MINUTES OF THE
SENATE Committee on Commerce and Labor
Seventy-First Session
May 21, 2001
The Senate Committee on Commerce and Laborwas called to order by Chairman Randolph J. Townsend, at 9:35 a.m., on Monday, May 21, 2001, in Room 2135 of the Legislative Building, Carson City, Nevada. The meeting was videoconferenced to the Grant Sawyer Office Building, Room 4401, Las Vegas, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.
COMMITTEE MEMBERS PRESENT:
Senator Randolph J. Townsend, Chairman
Senator Ann O’Connell, Vice Chairman
Senator Dean A. Rhoads
Senator Mark Amodei
Senator Raymond C. Shaffer
Senator Michael A. (Mike) Schneider
Senator Maggie Carlton
GUEST LEGISLATORS PRESENT:
Assemblyman David E. Goldwater, Clark County Assembly District No. 10
STAFF MEMBERS PRESENT:
Kevin C. Powers, Committee Counsel
John L. Meder, Committee Policy Analyst
Crystal M. McGee, Committee Policy Analyst
Scott Young, Committee Policy Analyst
Jude Greytak, Committee Secretary
OTHERS PRESENT:
Robert A. Ostrovsky, Lobbyist, Nevada Resort Association
Danny L. Thompson, Lobbyist, Nevada State American Federation of Labor- Congress of Industrial Organizations (AFL-CIO)
Ernest Adler, Lobbyist, Nevada Housing Coalition
Ernest K. Nielsen, Lobbyist, Washoe County Senior Law Project
Randy Ewell, General Manager, Mount Wheeler Power, Ely
Neill Dimmick, Director of Regulatory Operations, Public Utilities Commission of Nevada
Michael J. Willden, Administrator, Welfare Division, Department of Human Resources:
Terry K. Graves, Lobbyist, Pioneer Companies Incorporated, and Basic Management Incorporated
James L. Wadhams, Lobbyist, Newmont Gold Company
Fred J. Schmidt, Lobbyist, Raft River Rural Electric Cooperative
Scott M. Craigie, Lobbyist, Southern Nevada Subcontractors Association, and Farmers Insurance Group
Scott R. Rasmussen, Lobbyist, Nevada Subcontractors Association
Alfredo Alonso, Lobbyist, Citibank (Nevada) NA
Robert Barengo, Lobbyist, Nevada Consumer Finance Association
Keith L. Lee, Lobbyist, Responsible Mortgage Lenders Coalition
Samuel P. McMullen, Lobbyist
Chairman Townsend opened the hearing on Assembly Bill (A.B.) 338.
ASSEMBLY BILL 338: Makes various changes concerning workers’ compensation. (BDR 53-711)
Chairman Townsend stated the last time they heard A.B. 338, the committee had adopted Mr. Thompson and Mr. Ostrovsky’s proposed amendments. He stated this bill deals with someone who takes a permanent partial disability and subsequently receives a permanent total disability and how some of the money is recaptured.
Senator Carlton stated the reason they had not voted on A.B. 338 at the previous session was because Senator Schneider was not present.
Chairman Townsend read Bob Ostrovsky’s proposed changes to the amendment (Exhibit C).
Robert A. Ostrovsky, Lobbyist, Nevada Resort Association, testified this was compromise language he had worked out with Senator Carlton. He stated he was concerned this would still lead to litigation. He said he was also concerned this language would be interpreted as an “all or nothing” situation. He stated the language could be interpreted to mean you could deduct a previously paid lump sum from the monthly installments until all the money is repaid, or if there is a hardship, none of the lump sum would be recovered. He noted this appears to eliminate the possibility of adjusting the repayment, depending on the circumstances. Mr. Ostrovsky added he did not believe this was the original intent of the parties.
Senator Carlton suggested the legal department could better interpret this language. She agreed it was never her intention for the money not to be paid back, but the money could be paid back in installments which would not cause undue hardship on the family. Mr. Ostrovsky agreed with Senator Carlton’s statement.
SENATOR CARLTON MOVED TO AMEND A.B. 338 WITH THE PROPOSED AMENDMENT (EXHIBIT C).
SENATOR AMODEI SECONDED THE MOTION.
Chairman Townsend asked if anyone was present who represents claimants in workers’ compensation issues. Senator Carlton stated she had a conversation with Dean A. Hardy from the Nevada Trial Lawyers, and he had told her he thought the proposed language would be a service to claimants who would be afforded the opportunity to present their cases regarding repayment hardships.
Chairman Townsend asked Mr. Thompson if the claimants who receive a lump sum for a permanent partial disability are told at that time, they will be responsible for repaying some of the money if they are later declared to be permanently totally disabled.
Danny L. Thompson, Lobbyist, American Federation of Labor-Congress of Industrial Organizations (AFL-CIO), stated he does not know what they tell the claimants.
THE MOTION FAILED (Senators Townsend, O'Connell, Rhoads, and Schneider voted no.)
*****
SENATOR O’CONNELL MOVED TO DO PASS A.B. 338 AS AMENDED.
SENATOR CARLTON SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY
*****
Chairman Townsend opened the hearing on A.B. 349.
ASSEMBLY BILL 349: Establishes universal energy charge to fund low-income energy assistance and conservation. (BDR 58-1264)
Chairman Townsend stated, “I don’t know if . . . there has been additional language proposed or changes. There were . . . concerns . . . relative to the issue of the constitutionality.”
Ernest Adler, Lobbyist, Nevada Housing Coalition, stated:
After the chairman’s comments last week, I talked to Assemblyman Goldwater and to Kevin Powers [Senior Deputy Legislative Counsel, Legislative Counsel Bureau]. And essentially, the big constitutional problem had to do with the independent power producers and taxation of those. So, it was agreed to take them out of the bill, because . . . there was a constitutional problem, but then there was a collection problem. How do you collect [on] these sales made out-of-state, and how do you track the sales? And everybody agreed it turned out to be pretty much impossible and Neill Dimmick [Director of Regulatory Operations, Public Utilities Commission of Nevada] from the PUC [Public Utilities Commission of Nevada (PUCN)] just said he couldn’t do it. So, that is being deleted from the bill. The $25,000 [cap] per quarter is being added. Rural electrical co-ops have been deleted from the bill. And that’s kind of a summary of the amendments, in addition to the other amendments reviewed last week.
Chairman Townsend asked, “Do we have these?”
Mr. Adler replied:
We don’t because Kevin [Mr. Powers] was still drafting them this morning. . . . What you’re going to end up with is a simpler bill than the one that came into the committee. More things have been pulled out than have been added.
Chairman Townsend stated:
The real issue with this bill, which is a laudatory effort to deal with rising prices for low-income individuals, has begged some questions regarding collection because you’re talking about providers, and then we begged the question of the rurals. Those two tended to create some hurdles for us we were trying to figure ways over. There was the constitutionality issue, which [former] Senator Adler made reference to, which we think we have resolved. Because in many cases those producers were, if they produced a thousand megawatts, perhaps only 200 of it was staying in Nevada. How do you charge based on that, and is it an interstate commerce issue? The goal, of course, was to find the easiest way to take an incremental step in collecting enough money to provide [more money] to our current mechanism for people who ask for energy assistance. To the best of my recollection, there wasn’t going to be a new mechanism; we were just going to simply . . . continue to fund a current mechanism, so, if you went and applied through a LIHEA [Low Income Housing Energy Assistance (grant)] program or whatever, we were going to be able to accommodate it. Has there been a new mechanism for collection which would affect Mr. Dimmick in his role?
Mr. Adler replied:
Yes, I talked to Mr. Dimmick last week. . . . Most of it is going to be collected through the two power companies on the regular billing cycle, as the committee suggested last week. We have a few large consumers and the PUC [PUCN] will go to them individually and collect the money, so there are only two mechanisms, both relatively simple. We did away with all the complicated mechanisms. I wish I had the language for you.
Chairman Townsend asked, “In essence, the normal mill tax collected for purposes of funding the regulatory mechanism is the way we are going to collect this now?”
Mr. Adler responded, “Correct, for the most part, except for those exceptions.”
Chairman Townsend asked, “Is it going to remain the [universal energy charge of] 3.3 [mills assessed per therm of natural gas] and .39 [mills assessed on each kilowatt-hour of electricity] . . . ? Mr. Adler replied, “yes.”
Chairman Townsend asked, “Do we know what it does dollar-wise? Does that change it substantially?”
Mr. Adler answered:
No, because we’ve reduced the pool of people we’re collecting it from. It will go down because you don’t have rural electrical cooperatives, and you don’t have the independent power producers paying directly. And you have a cap. So it will be a reduction in dollars collected.
Chairman Townsend asked, “Do we know what the amount of dollars, at the current rate of travel, say if we averaged it over the last 2 years, what it would collect? Do you have any sense of that?”
Ernest K. Nielsen, Lobbyist, Washoe County Senior Law Project, testified:
The best we could do at this point is, it’s probably about $10 million we will collect. The reduction from $14 million is largely due to the cap that’s been imposed. It’s difficult to calculate all of what is not going to be collected as a result, but that’s our best estimate.
Chairman Townsend said, “I don’t care what is not going to be collected, I guess, I want to know how much is going to be collected that can be distributed to people in need.” Mr. Neilson responded, “About $10 million . . .”
Kevin Powers, Committee Counsel, presented a proposed amendment to A.B. 349 (Exhibit D). He stated:
The key change between the first reprint and this proposed amendment is in the first reprint we had a generation tax and a tax on electricity generated out of the state and sold at retail in the state, and then a tax on the generation of electricity generated in this state and sold in this state. What the proposed amendment does is create a tax on consumption. So the definitions have changed accordingly, and the tax falls on the “end-use customer.” And that’s one of the new defined terms in section 5 on page 1 of the bill. Section 8 defines “municipal utility.” Ultimately, one of the provisions of the bill exempts rural electric cooperatives [and] general improvement districts.
Chairman Townsend asked Mr. Powers to start with section 13 of A.B. 349.
Mr. Powers continued:
Section 13 creates the consumption tax for natural gas, and it requires each end-use customer to pay a universal energy charge of 3.3 mills on each therm of natural gas the end-use customer purchases from another person for consumption in this state. Then in section 14, is the same tax, but this time, .39 mills on each kilowatt-hour of electricity the end-use customer purchases from another person for consumption in this state. The public utility or municipal utility providing service to the customer collects the tax from the customer. If the customer is not receiving service through a public utility or municipal utility, it is the duty of the customer to pay the universal energy charge directly to the commission.
Section 15 is essentially the same as the similar section in the first reprint. It establishes the requirements for the commission to adopt regulations to carry out the enforcement of its provisions. One change is in subsection 3 on page 5 [of the proposed amendment (Exhibit D)]. This was mentioned by the chairman of PUC [PUCN] that the [PUC] [PUCN] wanted a lower threshold amount for the administrative charge. This reduces it to not more than 3 percent, which was proposed in an amendment by Mr. Nielsen. And it also provides the commission deducts their administrative charge before . . . depositing the money to the state treasurer for credit to the fund.
Mr. Powers continued his explanation of the proposed amendment (Exhibit D):
Section 16 on page 6 [is] similar to the provision in the bill creating the revenue fund for energy assistance and conservation. The key changes come in subsection 6, beginning on page 6, and subsection 7 . . . . These are the annual evaluation and accounting provisions to ensure the money being collected under the universal energy fund is being spent efficiently and effectively through the programs operated by the welfare division and the housing division. So, subsection 6 requires the joint annual evaluation, and subsection 7 provides the information which must be included in the report prepared by each division jointly, and then submitted to the Governor, the Legislative Commission, and the Interim Finance Committee.
Section 17 and 18 are essentially the same as in the first reprint. There will be language added relating to the type of a regulation the welfare division and the housing division must adopt. That language is attached at the end … That’s language Mr. Nielsen proposed and delivered to the committee at the last hearing on Friday.
Finally, the next most significant and actually the last significant change from the first reprint is in section 19 on page 10 [of the proposed amendment (Exhibit D)]. Section 19 on page 10 does several things: First, subsection 1 provides that the provisions of the universal energy charge in [sections] 17 and 18 of the act do not apply to rural electric cooperatives, general improvement districts, or other cooperative associations, nonprofit corporations, nonprofit associations that are declared to be a public utility pursuant to NRS [Nevada Revised Statutes] 704.673. Subsection 1, therefore, creates the exemption discussed on Friday. Subsection 2 provides that each of the entities described in subsection 1 has to develop their own plan for energy assistance and conservation for its own end-use customers, and then it provides the details of the plan. And [as] part of the plan, it has to impose on each of its own end-use customers an assessment or charge in [an] amount equal to the universal energy charge, and then it uses the money collected from the assessment or charge to carry out its own plan for energy assistance and conservation for its own customers. Finally subsection 3 on page 11 provides the end-use customer of one of these entities described in subsection 1 is not entitled to receive the benefits under the new programs being operated by the welfare division and the housing division pursuant to the other portions of the bill.
Chairman Townsend stated:
Let me ask Senator Rhoads . . . I want to go to section 19 first. This new language carves rural electrics out, and then requires them to create their own [energy assistance program]. And I believe it’s line 21 of page 10 [of (Exhibit D], [which says] each of these entities, which are the associations and rural cooperatives, shall develop a plan for energy assistance, [and] impose on each of its end-use customers an assessment or charge equal to the amount of the universal energy charge. It’s my understanding, and correct me if I’m wrong, Senator, but did we not hear testimony from those folks they already had plans in place. That’s the part I’m having a hard time with.
Senator Rhoads responded, “Mr. Chairman, I believe they already have a plan in place. . . . I understand the program is already in place.”
Randy Ewell, General Manager, Mount Wheeler Power, Ely, introduced himself. Chairman Townsend asked, “Do you currently have a program in place?” Mr. Ewell answered, “Yes we do, and I think most of the co-ops do have a program in place.”
Chairman Townsend asked:
Is it necessary to say “shall” there? I like the concept. I think what you’ve done in working with Mr. Powers is excellently written. But if you have one which is working, it might create a hardship on those folks out there who own their own power systems.
Mr. Adler stated:
I think … given the fact we took the independent power producers out, we’ve kind of done away with the constitutional question. Do we need to have “shall”? I guess that would be my question to Kevin [Mr. Powers]. Would it still be constitutional if we took “shall” out?
Mr. Powers replied:
It would be constitutional if you took “shall” out. The “shall” is only in there because it’s based on language provided by Mr. Nielsen who’s amendment [was presented] on Friday. The requirement they “shall” conduct this type of program is not constitutionally based.
Chairman Townsend stated:
I would think you would say something like, “If you do this you would consider the following items, but not limited to.” And let them design their own programs. And if they’ve already got one, you don’t want to fool with success. Mr. Goldwater, I don’t think that was your goal. It was trying to deal [with] particularly people in the urban areas who are having a rough time.
Assemblyman David Goldwater, Clark County Assembly District No. 10, interjected, “The chairman hit it on the head.“
Chairman Townsend stated:
Now, if we just simply took the mandatory part out, left everything else in, I thought it was well crafted. It gives some guidance, if they choose to use it. . . . In subsection 3 of section 15, page 5, which is the commission’s portion, how did we come up with 3 percent? Is that just what you figure? I mean this committee has been pretty consistent on actual costs, so we don’t have little pots of money starting to grow which are unnecessary.
Neill Dimmick, Director of Regulatory Operations, Public Utilities Commission of Nevada, stated:
We provided a fiscal note some days ago, which estimated approximately $300,000 or $400,000 would be our expense. That’s why we said we did not need the 4 percent, which at the time, when we were looking at approximately $15 million [in collected funds], would have produced $600,000, and wasn’t necessary. Three percent of $10 million is still in the range of the money we believe [is needed] to implement a more streamline program.
Chairman Townsend addressed the following statement to Michael J. Willden, Administrator, Welfare Division, Department of Human Resources:
There is a portion in here which allows you to deduct a percentage, and I thought it was 3 percent for your administrative costs, and I don’t remember what section it is in. . . . [reading from section 18, subsection 1] “the welfare division may not use more than 3 percent of the amount distributed to it.” Now obviously your 3 percent is smaller than his 3 percent, because he’s just taken it. Now is this a guesstimate? And it is fair if it is, because we’ve never done this before.
Michael J. Willden, Administrator, Welfare Division, Department of Human Resources, testified:
You’re correct. Our 3 percent is going to be 3 percent of roughly $7.5 million by the time we get to the 75/25 split. So it is only going to generate $200,000, $225,000, [or] maybe $250,000. We’re going to have, as I indicated before, a challenge to implement on that amount of administrative costs. We have an automated system change to make and I believe . . . [as] Mr. Goldwater’s presentation last week [indicated], we’re going to increase the enrollment from 10,000 or 11,000 to 40,000 folks. We’re going to make it work, but we are not going to have an extra pot of money. I can tell you that.
Chairman Townsend commented, “Then it begs the other question: Have we done the right [thing]? I don’t want them to be programmed for failure.”
Assemblyman Goldwater stated:
Mr. Chairman, I’m very comfortable in our budgeting process, and in the fact that we allowed this administrative cost. In the current infrastructure which is set up, we’re reinforcing current programs rather than developing new ones. And I am very comfortable, not only . . . is this a good start, but as the program moves forward, both at the PUC [PUCN] and at the welfare division and at [the] housing [division], there are enough safeguards and enough reporting, so we will be able to catch any windfalls or any short comings.
Chairman Townsend asked, “Have we determined now, with this amendment, approximately how much per month, per bill, this is going to be? . . . Mr. Dimmick, do you have any sense of that?”
Mr. Nielsen stated:
The mill assessment stays the same. The average residential customer on the electric side, using 650 kilowatt-hours a month would pay about 25 cents a month. The average natural gas customer would . . . pay approximately 18 cents a month on average. Those are the basic impacts on the residential side.
Chairman Townsend asked, “So, it’s 43 cents if you’re a natural gas and electric customer, on average?” Mr. Nielsen answered, “That’s correct.”
Terry K. Graves, Lobbyist, Pioneer Companies Incorporated, and Basic Management Incorporated, testified:
As a result of our discussions on Friday, and I’ve talked to my clients [and] we’ve come back with a proposed amendment (Exhibit E). . . . The amendment . . . proposes to add a subsection 6 to section 14, and the amendment would read: “The provisions of this section do not apply to any kilowatt-hour of electricity used in industries utilizing electrolytic-manufacturing processes.” And I believe this amendment would proportionately get those industries in somewhat the same position that mining achieved with the caps. As I indicated on Friday, the caps as they are set now at $25,000 per quarter, really are about close to the maximum these industries would be paying anyway. So the caps really don’t help them.
Chairman Townsend asked, “Do we have language on that?”
Mr. Graves and answered, “Yes.” Mr. Graves continued his testimony:
Secondarily, I’ve been told these industries are normally exempted from these types of mill assessments, because they are basic industries where the energy is actually a raw material in the process. And so the mill assessments tend to leverage up as they move from one process to the next, where it’s becoming consumer products. So I submit that for consideration.
Assemblyman Goldwater stated:
I appreciate Mr. Graves’ work on behalf of his clients, and think it’s an admirable [effort]. It’s what he is here for. When we start down the roads of exemptions, as Senator O'Connell will tell you first hand, and any of the members of your taxation committee [Senate Committee on Taxation], and every veteran member of this committee knows, it has a domino effect. It would be my sincere wish we could put this bill into place first, and let the people who want exemptions from this particular assessment come up and make the claim, hopefully based on the passage of Senate Joint Resolution [S.J.R.] 20, which lays out a criteria the legislature must consider when making an exemption. There are about five items in S.J.R. 20, and I think it is socially beneficial, has an affect on state and local government, all those kinds of things. So I would ask that you do not favorably consider this amendment, as articulately and politely laid out by Mr. Graves.
Senator Amodei asked Mr. Graves, “Terry, do have any idea what this would mean in terms of revenue loss for the program?”
Mr. Graves answered:
I don’t have a good fix. Some of the industries are electrolytic-manufacturing processes in BMI [Basic Management Incorporated] [and] some are not. BMI pumps water for the City of Henderson; which obviously would not be one of the exempted uses. It’s our estimate it gets us somewhere in the same level the cap does for the mining operations.
Senator O'Connell inquired:
We’re still going to have this effective upon passage and approval? Is there no time lag needed for setting up the program anywhere? . . . Is there any review of it by the next Legislature to see how effective it has been, or if there is enough money there, [or] if there is not enough money there?
Assemblyman Goldwater responded:
Yes, I think we’ve proposed amending it to provide additional reports of the collection and expenditure of the money. The “[effective upon] passage and approval”, I think was related to the timeliness of the issue, and the question as to whether or not we’re going to be able to get money together by summertime, and allow welfare to get going.
Senator O'Connell asked, “Don’t we have the $5 million which is in the Governor’s budget?”
Assemblyman Goldwater answered:
You know, I’ve heard the $5 million . . . is now $4 million. I’ve heard . . . it at one time was $7 million. I don’t know exactly where that is. I sit on that budget committee. I see it all the way around. I don’t know where it’s going to land. There are a number of budget issues up in the air. There was a recent article in the newspaper saying the public utility is considering trimming their benefit to low-income [households], based on the passage of this bill. So there are a lot of moving parts here. And I think we have to take a look at what the right thing is to do, and let the dust settle, and see where we are. There is a provision for reports on the expenditure and on the collection. And I hope those reports are thorough. Mr. Willden is nodding his head as well.
Senator O'Connell inquired, “So you have no problem with the timing of the date?”
Mr. Willden answered:
No, the timing of the date, the bill has been rewritten some, but they had a section in there before, and I believe it still includes it, the new rules won’t take place for 1 year. We will operate under the existing LIHEA rules. So we’ll be serving more households immediately with the new revenue stream. And then the new rules we need to adopt, and automated system changes, things like that with the utility companies, take place July 2002. So [with the] new revenue steam we would start serving new households immediately.
Senator O'Connell asked, “And you think those new households are going to be about 40,000?”
Mr. Willden responded:
That’s the projection this bill would allow us to cover. And again, our outreach efforts would drive the number of households. So we intend to move to a full outreach, and start covering as many households as we can this summer.
Senator O'Connell asked:
What do you do when the other money comes in play? Mr. Goldwater has said it’s kind of up in the air now. Pete [Pete G. Ernaut, Lobbyist] is telling me it is $4 million. How does that money become integrated into the system? And the charge continues on, regardless of whether you have the money? Is the money going to be handled by yourself, or is the money being handled by another division, or does it go into Nevada Power’s [Nevada Power Company’s] account . . . ? I don’t know if there is anybody here who can answer that.
Mr. Willden responded:
I think I can answer that. There are roughly three or four bills out there right now. We get the federal dollars which are administered by the state welfare division. The Governor’s one-shot . . . funding, which is $4 million or $5 million, would also come to the welfare division. Mrs. Parnell [Assemblywoman Bonnie Parnell, Carson City Assembly District No. 40] has a bill out there, and then [there is] this bill. All of the money would come to the welfare division to be jointly administered as one pool of funds.
Senator O'Connell commented, “I hope it doesn’t go into NOMADS [Nevada Operations Multi Automated Data System].”
Mr. Willden replied:
No, it doesn’t go into NOMADS, which is fully operational right now and certified. The LIHEA system is not part of NOMADS. It’s a separate system and runs independent of NOMADS. But all the funds would come together in one source. We would jointly administer them, and the rules are basically the same. They’ll be integrated. The only difference would be, as this amendment has, once the co-ops and the rurals are out, they wouldn’t have access to these funds. They would have their own funds, but would still have access to the federal dollars we administer. So, we will simply be identifying where a household lives, what utility they’re dealing with, or energy provider, and making the various funds work, whether it’s our federal funds, an electric company in the rurals, or our federal funds and this fund for the urban [communities].
Assemblyman Goldwater stated:
Just to build on what Mike [Mr. Willden] is saying, there will be an immediate crisis this summer, and we saw how many folks from our presentation are still unserved from this. So, an infusion this summer won’t hurt. And I should also be very clear it is not a pride of authorship or competitive thing. Governor Guinn has been a leader. He has been somebody who said, “I’m glad you’re doing this. I fully support you. We need to help low-income people through this power crisis. Whatever you’re doing, you have my full support.” And he has been very encouraging with low-income energy assistance, whether it’s a one-shot [appropriation], or on going, he has been very encouraging.
Senator O'Connell asked, “Okay, the account these [funds] are in, what kind of interest does it collect now?”
Mr. Willden responded:
I don’t know the answer to that. We don’t have an account now like this. Our federal LIHEA funds, we only draw them as we need them from the federal government. So this is the first time we’ll be dealing with this account. And the State Treasurer, I assume, will be managing the investment of these dollars.
Senator O'Connell asked:
If the State Treasurer does it, is there anyway you can see you’re getting more than 4 percent on it? . . . I’m very serious; because that is what most of the state funds get now. And that is not acceptable, if you’re working on . . . covering a lot of costs.
Mr. Willden stated:
I don’t know how long these state funds will be lying around though. If the predictions are correct, and we have the number of applications we have [predicted], we will be drawing these funds as quickly as they come in. They won’t be invested very long.
Senator O'Connell asked, “What is . . . the average monthly bill now of somebody you’re helping?”
Mr. Willden responded, “The average monthly utility bill [is] over $250. I don’t have that exact [figure].”
Senator O'Connell exclaimed, “It’s over $250?”
Mr. Willden, responded, “Right, for the low-income families, yes. That’s a combination of their gas and electric [bills]. You have to remember, a lot of these households are living in very poor, nonenergy-efficient households.”
Senator O'Connell asked, “We are working on the weatherization of these households as well?”
Mr. Willden replied, “The housing division does that. It is part of this bill. They would get 25 percent of the funding to work on weatherization.”
Senator O'Connell commented, “Yes, because I have quite a large home and I don’t pay that high a price.”
Mr. Willden asked Senator O'Connell, “For gas and electric combined?”
Senator O'Connell replied, “I don’t have gas. I just have the electric. And so I think that’s an extremely high amount.
Mr. Willden responded, “I can get you the exact numbers. I can provide that for you.”
Chairman Townsend stated:
Weatherization becomes so important to low-income folks. When we first started talking about this 20 years ago, everybody looked at us like we were crazy. And who was going to pay for it? Well, the fact is, the people who can least afford to have an energy inefficient home are the ones who do. And that’s the tragedy here. So we’re not going to fix it all. But, I think the goal here is well thought through.
Mr. Dimmick, stated:
With respect to the regulated utilities that have to implement and collect the tax, each one of them will have to file a tariff consistent with our rules and regulations. That will take a few days to process and implement. And of course, we can immediately start collecting money, but we will have to march through a rule-making to get some definitions. There will be some issues about who, what, what’s calculated, and a few other things. But we will need a few days . . . to process tariffs.
Senator O'Connell asked, “Is there a program, when they receive this help on conservation as well, so the door is not standing wide open while the kids are outside playing and the air conditioning is going full blast?”
Mr. Nielsen responded:
In terms of actions, housing division administers that. One of the things the regulations here are hoping to induce is additional education pieces to the weatherization program. So the issues you addressed will be dealt with.
Assemblyman Goldwater added:
If I may build on that: One of the more creative aspects of this particular program is it is a fixed credit based on median numbers and average utility bills. So it’s not just a check, the more you use the more you get. It’s based on averages. It’s based on what average people are using and what average people pay in utilities. So there is an incentive to . . . use less under the fixed credit program, whereas, if it’s just simply a discount on a utility bill, there’s no real incentive to use less. So the more conservative folks are, the better the benefit will be for them.
James L. Wadhams, Lobbyist, Newmont Gold Company, testified:
We’ve had some excellent cooperation and understanding with both Mr. Goldwater and the proponents of the bill. And I think, perhaps over the weekend, there might have been a drafting glitch in terms of the cap that was proposed of $25,000. We believe it was to be a cap on the industrial user, irrespective of the number of locations.
Chairman Townsend asked, “Mr. Powers, was that your direction, or your understanding, or how have you and Mr. Goldwater communicated on this?”
Mr. Powers stated:
The language proposed on the amendment [Exhibit E], and let’s turn, in the proposed amendment on . . . page 4, line 7, “During each calendar quarter the total amount of the universal energy charge of an end-use customer is required to pay pursuant to this section for each service location must not exceed $25,000.” The language was not clear on this issue so I drafted it to propose to the committee for their review in this manner.
Mr. Wadhams stated:
We had some discussion about commonly owned and controlled being the limiting factor in that. As this committee may not know, many of these operations will have literally dozens of locations serviced by a utility. And I think the discussion, and again we appreciate the cooperation of Mr. Goldwater on this, was [it] would be under the common control and ownership in that regard.
Chairman Townsend asked, “Mr. Goldwater, what’s your recollection?”
Assemblyman Goldwater stated: “That’s an accurate representation of my recollection.”
Senator Rhoads asked, “Does that mean [if] Newmont has several locations, they would be [charged] $25,000 at each location?”
Mr. Wadhams stated:
Senator Rhoads, that’s precisely why I’m here . . . . Newmont, being particularly familiar, has literally dozens of locations: Twin Creeks, Lone Creek, Carlin, et cetera. And I think that’s why the discussion was, [for] commonly owned and controlled, the cap would be $25,000 per quarter.
Senator Amodei asked:
We’ve already supported a renewable bill coming out of this committee, which we all expect will raise costs. We’ve heard testimony this [bill] will raise costs, not like what the market is doing, obviously, but it’s still going to raise costs. Do you have any thoughts on what the cost benefit is, in terms of raising costs in this environment, for programs such as this and the other things on the plate of this committee and the Legislature in general, at this particular point in time? Just the short version. Then I’d like to hear from Ernie [Mr. Adler] also on the same issue, please.
Mr. Goldwater responded:
The issue is adding costs and riders onto the power bill versus the benefit of the low-income program. The cost benefit is very simple. The only programs in place were very small: help from the local utility, as well as a LIHEA benefit, which comes from the federal government, computed on heating-days and not cooling‑days, which did not serve enough of our constituents in this state. It was a nothing benefit. For the very small amount of mill we’re putting on the utility bills, which will increase the average utility bill on both gas and electric 40 cents a month, we are going to be serving tens of thousands of . . . low-income people, through what is an absolute life or death issue, not a quality of life, life itself. If people . . . particularly people who are vulnerable, [like] old people, can not turn their air conditioners on in southern Nevada or in northern Nevada during the hot months, for fear they won’t be able to buy medicine or buy food, or buy whatever, it becomes a life itself issue. The 43 cents per month maximum, the benefit during this time of crisis, outweighed the cost.
Senator Amodei responded:
Thank you, and I appreciate [what you said]. Those are the facts in the building, and they’re great facts. I won’t dispute that with you a bit. But when we get outside of the building, and people start looking back at, now that they finally focused on energy issues, and what it costs, and who did what to what, and whether that resulted in [their power bill] going up or down, or [if it] even had any impact on them at all, What would you say to those people?
Mr. Adler stated:
I think there [are] a couple of factors here, and I think the chairman emphasized some of this. Going back to the Walt Higgins’ chart [see, Exhibit C from presentation made by Walter M. Higgins, Chairman, President and Chief Executive Officer, Sierra Pacific Resources, to the Assembly Select Committee on Energy, May 3, 2001], where we had the expensive power we bought at peak, and the weatherization and conservation portion of this bill reduces some of the demand, which is expensive power, which all of us have to pay for . . . . When we do the deferred energy case down the road, we’ve had to buy all this expensive power, we may be ratcheting down the amount we’re paying because we’re weatherizing some of those totally inefficient older homes, and that’s a big part of this bill. So, it may not actually be 43 cents when it comes out in the wash. The other thing is, in emphasizing what Assemblyman Goldwater said, I think this Legislature is going to have a real rough time if grandpa up in Elko freezes to death next winter, or Grandma gets too hot in her mobile home, down in Las Vegas and can’t get to the casino where it’s cool, and has a health problem because of that. I wouldn’t like to see this state take that kind of a chance, quite frankly, and I think we are going to get there. Because you’re going to see energy costs, I think, in 2002, if anything, are going to go higher; we all know that. And that concerns me as a public policy matter. Whether the 43 cents is worth paying so we don’t have that happen. Essentially, it’s like an insurance policy. You’re trying to make sure the most vulnerable [people] don’t have those kinds of situations occur to them. But, I think . . . you have got to look at the conservation and weatherization component of this. I’m not sure it doesn’t reduce some costs to the overall ratepayer.
Senator Amodei asked, “So do you think, on balance, this is the right thing to do even in this present market?
Mr. Adler replied, “Oh yes, I think it is.
Chairman Townsend asked, “Mr. Willden, are you adding these dollars to the weatherization program you already have? We’re not having to start up something are we?”
Mr. Willden answered:
Well we don’t have the weatherization program. We have the existing low-income energy assistance program. And, yes, these dollars would be added to the roughly $3 million program budgeted for next year.
Chairman Townsend said, “No, but on weatherization, [the] Housing [Division] does that, right?”
Mr. Willden replied, “[The] housing [division] does that. They have a very small weatherization grant. I couldn’t tell you the number; it’s in the hundreds of thousands.”
Chairman Townsend said, “They’re not here? Is anyone here from housing?”
Assemblyman Goldwater stated, “I can represent to you, Mr. Chairman, what they represented to me. They want to continue to build the current . . .
Chairman Townsend interjected, “We’re about to hand them $2.5 million and they can’t find their way to the building . . . .”
Assemblyman Goldwater stated, “He was very excited on Friday, to get the money.”
Chairman Townsend said:
Committee, we’ve probably asked enough questions, hopefully to get people rather knowledgeable on this proposed amendment. Mr. Powers, thank you for your work. . . . This is a compilation of all the things Mr. Nielsen brought forward. Is that correct? Or, Senator Adler, you’ve agreed to, Is that correct?
Assemblyman Goldwater stated, “That’s everything save Mr. Wadham’s concerns.”
Chairman Townsend reiterated, “It has everything except the concern about the end-user with multiple locations.”
Assemblyman Goldwater responded, “True.”
Chairman Townsend stated:
If we process this bill as brought forward, I would certainly put in the multiple location cap issue proposed by Mr. Wadhams and accepted by Mr. Goldwater. And then after that, I’d just move it . . . . Do you want to propose something Mr. Schmidt?
Fred J. Schmidt, Lobbyist, Raft River Rural Electric Cooperative testified:
The understanding we had when we discussed the bill on Friday was we thought the provision for requiring cooperatives to create a separate program, identical to the programs in place, was unnecessary if they had their own programs. I might suggest, rather than change the “shall” to “may”, the better approach on section 19 would be to leave section 1 and to eliminate section 2, if you’re going to make it permissive, because if cooperatives have the program, you don’t want them to have to create another program or make another filing with an entity.
Chairman Townsend interjected, “That was never the intent.”
Mr. Schmidt concluded, “So, if it’s permissive, I think the better step is just eliminate it all together on sub [subsection] 2, and preserve subsection 1 and sub [subsection] 3 [Exhibit D].”
Chairman Townsend said, “Can you help me find [these]? You just started talking about subsections.”
Mr. Schmidt replied:
It’s section 19 on page 10 [Exhibit D]. Mr. Chairman, you have suggested you make it permissive, whether a program is actually filed. I don’t think you want the PUC [PUCN] to guess whether these people are going to file programs or not, or under what standards, or make them commensurate.
Chairman Townsend asked, “So you’re saying take [subsection] 2 out? Mr. Schmidt answered, “Just take subsection 2 out of the bill in section 19. That way the exemption is preserved in subsection 1, and then in subsection 3 they’re not entitled to get money they didn’t contribute into the plan.
Chairman Townsend asked, “Does that still keep the constitutionality in place Mr. Powers?” Mr. Powers answered, “Yes, Mr. Chairman, it does not affect the constitutionality of the bill.”
Chairman Townsend stated, “We amend A.B. 349 with the proposed amendment which would include striking section 19, sub [subsection] 2, and adding the language on multiple end-users.”
Senator Carlton moved to amend A.B. 349 by striking subsection 2 in section 19, and clarifying the language on the multiple end-users at the location.
Senator Rhoads asked, “Mr. Chairman, are we just voting on an amendment? Is this just [the] amendment only?”
Chairman Townsend answered, “Just the amendment, to amend the bill.”
Senator Rhoads seconded the motion.
Senator O'Connell stated, “I’d like to ask the sponsor of the bill, if it helped the bill get more votes, would you consider the amendment offered by Mr. Graves?”
Assemblyman Goldwater answered, “In principle, I will not.” Senator O'Connell interjected, “I know you don’t like it.”
Assemblyman Goldwater added:
Yes, even
if it got it more votes, I wouldn’t feel good about supporting it for this
reason: There will be 100 lobbyists
asking for exemptions to this bill and to paying this charge. That’s their right
to do so. I think in the original draft of this bill, I would like to just stand by the principle of prohibiting any exemption based on use here.
Mr. Graves stated:
[I] might readdress Senator Amodei’s question to me. With the proposed amendment, changing the cap, I’m not sure these industries wouldn’t end up paying as much or more as mining is going to be capped at without this amendment. And it is an industry that’s significantly smaller than mining in terms of use of energy. So I think it is particularly punitive against these particular BMI Industries. And again, I don’t support this kind of an assessment on any basic industry, be it the chemical industries of BMI or mining. That would be my response to Assemblyman Goldwater.
Chairman Townsend stated, “This is to adopt the amendment to the bill. This is not a motion to do pass. So we’re just adopting the amendment on the question.”
THE MOTION CARRIED UNANIMOUSLY.
*****
Chairman Townsend stated, “Now we have a bill with all this in it. Do we have a motion on the bill as amended?”
Senator Amodei stated, “Mr. Chairman, I’ll do it just to see where we go so we can keep things moving and with respect to the chairman of Assembly tax [Assembly Committee on Taxation].”
Senator Amodei MOVED TO amend A.B. 349. WITH the proposed Graves amendment [Exhibit E].
Senator O'Connell SECONDED THE MOTION.
Chairman Townsend restated the motion, “…To adopt Mr. Graves’ amendment as proposed [Exhibit E]. Relative to section 14, [adding] a new subsection 6.”
THE MOTION CARRIED [Senators Townsend and Carlton voted no.)
*****
Chairman Townsend stated, “That’s now adopted. Now on the bill as amended, is there a motion to do pass as amended with the two amendments?”
Senator Amodei MOVED TO DO PASS A.B. 349 AS AMENDED.
SENATOR CARLTON SECONDED THE MOTION.
THE MOTION CARRIED (Senator Rhoads voted no)
*****
Chairman Townsend opened the hearing on A.B. 133.
ASSEMBLY BILL 133: Makes various changes concerning construction, constructional defects and common-interest communities. (BDR 3-667)
Scott M. Craigie, Lobbyist, Southern Nevada Subcontractors Association, and Farmers Insurance Group, presented a proposed amendment to A.B. 133 (Exhibit F). He commented A.B. 133 has the potential to be a solid reform bill on construction defects. He directed attention to subsection 1 of section 5 on page 1 of A.B. 133, which describes a claimant must notify the subcontractors by certified mail before they can commence an action against a contractor for construction defect damages. He added the same section requires the notification to include reasonable details of the damage or injury. He stated this first step before litigation is well defined, and he said he supports it. The second notice requirement, Mr. Craigie continued, can be found in subsection 2 of section 5, which requires the contractor to notify by certified mail, within 15 days, each subcontractor, supplier, design professional, or any professional who may be involved in the law suit. He said the third provision in A.B. 133 allows the contractor, subcontractor, designer, or supplier access to investigate the damage. He commented the bill is valuable because it offers major improvements in the existing law. He noted the proposed changes represent basic fundamental issues which must be addressed as well. Mr. Craigie said they want to keep the bill very simple and it will not have complex mechanics, taxes, fees, or even a fiscal note.
Mr. Craigie stated they propose deleting lines 8 through 11 on page 2 of A.B. 133, which concerns an expert opinion, which may use representative samples to describe the damage. He said they were not opposed to using an expert witness, but are opposed to using representative samples. He stated they were concerned the bill could expand a claimant’s opportunity to sue based on representative samples from other locations, and that was not the intent of the bill. He stated they also propose deleting lines 45 through 47 on page 4. He stated A.B. 133 should not be used to facilitate class action lawsuits. Mr. Craigie gave the example: If someone lives next door to a person who has a construction defect, they should not be included in a class action suit unless they also have a defect. He declared A.B. 133 is not about facilitating lawsuits; it is about repairing defects. Mr. Craigie commented the law should allow a person to go to court if a defect is not repaired. He opined the law should at least require validation there is a defect before the claimant can sue.
Mr. Craigie stated they had originally proposed striking lines 26 and 27 on page 3 (Exhibit F), but have decided to leave the section in the bill. He restated their main objective is to allow the builder the opportunity to repair the problem. He added, for the same reason, the struck portions of lines 7 and 9 on page 4 (Exhibit F) will now also be left in.
Mr. Craigie continued they propose striking lines 14 and 15 on page 6 of A.B. 133, which includes someone who teaches or has taught at an accredited college or university to be used as an expert. He commented defect litigation has become a mass-market business. He expressed they believe consultants should be limited to licensed professionals.
Mr. Craigie pointed out lines 30 through 43 on page 7 would need to be reconciled, depending on if the new language presented is used. He explained this section gives the subcontractors a right to make an offer on repairs. He noted this section was struck in the Assembly and Mr. Craigie suggested a deal had been made to leave this section in the bill. He added he had drafted new language to replace this struck section or he would agree to the committee deciding to return the original language to the bill.
Chairman Townsend
summarized Mr. Craigie’s statement for clarification.
He stated the proposal (Exhibit F) is a copy of A.B. 133,
second reprint. He continued the second reprint is
proposing to strike lines 32 through 43 on
page 7. He stated Mr. Craigie had said this section was not
supposed to be struck and either should be left in or replaced with new
language to address the issue
Mr. Craigie concurred with Chairman Townsend ’s explanation. Mr. Craigie pointed out page 15, lines 31 through 35 directly relate to S.B. 421, which includes time-share and homeowner associations language. He stated it is critical S.B. 421, which requires a vote of the homeowners, do pass as part of the package.
SENATE BILL 421: Makes various changes to provisions governing common‑interest communities. (BDR 10-446)
mr. Craigie continued, they propose striking lines 41 and 42 on page 15, which would be consistent with the changes in S.B. 421. The language in S.B. 421 requires a vote and eliminates the exemption, which is shown in lines 41 and 42 of A.B. 133.
Chairman Townsend stated this language can be found in section 64 and section 37 of S.B. 421. He said section 64 removes the requirement and section 37 adds the only thing a board can do to protect the health, safety, and welfare of its members is to hire a licensed contractor to deal with the problem.
Mr. Craigie continued, the critical issue involves the fundamental right to repair, which is defined on page 16 of A.B. 133. He gave an example: A person’s home has a defective roof. The homeowner calls an attorney who contacts the contractor, or the homeowner contacts the contractor directly. The contractor fails to repair the roof to the satisfaction of the homeowner, and the matter goes to court. Once the case goes to court, the law allows other defects to be added to the case, which may include subcontractors who had not previously been notified or allowed the opportunity to repair. Mr. Craigie reiterated the fundamental purpose of this legislation is to get the homes repaired.
Mr. Craigie said the new section begins on line 37 of page 16 of his proposed amendment (Exhibit F). He commented this language will have to be edited by the legal department. He stated this language would require the claimant and contractor to allow the contractor, subcontractor, supplier, and design professional a reasonable opportunity to repair each defect before commencing an action. He continued line 40 requires the contractor to allow the original subcontractor, supplier, or designer to repair before commencing an action. He added this provision applies regardless of when the party who performed the original work is identified, as stated beginning on line 46. Mr. Craigie commented the subcontractor who performed the original work would be most motivated to perform the repair. He added if the contractor is allowed to hire a third party or perform the repairs themselves, and fails to fix the problem, the original subcontractor should not be taken to court without the opportunity to repair the problem.
Mr. Craigie stated the last addition they propose is each and every defect must be identified, and notification and opportunity to repair must be given to the original team before it can be taken to court. This, he explained, would not allow new defects to be added to an ongoing litigation without affording the opportunity for repair. He stated he realizes this would add a slight burden on the claimant or the claimant’s attorney to identify all the defects before they commence the lawsuit. Mr. Craigie restated, the purpose of the law is to give the opportunity to repair. He noted one of the concerns mentioned is the homeowner should not have the burden of identifying each and every defect. He stated the burden would be placed on the attorney to survey the defects before commencing a lawsuit.
Mr. Craigie concluded, they would propose the bill be effective upon passage and approval, rather than the original October 1, 2001, date, which he believes would cause a flood of filings before that date.
Senator Shaffer asked Mr. Craigie if there is any place in the legislation that clarifies at which time the contractor’s responsibility ends.
Scott R. Rasmussen, Lobbyist, Nevada Subcontractors Association, testified chapter 11 of Nevada Revised Statutes (NRS) has three different statutes of repose for all construction in Nevada. He explained they include a 6-year statute of repose for all patent defects, an 8-year statute of repose for all latent defects, and a 10-year statute of limitations for those defects which were known or should have been known.
Senator Shaffer stated, if a roof complaint is filed 6 years after the original construction, the passage of time will have made it impossible to match the existing roof tiles.
Mr. Rasmussen stated, the intent is to have the problem repaired to the claimant’s satisfaction. He stated he did not know if the cosmetic quality of a roof repair would be considered a valid claim by the courts.
Senator Carlton asked if the proposed amendments (Exhibit F) was a consensus of the interested parties.
Mr. Craigie answered, these amendments are proposed by the Nevada Subcontractors Association, and copies were distributed to other concerned parties. He stated they had attempted to focus on the absolutes and eliminate some of the proposed complex mechanisms. Mr. Craigie added, when A.B. 133 goes back to the Assembly, a radically changed bill would be less likely to pass, especially after the Assembly’s efforts to get agreement from as many parties as possible.
Senator Carlton stated she was concerned about their choice of the language, “reasonable opportunity.” She added the original people who worked on a home are often unavailable; sometimes they will change their company’s name just to avoid litigation. She stated she is concerned if they limit the people who can repair to the original builders, those builders may not be accessible.
Mr. Craigie stated their proposal (Exhibit F) is only meant to establish the basic principles they wish to address. He said the bill drafters will have to form the language.
Senator Carlton stated not everyone is in agreement, and said she feels they are right back where they had started.
Mr. Rasmussen stated he believed what started as a cumbersome bill has now been reduced to the basic issue of allowing the repair to be made. He stated in A.B. 133’s original form the subcontractors who performed the original work were not afforded the opportunity to fix the problem. He restated they support the right to repair by those people who did the original construction. He noted they had left in the bill on lines 45 through 48 on page 2, the timelines requiring the repairs to be made within 45 or 90 days, depending on whether or not the defect is complex. Mr. Rasmussen stated the entire intent of the last section in the proposed amendment is to allow the original subcontractor one chance to repair before litigation commences. He noted if the contractor or subcontractor is out of business, they will not be able to repair. Mr. Rasmussen said, if the contractor is out of business, then it will become someone else’s responsibility to contact the subcontractors who did the original work.
Chairman Townsend stated the motion should be to amend A.B. 133, second reprint, with sections 44 and 45 from S.B. 516, which are the soils components.
SENATE BILL 516: Requires affidavit in support of action for professional negligence against certain design professionals. (BDR 3-1452)
Chairman Townsend commented how important the soils issue is especially for southern Nevada. He continued, it would also include sections 37 and 64 from S.B. 421, which is the common-interest community issue. These sections, Chairman Townsend explained deal specifically with section 9, subsection (e), of chapter 116 of NRS, which says the only things commenced through a vote of the board are issues effecting the immediate health, safety, and welfare of the members. He said other litigation must be commenced through a vote of the members. He added he would also include in the motion, the change to make the bill effective upon passage and approval. He said he would like the language on line 7, page 4, of the proposed changes (Exhibit F), “to the satisfaction of the claimant,” and on line 9, of page 4, of the proposed changes (Exhibit F) “to his satisfaction” to be left in the bill to protect the claimant.
Senator O'Connell moved to amend and do pass A.B. 133.
Senator Amodei seconded the motion.
The motion carried. (Senator Carlton voted no.)
*****
Chairman Townsend opened the hearing on A.B. 447.
ASSEMBLY BILL 447: Prohibits unfair lending practices for home loans. (BDR 52-440)
Senator O'Connell declared her son is a mortgage banker.
Senator Townsend declared he is a shareholder and a board member of a bank, which owns a mortgage company.
Alfredo Alonso, Lobbyist, Citibank, (Nevada) NA, stated they support Amendment No. 868. However, he said they would like to make the new language, which replaces section 11 on page 2, be more specific by saying, “refinancing of a home loan owned by the lender or affiliate of the lender.” He stated this would make the language clearer.
Senator Carlton asked if the change would mean this bill would only apply to refinancing within the same corporate structure. She asked if this law would apply to them if someone outside the corporate structure used these same tactics.
Mr. Alonso stated the purpose is to negate “flipping”, which is when someone has a loan with a bank or mortgage company and they refinance over and over, causing them to have exorbitant mortgages. He explained they want to make this specific to the individual mortgage company or bank.
Senator Carlton asked if they went to a different company would it then be legal?
Mr. Alonso stated they have addressed that question in a different part of the bill. He said if a homeowner wants to refinance they should be allowed to seek the best interest rate at another company. Mr. Alonso stated they are attempting to regulate a small group of companies conducting these illegal practices.
Senator Carlton asked Mr. Alonso to explain the proposed addition of the phrase “assets including, without limitation, income” from Amendment No. 868.
Mr. Alonso stated Assemblywoman Buckley (Assemblywoman Barbara E. Buckley, Clark County Assembly District No. 8) had proposed this language to ensure when an individual is trying to get a loan their actual income is considered. He said they are trying to regulate against predatory lending which occurs when money is lent to someone who clearly cannot afford to repay it.
Senator O'Connell asked Mr. Barengo if he has reviewed the language submitted by Mr. Scruggs (Kenneth T. Scruggs, Lobbyist, Household Financial Group Limited) (Exhibit G).
Robert Barengo, Lobbyist, Nevada Consumer Finance Association, stated he had seen the language. He commented Assemblywoman Buckley testified that Assemblyman Carpenter had been concerned some people who borrow money do not have enough assets but their income is enough to make the loan.
Keith L. Lee, Lobbyist, Responsible Mortgage Lenders Coalition, testified a loan can be based on “stated income” which allows the history of employment to qualify a person for a loan without other assets. He said this language makes sure “stated income” loans are still valid.
Mr. Barengo stated the language change suggested by Mr. Alonso accomplishes, more succinctly, about the same thing as the suggested change presented by Mr. Scrugg’s (Exhibit G). Mr. Barengo said the only difference may be the addition of the language, “at the time of such refinancing.”
Mr. Lee stated they concur with Mr. Alonso’s proposed addition to the amendment. Mr. Lee suggested another addition to section 11, subsection 3 after the words “refinancing” he suggested adding “by the homeowner.” He stated his concern is there may be a loan, which was assumed by a subsequent buyer, who would be a completely new owner, and the fees should then apply. He also suggested on page 3, section 12 of A. B. 447 adding the word “willfully” so it would read, “A person who willfully engages in an unfair lending practice.” Mr. Lee stated this would target the law toward persons who willfully, with an intent to defraud, rather than the majority of the companies who have no intention of committing any predatory practices. He also suggested the final section 19 should be changed to apply to loans entered into after October 1, 2001. Mr. Lee reasoned loans in existence now have been priced based on requirements of present laws, such as, the amount of interest charged, the prepayment penalty amount, grace period, et cetera. New loans, Mr. Lee suggested, entered into after the passage of this bill, could be priced according to the new law.
Chairman Townsend clarified on page 6, section 19 should be, “loans entered into after October 1, 2001.” Chairman Townsend asked Mr. Lee why they need to wait until October 1, 2001.
Mr. Lee replied section 12 also has the October 1, 2001, date. He said whatever the date, the law should only apply to loans entered into on or after the effective date.
Chairman Townsend stated the only reason to delay the effective date would be if the industry needed time to prepare the correct forms. He commented if they are trying to stop inappropriate behavior, why would they give someone until October to commit these offenses?
Samuel P. McMullen, Lobbyist, stated the time until October 1, 2001, would allow the new information to be assimilated into programs. He noted even though the systems will not change greatly, training and the notification provisions will take some time. He added noncompliance will mean a violation of the law. Mr. McMullen stated the language on page 3, line 11 of the amendment, says if you violate any of these regulations you loose the security provisions of the loan. He said these are serious consequences for a lender. Mr. McMullen stated this section, which could cause the risk factor to change, would support Mr. Lee’s suggestion regarding loans entered into, on or after, the effective date, which would need to be recalculated.
Chairman Townsend stated, so far they have the language to Amendment No. 868, Mr. Alonso and Mr. Lee presented.
Mr. Barengo stated the language Mr. Scruggs presented (Exhibit G) is an alternative to language presented by Mr. Alonso and Mr. Lee. He clarified the language they have so far for page 2, line 11 of Amendment No. 868 says, “Finance a prepayment fee or penalty in connection with the refinancing by the home owner of a home loan owned by the lender or an affiliate of the lender.” He commented it appears to run on. He noted the concepts are all the same, just the language changes.
Chairman Townsend asked the committee for an amend-and-do-pass vote on the bill, using Amendment No. 868, and asking the Legislative Counsel Bureau to delete line 22 on page 2 and to insert acceptable language.
Mr. Lee asked if the motion included his suggested language making the law apply only to loans entered into on or after a specific effective date. Chairman Townsend stated yes, they would include Mr. Lee’s recommendation, which would say “loans entered into after October 1, 2001.”
Mr. Lee also asked if the motion would include his suggestion of adding the word, “willfully.” Chairman Townsend responded, yes.
Senator Rhoads moved to amend and do pass A.B. 447.
Senator Carlton seconded the motion.
The motion carried. (Senator O'Connell abstained from the vote. Senator Schneider was absent for the vote.)
*****
Chairman Townsend opened the hearing on A.B. 123.
ASSEMBLY BILL 123: Revises provisions relating to health insurance provided by public employees’ benefits program. (BDR 57-603)
Chairman Townsend stated Senator O'Connell and he have discussed the bill. He said they will work in the future with regard to having separate groups hand out the benefits and bringing in the revenue. He commented there is still the issue of whether the insurance commissioner should have some kind of cursory jurisdiction over the committee on benefits, which was the original proposal. He added Mr. Wolff from the Highway Patrol Association (Gary H. Wolff, Lobbyist, Nevada Highway Patrol Association) proposed an amendment regarding the issue which dealt with the continued interpretation of who could leave the system and who could not leave the system. Chairman Townsend commented there is one amendment and the person who proposed the amendment is not present. Chairman Townsend noted he is interested in testimony from the insurance division, because they will have added responsibilities if the bill passes. He stated the amendment includes dramatic policy departure, and he would be reluctant to include it without testimony.
Senator Amodei moved to do pass A.B. 123.
Senator Shaffer seconded the motion.
The motion carried. (Senator O'Connell and Senator Schneider were absent for the vote.)
*****
Chairman Townsend closed the hearing at 12:00 a.m.
RESPECTFULLY SUBMITTED:
Jude Greytak,
Committee Secretary
APPROVED BY:
Senator Randolph J. Townsend, Chairman
DATE: