MINUTES OF THE MEETING OF THE JOINT SUBCOMMITTEE

ON PUBLIC SAFETY/NATURAL RESOURCES/TRANSPORTATION

OF THE

SENATE SubCommittee on Finance

AND THE

ASSEMBLY COMMITTEE ON WAYS AND MEANS

 

Seventy-First Session

March 6, 2001

 

 

The Joint Subcommittee on Public Safety/Natural Resources/Transportation of the Senate Committee on Financeand the Assembly Committee on Ways and Means was called to order by Chairman Lawrence E. Jacobsen at 8:14 a.m., on Tuesday, March 6, 2001, in Room 2134 of the Legislative Building, Carson City, 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.

 

SENATE COMMITTEE MEMBERS PRESENT:

 

Senator Lawrence E. Jacobsen, Chairman

Senator William R. O’Donnell

Senator Joseph M. Neal Jr.

 

ASSEMBLY COMMITTEE MEMBERS PRESENT:

 

Mr. David R. Parks, Chairman

Mr. Bob Beers

Mrs. Vonne S. Chowning

Mr. John W. Marvel

Mr. Richard D. Perkins

 

ASSEMBLY COMMITTEE MEMBERS ABSENT:

 

Mrs. Marcia de Braga (Excused)

 

STAFF MEMBERS PRESENT:

 

Bob Guernsey, Principal Deputy Fiscal Analyst

Steven J. Abba, Principal Deputy Fiscal Analyst

Jim Rodriguez, Program Analyst

Jennifer Ruedy, Committee Secretary

 

OTHERS PRESENT:

 

Tom Stephens, Director, Nevada Department of Transportation

Jerry Ross, Budget Analyst, Financial Management, Nevada Department of Transportation

Gerry Colquhoun, Chief of Financial Management, Nevada Department of Transportation

Steve Robinson, State Forester Firewarden, Division of Forestry, State Department of Conservation and Natural Resources

Ruedy Edgington, Assistant Director, Operations Division, Nevada Department of Transportation

Gene Segerblom, a private citizen

George Caan, Director, Colorado River Commission

Douglas Beatty, Finance and Administration Chief, Colorado River Commission

Cash A. Minor, Chief Financial Officer, Fiscal Affairs, Elko County

Stephanie Licht, Lobbyist, Elko County Board of Commissioners

 

 

NEVADA DEPARTMENT OF TRANSPORTATION

 

Transportation Administration – Budget Page NDOT-1 (Volume 3)

Budget Account 201-4660

 

Tom Stephens, Director, Nevada Department of Transportation (NDOT), said the NDOT budget is $1.3 billion for the 2001-03 biennium and represents over 1,600 employees.  He said capital outlays for the department reached $300 million 2 years ago and last year they reached $377 million.  He explained that without a significant increase in staff, the department has nearly doubled the program over the past few years because of efficient, hard-working individuals at NDOT.  According to Mr. Stephens, preservation of the system, capacity, and safety are the department’s fundamental areas of concern.  The number of traffic fatalities in Nevada decreased last year and for the first two months of this year they have decreased even further, when compared to the previous year, he added.

 

Mr. Stephens commented that NDOT had received many awards, which he had discussed at the Legislative Commission’s Budget Subcommittee on January 26, 2001.  He stated, in an effort to facilitate communication with the public, NDOT produces in‑house publications that have won awards.  The department also maintains a comprehensive website, he said.  He stated that federal funding for NDOT programs has increased through the efforts of the Nevada delegation in Washington, D.C.

 

Mr. Stephens addressed the important issue of safety.  He said Nevada has historically had high accident rates, but there was a dramatic decrease in fatalities in the state’s rural areas.  NDOT has not completed a detailed analysis of the decrease in fatalities in the rural areas; however, he said, he believes that the program to put  “rumble strips” on the side of the highways, to add more guardrails, and to extend culverts has contributed to the decline in rural highway fatalities. 

 

Mr. Stephens pointed out that the state salary survey revealed that engineers have “the greatest disparity between other states and also between other Nevadans who were polled by the State Department of Personnel of any benchmarked class that they surveyed.”  He said salaries are a major priority for the department in its Fiscal Year 2001 to 2003 executive budget.

 

Mr. Stephens stated, “Right-of-way has become a real big issue . . . lots of high costs, lots of lengthy court proceedings.”   The issue of local versus state responsibility for roads is currently being addressed through legislation, he explained.  Another issue of concern for the department has to do with project delivery time, he added.  He explained this is because construction for nearly every project does not begin until environmental, right-of-way, and design reviews have been completed.  He explained that major projects under construction now were initiated 5 to 6 years ago.

 

Mr. Stephens provided a handout (Exhibit C) that includes the following:  a written response to a request for information dated February 22, 2001, from the Legislative Counsel Bureau, NDOT’s conceptual ten-year cash flow projection, NDOT’s projected bonding plan, and a prioritized list of all recommended budget maintenance and enhancement decision units.  He stated it is difficult to compile a conceptual ten-year cash flow for a fluid program, for which the income is constantly changing. 

 

In regard to the ten-year cash flow projection, Mr. Stephens said the plan looks at one scenario that would work.  He explained that the program, as presented, would work at the levels proposed for the next biennium and beyond.  He noted that if a significant reduction in federal funding occurs, NDOT would reduce the program long before the point of actually committing funds to a project.  He noted if an increase in federal funding occurs, NDOT would likely approach Interim Finance Committee (IFC) to increase the program.  He added that if an infusion of funding from the local government materializes, NDOT would approach IFC to authorize the use of those funds.  He said Clark County is considering bonding, and the county has committed money to certain projects.  He stated that if money from Clark County does not materialize then those projects to which funding has been committed would not be completed in the currently estimated time frame. 

 

Mr. Stephens stated, “None of this is set in concrete.  We have to make sure that our revenues and expenses match no matter what the budget level is set at.  That is why we look far in the future.”

 

Mr. Stephens stated that federal funding has been very good, including an additional $30 million for an earmarked program last year.  He added that federal funds provided an additional $20 million designated for the combined use of Arizona, Nevada, and the federal government for Hoover Dam.  He said he believes NDOT will receive significant earmarked federal funds this next year, which would be in addition to what is reflected in the current budget, but they have projected a conservative budget without those potential funds.  He said he believes Nevada’s congressional delegation is well positioned to receive additional funding this next year.

 

Senator Jacobsen said, “It is our responsibility to make sure you are properly funded, you have adequate facilities and adequate equipment.”

 

Mrs. Chowning complimented Mr. Stephens on conducting numerous large construction projects in southern Nevada at night with minimal disruptions to the flow of traffic.  She asked Mr. Stephens to provide detail on some near-fatal accidents that have occurred recently where large trucks have fallen off the freeway, at the spaghetti bowl.  She questioned whether there was a conclusive study indicating the cause of the accidents, and she specifically cited concern regarding any possible flaws in the design.  Secondly, she asked about the process of procuring federal funds.  She asked Mr. Stephens to describe the assistance provided from the staff in the Washington, D.C., office, and the NDOT staff who liaison with the congressional representatives.  She asked, “Do we need both?”

 

Mr. Stephens said he has not received the accident report from the Nevada Highway Patrol Division yet regarding the accident at the spaghetti bowl.  He explained NDOT typically receives accident reports one month after the date of the accident.  This delay allows the Nevada Highway Patrol Division to complete a thorough investigation of the incidents, he added.  Mr. Stephens stated that he believes the accidents Mrs. Chowning refers to occurred during rainstorms, and there is no indication of a flaw in design.  He stated that NDOT takes corrective action whenever an accident report indicates a design flaw or whenever an inordinate number of accidents occur at the same location, indicating the need for a design change.  He said he would let her know the result of the accident reports in question as soon as he receives that information.

 

Mr. Stephens responded to the question regarding “the efforts to liaison with the congressional delegations on federal funding.”  He said that, in addition to informing the Washington, D.C., delegation of Nevada’s transportation needs, his staff also researches potential federal funding opportunities for the delegation to pursue on NDOT’s behalf.  He explained that the delegation often does not identify potential sources of funds without suggestions from his office.  He said NDOT provides funding to the Washington, D.C., office, which is headed by Mike Pieper, Director, Nevada State Office, Division of Economic Development, Commission on Economic Development.  Mr. Stephens explained that Mr. Pieper and his staff in Washington, D.C., liaison with the congressional delegation and the National Governor’s Association.  He explained that the efforts to liaison with an organization of governors, especially western governors of states similar to Nevada, has been very beneficial in the past.  He cited the public lands program as an example. 

 

Mr. Stephens pointed out that NDOT pays $150,000 annually for the services of a Washington, D.C., consultant who is an expert on federal highway matters.  The consultant is a former administrator of the Federal Highway Administration, he added.  Mr. Stephens stated that his staff interacts frequently with the staff to the congressional delegation to keep them abreast of issues pertinent to NDOT.  He explained that this is necessary because of staff turnover every two to three years in the Washington, D.C., offices, with the exception of U.S. Senator Harry Reid’s staff.  Furthermore, many of the staff working on specific issues for Nevada’s congressional delegates are subject specialists, but they have never visited Nevada.

 

Mr. Stephens noted that liaison efforts from Nevada include Mr. Stephens, who visits the Washington, D.C., offices a couple of times a year, and many of his colleagues.  According to Mr. Stephens, Kent Cooper, Chief of Programming, Nevada Department of Transportation, works on many of the nonfinancial issues concerning environment, air quality, programming, and complying with necessary requirements for potential funding.  He said other staff members assist in formulating programs, and Gerry Colquhoun, Chief of Financial Management, Nevada Department of Transportation, is involved in making program booklets.  He explained that Congress requests certain booklets, which are completed with help from discretionary funds from the Federal Highway Administration.  He pointed out that Nevada has received “hundreds of billions of dollars in extra additional earmarks.  So I think it has been a very beneficial program, for not a great deal of expenditure.  That’s probably one of the most cost-effective things that we do.”

 

Senator Jacobsen questioned whether any members of the Board of Directors, Nevada Department of Transportation, were present.  He acknowledged that no members were present, and questioned whether attendance is adequate at the board meetings.  He added that there had been many efforts by legislators, in the past, to make changes to the board.

 

Mr. Stephens responded, “The Board under Governor Guinn has become much more active.  We are meeting much more frequently.  In fact we are meeting this week.”  He added that the board, at this Friday’s meeting, would review the “NDOT Conceptual Ten-Year Cash Flow Projection” and written responses to Jim Rodriguez’s questions that were included in Exhibit C.  If the board does not approve these items, upon review, then Mr. Stephens will promptly provide amended information to the committee, he said.  He indicated the board has held numerous meetings lasting four to five hours that included a lot of public input and numerous public hearings.  Mr. Stephens explained, “The board has been much more active as far as day-to-day input into the operation of the agency and setting the project priorities . . . not that they weren’t involved before, but I’m just saying as far as spending more time on it, they certainly do.”

 

Senator Jacobsen explained the reasoning behind his question is that he attended a board meeting “a year or so ago that lasted about nine minutes.”  Mr. Stephens responded, “That was before Governor Guinn came in.  There haven’t been any 9‑minute meetings since Governor Guinn was there.”

 

Senator Jacobsen asked whether Mr. Stephens meets with his staff on a regular basis.  Mr. Stephens responded that he regularly conducts meetings with his immediate staff, and those staff members then conduct meetings with their staff.  He added that they also have monthly meetings with the 40 to 50 senior managers to discuss general issues, and each district has its own staff meetings. 

 

Senator O’Donnell told a story regarding past legislative efforts: 

 

Years ago, I think it was either ’87 or ’89 . . . we had two bills.  We had a gas tax increase of 5 cents . . . we also had a bill that changed the makeup of the board because it was felt that some people with some engineering background, some people that knew how to build a highway were important to get on the board in order to at least add some expertise to that decision-making process.  It was late in the session, I mean really late in the session, like about 2 o’clock in the morning late in the session and the then governor, Richard Bryan, called Assemblyman Len Nevin to ask him to get the bill out of his committee, which was a gas tax bill, and asked Senator Rhoads to get the bill out of his committee that was the re-makeup of the Transportation Board.  Len called Dean Rhoads and said I’ve talked to the Governor, the Governor said that he will go ahead and sign the bill reauthorizing the makeup of the board, if you will allow the gas tax to go through.  They agreed.  The two bills went like this [signaling two fingers crossing paths in the air], and that night the bills were passed and the bills went on over to the Governor’s office.  The Governor signed the gas tax bill, and the Governor vetoed the makeup of the board bill.  And Senator Rhoads was on his way home driving down highway 80 when he heard that his bill was just killed after the session had closed.  There has been, ever since, a desire on the part of some to do something in terms of the makeup of the board.  I’m sure you are well aware of my bill that I have this session, and last session, to do just that.  The question I would have would be, you say this governor, and this governor, I understand, is a different party from the last 16 years that I have been affiliated with this particular process, is a different Governor.  And he is a very hands-on Governor and he is doing wonderful things with the board.  The question I would have would be what guarantees do we have that this won’t slip back into the same old situation that we had with former governors where we had 9-minute meetings and we had a lot of emphasis placed on the transportation, NDOT to make the decisions that the board really should be making.  I think that is one of the big concerns that this Legislature has, and I’m not the only one.

 

Senator O’Donnell said there is no guarantee the next Governor will maintain an active board, so this topic will be debated later this session within another committee meeting.

 

Mr. Stephens said it would be inappropriate for him to comment on the makeup of the board, as it is beyond his control.  He added that there are no guarantees in life.  Senator O’Donnell responded, “To the contraire, we put it in writing to guarantee it, last in perpetuity, or unless another legislature changes it.”

 

Senator Jacobsen said he would encourage the legislators to attend the board meetings to witness them firsthand.  Senator O’Donnell said he would attend the next one.  Mr. Stephens said he believes three state senators attended the last meeting.  Senator Jacobsen said he was pleased to hear that.

 

Mr. Parks questioned whether NDOT ever sells bonds to be repaid from a source other than the gasoline and motor vehicle fuel tax.  Secondly, he questioned whether federal dollars are used to pay the debt on bond issues.

 

Mr. Stephens said he believes the last bond debt was repaid with at least 95 percent federal funds.

 

Gerry Colquhoun, Chief of Financial Management, Nevada Department of Transportation, stated that NDOT has historically repaid bonds with 95 percent federal funds and 5 percent matching funds from the gasoline and motor vehicle fuel tax.  The interest on bonds is also typically paid with gasoline and motor vehicle fuel tax revenue, he added.

 

Mr. Stephens said he believes it is now permissible to pay the interest with federal funds.  Mr. Colquhoun stated that, under the Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA), interest may now be paid with federal funds.

 

Senator Jacobsen indicated that two years ago NDOT stated 100 percent of the highways in Nevada required maintenance, and they accomplished 87 percent of those maintenance efforts.  He acknowledged weather conditions and emergencies take precedence, but inquired how NDOT prioritizes other maintenance and new construction projects. 

 

Mr. Stephens explained the prioritization process is very detailed and organized by Sohila Bemanian, P.E., Principal Materials Engineer, Materials Division, Nevada Department of Transportation.  Staff from the Materials Division identifies roads throughout the state that will require maintenance over the next few years.  He explained they visit the roads, collect detailed information, and finally program maintenance two years out by established priority.  The prioritization system they use assigns roads into different categories based on use; for example, an interstate highway would have a higher category than a road traveled by much fewer cars on a daily basis, he added.   He stated that the maintenance strategy is different for roads depending on the volume of traffic.  He said Ms. Bemanian then recommends which roads should be included in the following year’s maintenance program.  The Department allocates approximately $100 million annually for maintenance of the roads, so when her recommendations exceed the allocated funds, she must further prioritize what maintenance can safely be postponed another year, Mr. Stephens explained.

 

Mr. Stephens stated that the department’s maintenance program has improved over the past five years.  Categorizing roads has significantly helped the maintenance identification process, he said.  He cited a notable decrease in roads classified as “fair and poor condition” since 1999.  He explained that NDOT used to use the same strategy for the lesser-traveled road parallel to U.S. Highway 50 near Austin as they did for U.S. Highway 50, which is more heavily traveled.  This practice has been replaced by an improved categorization system.  Furthermore, he pointed out, Ms. Bemanian has received national and state awards for her work, including the prestigious AASHTO (American Association of State Highway and Transportation Officials) President’s Transportation Award for Quality.  He acknowledged that Ms. Bemanian had the support of excellent colleagues in her many accomplishments.  He said he believes the department has maintenance issues under control, but capacity issues present new problems.  According to Mr. Stephens, Nevada grew 66 percent in the past decade, and there is constant demand for new projects.  He said the majority of the new projects are requested for southern Nevada to increase capacity in that rapidly growing region.

 

Senator O’Donnell asked how much it would cost to build the Galena Bridge.  Mr. Stephens responded it would cost approximately $50 million.  He further explained that the alignment for the Carson Bypass Project was decided in the early 1980s.  He explained that the department considered different alignments including one on the east side of Pleasant Valley and another near the Callaghan Ranch Road area, which were both fairly flat alignments without a lot of difficult terrain.  He said there was a great deal of controversy surrounding the selection of the final alignment, which includes construction of the Galena Bridge.  Mr. Stephens said he believes a committee of legislators and local officials decided on the final alignment, which was fairly straight but did not appear to take into consideration the terrain.  He stated that the construction of the alignment requires large retaining walls and bridges, but it is too late to reconsider the sites in Callaghan Ranch or in Pleasant Valley because those areas are too developed at this point.  Furthermore, he said, NDOT has purchased the majority of the right-of-way along the Galena alignment, and the project is progressing.

 

Senator O’Donnell summarized Mr. Stephens explanation by stating, “Some legislators and some local officials determined where the tax dollars for highway and building construction would go in the northern part of Nevada.” 

 

Senator O’Donnell asked how many cars per day are projected to use the Galena Bridge.  Mr. Stephens responded that over the next 20 years use would grow to an average of 75,000 cars daily. 

 

Senator O’Donnell inquired whether the project cost is approximately $300 million.  Mr. Stephens answered affirmatively.  He explained, “The alternative to that is you keep using the current road and it would go to level of service F during some part of the day.  A four-lane road cannot handle 75,000 cars a day.”

 

Mr. Stephens explained that he joined the department in 1995, and the Galena Bridge decisions were made nearly 20 years ago.  Senator O’Donnell said, “If that bridge has anywhere near the traffic count that the flyover to the airport does, we’re going to be upset.”  Senator O’Donnell suggested the flyover at the Reno airport is used very seldom.

 

In reference to the department’s reported performance indicator regarding engineering and design costs, Senator Jacobsen asked Mr. Stephens to explain the reasoning for nearly doubling the budget for engineering and design.  Mr. Stephens responded that the increase in the overall size of the department’s programs warrants a substantial increase in staff, specifically in the areas of right-of-way and environmental issues.  For example, he said the widening of U.S. Highway 95 from six lanes to ten lanes in Las Vegas necessitates the purchase of 122 homes, several hundred apartment units, mini-warehouses, gas stations, and various other businesses, many with individual right-of-way actions.  Right-of-way actions require a great deal more time and effort for the department, he added.  He pointed out that environmental issues are extremely time-consuming; for example, the department anticipated the decision on the environmental statement for the Hoover Dam highway bypass project a year ago.  He pointed out that statement should be signed later this month, after consulting with more than 20 Native American tribes, each of which had to acknowledge they had been consulted on the project regardless of their opinion.  He summarized that the projects undertaken by the department were more numerous and more complicated than initially anticipated.

 

Senator Jacobsen asked for further information on the source and allocation of revenue.

 

Mr. Stephens said the program is monitored constantly to reflect any change in funding, so program projections are often modified.  He articulated state, federal, and local funding, as well as funding from bond issues, support NDOT projects.  He pointed out that local government money is becoming more significant for future projects because of the bonding program that the regional transportation commission of southern Nevada is implementing to fund specific projects.  He provided a booklet with extensive detail concerning the department’s current bonding proposal. (Exhibit D. Original is on file in the Research Library.)

 

Mr. Stephens stated that, in addition to the state and local sources of funds, he anticipates a significant increase in federal funds for the current year and over the next two years.  He said he believes state funding will be maintained near the current level for the coming biennium.  He said other agencies that receive funding from the State Highway Fund have increased their requests in the current budget but NDOT has not increased its funding from the State Highway Fund.  He pointed out there is current legislation under consideration (A.B. 261) to decrease the gas tax by 5 cents, for a net annual decrease of approximately $46 million.  He explained that the state receives 17.65 cents and the local government receives 15.35 cents of the motor vehicle fuel tax.  The proposed 5-cent reduction would be taken entirely from the amount the state receives.  He said this decrease in funding would have a detrimental effect on the department’s capital improvement program.  NDOT’s entire budget would have to be re-figured to compensate for the loss of funding, he stated.

 

ASSEMBLY BILL 261:  Revises provisions regarding tax on motor vehicle fuel.  (BDR 32-89)

 

Mr. Stephens briefly discussed NDOT expenses.  He said non-capital expenditures would be “fairly flat,” the capital expenses would increase, and the bond repayments will increase over the next biennium.

 

Senator O’Donnell asked what effect would the Governor’s “lifting the 22 percent cap” on the Department of Motor Vehicles and Public Safety (DMV&PS) have on the NDOT budget.  Mr. Stephens responded that NDOT’s budget is based on the budget submitted by DMV&PS, and he does not believe the DMV&PS budget has been altered.  Therefore, it would not affect NDOT’s budget, he concluded.  He added that NDOT’s budget also includes a $2 million reserve, which the Legislature added into the NDOT program and was funded from the State Highway Fund.  He stated that he could not speculate on the effect of the Governor’s action in future bienniums.

 

Senator O’Donnell opined that it will affect NDOT’s budget, and he requested further analysis of this issue by the LCB Fiscal Division.

 

Mr. Marvel said, “We’ll be changing the collection of the gasoline tax to DMV and I presume that’s going to be “taxed at the rack.”  And when we changed it for special fuels, remember, we picked up about $10 million.  Do you anticipate any additional revenue when we change the status of the tax?”

 

Mr. Stephens responded that NDOT does not project any additional revenue.  He said NDOT currently receives timely payments from the Department of Taxation, and NDOT would like to maintain that cash flow.  He said if DMV&PS audits the accounts to a greater extent than the Department of Taxation has, then some additional benefit may result for NDOT.  In response to Mr. Marvel’s question, he explained that the benefit derived from the change for diesel fuel resulted from changing the “point of taxation, not the tax collector.”  He concluded the point of taxation is not being changed in this instance, so there should be no benefits similar to those that occurred with the diesel.

 

Mr. Marvel asked whether Mr. Stephens were certain of that.  Mr. Stephens said he would verify his information and let Mr. Marvel know.

 

Senator Jacobsen asked Mr. Stephens to explain the decline of approximately 60 percent, in the State Highway Fund balance.  Mr. Stephens said he feels the fund was previously too high, and would prefer to maintain the fund closer to the current level of just over $100 million.  He explained, “Mr. Parks is probably familiar with the way it is done at the RTC (Regional Transportation Commission) in southern Nevada, and they basically bank the whole amount of money for a project before they start the project.”  Conversely, he explained, NDOT uses projected future revenue for current projects in progress.  In order to implement a financing system similar to the RTC, NDOT would have to stop projects for a full year to accumulate a sufficient fund balance before continuing, he added.  He said it is merely a different method of accomplishing the same goal, and NDOT prefers the current method because it enables them to keep up with the phenomenal growth occurring in Nevada.

 

Senator Jacobsen requested an update on the six super projects in design or currently under construction.  He further asked Mr. Stephens to explain the priority status of the projects.

 

Mr. Stephens said the six super projects are proceeding without a designated priority status because each has unique concerns, which may affect individual schedules.  He addressed the Interstate 15 (I-15) widening project from the California/Nevada state line to Las Vegas.  He said, “That is the lifeline for the economy in Nevada,” despite any objection northern Nevadans may raise.  He stated the economy of Nevada depends on the economy of Las Vegas.  I-15 is a four-lane road, two lanes in each direction, and it is extremely congested.  First, he said, NDOT has been working with California to improve the Barstow interchange.  NDOT allowed some federal funding, otherwise intended for Nevada, to be designated to California to widen the highway between Barstow and Victorville. 

 

Second, he said, NDOT is widening the road between Las Vegas and Primm.  The first project to widen the road was completed in September 1999, four months before the scheduled deadline of “the millennium.”  The second project, which is a truck-climbing lane that extends from St. Rose Parkway past Sloan, is nearing completion.  The third project is the addition of a third lane from Sloan to Primm, and the fourth project is a fourth lane returning from Primm to Sloan.  He explained that NDOT encountered problems with federal funding on this project, but they have been addressed.  He pointed out that this project is a high priority.

 

Senator O’Donnell said U.S. Senator Harry Reid has done an excellent job procuring federal funds for Nevada’s highways.  He commented that it was an excellent strategy on Senator Reid’s part to relinquish federal funding to California to further the I-15 project. 

 

Mr. Stephens addressed the second super project, widening U.S. Highway 95 (U.S. 95) from six lanes to ten lanes.  NDOT has nearly completed the first phase of this project, which is from “the Rainbow curve north to Cheyenne.”  He said they would soon begin the second phase of this project from “Cheyenne to Craig,” which will widen that stretch of road from two lanes in each direction to three lanes in each direction.  The reasoning for completing these particular phases of the project first is to alleviate travel to the Rainbow curve where traffic can then exit from the highway.  He explained, “beyond the Rainbow Curve, going down to the spaghetti bowl there is no relief.  We also do not have any right-of-way issues there.  And right-of-way issues are very important.”  He stated that NDOT is currently purchasing the right-of-way on the rest of the route.  He said phase 2, which is a Bridge at Torrey Pines has been “let.”  He added phases 2A and 2B are the bridges at Valley View and Decatur, and phase 3 is the spaghetti bowl to Valley View.  Phases 4 and 5 are from Valley View onto the Rainbow Curve, he added.  He stated that phase 2C is the rebuilding of the overpass at Rainbow, which will alleviate the traffic on Rainbow and potentially encourage traffic to “stay off the main line.”

 

Senator O’Donnell asked how many vehicles travel U.S. 95 on a daily basis.  Mr. Stephens responded, “several hundred thousand.”

 

Senator O’Donnell asked whether the U.S. 95 project could be completed prior to work on the Galena Bridge.  Mr. Stephens responded that the U.S. 95 project is progressing as fast as possible; the only issues slowing the process are right-of-way and design, not lack of funding. 

 

Senator O’Donnell questioned whether the additional positions recommended in the budget are for right-of-way issues.  Mr. Stephens answered that five right-of-way positions were requested in the current budget.  All of the right-of-way engineering is performed at the Carson City office, so most of the new right-of-way positions will be in Carson City, he added.

 

Mr. Stephens addressed the Interstate 580 (I-580) project to finish the interstate connection between Interstate 80 (I-80) and Carson City.  He explained that most of the environmental issues have been resolved, and the most significant right-of-way has been purchased.  He said he believes construction on the I-580 project will begin late in 2002.  The only freeway lacking is from the middle of Washoe Valley to the Mount Rose intersection, he noted. 

 

Mr. Stephens discussed the Hoover Dam highway bypass project.  He explained that the Hoover Dam experiences extreme congestion with an average daily count of 12,000 vehicles on a two-lane highway, one lane in each direction.  He added that large trucks frequently use it.  He explained that federal funding would provide the bulk of the financing for the Hoover Dam project, having committed $108 million in federal funds thus far.  Both Nevada and Arizona have each committed $20 million for a combined total of $40 million, he added.  He said the project is currently seeking an additional $85 million from the federal government to proceed.  The governors and state department of transportation directors from Arizona and Nevada recently met in Las Vegas with the Chairman of the House Transportation and Infrastructure Committee, Don Young, who is from Alaska.  They also met with the new Secretary of Transportation Norman Y. Mineta last week in Washington, D.C., in part to discuss this project. 

 

Mr. Stephens explained that the federal government is managing the project while Nevada and Arizona participate equally.  He said, “We think that that could be a real good project for them [U.S. Government] to pump money into as kind of a poster child for a public works program nationally because there is no project that is going to be more visible on the national scene than building a bridge near Hoover Dam.”

 

Mr. Stephens explained that the Boulder City highway bypass, U.S. Highway 93 (U.S. 93), has ignited controversy, and will likely not begin construction for four more years.  He explained that Boulder City residents do not want to improve the highways, while the Boulder City businesspeople do want the improvements.  He said that his department is trying to be very sensitive to everyone involved in the controversy.

 

According to Mr. Stephens, NDOT is currently completing phase 1A of the Carson City highway bypass.  He commented that many of the bridges in the northeast part of Carson City are now under construction.  Pending completion of a few remaining right-of-way purchases, phase 1B should begin next year, 2002, he stated.  This project will connect U.S. Highway 50 (U.S. 50) to the bottom of Lakeview Hill in Carson City.

 

Senator Jacobsen requested a brief written summary of these six super projects.  He explained that these projects generate a lot of public interest, and the legislators would appreciate having the appropriate information available for them to respond to public inquiries.  Mr. Stephens responded affirmatively.

 

Mr. Parks questioned whether the Sugarloaf alignment is the certain choice for the alternate crossing over the Colorado River.  Mr. Stephens acknowledged that was true, and provided reasoning for that decision.  Mr. Stephens cited environmental problems for the other alignments considered.  He explained that the Sugarloaf alignment is situated near power poles, which will need to be relocated to accommodate the new passageway.  He pointed out that this area is a national park, a recreation area with vast areas of undisturbed land, so they opted to situate the alignment in an area that had already been disturbed rather than a pristine environment.  He said many groups have been involved with this project including the U.S. Bureau of Reclamation, U.S. National Parks Service, and Native American tribes.  He said that the “record of decision” would be signed in March 2001, and the Sugarloaf alignment is the preferred alignment.  He mentioned another alignment that was considered was further to the north, across Lake Mead, and many people voiced concern over spills into the lake.  He added that an alignment through Laughlin had been suggested, but that was not feasible because it would involve state highways and a substantial increase in mileage.  He concluded that federal funding would not be available if the alignment involved state highways; therefore, neither Nevada nor Arizona would entertain that suggestion.

 

Mr. Parks asked whether the Galena Bridge would be completed prior to the completion of the Carson City highway bypass.  He said he is concerned there would be increased congestion in Carson City if the highway bypass is not completed by the time of the Galena Bridge completion.

 

Mr. Stephens said he thinks traffic that currently travels toward Dayton will use the new bypass upon completion of phase 1 to U.S. Highway 50, but all other traffic will continue to flow directly through Carson City.  NDOT has proposed to “re‑stripe” the southern part of Carson Street from a four-lane roadway to six lanes to alleviate congestion in that direction, he added.  He said converting the existing travel lanes is not an ideal solution, but it will offer some relief until the bypass is completed.  He cited similar experiences with U.S. 95.  Carson Street is a “fairly low-speed road . . . so we think that will give us some interim relief.”  The bypass is not scheduled for completion until 2010, he concluded.

 

Senator Jacobsen asked Mr. Stephens to comment on the 800-megahertz (MHz) radio systems.  Mr. Stephens said issues of compatibility with the radios of other agencies have slowed the conversion, but it is still underway.  He stated that he is unable to provide any greater detail at this time.

 

Senator O’Donnell said:

 

Last session, we had a bifurcated system where we tried to make the best of both worlds by getting the best of two different competitors competing against one another to get a 800-MHz system in.  I have talked to the Governor about this, and he has some concerns about this radio system.  Are you willing, today, to tell me which vendor is the better vendor?  Are you willing to tell me whether we should go back to a one-radio system?  Or, would you get that information over to me shortly.

 

Mr. Stephens replied that question would be more appropriately directed toward Richard Kirkland, Director, Department of Motor Vehicles and Public Safety.  He stated Mr. Kirkland adopted NDOT’s system when Mr. Kirkland was the Washoe County Sheriff.  Mr. Stephens said he believes his department did not make any mistakes in their proposal and suggested the Nevada Highway Patrol could better respond to their own radio system needs.

 

Senator Jacobsen stated this issue is significant and warrants further discussion with the LCB staff.

 

Mr. Beers pointed out that NDOT appears to have spent approximately 60 percent of the appropriation the department received during the 1999 Legislative Session, and asked whether the implementation of the new system is completed.  Mr. Stephens said he would provide a complete status report on the implementation including partners.  He added that it is more efficient to use one mountaintop site for multiple agencies.

 

M-100 Inflation & Per Unit Adjustment – Page NDOT-3

 

Senator Jacobsen commented that he helped start the Honor Camp years ago, and he is pleased to see NDOT utilizing the program.  He said there are about 2,500 beds in the Honor Camp system, and it is worthwhile to utilize the program to the extent of its capacity. 

 

Mr. Stephens said the department spent $494,860 of their budget on Honor Camp payments last year, and the current budget allows for $416,000.  He said he anticipates Honor Camp payments will exceed the current amount budgeted.  He added that money could be transferred from the operating category to make Honor Camp payments.  Mr. Stephens said the department is proposing to expand their use of Honor Camps; NDOT is requesting approximately $913,000 each year of the 2001-03 biennium.  He said Honor Camp workers are equipped with proper safety equipment and training to work alongside the highways as safely as any other member of an NDOT crew, which he acknowledged has inherent risks.  He said the department proposes a significant increase in this program because “we feel that the Honor Camp program is really going to be our savior.”

 

Senator Jacobsen asked Steve Robinson, State Forester Firewarden, Division of Forestry, State Department of Conservation and Natural Resources, to explain the 58.2 percent increase in the rate paid for prison crews by the Nevada Division of Forestry.  Mr. Robinson had just entered the room, and he replied that he was unprepared to answer that question at this time.  He assured Senator Jacobsen he would provide that information later that day.

 

Mr. Parks questioned whether NDOT had any written labor agreement with the Nevada Division of Forestry.  Senator Jacobsen responded that he believes they do.  Furthermore, he offered to forward a copy of the information he will receive from Mr. Robinson to Mr. Parks.

 

Ruedy Edgington, Assistant Director, Operations Division, Department of Transportation, said a labor agreement with the Nevada Division of Forestry was signed during the past two months.  He responded that additional lights were provided on the equipment for the safety of the crews, which may have contributed to the increase in cost.

 

Mr. Parks asked Mr. Edgington to clarify whether the Honor Camps were to be used for increased services this year.  Mr. Edgington stated that the department has sufficient work to occupy the prison crews year-round, but they typically deplete funding for the services about three-fourths of the way through the year.  The increase in funding will allow them to expand the services and to maintain the program year-round.

 

M-200 Demographics/Caseload Changes – Page NDOT-3

 

Senator Jacobsen addressed the maintenance decision unit M-200, which recommends 24 new positions and associated equipment.  Jerry Ross, Budget Analyst, Nevada Department of Transportation, responded that most of those positions are to satisfy expanding road needs in the Las Vegas area.  This request represents a 1.46 percent increase in NDOT’s staff over the 2001-03 biennium.  Equipment and remodeling associated with the additional positions is included in this request. 

 

Mr. Stephens added that 15 of the 24 requested positions are to be located in Las Vegas.  Of the 15 positions in Las Vegas, eight people are designated for a new sweeping crew.  He stated that five right-of-way engineering positions are included in the staff requests, four to be located in Carson City and one in Las Vegas.  He said NDOT is adding a traffic safety engineering position, specifically an electrical engineer, because the department currently lacks an electrical engineer to address the numerous electrical issues that arise in their work.  Intelligent transportation systems are increasing, he noted.  NDOT has also requested a biologist to help address the myriad of environmental concerns the department encounters.  He said additional staff is proposed to complete more equipment maintenance at night in Las Vegas.  He commented that many lights are burned out on the freeways in Reno because of a shortage of lighting operations and repairs crews, so there are additional positions requested for these crews.  New freeways also necessitate a greater need for lighting crews, he added.

 

M-630 TEA-21 – Page NDOT-5

 

Senator Jacobsen asked whether the Bicycle Planning Project and the Job Access Program are related to PRIDE.  Mr. Stephens answered affirmatively and added the program is federally funded because it is prohibited to spend state highway funds on transit.

 

Mrs. Chowning commented that she visited an employment place in Clark County where disabled people received transportation to and from work, but it was not clear who provided the transportation.  Mr. Stephens said he believes the program Mrs. Chowning referenced is offered by the Regional Transportation Commission of southern Nevada.  He explained that the PRIDE program offered by NDOT is essentially a rural program to transport people from one city to another.  He said most of the programs currently offered in Clark County are part of the Regional Transportation Commission of southern Nevada, which is an extension of the taxicab and bus services.  He offered to provide Mrs. Chowning detailed information on NDOT’s current transit programs in the Clark County area.

 

Mrs. Chowning asked Mr. Stephens to explain the distribution of the $300,000 appropriation from the 1999 Legislature. 

 

SENATE BILL 560 OF THE SEVENTIETH SESSION:  Makes various changes relating to governmental administration.  (BDR S-1788)

 

Mr. Ross responded that the funds were used to match federal funds, which, when combined with some local funds, were used to initiate the PRIDE bus service between Carson City and Reno.  Since the inception of the bus service, they have initiated efforts to expand the service to Gardnerville and Fernley, he added.  According to Mr. Ross, NDOT has spent approximately $800,000 of both federal and state funds on that program to date.

 

Mrs. Chowning asked whether there were any funds remaining of the $300,000 appropriation.  Mr. Ross replied that most of those funds were expended during the first year of the program, but were later reimbursed by federal matching funds.  He indicated legislative staff recognized the initial funds spent as the appropriated funds and considered them expended.

 

Senator Neal further explained:

 

The transportation in southern Nevada is of two types.  One, which he just mentioned is the cab service, which was originally EOB [Economic Opportunity Board], but EOB still has a portion of that transportation service.  So, he is correct that it is under CAT [Citizens Area Transit].  And EOB has another portion, which is door-to-door; you know transportation for people who are under Medicaid.

 

E-710 Replacement Equipment – Page NDOT-5

 

Mr. Edgington discussed the proposed replacement equipment.  He stated that from 1997 or 1998 to the current budget, the replacement budget has approximately doubled from $4.5 million to $9 million.  During the past four years, NDOT has reduced its equipment replacement deficit by about $4.4 million, he added.  He said NDOT requires $7.5 million to break even in this account.

 

Senator Jacobsen asked Mr. Edgington to provide a detailed list of the type of equipment and its age.  Mr. Edgington agreed to formulate a more detailed report than what currently exists for the committee.  Senator Jacobsen explained his interest in this information:

 

The two cemeteries, both north and south, need a two-yard dump truck.  And I was trying to work a deal where maybe every quarter, we could bring them in for maintenance and pay for the repairs, if they’re necessary.  But realize that it’s tough for us to take that equipment and usually it’s surplus anyway and pretty well over the road.  But they want $45,000 for a new truck and I don’t see where that’s warranted for a vehicle that goes maybe 5 miles a week.

 

Mr. Edgington responded that NDOT’s dump trucks are usually retired after 11 years of service and approximately 300,000 miles.  He said the department would consider drawing up an agreement to provide the services Senator Jacobsen described.

 

Senator O’Donnell asked whether snowplows were the cause of two accidents he recently witnessed driving back and forth from his home in Lake Tahoe.  He asked the question because the snowplows were at the scene of the accident before police.  Mr. Edgington said he is unaware of any accidents involving their equipment.  Mr. Stephens added he would investigate further.

 

Mr. Stephens pointed out the department is reducing the average age of its equipment.  He added that the average age of graders a couple years ago was 17 years old and this biennium it will be reduced to 13 years old.  He commented that a 17-year-old grader might raise safety concerns.

 

Senator Jacobsen asked Mr. Stephens to address the condition of the department’s maintenance stations.  Mr. Stephens said his staff works diligently to maintain the stations, but a storage problem is occurring with the increasing size of new equipment.  The maintenance stations require some modification to accommodate the larger-size equipment.  He added that a new maintenance station had been built at Glendale that opened approximately 1½ years ago in Clark County between Las Vegas and Mesquite.  Some new facilities will be constructed next summer at Spooner and Kingsbury at Lake Tahoe; the Kingsbury facility has fallen down, he added.

 

Senator Jacobsen inquired whether there were any surplus maintenance stations available for use by the prison crews.  Mr. Stephens replied that he is unaware of any.  Mr. Stephens pointed out that the Governor’s remarks during the State‑of‑the‑State Address regarding potentially closing some maintenance stations had created a “firestorm.”  He explained that there is a genuine need for all of the maintenance stations, and they all have “an advocate.”

 

Mr. Parks asked whether the performance indicators could be further broken out to indicate the various activities such as maintenance, overlay, or construction.  Such a breakout would enhance the significance of the performance indicators for the legislators.  Secondly, he asked whether the revenue projections are likely to change prior to the finalization of the budget.  Mr. Stephens said this is their final budget.  The only changes he could anticipate, but prefers to not project, are increases in federal funding, he said.  In the event additional federal funds are received, he stated, NDOT would present a revised budget to the Interim Finance Committee (IFC).  Thirdly, Mr. Parks reiterated a request for information regarding a replacement equipment management report.

 

Mr. Stephens referred to the handout titled “Typical Project Cash Flow” (Exhibit E).  He stated that NDOT would be in a very difficult situation if the legislators did not approve the department’s capital improvement program because many contracts have been signed prior to those funds being disbursed next year.  The cash flow diagram illustrates his point that funds are committed well in advance of actual disbursement (Exhibit E).  He clarified that federal funds are guaranteed upon signing the contract, but state funding depends on each biennium budget.

 

Senator Jacobsen asked whether the Washington, D.C., office is beneficial to NDOT.  Mr. Stephens responded that Michael Pieper is doing an excellent job and that NDOT definitely benefits from his experience and connections in the capitol.  Senator Jacobsen also asked whether communication had improved with the congressional delegates.  Mr. Stephens responded that communication is greatly improved.  He added that he received a call from Nevada Representative Shelley Berkley, United States House of Representatives, this morning.  He said her call was regarding a project to construct a traffic management center next year in Las Vegas. 

 

Mr. Stephens discussed the project.  He pointed out that the new highway patrol headquarters will be located in the southern part of Las Vegas near Decatur and the Beltway on a parcel of land that NDOT is currently acquiring through an exchange with the airport authority.  Right-of-way issues slowed this exchange considerably, he added.  He said that, within the highway patrol headquarters, NDOT would locate a traffic management center where the Las Vegas Area Computer Traffic System (LVACTS) will be located.  The center will include an information technology service (ITS) system with changeable message signs, ramp meters, and television cameras on the freeway.  He said this would be an excellent project.

 

Mrs. Gene Segerblom, a former assemblywoman and resident of Boulder City, testified regarding the Boulder City bypass.  She asked Mr. Stephens to keep the large trucks out of Boulder City, even if it means diverting them all the way to Laughlin.

 

Mr. Stephens said NDOT is considering a compromise to build a truck route around the city but allow all remaining vehicles to travel through Boulder City.  Mr. Stephens said the business people in Boulder City would like all the cars to stay in town but everyone agrees the trucks should be diverted around the city.  He said he believes a lot of the residents would like to see all of the cars and trucks gone and “make a cul-de-sac in Boulder City.”  He said the situation would require another compromise.

 

He further added that the Boulder City residents are extremely active in the public participation process.

 

Senator Neal asked who makes the final decisions on the Hoover Dam bridge project.  Mr. Stephens responded that the ownership and operation of the proposed alternate bridge will be jointly shared by Arizona and Nevada on completion of the project.  Presently the crossing of the Hoover Dam is owned and operated by the federal government and they also control the land on both sides of the bridge.  Senator Neal clarified that the federal government will play a significant role in the ultimate alignment decision.  Mr. Stephens agreed.  He explained that Nevada and Arizona would have an easement throughout the alignment area to maintain and operate the road and the bridge.

 

Senator Neal questioned where the truck route to bypass Boulder City would be located.  Mr. Stephens responded it would be located south of the airport, then around Lake Mead station (a large electrical sub-station).  He said he believes Boulder City is the largest city in Nevada in area, with hundreds of square miles of uninhabited land.  He explained that the truck route would be located in the uninhabited area of Boulder City.  Mr. Stephens explained that the truck route would then come right back up on Highway 93 near the Hacienda.  He added that this alternate truck route might be significantly cheaper because it would require only two travel lanes and a climbing lane on the hill.

 

COLORADO RIVER COMMISSION

 

Colorado River Commission – Budget Page CRC-1 (Volume 3)

Budget Account 296-4490

 

Senator Jacobsen welcomed George Caan, Director, Colorado River Commission (CRC), to present an overview of the commission.  In light of the fact that this is CRC’s first visit to the Legislature, Senator Jacobsen suggested Mr. Caan provide a written handout highlighting CRC programs at future visits.  Mr. Caan responded affirmatively.

 

Mr. Caan explained the CRC has a seven-member board whose membership consists of Richard Bunker, Chairperson, four members appointed by the Governor, and three members appointed on a yearly basis by the Southern Nevada Water Authority.  CRC is entirely supported by its customers; Mr. Caan pointed out the CRC does not receive any state funds.  He stated the commission’s core responsibility is to protect the state’s water, power, and land resources relating to the Colorado River.  He cited the following accomplishments over the current biennium: 

 

In partnership with the Southern Nevada Water Authority, the rules for banking water in southern Arizona and the rules to establish interim surplus guidelines to help California reduce its dependence on Colorado River, while allowing Las Vegas and others to get their supplies of Colorado River for the next 15 years in a period where we have adjusted to allow California to gradually reduce their dependence on allocations that we need in Nevada and Arizona.

 

Additionally, he said that CRC is implementing endangered species recovery programs through the Lower Colorado River Multi-Species Conservation Program (LCRMSCP); there are more than 100 threatened or endangered species in the lower Colorado River.  He said he believes a plan to protect these species is vital to continuing both water and power operations along the Colorado River. 

 

Mr. Caan commented that CRC has defended its federal hydropower contracts and kept power rates as low as possible while ensuring the projects are well maintained.  He pointed out that CRC receives about 25 percent of the power generated by Hoover, Parker, and Davis Dams, which is then distributed to customers throughout southern Nevada including utilities and retail customers.  He stated that the River Mountains Transmission Project, which is a 230-kilowatt transmission system, would be completed next month.  It will support the electrical needs of the southern Nevada water system, and the new treatment and transmission facilities that were recently constructed, he added.  He stated that the system will be energized next month and that it will be an independent system tied into the Lake Mead substation which will allow the Southern Nevada Water Authority (SNWA) to obtain reliable and affordable power resources.  He mentioned that in 1998, the CRC began delivering non-hydropower, general electrical resources to the water authority, which they will continue to do as the water authorities needs increase. 

 

Mr. Caan stated that the current biennium budget outlines numerous opportunities to continue the commission’s current work.  He explained that CRC is considering the introduction of some “pilot legislation” in the United States House of Representatives to begin the recovery program for endangered species in the lower Colorado River.  He cited the following current projects that will be continued:  the implementation of interim surplus guidelines, successful negotiation of an agreement with Arizona to develop a water banking program, deliveries to hydropower customers, and deliveries to the SNWA.  He added that CRC is developing an affordable resource portfolio for the SNWA to allow them to continue to keep water rates reasonable and affordable for southern Nevada.  He explained CRC is also reviewing contract extensions for power contracts associated with the Parker-Davis project, which will expire in 2008.  It is usually a five to ten year process to negotiate contract extensions, he added. 

 

Mr. Parks asked Mr. Caan to comment on the land sale in Laughlin.

 

Mr. Caan replied that approximately 9,000 acres of land in the Laughlin area were given to CRC sometime before his tenure with CRC.  He said he believes the property was given to CRC for possible development through water and power contracts, but there is currently no activity on the property.  He said the land is located south of Laughlin between Laughlin and Needles.  He pointed out that any proceeds from land that is sold or developed would be contributed to the Fort Mojave development fund to be used for capital improvements for the town of Laughlin, and distributed by the Clark County Commissioners.  For this reason, he said, “we’re not willing to give it up for the lowest cost possible.”  Currently, there are no development proposals, but any future inquiries by developers would be instructed to participate in a public process, he added.  He commented that only speculative calls regarding the property have been received at this point.  He stated that he does not foresee any development on that land at least during the next biennium.  People who continue to inquire about the property will be provided information about the sale process, he added.

 

E-375 Environmental Policies & Programs – Page CRC-4

 

Senator Jacobsen requested justification to increase the agency’s base funding for contract services with an additional $450,000 and the significant increase in out-of-state travel funding.

 

Douglas Beatty, Finance and Administration Chief, Colorado River Commission, responded to the question.  He explained that the $450,000 increase is pursuant to legislation passed in 1995. 

 

ASSEMBLY BILL 542 OF THE SIXTY-EIGHTH SESSION:  Makes various changes relating to Colorado River commission.  (BDR 48-963)

 

Mr. Beatty explained that the Southern Nevada Water System was transferred to the SNWA in 1995.  He explained that part of the transfer legislation was an agreement with the SNWA to participate in research and development projects, such as water augmentation and water quality, or anything related to the river.  He said that in 1995 budget account 296-4497, CRC Research and Development, which still exists, was used for research and development.  He pointed out that the budget account was funded entirely by power customers from a power administrative charge.  He explained,

 

The water folks really didn’t have any participation in those R&D funds.  And so, if a water-related R&D project came up there was no mechanism for us to deal with that.  So as part of the transfer legislation, we did make this agreement.  And we, in statute, those water related R&D projects are defined, what we can do and the amounts that the Southern Nevada Water Authority agreed to fund in our budgets.  Now what our agreement was, that we would seek authorization from the Legislature and put those in the budgets.  And that $450,000 has been put into the budget every year since that transfer.  And then we would ask the SNWA to fund that, to actually fund any of those projects as those projects came up.  But it would be in our budgets and would be available for us to use should one of those projects come up.”

 

Mr. Caan responded to a question regarding out-of-state travel.  He explained that the Colorado River travels through seven states for 1,500 miles, and the governance of the river necessitates a substantial travel budget.  He pointed out that meetings regarding water and power take place throughout the river basin.  He said all federal hydropower issues for both Hoover and Davis Dams are sponsored by the federal power marketing administration.  He added that the western area power administration is headquartered in Phoenix, so contract extensions, contract renewals and rate design for each of the separate projects is conducted during numerous trips to Phoenix.  In addition, meetings regarding the Arizona water bank are generally held at the Arizona Department of Water Resources located in Phoenix, he added.  He commented that the contractors for both water and power reside in California, Arizona, Nevada, Utah, Wyoming, and New Mexico, which necessitates travel to negotiate various environmental, water, or power related issues. 

 

Mr. Caan stated that the lower basin of the river is governed by the federal government through the Bureau of Reclamation, U.S. Department of Interior, and that results in many trips to Washington, D.C.  He said CRC spends a lot of time negotiating with the Bureau of Reclamation and briefing Nevada’s congressional delegation on issues related to the river.  He summarized that CRC customers fund the travel budget, and they have each approved this level of travel.  He said he does not anticipate using all of the travel funds, but he appreciates the ability to be able to respond to any issue potentially affecting Colorado River governance.

 

Senator Jacobsen requested comments on current legislation associated with the Colorado River commission.

 

SENATE BILL 138:  Exempts Colorado River commission from State Budget Act.  (BDR 31-344)

 

Mr. Caan said that S.B. 138 resulted from the Governor’s fundamental review of state government.  He said the objective is to allow agencies that do not receive general funds to operate more efficiently by bypassing The Executive Budget process and allowing respective agencies to approach the Legislature directly.

 

Senator Jacobsen asked whether Mr. Caan perceives any disadvantages to this bill.  Mr. Caan did not perceive any disadvantages, only some administrative relief for both the CRC and the Governor’s Office.  He commented that the CRC budget is reviewed by its customers and the seven-member water board prior to appearing before the Legislature for final budgetary authority.

 

Senator Jacobsen asked where the CRC offices are located.  Mr. Caan responded they are located in the Grant Sawyer State Office Building.

 

Senator Neal stated concern over the high cost of energy and the power crisis in California.  He asked whether the committee could assist in any way to enable the CRC “to do their job better.”

 

Mr. Caan replied, “First, I think giving us the authority to do what we are currently doing for the customers we service, probably from a legislative point of view, is the best thing you could give us.”  He cited high customer satisfaction with the agency’s current operations.  He said CRC has secured good power supplies to supplement hydropower resources for its retail customers and for SNWA, and this is possible due to CRC’s ability to enter into long-term contracts for the years 2000 and 2001.  He explained that as a non-profit state agency, CRC is able to pass through incurred costs and work directly with the customers to reduce their costs.  He said he believes SNWA is a great customer.  He explained that SNWA has very large pumps that operate sporadically, yet they must purchase sufficient electricity to operate them at all times.  He pointed out that CRC is able to sell the extra power not used, while the pumps are inactive, to Nevada Power Company and to others to defray costs to SNWA for the construction of the new systems.  He said he believes this process will bring less expensive resources into Nevada than those available for purchase in the open market.

 

Senator Neal commented that CRC appeared before IFC to request permission to purchase 75 megawatts of power for the SNWA.  He asked whether those contracts have been executed.  He further questioned what allocation of the hydropower produced by Hoover Dam is received by CRC.

 

Mr. Caan responded that Hoover Dam, at peak capacity, can produce approximately 2,000 megawatts, but it generally produces less because it is based on water delivery.  He explained that southern Nevada receives 475 megawatts or approximately 20 to 25 percent of that capacity.  He said 235 megawatts, or half of the southern Nevada allocation, is sold to Nevada Power Company.  The rest of the power is sold to various entities including:  Overton Power District, Lincoln County Power District, Valley Electric Association, Boulder City, and the BMI industrial complex in Henderson.

 

Senator Neal asked how Nevada Power Company’s current divestiture of some power generating facilities in southern Nevada would affect CRC.

 

Mr. Caan commented on the relationship between CRC and Nevada Power Company with regard to Hoover Dam.  He said his agency currently has a contract, commonly referred to as a purchase power agreement, with Nevada Power Company, which extends to the year 2017.  All of the Hoover Dam contracts extend to 2017, he added.  He said the Hoover Dam contract is just one of many purchase power contracts Nevada Power Company currently has, but the Hoover Dam contract is used differently.  He explained that the Hoover Dam contract is used “to support the infrastructure delivery of all other power sources,” which is known as “an ancillary service.”  He stated that the Hoover Dam contract might not be assigned with the rest of the other purchase power contracts because it helps support the reliability of the power system.  In the event Nevada Power Company does attempt to assign that contract, it would require approval by CRC, as well as approval by Nevada Power Company.  Depending on the results of the assignment process, CRC may need to repeat the allocation process, he added.  He reiterated the Hoover Dam purchase power agreement is one of many contracts that Nevada Power Company currently has.

 

Senator Neal questioned whether Nevada Power Company is allowed to resell power it has purchased from CRC on the open market.  Mr. Caan responded that there is a stipulation that Hoover Dam power may not be resold, restricting all purchasers of Hoover Dam power and hydropower from making a profit through reselling.  Mr. Caan said there are no restrictions regarding how customers deal with their non-hydropower supply.

 

Senator Neal asked whether the customers could sell power then replace it with the Hoover Dam power purchased from CRC.  Mr. Caan suggested the question would be better addressed to the customers because he has no knowledge of how Hoover Dam power is dispatched by their customers; it is an internal process within those companies.  He added that the Hoover Dam power is used as an operational resource, which would make it more beneficial for the customers to retain.

 

Senator Neal questioned whether CRC views the sale of the 235 megawatts to Nevada Power Company as the last stage of the process.  Mr. Caan said that is true with all hydropower customers; upon purchase of the power, they are free to distribute the power as prescribed by their own community statutes.  However, he added, there is a stipulation in place, only for Nevada Power Company, that certain benefits “for what we commonly refer to as Hoover B have to be passed on to residential rate payers.”  The agreement with Nevada Power Company was negotiated with involvement from a consumer advocate and the public utilities commission.  That is the only stipulation Nevada Power Company must currently abide by.  He explained, “They used to do it in the deferred energy accounting mechanism and we’ve had to readjust it for the new mechanisms that are without deferred energy accounting.”

 

Senator Neal asked how many megawatts are required to serve southern Nevada.  Mr. Caan said he believes it requires 4,000 to 5,000 megawatts at peak capacity, but he is not sure.  He suggested that Nevada Power Company would be better able to respond to that question.  He said Hoover Dam power constitutes 4 percent of their total power, so maybe that would help calculate the total power.

 

Senator Neal asked how many rural cooperatives receive power from CRC.  Mr. Caan responded that they serve 5 rural cooperatives and municipalities: Overton Power District, Lincoln County Power District, Valley Electric Association, Boulder City and Nevada Power Company.  He stated they do not serve any other communities beyond those he mentioned.

 

Mr. Caan addressed S.B. 211.  He pointed out that the bill is sponsored by the SNWA, and it “would allow the CRC to serve any political subdivision in the state.”

 

SENATE BILL 211:  Expands authority of Colorado River commission to provide electric services to political subdivisions.  (BDR 58-633)

 

Senator Neal inquired whether the potential repeal of the deregulation legislation passed in 1997, A.B. 366, would affect the CRC’s service to SNWA.

 

ASSEMBLY BILL 366 OF THE SIXTY-NINTH SESSION:  Revises provisions for regulation of electric service to allow customers direct access to alternative sellers of electric services.  (BDR 58‑1390)

 

Mr. Caan explained that prior to the passage of A.B. 366 of the 1997 Legislative Session, CRC responded to a request for proposals (RFP) by SNWA to provide service.  He explained that an opinion was issued by the Attorney General’s office, granting CRC the authority to serve SNWA.  Therefore, he said, he believes CRC had the authority to serve SNWA and its existing customers prior to passage of A.B. 366 of the 1997 Legislative Session.  He said CRC had not sought to serve anyone but SNWA.  However, he noted, in the event CRC decided to, he felt it had the authority to serve other public bodies.  He said CRC was not compelled to serve other bodies outside of the new facilities for the SNWA.  He pointed out that A.B. 366 of the 1997 Legislative Session clarified, through legislation, specifically whom CRC was authorized to serve.  He said he believes A.B. 366 of the 1997 Legislative Session “confirmed the opinion of the Attorney General, but also constrained our opinion about serving anyone else.”  The repeal of this deregulation legislation would return CRC to its position prior to the legislation when CRC believed it had the authority to serve others, he said.  He acknowledged that his stated belief might be challenged, resulting in the issuance of another opinion.  He stated, “The legislation did not change any of the customer service or operations for the CRC because we had no plans to serve anyone but those currently served with hydropower and the water authority.”

 

Senator Neal said he had introduced the deregulation bill in 1997.  He explained that during the legislative process he and his colleagues had tried to keep CRC intact and able to honor its contracts with the SNWA.

 

Mr. Caan said both the attorney for the CRC and the SNWA are carefully reviewing S.B. 269.

 

SENATE BILL 269:  Repeals provisions pertaining to competitive provision of retail electric and natural gas service.  (BDR 58-162)

 

Mr. Beers questioned how the CRC determines the cost of energy from the Hoover Dam projects.  Mr. Caan replied that the hydropower program is a cost-based rate.  He explained that each year CRC staff analyze the cost to operate each project including “labor, staff, operation, maintenance, repair, capital improvements, debt service, and purchased power,” which is necessary to support the reliability of each project on the river.  He added that the river projects include Glen Canyon, Hoover, and Parker-Davis.  He said that after they determine a general expense category, they determine how much water there is, which will determine how much electricity can be produced.  He further explained that they divide the total electricity that can be produced, by the revenues that are needed to determine a final cost.  This is an on-going process throughout the year, he added.  He pointed out that the rates are published in the federal register, and then they abide by those rates over the year.  He commented that each project has its own rate process, rate schedule and cost-based rate.  He said this process is the same one traditionally used by regulated utilities with the exclusion of any return on equity or profit, as it is a public power project.

 

Mr. Beatty clarified that the federal government owns and operates all of the Colorado River projects that Mr. Caan discussed.  He stated that, although CRC participates in the budget process, it is federal employees who are responsible for the process that Mr. Caan explained.

 

Mr. Beers inquired whether the cost of the Hoover Dam Visitor Center is included in the electric rate.  Mr. Caan responded affirmatively; it is included in the cost to operate that project.  Mr. Caan explained that the visitor center is now generating sufficient revenues to cover approximately half its operation costs.  He added that the volume of the visitor center has consistently increased; it is one of the most frequented public facilities in existence.  He stated that CRC has advocated for, and the federal government supports, increasing revenue from the Hoover project to try to generate enough revenue to pay for 50 percent or more of the debt service.  To this end, the visitor center admission rates have been increased.  It is one of the many ongoing processes that all of the participating states address with the federal government.  CRC is working very hard to minimize the impact on the power rates “to our customers, who are very vocal about this, as well as we are, to reduce those costs.”

 

Mr. Beers asked whether there is any markup to the cost-based rate charged to customers.  Mr. Caan replied they do not mark up their rates, but they do include an administrative charge to recoup their costs and to generate money for the CRC budget.  He stated that the administrative charge, paid monthly by the customers, pays for the invoicing, accounting, “backroom operations,” and the staff that works with federal agencies to reduce costs and to improve production of the facilities.  He pointed out there is a public process to review the administrative charge, and any increases require 6 months’ notice prior to approval. 

 

Mr. Beers asked, “Before the $100 million visitor center, were you one of Nevada Power Company’s cheapest sources of electricity, and what about now that we have the visitor center?”  Mr. Caan said he believes CRC power is probably the cheapest source of electricity, at two to three cents, for Nevada Power Company despite the cost of the visitor center.  He pointed out that the power source is debt free after approximately 60 years of existence, with the exception of the visitor center, and the fuel is free.  He explained, “Mother nature is really what drives the rates.  This year we have lower river reservoir storage and so we have lower production.”  Therefore, many customers will have to purchase supplemental resources in the market, which is higher, he added.

 

Senator Neal asked what the CRC charges for power.  Mr. Caan responded that their delivered cost was approximately 3 cents, in the year 2000, for the Henderson industries.  He explained:

 

It is important to note that these are large industries with large off-peak loads where we can get good deals for them.  It’s not your typical residential household that has loads that are difficult to buy in large chunks because they are variable during the day.  The cost for Hoover power is in the 2 cents.  That is typically federal hydropower, although the Glen Canyon dam, because of environmental restrictions, is more in the 3,4,5 cents range.  It’s higher because we have had to reduce its capacity to accommodate endangered species programs.  Parker dam is less than 1 cent.

 

Senator Neal asked whether the cost of a megawatt was approximately $30 to $40.  Mr. Caan replied that the Hoover cost is about $10 to $20 per megawatt.  He noted, “It is important that all of the capacity is fully allocated to 2017.  I mean they are fully allocated, and as the water levels go down, those resources are less.”  He said he believes it is a very good deal for southern Nevada.

 

Senator Neal asked whether the prices within the contract are also allocated for the year 2017.  Mr. Caan replied affirmatively.  He pointed out that the cost-based price is low because of free fuel and minimal debt service on the 60-year-old project.

 

Senator Neal said that is probably the cheapest power currently available on the West Coast of the United States.  Although it may be Nevada Power Company’s cheapest resource, it constitutes only 4 percent of their total resources, he added.

 

Senator Jacobsen requested a facility map.  Mr. Caan agreed to provide one.

 

Mr. Beatty explained that the CRC appeared before the Interim Finance Committee (IFC) in November with an increase that was approved for some power costs.  He pointed out that the Governor, at the request of the CRC, recommends significant increases in both budget accounts 502‑4501, Power Delivery System and 505‑4502, Power Marketing Fund for this biennium.  He stated that the power markets started to fall apart after submittal of the original budget.  He said California, which is closely related to Nevada’s markets, has experienced “a meltdown” in the past few months.  He commented that the increase in California prices has translated into increases in Nevada’s costs.  He said that review of the existing budget accounts for the current fiscal year indicates there is not enough authority to continue power purchases and sales in those two accounts.  To this end, the CRC has requested, under expeditious action of the IFC, increases to those budgets.  The requests were submitted last week to the Department of Administration, and the LCB staff has the request, he added.  Mr. Beatty reiterated that there is an expeditious action of the IFC request pending right now for a substantial increase to two funds to finish out the current fiscal year.  He pointed out the requested increase amounts are $127 million for budget account 505‑4502 and $35 million for budget account 502‑4501.

 

Senator O’Donnell asked what that request means for the consumer.  He said the request appears to be “a pass-through, basically asking for an authorization to retail more power.”

 

Mr. Caan said the CRC’s goal is to provide net delivered energy at a reasonable cost to its limited customers, currently 12 customers.  He explained that CRC must buy enough energy to support all of the SNWA pumps to run full-time at peak capacity, although they generally do not operate at full capacity all the time.  When the pumps are not in operation, CRC attempts to sell the surplus power to generate revenue to offset the cost of the power they do need, he added.  He said that CRC engages in transactions with over 12 energy companies that allow them to trade into the markets.  He pointed out that CRC had previously used the California power exchange, a trading hub, as the major market to accomplish these transactions, but the exchange went out of business.  Now, he explained, in order to make trades to generate revenue from sales, it requires a lot more transactions, which require more effort and more authority on the part of CRC.  He pointed out that each transaction is a lot higher because they used to sell at $50 a megawatt and they now sell at approximately $150 a megawatt.  He added that is beneficial to the SNWA because CRC is able to generate more revenue to reduce their costs.  He said they are requesting the additional authority to be able to process the transactions, and the result will be a net delivered cost lower than it would have been without the authority.

 

Senator O’Donnell asked whether an IFC meeting is scheduled.  Mr. Beatty responded that he did not believe an IFC meeting had been scheduled yet.  He added that the meeting would need to be scheduled within 15 days of the expeditious action request or the increase will automatically occur.  He said the issues are similar to those associated with increases in their budget that have been discussed.

 

Mr. Beers asked, “Is your assessment that funds your operation per unit of power or per dollar of power?”  Mr. Beatty replied that it is per unit of power.  He explained the various funding mechanisms CRC has.  He said that the funding mechanism for the SNWA, that funds water-related administrative activities, is strictly tied to the budget that the Legislature approves, not to anything such as per acre-foot or per gallon.  Conversely, he said the power administrative charge for hydropower and for supplemental power purchases for CRC’s long-standing customers is .72 cents per kilowatt-hour.  He said the charge that funds the Power Delivery System, budget account 502‑4501, which is the high-voltage transmission system and distribution system that ties into the SNWA’s pumps, pipes, and treatment plant is funded by a budget proposed by CRC and approved by the boards of both the SNWA and the CRC.  It’s not associated with kilowatt-hours.

 

Mr. Caan reiterated that CRC’s rates are cost-based. 

 

Mr. Beers questioned whether cost-based rates enable CRC to accommodate the increased administrative costs that the new environment has produced.  Mr. Beatty explained that the administrative tasks are less cumbersome with SNWA now that their rates are determined by budget, not linked to kilowatt-hours as they were under previous contracts.

 

Senator Neal questioned whether the contract between CRC and the Nevada Power Company is public information because he would appreciate a copy.  Mr. Caan acknowledged all of CRC’s contracts are public information and agreed to provide a copy of the requested contract to Senator Neal.

 

Senator Jacobsen stated that there is insufficient time to hear the remaining two budget overviews, and he asked whether anyone had traveled from out-of-town to address those budgets.

 

Cash A. Minor, Chief Financial Officer, Fiscal Affairs, Elko County, presented a letter (Exhibit F) from George R.E. Boucher, Elko County Manager, which relates to the committee’s February 22 meeting of Nevada Division of Forestry cost allocation plan.

 

Stephanie Licht, Lobbyist, Elko County Board of Commissioners, said she merely wanted to ask that the letter from Mr. Boucher be included in the record of today’s meeting.

 

Mr. Parks welcomed a group of students from Henderson visiting the committee.

 

Senator Jacobsen adjourned the meeting at 10:46 a.m.

 

 

RESPECTFULLY SUBMITTED:

 

 

 

Jennifer Ruedy

Committee Secretary

 

APPROVED BY:

 

 

                       

Senator Lawrence E. Jacobsen, Chairman

 

DATE:           

 

 

                       

Assemblyman David R. Parks, Chairman

 

DATE: