MINUTES OF THE MEETING OF THE
JOINT SUBCOMMITTEE ON GENERAL GOVERNMENT
OF THE
SENATE Subcommittee on Finance
AND THE
ASSEMBLY COMMITTEE ON WAYS AND MEANS
Seventy-First Session
March 16, 2001
The Joint Subcommittee on General Government of the Senate Committee on Finance and the Assembly Committee on Ways and Meanswas called to order by Chairman William R. O’Donnell, at 8:19 a.m., on Friday, March 16, 2001, in Room 3137 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 William R. O’Donnell, Chairman
Senator Lawrence E. Jacobsen
Senator Joseph M. Neal Jr.
ASSEMBLY COMMITTEE MEMBERS PRESENT:
Mrs. Vonne S. Chowning, Chairman
Mr. Bob Beers
Ms. Christina R. Giunchigliani
Mr. Lynn C. Hettrick
Ms. Sheila Leslie
Mr. David R. Parks
STAFF MEMBERS PRESENT:
Gary L. Ghiggeri, Senate Fiscal Analyst
Steven J. Abba, Principal Deputy Fiscal Analyst
Mindy Braun, Education Program Analyst
Jim Rodriguez, Program Analyst
Rick Combs, Program Analyst
Carla Watson, Program Analyst
Jennifer Ruedy, Committee Secretary
OTHERS PRESENT:
Sydney H. Wickliffe, C.P.A., Director, Department of Business and Industry
Joan Buchanan, Administrator, Real Estate Division, Department of Business and Industry
Kathy Ryan, Deputy Chief, Planning and Programming Division, Department of Information Technology
Bill Maier, Administrative Services Officer, Department of Business and Industry
David R. Walker, Deputy Administrator, Real Estate Division, Department of Business and Industry
Renee Diamond, Administrator, Manufactured Housing Division, Department of Business and Industry
L. Scott Walshaw, Commissioner, Division of Financial Institutions, Department of Business and Industry
Terry Johnson, Labor Commissioner, Office of Labor Commissioner, Department of Business and Industry
David McNeil, Energy Program Specialist, Nevada State Energy Office, Department of Business and Industry
DEPARTMENT OF BUSINESS AND INDUSTRY
B&I, Real Estate Administration – Budget Page B&I-13 (Volume 2)
Budget Account 101-3823
Senator O’Donnell disclosed that he is a real estate agent and broker licensed in the Nevada. He added that his wife is also a real estate agent. Mrs. Chowning disclosed that she is a real estate agent and her husband is a real estate broker licensed in Nevada. She said, “These budgets won’t affect us any differently than anybody else because we get charged the very same fees as everybody else. I will be voting.” Mr. Parks also disclosed he is a licensed real estate agent.
Sydney H. Wickliffe, C.P.A., Director, Department of Business and Industry, discussed the Real Estate Administration budget. She said the Real Estate Division has experienced difficulty keeping pace with the phenomenal growth in Nevada, particularly in southern Nevada, over the past 10 years. The number of licensed real estate agents in southern Nevada has grown accordingly, she added. She stated that the current real estate agent licensing system is inefficient and antiquated, so the division is proposing a new system. She cited high turnover within the division, which has allowed the division to restructure. She said the Licensing Manager position vacancy was filled through a promotion within the division. She explained that David R. Walker has been the Deputy Administrator with the Department for a mere six days, and the department is currently recruiting for the ombudsman position. She mentioned that the person responsible for preparing the budget is no longer with the department, so Bill Maier, Administrative Services Officer, will assist Joan Buchanan, Administrator, Real Estate Division in addressing the division’s budget.
Joan Buchanan, Administrator, Real Estate Division, Department of Business and Industry, stated that the mission of the division is “to protect consumers in a real estate transaction,” which has expanded beyond the sale to include issues related to appraisals, home inspections, tax deferred exchanges, property managers and community association managers. She elaborated on the responsibilities of her division. She pointed out they continue to provide an updated “seller property condition form,” which sellers complete for buyers. She said the division reviews all subdivision and timeshare documents prior to sales, to verify whether bonds or disclosure documents are required. She cited an example in Las Vegas in which her division had to issue “a cease and desist” recently for a housing project in bankruptcy to ensure the homes will be delivered to the buyers without forfeiture of their option payments. She explained that the Common-Interest Communities Ombudsman assists in the operation of boards, educates homeowners on their rights and responsibilities, and facilitates alternative dispute resolutions.
SENATE BILL 451 OF THE SEVENTIETH SESSION: Makes various changes to provisions governing common-interest communities. (BDR 10-924)
Ms. Buchanan explained that common interest communities have benefited from legislation passed during the last session, which expanded the division’s authority to subpoena records. She said they have resorted to a subpoena only once in the past biennium. She said she believes the decrease in subpoenas is a direct result of people recognizing the division’s expanded authority and attempting to comply with the division’s initial requests.
She commented that the new data registration project would provide improved statistics including new performance indicators shown in her handout (Exhibit C). Senator O’Donnell asked whether the performance indicators previously received from the division were, in fact, from the previous biennium. Ms. Buchanan replied affirmatively and explained, “the system had erred.” She clarified the correct performance indicators were provided today (Exhibit C).
Ms. Buchanan discussed the one-time appropriation in the amount of $321,039 requested in The Executive Budget for the development of an automated real estate agent licensing system. She said the appropriation amount was based on estimated figures associated with a similar licensing system in Oregon, so she is not sure whether the figure is too high or too low at this point. She said she believes they have estimated a high figure to be conservative, but they will have specific figures when their current study is completed. She explained that the current licensing system is a four-part receipt system, which has been in place for many years. With the current system the license is processed within 3 to 4 weeks of application, she added. She pointed out the new system will integrate all the disciplines and functions into an efficient, comprehensive mode of fee collection, receipting, license issuance, accounting, data information collection, and depositing.
In response to the legislative audit, Ms. Buchanan commented that the legislative auditors share the division’s belief that this system will improve financial control of their daily work process and enable better tracking of disciplinary licensing actions and continuing education requirements. In summary she said she believes the new system will be expedient, error free, and reduce paperwork and duplicity of efforts.
Senator O’Donnell asked what hardware and communications equipment would be purchased with the $321,039 appropriation. Ms. Buchanan responded the division is currently “at the business level analysis program stage right now and the next phase is the functional requirements.” Senator O’Donnell asked whether anyone was present to provide further details on the specifics of the proposed system. He said he believes a new system is necessary, but he would appreciate more information. He further indicated he would like an accurate estimate of the project’s costs to determine whether fees collected from the real estate agents, general fund, or a combination thereof will fund the system.
Kathy Ryan, Deputy Chief, Planning and Programming Division, Department of Information Technology (DoIT), said she is unable to provide an accurate estimate at this stage of the project analysis. Senator O’Donnell questioned what the requested figure, $321,039, was based on. Ms. Ryan explained that the Real Estate Division submitted the request based on Oregon’s system, not on figures provided by DoIT. She said DoIT is conducting a business process analysis to determine functional requirements before evaluating the Real Estate Division’s system needs and corresponding costs. DoIT suggests that this analysis be completed before committing to the system Oregon has in place, she added.
Senator O’Donnell asked Ms. Buchanan the amount of fee-generated funding available in her budget for this project. She responded that last year, approximately $270,000 was generated from the testing service, which would revert to the General Fund if not used by the end of this fiscal year. She stated that other groups within the division would be using the system and could possibly contribute funding. Senator O’Donnell asked whether remaining funds at the close of the fiscal year revert to the General Fund for those groups also. She replied that those funds would not be reverted.
Senator O’Donnell questioned the likelihood of the $270,000 reverting to the General Fund. Ms. Buchanan said there is currently $206,000 that will be reverted. Senator O’Donnell commented that he would rather utilize the examination fees than General Funds for this project.
Mrs. Chowning agreed with Senator O’Donnell’s comment, and she acknowledged a shortfall of General Funds in the budget for the next biennium. She requested an all-inclusive breakdown of equipment costs, training, maintenance, and any other associated costs as soon as the information is available to the division. It appears that DoIT’s project estimate is less than what the Real Estate Division proposes, she added.
Ms. Ryan stated that DoIT will study different alternatives, “cost it out, what platform it’s going to run on, conversion costs, communication costs, [and] training.” All of that information will be provided to the committee, she added.
Mrs. Chowning asked staff to review the possibility of funding the new system with the examination fees, which Ms. Buchanan stated would otherwise revert to the General Fund.
Bill Maier, Administrative Services Officer, Department of Business and Industry, clarified that testing fees collected in the base year are projected at $491,400, which is offset by corresponding expenditures of $283,883. The $207,000
balance would be reverted to the General Fund, he added. He stated that there were other fee-generated accounts that could contribute to the cost of the system.
Senator O’Donnell pointed out that there is a “$121,000 differential, or $115,000 differential between what is coming out of the General Fund and what is available from a reversion of the $206,655.”
Mr. Beers asked when the division anticipates having the requested information. Ms. Ryan responded that the business process analysis would be completed by the end of this fiscal year. She said, at that point, DoIT would proceed with a detailed analysis of functional requirements and establish evaluation criteria, which she said would be available by October, 2001, at the earliest.
Mr. Maier said “this system is an outgrowth from my business process re-engineering and we had several issues regarding the combining, the identification of revenue processes and the combining of functions across the department.” He explained that during the last biennium, the department’s resources had been focused on the insurance division’s licensing system, which caused a delay in working with DoIT on this project. He pointed out they did not begin working diligently with DoIT until November. He said, they completed some preliminary flow-charts and identified processes prior to working with DoIT’s planning division, but DoIT is currently training them on more effective methods to approach this project.
Mr. Beers said he believes it is too early in their process for DoIT to provide an accurate estimate. He suggested that the committee try to save the discussed fees from reversion while allowing them to proceed with the process. He said he believes the Interim Finance Committee (IFC) will have to make the final decision.
Senator O’Donnell said he agreed this would need to be addressed by IFC during the interim, but he would like a “fudge factor number” by the close of this budget. He explained:
I have been involved in these contracts and payment of technical support and software programs, and it seems like the amount of the contract is always equal to the amount that the Legislature puts in the category for computers and technical support. . . . It’s no reflection on the division, it’s the software company who comes in and bids on it and knows that there’s $321,000 in there; that’s about what the contract will come in at.
Senator O’Donnell asked Ms. Buchanan to discuss the vacant position of Common-Interest Communities Ombudsman. She said she would prefer to address the vacancy after responding to a previous information request from Mindy Braun, Education Program Analyst, Legislative Counsel Bureau.
Ms. Buchanan referred to the “licenses and fees” line item in the resources section on page B&I-13 of The Executive Budget. She explained that the division originally budgeted $199,802 for this line item, but the line item is now recommended at $455,508. She acknowledged that is an increase of approximately $255,000. She stated this revenue is associated with timeshare projects and includes timeshare registration fees and licensing fees of timeshare agents and representatives. She pointed out that in 1999 there were 529 timeshare agents and today there are “896 of them, of timeshare sales reps [representatives], two years ago we had 500 and today we have 1,232.” The phenomenal growth within the timeshare industry in Nevada explains the expansion of this account, she summarized.
Ms. Buchanan said that an unfunded mandate passed during the 1995 Legislative Session commenced her division’s assistance with homeowners by offering a process for alternative dispute resolutions. Approximately 60 parties have utilized the process each year since its inception, she stated. She explained that there are four full-time positions in the office of the ombudsman. She commented:
Data registration started in July when we also picked up from the Secretary of State to collect the dues, or the unit fees. We are averaging 144 new HOAs [homeowners’ associations] a month. We project out that we will have 1,728 HOAs by the end of this fiscal. . . . We know that this is a constant source of funds. We know that its got more money than it needs. And it needs either program development or it needs to lower the door fee. . . . The people of this state are getting used to the law. They are coming around doing the reserve studies. The boards are conscious of trying to follow the book. The homeowners are starting to learn their rights. Subpoena program is working.
Ms. Buchanan stated she was providing new performance indicators pursuant to a prior request by Ms. Giunchigliani (Exhibit C).
Mrs. Chowning questioned the need to increase the half-time position to full-time. Additionally, she requested clarification of the specific figures relevant to the increase in homeowner’s associations that Ms. Buchanan previously cited.
Ms. Buchanan responded:
There has been no scientific records until we started in July. We went from the Secretary of State’s Office, on their non-profit corporate list, and we had to just guess, send out a survey. And that’s where we started in 1995, when we started in this business of homeowners’ associations. So we just didn’t know, and it just continues to grow. And gee, when we got the check in from Summerlin, it was like 13,000 new people. You know that we, that’s the biggest we’ll probably have in this state, so it just added a lot of new doors.
Mrs. Chowning asked her to clarify the current number of homeowner’s associations. Ms. Buchanan said “1,728, approximately, is what we think we’ll have by the end of this fiscal.” Mrs. Chowning clarified the number appeared to indicate an increase of about 300 percent from the division’s original estimate. She surmised that would result in an increase in associated workload of approximately 300 percent.
Ms. Buchanan nodded her head affirmatively. Mrs. Chowning further questioned whether the current four-person staff is sufficient to accommodate the increased workload. She stated that she believes the services offered by the office of the ombudsman are extremely helpful. She said Mr. Beers had recently asked her the number of homes that are 15 years or less in age and that are available without an association. Mrs. Chowning commented that in Las Vegas there are very few. She said, “Its just a part of doing business now, increases everybody’s paperwork, but of course, I believe in all of the disclosure.” She said that people who do not want to be a part of an association have no choice but to purchase an older home. She pointed out that associations differ vastly in size and in quality, but the maintenance of a person’s home and surroundings is now a “political” process. She stated, “they are not in there owning their homes all by themselves anymore, they are a member of a group, like it, or not.”
Mrs. Chowning asked Ms. Buchanan to clearly explain the justification for additional support. She also expressed concern regarding the proposed transfer of $10,000 from Common Interest Communities budget, 101‑3820, to the Real Estate Administration budget, 101-3823, for support of the office of the ombudsman. She said she is concerned because the transfer would set a precedent for other funds established for a particular statutory purpose.
B&I, Common Interest Communities – Budget Page B&I-19 (Volume 2)
Budget Account 101-3820
David R. Walker, Deputy Administrator, Real Estate Division, Department of Business and Industry, responded to Mrs. Chowning’s first question regarding whether the current ombudsman’s office staff is capable of handling the ever‑growing workload. He responded affirmatively. He explained that the role of the ombudsman’s office is purely advisory not regulatory. He indicated they anticipate about 12,000 phone calls, but they are usually from people trying to work within the system. The office provides information and assistance and many times that prevents problem cases, he noted.
B&I, Real Estate Administration – Budget Page B&I-13 (Volume 2)
Budget Account 101-3823
M-200 Demographics/Caseload Changes – Page B & I-15
Mrs. Chowning questioned whether the request to increase the half-time position to a full‑time position is for support to the office of the ombudsman. Mr. Walker replied affirmatively. Ms. Buchanan clarified that the requested increase of the half-time position to a full-time position is for additional support to the appraisal officer. She said that new federal mandates created a time limit of one year for completion of work; therefore, the appraisal officer needs additional clerical support. Other reasons she stated to justify the additional clerical support were: the new deputy administrator moved to Las Vegas with an additional workload, the legislative audit identified a need for expediting bank deposits, and the increased workload in the Carson City office resulting from demographic growth.
Mr. Maier explained that, upon the proposed increase of clerical support, the duties in Las Vegas and Carson City will be restructured. He said some duties presently performed in Las Vegas would be transferred to the Carson City office.
Mr. Beers questioned, “I’m kind of confused with the number of Homeowner’s Associations growing, why the performance indicators are predicting a 25 percent drop in information and phone requests for each of the next three years?” Mr. Walker responded:
We are anticipating, through education, that these people will be better informed. Consequently, there will be fewer complaints, fewer people who don’t realize what exactly they’re doing. And that by training the homeowner’s associations, that they will also realize their role. And we anticipate the complaints to decrease.
Mr. Beers asked how many information and phone requests they had received so far in fiscal year 2001. Mr. Walker responded, “close to 8,000.”
Mr. Beers said, “With another three to three and a half months left in the year, so apparently all of the education you did in handling the 8,100 actual calls in fiscal year 2000 has not had the anticipated effect of decreasing the number of calls you are handling in 2001. But that’s about to turn around, you’re telling us.” Mr. Walker replied, “Yes, sir.”
Mr. Beers questioned whether Mr. Walker is planning to eliminate positions that currently handle the rapidly-decreasing volume of phone requests. Mr. Walker replied:
No, because these positions are being used where they should be used, in the education process and working with these people directly. We would love to see the phone information continue, and continue to rise. But we really feel that through educating these people, that they won’t need to pick up the phone and call and ask what they can do or what they can’t. That they will be aware.
Mr. Beers asked, “Are the people you are educating the board members and managers, or the members?” Mr. Walker answered, “All.”
Mr. Beers suggested Mr. Walker consider the possibility that the number of requests for information may not decrease. Mr. Beers expressed concern related to their internal controls. He then proceeded to ask Mr. Walker how long he had been employed by the division and to provide some professional background information. Mr. Walker responded that he had previously owned his own business for the past thirty-five years before joining the division 6 days ago. Mr. Beers questioned whether he had performed his own accounting. Mr. Walker explained that he had performed all his own bookkeeping at his previous business, but his accounting was performed by a certified public accountant (CPA). Mr. Beers asked whether it was a small business. Mr. Walker replied, “Our revenues were about $2,000,000 a year.”
Mr. Beers asked, “Mr. Maier, are you going to be involved in establishing some internal controls? Because our last audit found the exact same deficiencies that caused the embezzlement at the audit [agency] before.” Mr. Maier responded, “Yes, thank you, Mr. Beers. That is a priority of our office . . . the director’s office.”
Ms. Buchanan stated that regulation of community managers and other real estate interests improves communication among the different areas. For example, she explained there were long-standing controversies regarding oleander bushes, which were finally addressed through a position statement issued by the “license manager.” The position statement alleviated the on-going controversies by defining the difference between oleander trees and oleander bushes.
Mrs. Chowning expressed her gratitude for the division’s action regarding the oleanders. She further indicated that there would be a bill addressing the issue of homeowners’ inheriting problems with homeowner’s associations from former owners upon the close of escrow.
Ms. Buchanan explained numerous enhancements:
The money was not spent in the last biennium in the ombudsman’s office, so all of these enhancements for out-of-state travel, in-state travel, operating, training, are being put back in. They were in the original base budget, but they were never spent. So we just didn’t get the programs developed, which is what we are planning to do now.
Senator O’Donnell asked if the fees might eventually be reduced. Ms. Buchanan responded that is possible because they are learning as they proceed.
Mrs. Chowning thanked the division for its on-going education efforts. She further stated that people without English proficiency should be a growing concern to this division because they are often forced to work with real estate agents who cannot communicate with them in their native language. She said she hopes to see future legislation addressing this issue. She explained, “People are being taken advantage of in their transactions, and nobody really can get a handle on it because the people taking advantage don’t speak English well either.” She acknowledged that the division has been proactive in its efforts concerning this issue, and she encouraged staff to continue their efforts to provide relief to this area of consumers.
Ms. Buchanan stated that “predatory lending” is a problem, and the division will be hosting a course sometime during May 2001 to educate licensees, appraisers and other interested parties on this issue. The Federal Bureau of Investigations (FBI) will be hosting this course in conjunction with the division, she added.
Senator O’Donnell asked Ms. Buchanan to define predatory lending for the committee. Ms. Buchanan responded that “people are selling houses and a straw buyer will come in and have it appraised up. Maybe a $200,000 house for $400,000, and then they don’t make any payments on it.” She explained that the problem occurs with fraudulent appraisers. The results are large profits for one party and a defaulted loan for the other party, she said. She claims that the division has had limited success in apprehending “straw buyers,” and the division was responsible for the arrest of one fraudulent appraiser this year. She said that issue is very important and complex.
B&I, Manufactured Housing Division – Budget Page B&I-75 (Volume 2)
Budget Account 271-3814
Senator O’Donnell welcomed Renee Diamond, a former assemblywoman. Ms. Diamond, Administrator, Manufactured Housing Division, Department of Business and Industry, explained that the division is a self-funded, fee-based agency with four budget accounts. She stated that the budgets were prepared as “bare bones,” and the division is confident it can maintain the current level of service within the proposed budget. The budget, as recommended, has no new programs, and budget account 271‑3814 was reduced by two employees.
Senator O’Donnell asked Ms. Diamond to address the fact that complaints appear to have decreased but their staff has not.
Ms. Diamond said, nationally, the annual sales of new manufactured homes are down 28 to 30 percent. In Nevada the decrease is closer to 35 percent, she noted. She explained fewer home sales translates into fewer complaints because there are fewer problems with contracts and the homes themselves. She said she believes there will always be complaints regarding both new and used homes. She said complaints regarding used home sales have been relatively consistent, which is evident in the performance indicators. Ms. Diamond pointed out that she rearranged this budget to centralize complaint resolution in the Las Vegas office in lieu of the local jurisdictions in Carson City and Elko. She clarified that one person in Las Vegas handles all complaints related to the homes and corresponding sales contracts. She said that enables people in the satellite offices to perform other duties, such as issues concerning landlord/tenant relations.
Ms. Diamond said that legislation passed during the 1999 session mandated that the essential systems within a used home had to be in working order upon sale and this has reduced corresponding complaints. She mentioned that predatory lending is an issue within her division also. She explained her division attempted to revoke the license of an individual who had 84 fraudulent loans to Deutsche Financial, worth approximately $2,000,000, but the courts and the hearing officer did not permit the revocation. She pointed out that normal repossession rates within the manufactured housing industry are generally below 10 percent, but for this lender it was 35 percent. She explained that he would change a $500 down payment to $5,000, so people would be considered credit worthy. Subsequently, many of these people were unable to make their payments, and they would walk away from the home with minimal financial loss.
Ms. Diamond pointed out that many of the complaint investigations have become increasingly complicated. She said the division has “put three dealers out of business over the last year and a half” for fraudulent activities, and that may account for the decrease in complaints. She commented, “Maybe 5 percent of the dealers give us 100 percent of our work.” She said she believes that the number of complaints has decreased, but they are more complicated cases. She explained that there is only one person responsible for complaint resolution and all the associated investigation for the state.
B&I, Mobile Home Parks – Budget Page B&I-84 (Volume 2)
Budget Account 271-3843
Senator O’Donnell asked how many new mobile home parks have opened recently in Nevada. Ms. Diamond responded that many parks have been replaced by retail centers such as “Rite Aid and Walgreen’s,” but there are three new large parks currently in development in southern Nevada. She said the cost to develop a mobile home park has become prohibitive to development, especially in Clark County. For this reason, she said she expects the number of parks to be static in the future.
Senator O’Donnell said he has witnessed a great deal of legislation concerning manufactured housing, which he said he believes made affordable housing too expensive to develop. He said, “we disenfranchised a lot of people who could have owned a mobile home,” but developers no longer want to build them because of the proliferation of laws that restrict their return on investment. Ms. Diamond agreed. She said her division’s role in the development of new parks does not extend beyond the initial approval of plans. She pointed out that the lack of mobile home park development is a problem nationwide, but she indicated that states such as Texas and Pennsylvania have successfully fostered cost-effective park development.
Ms. Diamond pointed out that mobile home park owners fund this budget with a fee per occupied space, and these funds are used for complaint resolution and education. She stated that their performance indicators illustrate the success of their efforts to educate the professionals in the manufactured housing division to reduce complaints and disputes. She stated that although they handle fewer complaints, they have become more complex.
Mr. Beers requested a five- or ten-year projection of spaces available. He cited concern of the “water hookup issue,” which he perceives as prohibitive to future development of new mobile home parks and, consequently, affordable housing. Ms. Diamond said it is a “guessing game,” but she would confer with Mr. Joseph C. Guild, III, Lobbyist, Manufactured Home Community Owners.
Mr. Beers clarified his question, stating he would like information that might illustrate a “flattening effect” on new spaces because of past legislation, not projections of future spaces available. Ms. Diamond said she would contact Mr. Beers later to further clarify his request.
Senator O’Donnell explained Mr. Beers is requesting a correlation study. He said he would like to see what effects the laws passed over the past ten years have had on the number of units that were available. Ms. Diamond agreed to try to find the information.
B&I, Manufactured Housing Division – Budget Page B&I-75 (Volume 2)
Budget Account 271-3814
Mrs. Chowning stated that a lot of the performance indicators indicate activity is decreasing, so the committee would like to know why the agency chose to raise fees, rather than to provide for a corresponding reduction in staff and operating costs. She requested a written statement of the agency’s estimating methodology in projecting revenues and expenses and an inventory list indicating model, age, CPU type, software version, etc., of all equipment and software being replaced and purchased. Furthermore, she questioned why it appears that half of the abatement complaints were not resolved.
Ms. Diamond explained that their staff was reduced by two positions, one in Las Vegas and one in Elko, which will result in salary savings of approximately $78,000. She said the Elko investigator performs few inspections, but she believes it is important to have that one staff person present in Elko. Therefore, his workload has decreased, but she does not want to completely remove the division’s presence in Elko at this time. She noted that the fee increases went into effect on March 15, 2001, and they were the first increases since 1985. The industry agreed to the modest increases at public hearings, she added. Ms. Diamond clarified that the fee increases do not affect citizens in the parks, only the professionals in the industry.
B&I, Mobile Home Lot Rent Subsidy – Budget Page B&I-80 (Volume 2)
Budget Account 630-3842
ASSEMBLY BILL 195 OF THE SEVENTIETH SESSION: Makes various changes to provisions governing mobile home parks. (BDR 10-516)
Ms. Diamond stated A.B. 195 of the 1999 Legislative Session resulted in a significant increase in participants in the subsidy program. She explained that qualified recipients benefit from a subsidy in the amount of 25 percent of their monthly rent. She pointed out that the subsidy is paid directly to the park owner. There are currently 450 people on that program, she added. She explained that the subsidy funds are generated from payments received by each member of the park community; therefore, more parks would equate increased funds for the subsidy. She stated that the program is currently operating at capacity, and she said the current waiting list for the subsidy would expand to approximately 50 applicants by this December.
Senator O’Donnell clarified that the subsidy is funded by a $12 per space fee paid annually by the members of the park community, so their neighbors can rent a similar lot at a 25 percent discount, which all goes back to the owner of the park. He commented that current outreach efforts would find more people qualified to take part in this rent subsidy, and they will be put on waiting lists because of a lack of funds. He said he anticipates that Ms. Diamond will approach the 2003 Legislature with a waiting list problem and propose to raise the fee.
Ms. Diamond said she believes strongly in the program, and she believes it is similar to a state welfare program that is funded by state residents for the benefit of a small group of people. She responded, “I get your point, but in my case, what I’m seeing is the real people involved. So for me it’s the best thing we do.” She said she believes that the $1 per month paid by the members is insignificant to them, in light of the benefit it provides.
Senator O’Donnell suggested that Ms. Diamond either raise the fees or stop all outreach efforts. She said she believes the need for this subsidy will increase despite cessation of outreach efforts due to an aging population on fixed incomes and a looming economic downturn. He said that the idea is “philanthropic.” He added that this does not change the fact that park growth is declining and there are insufficient funds already. He said this is another example of an attempt to “do good” that results in fewer developers wanting to proceed with these types of projects. Ms. Diamond assured Senator O’Donnell that she would convey his sentiments to the appropriate parties.
Mrs. Chowning explained that this subsidy is intended to provide temporary assistance to people unable to pay their space rent. She said the expenses incurred when people are forced to move from their spaces are significantly higher than the moving expenses associated with leaving an apartment. She commented, “This is modest help that the people who own the land under which these people’s homes sit are choosing to help people temporarily, and I applaud them.”
Ms. Diamond agreed with Mrs. Chowning’s remarks.
B&I, Mobile Home Parks – Budget Page B&I-84 (Volume 2)
Budget Account 271-3843
Ms. Diamond pointed out this account is funded by fees collected from park owners. This account provides for confidential complaints by residents of the parks regarding infractions of the law committed by the owners or management of the parks.
B&I, Financial Institutions – Budget Page B&I-107 (Volume 2)
Budget Account 101-3835
E-805 Major Reclassifications – Page B&I-110
L. Scott Walshaw, Commissioner, Division of Financial Institutions, Department of Business and Industry, said this decision unit proposes to convert 1 vacant examiner position in the Carson City office to 2 Program Assistant II positions. He explained the reason is that essentially the administrative staffing in his office has remained unchanged for over 20 years, and they are at the limits of their productivity gains from the addition of electronic data‑processing equipment. He said he is doing all his own correspondence as the deputies and the examiners are doing also. He indicated secretarial staff is basically just processing paperwork for the licensees that they are responsible for, and they are near their production capacity limits.
Senator O’Donnell asked Mr. Walshaw to describe the examination process. Mr. Walshaw explained the objective of an examination is to ascertain whether the licensee is in compliance with the law. He said that the examiners are not trained in one specific area, as in many other states, because the division expects them to perform examinations of a wide variety of licensee’s businesses.
Senator O’Donnell asked, “Do you make sure that people who have accounts, such as mortgage companies, that they make sure they get the money in the right accounts?”
Mr. Walshaw responded:
Those companies that are in the business of doing that type of activity, which believe it or not, are the minority of the number of licensees that we have are scrutinized in that capacity on two fronts. First of all, there is a requirement that if they do that they have to produce an audited financial statement prepared by an outside CPA [certified public accountant] firm each year. That is a requirement of statute. Secondly, obviously, when our people go in to do these exams, that’s one of the things that they review and I might add that the way our supervisory examiners schedule mortgage company examinations is that the focus is on first doing those companies that have that kind of fiduciary responsibility.
Senator O’Donnell said, “So you make sure that the money goes in the right accounts, and if its not then you . . . fine them.”
Mr. Walshaw said, “That’s the requirement of the statute.”
Senator O’Donnell questioned why Mr. Walshaw’s division deposited $180,000 into the wrong account within their own division.
Mr. Walshaw responded:
Well, that’s a debatable point as we discussed in our response to the audit, we believe that, that money was what we considered to be as recovery costs. Meaning that in the process, and negotiating, let’s say, an action that we took against an unlicensed company, one of the things that we try to do is, even though we don’t have the statutory authority specifically to administer this. In the consent negotiation, where we would consent to let them apply for a license or consent to allow them to do some activity that we took action against, we try to recover a cost. And those costs could be what we had to do essentially to investigate that company’s activities to get to the point where we issued an order or took whatever action we were taking. And we just recently asked the budget office to process a bill for us that would make [this] clear.
Senator O’Donnell interjected, “BDR 18-1445 . . . that is completely unethical and immoral.”
BILL DRAFT REQUEST 18-1445: Enable the Financial Institutions Division of the Department of Business and Industry to recover costs related to an investigation in the course of a negotiated settlement of an administrative action. (Later introduced as Assembly Bill 626.)
Senator O’Donnell said he has argued with Tahoe Regional Planning Association (TRPA) over the exact same issue for the past ten years. He clarified the issue is the use of the fines received from an institution to pay for your organization. He said those fines must be deposited into the General Fund, from there, the “Legislature will allocate those funds back to you if we feel they are necessary. That gives an arm’s length’s distance between you and the money.” He said he hopes Mr. Walshaw will not pursue the BDR because “it is incestuous and its wrong.”
Mr. Walshaw said the intent of the BDR is “to attempt to recover actual costs incurred in the investigation of that activity.” Senator O’Donnell said that is exactly the problem.
Senator O’Donnell explained his position:
If you go out to a financial institution and you need to recover the costs of doing an examination, whether the financial institution has done right or wrong, you need to find something in there in order to go after that financial institution to get your money back to pay for your budget. The intent is to recover enough money to pay for your staff, to pay for your time, to pay for investigations. Is it not?
Mr. Walshaw responded:
Only in those instances where the money is being expended out of this account, not our main operating account. I guess the confusion is, I see exactly where you’re heading, but that’s not what the intent is. The intent is only to allow us to preserve the investigative account for what it was intended to do, which is to investigate, in part, things like unlicensed activity. Now, if you don’t process the BDR that’s fine, I’m just saying, we think that its only fair, that in those situations, where we’re talking, using this limited example, not where we do routine examinations of financial institutions because I agree with you completely. Then we get into a situation where every time my examiners go out to a bank, they are looking for ways to generate revenues. I mean, that’s absurd, that’s not what the purpose is and that’s not what we’re talking about here.
Senator O’Donnell stated he disagrees.
Mr. Walshaw explained that the $180,000 that Senator O’Donnell had referenced was received over the span of two to three years from the limited examinations of unlicensed activities.
Senator O’Donnell explained that the records indicate the $180,000 in question was used for conferences, travel, and subscriptions, amongst other items. He added that the division could not continue to use these funds at its discretion outside the purview of the Legislature.
Mr. Walshaw responded, “We do not rely on these funds in that account. Its that simple.” Senator O’Donnell asked, “If you don’t rely on those funds, then why not put the money back in the General Fund?”
Senator O’Donnell noted the division’s budget included 197 examinations between the year 1999 and 2000, and between the years 2001 and 2002 there are 849 examinations budgeted. He questioned the division’s ability to complete this four‑fold increase in examinations with the proposed replacement of 1 examiner by 2 Program Analyst II positions.
Mr. Walshaw responded there are currently six vacant examiner positions. He explained:
When we had a base budget review last year, one of the issues that was raised, and I don’t know whether you’ve got this information in front of you, or are familiar with it, was the use of numbers we had in our staffing ratio. They basically did not add up. And we reviewed that and we said okay, until we get a handle on what the actual staffing ratios are, we will freeze any hiring. So, basically, we kept approved vacant examiner positions open until, as we’re sitting here in front of you right now, until we get a handle on those staffing ratios, which I believe that we do. We essentially implemented a revised reporting format for our examiners to use that accounts for every hour of every day and backs, if you would, up into the total examinations and total hours available. We believe that we now have justification to fill the necessary examiner positions to do the jobs that you’re talking about right now.
Senator O’Donnell asked, “How many vacancies do you have?” Mr. Walshaw responded, “Six.” Senator O’Donnell asked for further clarification.
Mr. Walshaw explained:
We had the authority to hire the examiners. The problem was we could not, on paper, justify hiring those people without knowing whether there was a need to hire them. And until we got the staffing ratio situation fixed to the point where we could demonstrate that we had the necessary time, on paper, to do the examinations, and therefore we knew how many additional examiners we would need to do how many jobs; we agreed not to hire anybody.
Senator O’Donnell asked why Mr. Walshaw had allowed six positions to remain vacant despite the various problems within the mortgage industry, financial institutions, excluding banks, and various lenders. Mr. Walshaw responded that his actions were a direct result of the base budget questions regarding justification for the positions.
Senator O’Donnell stated that Mr. Walshaw had the authority to hire people for the six positions.
Senator O’Donnell asked whether Mr. Walshaw had completed the staffing ratios he had referenced. Mr. Walshaw replied that the staffing ratios were available last summer, but they wanted to further monitor those ratios to justify the hiring of those positions. He said the division now feels justified to initiate the hiring process. Senator O’Donnell encouraged him to proceed in hiring the positions.
Senator O’Donnell stated that only 197 examinations of the 740 that were projected for Fiscal Year 2001 were completed. Mr. Walshaw explained that his division attempts to examine every licensee on an annual basis, but that is impossible for a variety of reasons, the least of which is staffing. He pointed out that their schedules are affected by the Federal Deposit Insurance Corporation (FDIC) examinations. He stated that the division’s top priorities for examinations are institutions that have a fiduciary responsibility.
Senator O’Donnell asked whether the base budget was completed before or after the projections were done for the number of examinations during the last biennium. Mr. Walshaw responded:
The base budget was done before the revision to the projections was done because obviously there is growth in the number of licensees that has occurred. Secondly, at the time we put the budget together we make a best case or best guess estimate of what those exams are going to be. So, the answer is probably yes to both.
Senator O’Donnell questioned whether Mr. Walshaw intended to perform 849 examinations in FY 2002, when he has not even initiated the hiring process for the necessary examiners to perform the examinations. Mr. Walshaw responded affirmatively.
Senator O’Donnell questioned the self-funded status of the agency. Mr. Walshaw acknowledged that fees generated from the institutions licensed in the state support the agency. Senator O’Donnell asked whether the hourly rate charged for the examinations was a little deficient at $30 to $50. Mr. Walshaw agreed they are considering an increase in their rate, but he believes the institutions will complain about any rate increase.
Senator O’Donnell stated that the revenue generated from non-depository fees needs to be increased to narrow the gap between income and expenses. Mr. Walshaw agreed.
B&I, Financial Institutions Investigations – Budget Page B&I-112 (Volume 2)
Budget Account 101-3805
E-710 Replacement Equipment – Page B&I-113
Mrs. Chowning asked for justification of the request to reduce this account reserve by $252,855 to fund computer hardware and software for staff in the Financial Institutions budget account. Mr. Walshaw stated that he provided an explanation on that decision unit to committee staff, and any amendments proposed by the committee would be acceptable to him. Mrs. Chowning stated that she had not received a copy of his statement, and she suggested they consider an improved method of tracking the funding properly. He said he would consider doing it differently.
M-201 Demographics Caseload Changes – Page B&I-113
Mrs. Chowning asked Mr. Walshaw to discuss whether the Deputy Attorney General position funded by this budget account is necessary. He responded that justification for that position is the responsibility of the Office of the Attorney General; they only fund the position.
She further questioned the use of this budget account for training purposes. Mr. Walshaw stated that his division agreed with the auditors to transfer the training expenses to budget account 101-3835, but that will result in some amendments to the existing budget. He explained:
Initially some of those expenses were justified as coming out of that account appropriately, and where we got into trouble is that it got a life of it’s own. In other words, the first time we had to send examiners to San Francisco to examine First Republic Bank, which was a newly-organized institution under Nevada’s interstate bank law. They are chartered in Nevada. They operate branches in Nevada, New York, and California, and they are headquartered in San Francisco. So, that required us to send our people, literally to go to San Francisco, to do the examination. They cannot do it locally. So the first time that occurred, obviously, it’s appropriate to take money to pay for those out-of-state travel expenditures to do that examination. And the argument the auditors made and I agree with them is that once you’ve got to the point where that’s a predictable on-going event, it should be moved into the operating account to be properly expensed against that institutions exam.
Senator O’Donnell stated “your institution” is responsible for examining other financial institutions, mortgage companies, and secondary lenders, to ensure they comply with the law and to make sure that the public’s trust is in tact. He said that when “you and your organization” were under examination, the auditor found that “even you” had problems and mistakes in this organization, which supports the committee’s concern about having every financial institution investigated. He added, “If even your organization had trouble, can you imagine what’s out there for the public?”
Senator O’Donnell concluded by stating Mr. Walshaw should hire six examiners and proceed with the examinations. Mr. Walshaw agreed.
B&I, Labor Commissioner – Budget Page B&I-179 (Volume 2)
Budget Account 101-3900
Terry Johnson, Labor Commissioner, Office of Labor Commissioner, Department of Business and Industry, presented an overview of the program. He cited numerous accomplishments for his office during the past 18 months, including that they managed to reduce the wage claim backlog by half, revised the state public works regulations for the first time ever, expanded apprenticeship training, adopted child labor provisions, and eliminated a two-year backlog in the handling of certified payroll reports. He said they still have a lot of work to do, and they would like to have some statutes revised that would enhance their ability to enforce the laws passed by the Legislature. He cited particular interest in streamlining the process for certified payroll reports. He pointed out that a legislative audit performed in 1994 recommended that the agency submit some statutory revisions to assist them with certified payroll reports. At the time, the agency was inundated with payroll reports from all over the state, he added. He stated that his agency is submitting a proposal this session that would be consistent with the recommendations of the auditor. He acknowledged that the agency still has a wage-claim backlog of approximately three years or 994 wage claims that extend back over a 3-year time period. He said the agency’s computer systems present on-going challenges, but overall, he is pleased with their accomplishments. He said they would continue to improve and to strive toward where the committee would like to see them.
E-806 Unclassified Pay Changes – Page B&I-181
Senator O’Donnell asked Mr. Johnson to discuss the salary increases requested for the Labor Commissioner, Deputy Labor Commissioner, and Chief Assistant Labor Commissioner. Mr. Johnson responded that the Deputy Labor Commissioner currently earns approximately $36,000, which is not comparable to similar positions within other agencies of the Department of Business and Industry. He said the increases are needed because there are instances where supervisors are earning less than their staff, which results in morale problems and turnover. He said there have been five deputies during the past five years, and he would prefer to establish some stability within management.
Mrs. Chowning suggested Mr. Johnson work with staff to thoroughly compare salaries within the department, including with the Real Estate Division and others. Mr. Johnson responded that he would be happy to work with staff. He stated that they do have relevant comparisons completed during the past year by a department salary survey.
Ms. Giunchigliani clarified that the committee would like to avoid creating another salary disparity within the department and the department salary survey would be very beneficial for the evaluation process.
Senator O’Donnell said, “Just to let you know, there probably will be an adjustment there.”
Senator Neal stated that a comparison of other labor commissioners in states of comparable size to Nevada would be more relevant than a comparison with the Real Estate Division. He said it would better reflect the work performed by the Labor Commissioner.
Senator O’Donnell indicated he would ask LCB staff to research those salaries nationwide.
B&I, Energy Conservation – Budget Page B&I-183 (Volume 2)
Budget Account 101-4868
Senator O’Donnell questioned why this program still exists.
Bill Maier, Administrative Services Officer, Department of Business and Industry, stated this budget account is funded from two sources. The first source is Petroleum Overcharge Rebate budget account, 101-4539, which is used as leverage for smaller individual annual grants. Secondly, there are several of these smaller grants, generally identified in budget account 101-4868 as State Energy Program (SEP) Grants, which the agency utilizes to operate.
David McNeil, Energy Program Specialist, Nevada State Energy Office, Department of Business and Industry, said that he would be presenting this budget in lieu of his colleague James M. Brandmueller. Mr. Maier said the agency is currently working on twenty-six sub-grants.
Senator O’Donnell asked where the agency receives its funding to continue its operations.
Mr. McNeil said the SEP Grant received from the federal Department of Energy is the primary source of funding. Partnerships with a variety of entities within the state “put together competitive proposals or responses to solicitations that are also issued through the U.S. Department of Energy” for additional funding, he added.
Senator O’Donnell stated that he tried to discontinue this program two years ago. He stated that he does not perceive any benefits from this agency.
Senator O’Donnell indicated that all committee members had heard the program overview last session, and that was sufficient. Ms. Giunchigliani encouraged Mr. McNeil to provide his prepared statement in written form to the committee members, as she would be interested in the program.
Ms. Giunchigliani asked whether any of the funding could be used for weatherization programs. Mr. McNeil responded, “No.”
Ms. Giunchigliani questioned whether the program focuses educational programs on how to use renewable energy. Mr. McNeil discussed some of the programs on the building efficiency side. He said they assist in the following areas: building energy code, education compliance work, and construction consulting on design for energy efficiency and reduced construction costs. He explained that they recently collaborated with Florida Solar Energy on some work.
Ms. Giunchigliani questioned whether funds from the Petroleum Overcharge Rebate budget account could be used for weatherization. Mr. Maier said the consent orders define some broad areas that are covered including grant and loan programs for weatherization and other energy conservation equipment installation. Ms. Giunchigliani suggested they continue this conversation regarding the possibility of utilizing this agency to alleviate the energy crisis currently affecting many lower income residents.
The meeting was adjourned at 10:38 a.m.
RESPECTFULLY SUBMITTED:
Jennifer Ruedy
Committee Secretary
APPROVED BY:
Senator William R. O’Donnell, Chairman
DATE:
APPROVED BY:
Assemblywoman Vonne S. Chowning
Chairwoman
DATE: