mr. Comeaux explained that if the traditional manner of financing was approved, the current capital improvement program would have to be reduced by about $75 million. Mr. Comeaux explained that if the assumptions were correct, there would only be so much that could be done over the next four years or six years based on available cash and a finite amount of bonding capacity.

Chairman Arberry recalled that in earlier testimony, Mr. Comeaux discussed proposed reallocations from current projects in the amount of $3,000,000. In response to a request from the Chairman, Mr. Comeaux agreed to provide a copy of the list.

Recalling Mr. Comeaux's testimony concerning flexibility, Chairman Arberry pointed out that the department already had flexibility and that any capital improvement projects that were approved could be funded to begin with a loan from the General Fund and the balance funded from bonds. Mr. Comeaux agreed; however, he advised that the proposal would provide additional flexibility and that $18 million would not have to be borrowed from the General Fund.

CAPITAL IMPROVEMENT PROJECTS DETAIL BY PROJECT, APPENDIX-18

Mr. Patrick requested approval to have the subcommittee entertain an item concerning increasing the debt limit for energy retrofit in state‑owned buildings. The Chairman agreed.

The key points addressed by Mr. Patrick were:

Nevada Revised Statutes 338.1906provided $5 million of debt capacity to perform energy retrofits in state-owned buildings;

The state had executed and completed retrofits in approximately one million square feet of state-owned buildings;

The state had immediate plans to expend the allowable $5 million of debt capacity allowed in statute;

Currently $2 million of the $5 million had been obligated and the balance was planned to be expended in the immediate future;

Debt currently not under the $0.15 repayment scope, but considered to be a part of the 2 percent constitutional debt limit;

Current legislation required the debt to be repaid from operational savings and was intended to continue in that manner;

The Department of Administration recommended that the debt limit be increased from $5 million and placed in the CIP bill;

Senate Bill 22 that would have revised provisions related to retrofitting of governmental buildings for energy efficiency was considered indefinitely postponed in the Senate Standing Committee on Government Affairs. It was Mr. Patrick's opinion the bill was indefinitely postponed because of add-on language that included criteria for the savings from energy retrofits to be used to purchase renewable resource energy.

Mr. Patrick advised that both the Governor's Office and the Department of Administration would like to see the increased debt limit added into the CIP bill. Mr. Patrick advised that Robin Reedy, Director of Debt Management, Office of the State Treasurer, was prepared to discuss the issue.

Senator Raggio explained that one of the reasons S.B. 22 was indefinitely postponed in the Senate Committee on Government Affairs was that the bill specifically sought to raise the $5 million authorized in statute to approximately $50 million which could impact the issuance of bonds. In response to a question from Senator Raggio, Mr. Patrick indicated his original proposal was for $20 million to keep the program going for the next several years and that the program would "inevitably" be paid for out of operational savings. Having testified in support of S.B. 22, Mr. Patrick stated that the PWB could implement "$5 million worth" of retrofitting governmental buildings for energy efficiency every year or two and that increasing the authorization in $5 million increments would benefit the state. Mr. Patrick reported that projects completed under the statute had created a savings of approximately 16 percent in electrical demand.

Senator Raggio requested clarification on the figure being suggested for the debt limit. Mr. Patrick deferred to Robin Reedy. Robin Reedy advised that currently the increased authorization would have to be counted under the 2 percent debt limit and not under the $0.15 maximum allowed from property tax. Senator Raggio questioned where the money was coming from to pay the "debt service." Ms. Reedy responded that the contracts were set up in a manner that paid the debt from energy savings. Additionally, Ms. Reedy advised that as long as the service was being paid in that manner, it was not counted under the $0.15 property tax rate and was considered "a wash." It was Senator Raggio's understanding that in order to begin the work, the state had to put the money up first. Mr. Patrick clarified that the current configuration of the contract provided that the energy service company had responsibility for financing, as well as design and construction services and follow-up through verification that the savings were there and the contract included a guarantee from the contractor that the savings would be there. In response to a question from Senator Raggio, Mr. Patrick verified:

The contract guaranteed that the contractor obtained the financing to do the work;

The state did not put any money up; and,

The state paid only if savings resulted.

Ms. Reedy reported that testimony on S.B. 22 discussed a change using money saved from retrofitting state buildings to pay for a renewable energy resource. Ms. Reedy indicated such a change would have created a problem in that money to pay for the debt would have been taken away, and the debt would have to be placed under the $0.15 maximum property tax allowance.

In response to a question from Senator Raggio, Mr. Patrick agreed that increasing the $5 million debt limit to $15 million would be "a great step to keep the program going through at least the next biennium and possibly two bienniums." Senator Raggio requested that Mr. Patrick provide language to amend S.B. 22 either through the money committees or the Committee on Government Affairs. Mr. Patrick agreed.

DEPARTMENT OF HUMAN RESOURCES, SPECIAL CHILDREN'S CLINIC ADDITION, RENO (CIP 01-C9)

Mr. Patrick advised the members that CIP 01-C9 requested $2,424,196 to fund construction of a 7,100-square-foot addition to the Special Children's Clinic in Reno and remodel approximately 3,000 square feet of existing space. Mr. Patrick pointed out that the 1999 legislature provided authorization under CIP 99-S04B for advanced planning for the project. Additionally, Mr. Patrick reported that the Special Children's Clinic had outgrown its current facilities and staff had increased from 27 to 53 with many offices holding two or three occupants. A number of safety issues associated with the site were brought to the attention of the subcommittee. Safety issues included fire department access as well as the immediacy of the parking lot to high-speed traffic, which would be corrected by the project.

Chairman Arberry called attention to a revised project cost estimate submitted by the PWB that combined CIP 01-C9 with CIP 01-M18 to finish the basement floor of the Special Children's Clinic in Reno. Mr. Patrick advised that CIP 01‑M18 had been previously discussed in the hearing for the Department of Administration. Mr. Patrick explained that the projects were not considered to be duplicates; however, the concrete floor in the basement was considered a higher priority, and the projects were separated in the event the major project was not approved. Mr. Patrick agreed that the projects could be combined and advised that if the projects were funded with two project numbers, a contract with a dual-funding authorization would be implemented in order for the project to get as many economies as possible. Mr. Arberry noted that if the projects were combined, the total cost of the project would be reduced by $3,845. Mr. Patrick agreed to review the project costs.

Chairman Arberry also called attention to the fact that the 1999 legislature approved $111,097 for advanced planning through construction documents and that an additional $93,933 was being requested for Architectural/Engineering (A/E) design and supervision costs. Chairman Arberry asked that comments be addressed to the reason additional A/E costs were being requested. Mr. Patrick clarified that $111,097, allocated in the 1999 Legislative Session, took the project through construction documents, and was approximately 70 to 75 percent of the total professional services costs required. Additionally, Mr. Patrick advised that the PWB would contract with the architect of record to monitor construction and plan checking.

NEW GYMNASIUM WOOD FLOOR AND LIGHTING UPGRADE, CALIENTE YOUTH CENTER (CIP 01-M10)

Mr. Patrick identified CIP 01-M10 as a project to replace the existing gymnasium floor and lighting at the Caliente Youth Center. Mr. Patrick explained that the 30-year-old rubber gymnasium floor was a safety issue for the children at the Youth Center who had suffered abrasions. Additionally, Mr. Patrick advised that the lighting was not adequately covered and had at times caused users of the facility to be showered with glass and debris. Mr. Patrick advised the members that the recommendation was to replace the rubber floor with a new wood floor and to have the staff of the Caliente Youth Center purchase and install the light fixtures and an additional basketball backboard for a total of $89,214.

Chairman Arberry questioned how the $1,350 cost of the backboard was determined. Mr. Patrick advised that the PWB would review the cost of the backboard and provide the information to staff.

INSTALL BACKFLOW PREVENTORS & VALVES (BLDGS. 7,8, 11,12 & 15) SNCAS (CIP 01-M11)

Mr. Patrick identified CIP 01-M11 as a project to install backflow preventors and valves on sewer lines from buildings 7, 8, 11, 12 and 15 at the Southern Nevada Child and Adolescent Services campus. Mr. Patrick described "backing up" problems in some of the sewer lines that occurred during heavy rainfall and advised that the installation of backflow preventors would prevent the blockage. In addition, there were some existing water service valves and gate valves for the domestic systems that were worn out and nearly inoperable to provide a normal major maintenance on the water systems. Funding in the amount of $105,210 was recommended for the sewerage and domestic water improvements.

Mr. Marvel called attention to the construction cost breakdown and the cost for four 6" gate valves for $17,250 and questioned how much additional pipe for plumbing needed to be installed. Mr. Patrick advised that gate valves would be installed underground on a pipe that had a device that actuated the valve, which would involve trenching and backfill. Mr. Patrick was uncertain whether additional pipe work would be required. It was Mr. Marvel's opinion the cost for the valves was high. Mr. Patrick advised that the PWB would revert any funds that were not used on the project.

CHILLER REPLACEMENT (BUILDING 7) SNCAS – CIP O1-M12)

Mr. Patrick identified CIP 01-M12 as a project to replace an existing chiller and chilled water pumps in building 7 which, after 25 years, had achieved the end of "their useful life." Mr. Patrick noted certain items within the program, such as water treatment was critical to the long-term maintenance of the equipment, and testing and balancing that assured the equipment was being used appropriately, and the cold water was being distributed to the appropriate parts of the building. Total funding for the project was recommended at $129,716.

HOUSING UNIT DOOR LOCKS, CALIENTE YOUTH CENTER (CIP 01-M13)

Mr. Patrick identified CIP 01-M13 as a recommendation to replace door locks on a campus‑wide basis at the Caliente Youth Center. The locks dated back to 1962 and specialized parts on some doors were no longer available. Mr. Patrick advised that there had been a consensus agreement between the Department of Human Resources and the State Fire Marshal to revise the occupancy classification of the buildings. Mr. Patrick explained that the dormitories, as originally constructed, were classified as institutional occupancy. The agreement revised the classification to residential occupancy, which minimized the cost of retrofits and brought current codes into compliance. The residential occupancy classification required that dormitories maintained "free egress" with 24-hour supervision. Mr. Patrick explained that the residential classification prohibited deadbolts, which would be removed and covered with plates to eliminate the need to replace the doors. One lockable timeout room was proposed within each unit. Funding for the project was recommended by the PWB for $93,202.

Chairman Arberry called attention to the fact that the 1999 legislature approved funding that ensured the dormitories complied with an "Institutional‑3" classification and questioned the change to a "Residential-1" classification. Mr. Patrick indicated that historically the determination for dormitory classification went back even beyond the last two or three sessions. A project that eliminated a room and changed it to a method of egress was conducted at the Nevada Youth Training Center (NYTC) in Elko, and it was intended to conduct a similar project at Caliente; however, after consideration during the design of the project, the Department of Human Resources considered it unreasonable to give up beds and the capability to house more individuals. An alternative to create egress through a maintenance backdoor was considered. However, that method was not considered a true conforming method and after negotiating with the State Fire Marshal, it was determined best to provide a second method of egress from the dormitories to ensure that dormitories maintained unobstructed egress 24-hours per day and that fire sprinklers would be installed in the rotunda area.

In response to a question from Chairman Arberry concerning legal issues, Mr. Patrick advised that the change was documented, reviewed, and determined to be in compliance with the Residential-1 classification.

Chairman Arberry noted that there were only seven dormitory units at the Caliente Youth Center rather than the eight units outlined in the construction cost breakdown and questioned whether the estimated construction costs for the project could be reduced. Mr. Patrick deferred to Department of Human Resources' staff. Chairman Arberry recognized Bruce Alder.

Bruce Alder, Deputy Administrator, Division of Child and Family Services, identified himself for the record and expressed agreement that there were only seven dormitory units. Mr. Alder explained that the eight units indicated in the construction cost breakdown were apparently calculated in error. Mr. Patrick advised that if the PWB could verify the project at seven housing units, the cost of the project would be reduced.

HVAC SYSTEMS RENOVATIONS FOR MULTIPURPOSE AND CLASSROOM BUILDINGS, CALIENTE YOUTH CENTER (CIP 01-M14)

Mr. Patrick identified CIP 01-M14 as a project that would replace existing heating and air conditioning equipment serving the multipurpose and classroom buildings at the Caliente Youth Center. Mr. Patrick advised the members "the existing equipment was approximately 30 years old and had reached the end of its useful life." Additionally, Mr. Patrick advised that the reverse cycle heating capabilities on the existing heating and cooling units had been disabled to the point that the units were currently heated through resistance heating which was "highly inefficient." While the project was originally recommended at $254,226, Mr. Patrick advised that a revised project cost estimate would be provided that removed the $28,000 for facility security and access allowance which was determined by PWB project personnel to be a higher level of security than what it was when the original estimate was developed.

Chairman Arberry asked whether a HVAC maintenance agreement would be executed for the two buildings. Mr. Patrick advised that Caliente was a remote site and a maintenance agreement was considered an exorbitant cost. Mr. Patrick explained that maintenance agreements generally ensured the correct chemistry in the boiler and refrigerant systems and since the replacement units had no associated water systems, a maintenance agreement was not being recommended for the project.

Mr. Marvel questioned whether the maintenance projects recommended for the Caliente Youth Center could be completed without the buildings being vacated. Mr. Alder advised that the project would be completed without vacating the buildings, which he said was the reason the facility security/access allowance had been eliminated from the construction cost breakdown. Chairman Arberry asked that the PWB staff also provide assurance that the recommended maintenance projects could be completed without vacating the housing units. Mr. Patrick advised that he would confer with the project manager and provide the information to staff. Mr. Alder clarified that one of the buildings was an academic building, and the work was independent of children in classes and the multipurpose building was not a residential area.

REMODEL RECEPTION AREAS FOR SECURITY, BUILDINGS 7 & 15, SNCAS (CIP 01-M15)

Mr. Patrick identified CIP 01-M15 as a recommendation to remodel the reception areas of buildings 7 and 15 seen as both a security and accessibility issue at Southern Nevada Child and Adolescent Services. Funding in the amount of $174,516 was recommended to construct a secure reception area in both buildings. Mr. Patrick advised that both buildings had heavy community traffic and required remodeling to provide a secure reception area. Additionally, Mr. Patrick advised that Americans with Disabilities Act (ADA) work was also required to provide access for the public and proper access to the counters.

HVAC SYSTEM RENOVATIONS (BUILDING 9) SNCAS (CIP 01-M16)

Mr. Patrick identified CIP 01-M16 as a heating, ventilation, and air conditioning (HVAC) system renovation in building 9 at Southern Nevada Child and Adolescent Services. The project was recommended to replace existing HVAC equipment that was approximately 25 years old and had reached the end of its useful life. Mr. Patrick noted that in the 1997 session, CIP 97-M16 included the same work for buildings 9 and 10. Upon implementation of the project in 1997, building 10 was determined to require unanticipated and extensive work that included difficult access to the area above the ceilings, duct modifications, and exterior gas piping that was not included in the original cost estimate. Mr. Patrick advised that the department recommended finishing building 9 with funding that amounted to $134,029 provided in CIP 01-M16.

EXTERIOR PAINTING AND BLOCK SEALING (BUILDINGS 13, 14,15, & 16, POOL HOUSE AND DESERT WILLOW TREATMENT CENTER) SNCAS (CIP 01‑M17

Mr. Patrick identified CIP 01-M17 as a project to provide exterior painting and sealing for buildings 13, 14, 15, 16, the pool house and Desert Willow Treatment Center at Southern Nevada Child and Adolescent Services (SNCAS). Mr. Patrick advised that the exterior buildings were in serious need of patching and repair and recalled discussion in a prior hearing concerning the $100,000 project to repair the building that housed the Printing Division. Mr. Patrick pointed out that the repair for the Printing Division had gone beyond simple maintenance and now required major renovation. Mr. Patrick advised that approval of recommended funding in the amount of $181,911 for CIP 01‑M17 would prevent returning to the legislature with a $100,000 request for each one of the buildings. Mr. Patrick described the project as preventative maintenance and indicated that postponing it would only increase the cost.

Chairman Arberry called attention to CIP 95-C2, approved by the 1995 legislature, for funding in the amount of $8,787,261 to construct the Desert Willow Treatment Center, a 56‑bed juvenile treatment facility. Chairman Arberry noted that construction of the building was completed in 1998 and asked the PWB staff to provide information on why the building had not been sealed when the project was completed. Mr. Patrick advised that CIP 95‑C2 for the construction of the Desert Willow facility had cost concerns throughout the project, and one of the "value engineering items" instituted was not to seal the building.

Chairman Arberry addressed the $15,191 cost estimate for architectural and engineering (A/E) design and supervision fees for the project and asked the PWB to explain why A/E design and supervision fees were necessary to paint and seal buildings and to place metal caps on the tops of block walls. Mr. Patrick advised that the dollar amount for the A/E for Desert Willow Treatment Center required a formal bid package. Additionally, Mr. Patrick advised that the A/E contract would be negotiated, and if the costs were less than anticipated, the monies would be reverted. Chairman Arberry asked if the project could be completed in-house. Mr. Patrick advised that the PWB would like to present the project as if it was out-of-house, however, requested the flexibility to allow the PWB to conduct the project in-house if appropriate. Chairman Arberry strongly expressed the subcommittee's need to "save every dollar" and the subcommittee's preference to defer approving the project until the A/E design and supervision fees could be removed. Chairman Arberry asked the PWB representatives to work with staff on eliminating the A/E design and supervision fees. Mr. Patrick indicated that the PWB would consider the request and provide the information to staff. Chairman Arberry expressed dissatisfaction that the original project was completed without sealing the walls and metal caps for the block walls.

Mr. Dini also strongly expressed dissatisfaction that the buildings had not been sealed during construction and thought a fund had been established that addressed problems such as the ones that had occurred at Desert Willow Treatment Center. Mr. Patrick said that while the original plans included full landscaping and a softball field, landscaping had been completed for the internal courtyard and front entrance only, and the softball field was essentially "a dirt patch." Mr. Patrick advised that, insofar as additional funding was concerned, the cap was normally considered a part of the roofing item in a reroofing application. Mr. Patrick indicated it was possible that the PWB manager could have requested funding through IFC to put the cap on the building.

In response to a question from Senator Mathews, Mr. Patrick advised that a bond was required for any project over $35,000, and the contract for the Desert Willow Treatment Center would have been in the $6 to $7 million range. Additionally, Mr. Patrick explained that the Treatment Center had been a low-bid project built according to plans and specifications, and he indicated the cap for the block wall and outside sealing may have been removed as value engineering items.

In response to a question from Senator Mathews, Mr. Patrick advised that the PWB inspectors addressed what was in the contract and code-related items. Mr. Patrick explained that there could have been a decision by project management that removed the items under discussion as value engineering items to allow the completion of the building within cost. Mr. Patrick recommended approval of the maintenance project so that the building was not further complicated with deterioration of the exterior.

Chairman Arberry strongly expressed the legislative body's frustration in providing funding in the amount of $9 million to complete a project only to have the PWB return to request additional funding for the same project. Chairman Arberry questioned what the PWB would be required to do to properly manage its projects. Mr. Patrick attributed the problem to a conflict in trying to complete the last few items in the scope of a project and the agency's intention to maximize whatever could be gained for the dollars. Mr. Patrick suggested that the PWB, as the responsible agent for managing the budget, schedule, and scope of a project, could perhaps optimize what could be gained and place a planned reversion in the budget to create some flexibility.

Senator Coffin attributed the problem to a lack of personnel and expressed doubt that planned reversions would work, as planned reversions created over budgeting. As indicated in the PWB budget hearing, Senator Coffin reiterated that more inspectors were needed and should be on-site at all locations where construction was occurring. Senator Coffin specifically indicated that inspectors should be in Carson City, Ely, Elko, or southern Nevada, and that they needed the authority to review the work of the contractors and architects and to work with the client agency.

Chairman Arberry made it clear that requests for additional funding to continue a project that had been previously funded would be met with a negative response in the future.

FINISH BASEMENT FLOOR, SPECIAL CHILDREN'S CLINIC (CIP 01-M18)

Chairman Arberry announced that CIP 01-M18 had been covered earlier in the hearing during the presentation of the addition of the Special Children's Clinic (CIP 01-C9).

SCAN ALARM UPGRADES, LAKES CROSSING (CIP 01-M19)

Mr. Patrick identified CIP 01-M19 as a project to remodel the existing scan alarm system at the Lakes Crossing Center for the Mentally Disordered Offender. Mr. Patrick indicated the current system was 25 years old and the system's inability to interface with the modern system installed for the new 12‑bed addition to Lakes Crossing had created numerous safety issues. Mr. Patrick advised that the department recommended funding in the amount of $274,570 to provide proper alarm systems for the personnel and the occupants.

REPLACE DOOR HARDWARE (BUILDINGS 2,3, & 3A) SNAMHS (CIP 01-M20)

Mr. Patrick identified CIP 01-M20 as a project to replace all door hardware in buildings 2, 3, and 3A at Southern Nevada Adult Mental Health Services (SNAMHS). Mr. Patrick advised that the 13-year-old locks were worn out and unreliable and that heavy-duty, hospital-grade hardware, anticipated to have the same life expectancy of the building, was recommended to replace the worn-out locks.

Mr. Patrick called attention to the installation of fire dampers in all three buildings listed under the construction cost breakdown for a cost of $27,896. Mr. Patrick explained that a current project to provide a life safety upgrade in building 3 had experienced an unanticipated funding shortfall, and S.B. 247, if approved, would provide a supplemental appropriation to the Department of Human Resources for the unanticipated shortfall for buildings 3 and 3A. Mr. Patrick advised that CIP 01-M20 was currently under review to decrease funding for buildings 3 and 3A. In response to a question from Chairman Arberry concerning the amount of the decrease, Mr. Patrick advised that the project was under review and the number was not currently available.

Chairman Arberry called attention to the A/E design and supervision fees and questioned whether the fees were solely for the replacement of locks. Mr. Patrick advised that the PWB had executed a number of projects on the campus without architectural involvement and would provide information to staff.

REPLACEMENT OF EXTERIOR DOORS & HARDWARE (BUILDINGS 9-15) SNAMHS (CIP 01-M21)

Mr. Patrick identified CIP 01-M21 as a recommendation for $99,556 to replace the exterior doors and door hardware for buildings 9, 10, 11, 12, 13, 14, 15 at Southern Nevada Adult Mental Health Services (SNAMNS) in Las Vegas, and pointed out there was no A/E design and supervision fees for the project. Mr. Patrick indicated the doors and hardware were rusted, warped, and worn‑out, and the project was substantiated by the fact that there were safety concerns for the individuals and staff occupying the buildings.

WATER HEATER REPLACEMENT (BUILDING 3) SNAMHS (CIP 01-M22)

Mr. Patrick identified CIP 01-M22 as a recommendation to replace the existing gas-fired water heaters serving the 88-bed psychiatric hospital building at the Southern Nevada Mental Health Services (SNAMHS) complex in Las Vegas. Mr. Patrick explained that the current water heaters were 15 years old and the replacement included new water softeners that would extend the life of the water heaters and plumbing fixtures. Recommended funding was in the amount of $87,146.

Chairman Arberry asked for information concerning the duties the architect or engineer would have in replacing existing hot water heaters and installing water softeners. Mr. Patrick responded that the project would be publicly bid in order to maximize the project's value to the state, and duties by the architect or engineer included creating the bid package, performing a final inspection to ensure code requirements were complied with and that practices of the industry were maintained. Chairman Arberry questioned the accuracy of the $7,686 cost estimate for A/E design fees. Mr. Patrick advised that while the design did not always absorb the total amount of the funding, construction administration and meeting costs also had to be included. Mr. Patrick indicated similar projects required an "inordinate" amount of PWB project management time and the $7,686 recommended for CIP 01-M22 was a minimum level that ensured quality assurance by the engineer. Chairman Arberry requested that PWB representatives work with staff to determine whether the A/E design could be accomplished in-house. Mr. Patrick indicated that the CIP 01-M22 was a mechanical project, and pending approval of the mechanical engineer position requested in the PWB enhancement budget, the A/E design could be accomplished in-house.

SAFETY PLATFORMS, SECURITY WALLS, PERIMETER FENCE, LAKES CROSSING, RENO (CIP 01-M23)

Mr. Patrick identified CIP 01-M23 as a recommendation for $95,317 to install safety platforms, security walls, and perimeter fencing at the Lakes Crossing facility in Sparks. Mr. Patrick indicated there were safety issues connected with equipment located on the roof, a deteriorated security wall, similar to the problems experienced at the State Printing Division, and the perimeter fencing would create a secondary wall to prevent weapons or paraphernalia from being tossed over the fence into the exercise yard and outdoor facilities.

The Chairman recognized Carlos Brandenburg, Ph.D., Administrator, Division of Mental Health and Developmental Services. Mr. Marvel asked Dr. Brandenburg to address the issue of contraband being thrown over the fence. Dr. Brandenburg identified himself for the record and explained that Lakes Crossing was a "free‑standing secured facility" and because of the "casual-labor office and the nature of the clients," weapons and other types of contraband were thrown over the wall. In response to a question from Mr. Marvel, Dr. Brandenburg indicated there was enough space available to install perimeter fencing. Dr. Brandenburg explained that the fence would be installed on the other side of the evacuation road.

Senator Coffin asked Dr. Brandenburg, as the administrator of a client agency, to address where in the project plan process the agency felt they needed to make changes to the original plans. Additionally, Senator Coffin questioned whether Dr. Brandenburg viewed change orders as unforeseen or whether there was a flaw in the process. Dr. Brandenburg addressed the process as flawed and used the Lakes Crossing 12-bed addition as an example. Dr. Brandenburg indicated that one of the reasons funding for the scan alarm system was requested was that it was "value-engineered out of the original project" because the original plans had been changed. Dr. Brandenburg explained that when the schematic for the original project was received, the architect indicated he could open up a few rooms, which proved to be incorrect because the rooms had load-bearing walls. Funding had already been authorized, and the project had to be scaled down eliminating the intake room, the holding room, and scan‑alarm system. It was Dr. Brandenburg's opinion the project architect had been a poor choice and had not provided the client agency or the PWB with good information.

In response to a question from Senator Coffin, Dr. Brandenburg indicated the agency was involved with the Public Works Board in selecting an architect and indicated a selection was "the cut of the draw" after having pointed out that they had no problems at all with the new 90‑bed hospital in Sparks that had "a great architect and a great PWB project manager."

Ms. Giunchigliani questioned whether bonds were available for the design and implementation of a project. Mr. Patrick replied that projects over $35,000 required the contractor to be bonded and insured. Additionally, Mr. Patrick advised that 10 percent of the construction administration fee for the contractor and the architect was retained until the completion of a project. Ms. Giunchigliani indicated it appeared that 10 percent was not enough and inquired about the possibility of imposing additional penalties for an architect or contractor whose work was considered poor. Mr. Patrick advised that the PWB did have the opportunity to "go after" the architect for errors and omissions. After seeing the problems with the Lied Library and the Veterans' Home, Ms. Giunchigliani said the committees needed to know from the PWB if the percentages being withheld should be raised. Ms. Giunchigliani expressed frustration in the fact that projects incorrectly designed or funded jeopardized the very people who needed the most assistance. Ms. Giunchigliani suggested that at some point the PWB representatives should provide the subcommittee with recommendations on some resolution to the problems under discussion.

REPAIR STUCCO, PATCH AND PAINT (BUILDING 3) SNAMHS (CIP 01-M24)

Mr. Patrick identified CIP 01-M24 as a recommendation for $90,130 to repair stucco and patch and paint the exterior walls for the 88-bed psychiatric hospital building at the Southern Nevada Adult Mental Health Services (SNAMHS). Mr. Patrick reiterated his earlier comment that maintaining the exterior of the building would prevent a future major repair.

Chairman Arberry questioned why A/E Design and Supervision fees were necessary to patch and paint a building. Mr. Patrick responded that the PWB would review all the projects that involved the exterior repair of the buildings on the SNAMHS campus and determine the overall need. Mr. Patrick indicated that if a certain technology could be established that could be used on all the buildings, the expertise of an architect could be eliminated on an individual project-by-project basis.

Chairman Arberry discussed the indoor air quality concerns at Southern Nevada Child and Adolescent Services (SNCAS) noting that the presence of mold had been detected in some of the buildings on campus and asked Mr. Patrick to address that concern. Mr. Patrick indicated his awareness of a project funded by the Risk Management Division to conduct mold remediation in building 9. It was Mr. Patrick's understanding that the Risk Management Division was also administering a project to conduct studies on other buildings, which had not yet been completed. Mr. Patrick indicated a draft of the study would be forwarded to staff upon availability and discussion could take place upon completion of the study. Mr. Patrick agreed that the indoor air quality was a problem in a number of areas and while not specifically addressed anywhere in the capital improvement program, recent communication with the asbestos project coordinator indicated that administrators of the buildings being studied were looking for funding to address the concerns. Mr. Patrick advised that he did not have any knowledge of the magnitude of the funding required to address the indoor air quality issues of the buildings being studied.

ADVANCE PLANNING FOR 2003 CAPITAL IMPROVEMENT PROGRAM (CIP 01‑C5)

Mr. Patrick identified CIP 01-C5 as a request for funding in the amount of $200,000 for the advance planning necessary to develop agency requests for the 2003 Capital Improvement Program. Mr. Patrick indicated that historically the PWB project for advance planning had been funded at the $150,000 level. Mr. Patrick explained that an additional $50,000 was requested to provide support to space utilization and ten-year capital planning. Documents drafted by the PWB illustrated a review of a ten-year capital plan that included approximately $1.3 billion dollars of proposed expenditures over the next ten years. Mr. Patrick pointed out that an additional $50,000 would assist that effort by providing the ability to obtain planning, architectural, and engineering support.

Chairman Arberry inquired whether any funds remained from the 1999 program. Mr. Patrick was uncertain that funds remained and indicated that $70,000 of the $150,000 funded in 1999 had been used for the Motor Pool project in addition to other projects. Mr. Patrick indicated he would provide an accurate balance of the 1999 funding to staff. It was Chairman Arberry's understanding that only $80,000 of the 1999 funding had been expended and questioned the need for $200,000. Mr. Patrick reiterated the additional $50,000 was requested for ten-year capital planning, which had not been requested in the past and was considered out of the scope of planning for the next biennium. Mr. Patrick pointed out that the $150,000 was for miscellaneous planning and study projects that only became apparent during the biennium.

Chairman Arberry requested the PWB to provide a detailed list of the statewide projects that had been completed with funds from the 1993, 1995, 1997, and 1999 CIP programs and the cost of each project that was completed. Mr. Patrick advised the list was readily available and would be provided to staff.

STATEWIDE ROOFING PROGRAM (CIP 01-S1)

Mr. Patrick identified CIP 01-S1 as a recommendation for funding in the amount of $1,715,160 to continue the ongoing statewide roofing program. Mr. Patrick advised the members of the subcommittee that the current roofing program included preventative maintenance for 10 years after installation of a new roof as well as a 15-year warranty and included a program manager and support personnel who immediately handled roof leaks.

Moving to the construction cost breakdown, Mr. Patrick pointed out miscellaneous items required to support ongoing needs that were not readily identified at the beginning of the biennium:

Item 9-$75,000 - Repair interior water damage from roof leaks;

Item 10-$50,000 - Asbestos abatement;

Item 11-$75,000 - New line item to repair roofs not under warranty currently estimated at 100+. Mr. Patrick advised that the PWB had always encouraged building administrators to maintain funding in their budget to allow for roof repair for damage attributed to unprofessional installation of, for example, antennas, and;

Item 7-$322,447 - Core ten roofs for the Southern Nevada Correctional Center (SNCC). Mr. Patrick advised that the core ten roof line item addressed a portion of nearly every roof on the campus at the Jean facility which totaled approximately 30 percent of an area of 100,000 square feet.

Chairman Arberry questioned whether requests for asbestos abatement funds had been included in past statewide roofing projects. Mr. Patrick responded that abatement funds had been included in past programs. Chairman Arberry questioned whether asbestos abatement funding had been included in the new projects. Mr. Patrick responded that historically the PWB had a line item in their estimates for the statewide roofing program, which was proposed to continue. Mr. Patrick further explained that while asbestos abatement was not included in the individual project line items, a lump sum line item for $50,000 was included in the statewide roofing program that covered all roofs.

STATEWIDE ADA PROGRAM (CIP 01-S2)

Mr. Patrick identified CIP 01-S2 as a $1,000,000 recommendation to bring state buildings into compliance with the requirements of the Americans with Disabilities Act (ADA). Mr. Patrick pointed out the line items under the construction cost breakdown totaled $1,385,000; however, the PWB recommended that ADA compliance be implemented in the million-dollar range due to budgetary constraints. Mr. Patrick advised that new projects were recommended to be completed with available funding based on the results of surveys conducted in 1993 and 1995.

Mr. Marvel asked when the state would be caught up on meeting the requirements of the ADA. Mr. Patrick advised that in 1993 it was estimated that the total ADA compliance project would cost about $14 million, and to date, approximately $4 to $6 million had been expended. Mr. Patrick noted that in addition to the Statewide ADA Program, some of the 2001 remodel projects included ADA requirements. Specifically, Mr. Patrick called attention to CIP 01‑M15, a recommendation to remodel the reception areas for Southern Nevada Child and Adolescent Services that met the requirements of the Americans with Disabilities Act (ADA).

In response to a question from Mr. Marvel concerning lawsuits, Mr. Patrick advised that existing older buildings fell under the Uniform Commercial and Building Code (UCBC) and received some relief from the ADA. Additionally, Mr. Patrick said that federal guidelines allowed some relief for older buildings.

Chairman Arberry asked how the PWB would determine which projects would be completed with the funding recommended by the Governor for the ADA Program. Mr. Patrick explained that while the PWB had not prioritized the projects, flexibility was requested to perform the work seen as necessary. Mr. Patrick advised that the PWB often received complaints concerning ADA issues and one way to prevent Department of Justice lawsuits was to maintain some flexibility in where the funding was expended. Mr. Patrick noted that the list of agencies under the construction cost breakdown were considered the highest priority items for completion under the requirements of the ADA. Mr. Patrick indicated that a priority listing could be provided to staff, or the PWB could be provided with the flexibility to respond to the "squeaky wheel."

STATEWIDE FIRE SPRINKLER PROGRAM (CIP 01-S3)

Mr. Patrick identified CIP 01-S3 as a request for funding in the amount of $1,700,000 for the statewide sprinkler program. Mr. Patrick pointed out that the construction cost breakdown listed line items for both suppression and detection systems. Mr. Patrick indicated that historically the sprinkler program had not included alarm systems; however, the PWB believed fire alarms were as important as sprinklers and had been included in the statewide program.

Mr. Patrick indicated that the projects included:

$434,837 - Nevada State Museum. Suppression.

$162,450 – Jean Conservation Camp (JCC). Suppression and Detection. A project funded in 1997 for JCC included six housing units and a culinary. Current plan for the old culinary facility was for storage. Facility would be required to be equipped with sprinklers and alarm to meet code requirements for storage.

$132,335 – Indian Springs Conservation Camp (ISCC). Suppression and Detection. Areas that would be used for storage required to be equipped with sprinklers and alarm to meet code requirements for storage.

$515,195 – Ely State Prison (ESP) – Detection Replacement and Upgrade. Mr. Patrick described ESP as a ten-year‑old institution. Maintenance staff and prison administration informed PWB of the difficulty in obtaining replacement parts for the detectors and new detectors did not communicate with the control systems. Additionally, Mr. Patrick advised that the current system was neither fire code compliant nor National Fire Protection Association compliant. The project under the statewide fire sprinkler program upgraded the entire alarm system for the ESP. Mr. Patrick advised the members of the subcommittee that since being made aware of the obsolescence of some of the parts, the PWB had searched for parts and technologies that could be substituted and had been unable to determine the availability of resources.

Chairman Arberry suggested that the Ely State Prison be individually addressed as a project and separated from the statewide fire sprinkler program. Mr. Patrick agreed that the PWB would address the Ely State Prison as a separate project.

STATEWIDE CONSTRUCTION CONTINGENCY (CIP 01-S4)

Mr. Patrick identified CIP 01-S4 as a recommendation for $2 million to complete projects that had extraordinary facility and funding needs. Mr. Patrick indicated that in rare circumstances, projects were recommended to increase in scope and cost outside the previously approved funding. Additionally, Mr. Patrick pointed out that these funds would only be utilized with approval of the full legislative body or the Interim Finance Committee when the legislature was not in session.

Mr. Marvel called attention to funding constraints and asked if the PWB could "live without" the funding recommended for the Statewide Construction Contingency project. Mr. Patrick indicated that it was "highly unlikely" the PWB could live without the funding. In response to a question from Mr. Marvel on what the PWB anticipated, Mr. Patrick discussed the various claims against projects such as the Lied Library and Veterans' Home and indicated there might be other projects where the requirements for money went beyond the original funding and for which the $2 million would support.

Chairman Arberry put the PWB on notice that the subcommittee was contemplating removal of the recommended funding for the Statewide Construction Contingency project.

STATEWIDE PAVING PROGRAM (CIP 01-S5)

Chairman Arberry moved from CIP 01-S5 to CIP 01-S6.

STATEWIDE ASBESTOS, LEAD, AND INDOOR AIR QUALITY PROGRAM (CIP 01-S6

Mr. Patrick advised that the PWB project manager was currently developing another cost estimate for the asbestos, lead, and indoor air quality program. Mr. Patrick requested that the PWB be permitted to submit the revised cost estimate to staff in that the revised estimates would more accurately reflect the programmatic needs of the whole capital improvement program.

STATEWIDE STORAGE TANK REMOVAL PROGRAM (CIP 01-S7)

Chair Arberry moved from CIP 01-S7 to CIP 01-S8.

STATEWIDE ENERGY RETROFIT PROGRAM (CIP 01-S8)

Mr. Patrick identified CIP 01-S8 as the statewide energy retrofit program which had been addressed earlier in the hearing concerning recommendations for amendments to NRS 338.1906. Mr. Patrick advised that Nevada Revised Statutes authorized state agencies to enter into contracts with companies that performed energy saving retrofits on state buildings.

Mr. Patrick advised that during development of the capital improvement program, funding requested by state agencies for energy retrofits totaled $10 million. With a successful project that totaled $2 million, Mr. Patrick indicated the PWB believed the program would expand to the $15-$20 million range in the next biennium or two. Currently, Nevada Revised Statutes limited the amount of money to $5 million that could be committed beyond the biennium for energy retrofit projects. Mr. Patrick indicated a need for funding beyond the $5 million debt limit noting the requirements of aged facilities for the Department of Prisons and the Department of Human Resources.

For the record, Mr. Patrick noted an issue that had come up in administration of the program was whether or not the University System was underneath the $5 million debt limit authorized in statute. It was Mr. Patrick's understanding the Attorney General had issued an opinion indicating that the system fell under the limit. Additionally, Mr. Patrick advised that the University System had provided some non-appropriation clauses within their contract, which conformed to the Attorney General's opinion that it would not fall within the debt limit. Mr. Patrick stated that it was the PWB's opinion that if the University System continued to provide non‑appropriation clauses, "they could be exempt from the debt limit."

Mr. Patrick commended the merits of the program and pointed out that existing projects saved 15 to 20 percent of the electrical demand for which prices had increased up to 33 percent or more from the past calendar year. It was Mr. Patrick's opinion that savings achieved by the program could help to mitigate some of the required funding levels to support the buildings and rising utility costs.

With no further business to come before the subcommittee, the meeting was adjourned at 10:46 a.m.

RESPECTFULLY SUBMITTED:

Connie Davis

Committee Secretary

APPROVED BY:

Assemblyman Morse Arberry Jr., Chairman

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