SENATE COMMITTEE ON GOVERNMENT AFFAIRS

MINUTES OF THE

SENATE Committee on Government Affairs

Seventy-First Session

February 9, 2001

The Senate Committee on Government Affairswas called to order by Chairman Ann O'Connell, at 11:55 a.m., on Friday, February 9, 2001, in Room 2149 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.

COMMITTEE MEMBERS PRESENT:

Senator Ann O'Connell, Chairman

Senator William J. Raggio, Vice Chairman

Senator William R. O’Donnell

Senator Jon C. Porter

Senator Joseph M. Neal, Jr.

Senator Dina Titus

Senator Terry Care

GUEST LEGISLATORS PRESENT:

Senator Mike McGinness, Central Nevada Senatorial District

STAFF MEMBERS PRESENT:

Kim Marsh Guinasso, Committee Counsel

Juliann Jenson, Committee Policy Analyst

Julie Burdette, Committee Secretary

Sherry Rodriguez, Committee Secretary

OTHERS PRESENT:

Carole A. Vilardo, Lobbyist, Nevada Taxpayers Association

Thomas J. Grady, Lobbyist, Executive Director, Nevada League of Cities and Municipalities

Dean Heller, Secretary of State

Renee Lacey, Chief Deputy Secretary of State, Office of the Secretary of State

Chairman O’Connell:

We are going to go ahead and call the meeting to order. Senator Porter is not here yet, but everybody else is here. Marvin [Marvin A. Leavitt, Lobbyist, City Of Las Vegas] left me notes on this. Marvin [Mr. Leavitt] suggested that we pass option 1, he thinks it is the best way to handle the situation. He feels that we need option 2 but there is a lot of work that needs to be done, so he is suggesting that we not pass option 2 yet, but that we do have something in the law that would address the need . . . . As everybody knows we do have presently five different counties that are suffering financial hardship.

Senator Neal:

What are you referring to?

Chairman O’Connell:

Senator Neal, this would be draft 1 [Exhibit C] and this is draft 2 [Exhibit D].

Senator Neal:

The one that has been titled “Leadlines of Repealed Sections” [Exhibit C] is draft 1 and draft 2, not titled, just stapled together [Exhibit D].

Chairman O’Connell:

Yes. . . . Mr. Neighbors [Assemblyman P.M. “Roy” Neighbors, Esmeralda, Lincoln, Mineral and Nye Counties Assembly District No. 36] has suggested that we go with option 1.

Senator Mike McGinness, Central Nevada Senatorial District:

Yes, Chairman, for the record [Senator] Mike McGinness, Central Nevada Senatorial District. After reviewing draft 1 [Exhibit C] is probably the best option. You know, looking at what is best for my constituents in Gabbs, I believe that is the way their tax situation is going to be addressed most fairly for them. Again as I mentioned, a most difficult position to be placed in, but I think in the long term, that is the way to go.

Carole A. Vilardo, Lobbyist, Nevada Taxpayers Association:

I would concur with Marvin [Mr. Leavitt]. I think that you need to do draft 1. We track Gabbs through the committee on local government finance. Something that was not addressed the last time, but the whole situation with Gabbs has been ongoing. The prior council had adopted a resolution to disincorporate, their only caveat to that was that they did not want to hold the election during the municipal elections because they wanted, this is a quote, “to be able to tell their grandchildren that they had existed through two centuries.” They did not want to disincorporate with the old council until . . . what would have been 2000. And then, as Tom [Thomas J. Grady, Lobbyist, Nevada League of Cities and Municipalities] indicated, because there had been municipal elections between the time they passed the resolution, and what would have been the year 2000, they were all voted out. At one of the local government committee meetings, the council members that attended kept saying to me, “The state has taken our money. If the state would give us the $3.64, we would not have this problem.” I know I and two members from local government and the Department of Taxation tried to explain they did not get the whole $3.64. It is unfortunate, but I truly believe that you need to do that. I also believe we need to clean up some of the mechanics as, Marvin [Mr. Leavitt] indicated, within the severe financial emergency, and we need to try to create an accommodation if we should have this problem with other counties.

Senator Neal:

My question is, why would we have a person from Las Vegas here talking about Gabbs? Is she [Ms. Vilardo] supplying an expert opinion here?. . .

Chairman O’Connell:

No, she has just been working on the issue along with Marvin [Mr. Leavitt]. That is the only reason that Carole [Ms. Vilardo] is here speaking to the issue.

Thomas J. Grady, Lobbyist, Executive Director, Nevada League Of Cities And Municipalities:

Thank you, Madam Chairman, for the record, [I am] Tom Grady, Nevada League of Cities. As Senator McGinness stated, this is a very difficult situation. I agree with Carole [Ms. Vilardo], if the city had gotten the $3.64, then none of us would be here, but that is not the case. I am concerned if we do a bill that encompasses every city, every county where they did not have to come back to an elected body, that could have some dangers. So I hope when the final bill is crafted that . . . an elected body such as the Legislature would have the final say if they are disincorporated.

Chairman O’Connell:

Thank you. Are there any questions?

Senator McGinness:

Madam Chairman, it is my concern that we are here talking about Gabbs like they do not exist, but they have been notified of all the meetings and have chosen not to be here. And that puts us in a difficult position, but it is not that we are doing this behind closed doors, as they have been notified of all the meetings and have chosen not to participate.

Chairman O’Connell:

Well, I think that this is not a new situation, it has been going on for the past 2 years. Anyway, they are very much aware of the proposals before us here. If there are no questions . . .

Senator Neal:

I just have a question, assume that we go through with this dissolution of the Gabbs city incorporation, we still have some people living there, right? So where would they go for court services, and filing, would they now have to go to Tonopah?

Chairman O’Connell:

No, they become a part of the county. They are just an unincorporated city, is that not correct, or town?

Answers In The Background:

Town. Town.

Senator Neal:

So, do they have to set up a town board or something like that? Is that what we envision here?

Mr. Grady:

Senator yes, they could set up a town board. They could go one of two ways, either an elected town board as has another city in that county, Pahrump. I believe Round Mountain has an elected town board, or they could have an appointed town board, appointed by the county commissioners. Either way they would still have a certain amount of self-government, if you will. They would still have their little city hall where they would have their town meetings. It would be no different than many of our other rural areas that are not incorporated into cities.

Senator Neal:

So, the county commissioners are empowered to set the town votes?

Mr. Grady:

The county commissioners can.

Senator Neal:

OK. You said they can.

Mr. Grady:

And the county commissioners, I believe, the other day when they were here, pledged that they would work with them. In fact, they have through the last 4 years, worked very closely with the people of Gabbs.

Senator Neal:

I just do not want to be voting to dissolve that corporation [incorporation] and the citizens who are there do not have to go to Tonopah. Tonopah is a long way from Gabbs.

Senator McGinness:

Madam Chairman, I might indicate that when Commissioner Carver [Richard L. Carver, Chairman, Board of Commissioners, Nye County] and the County Manager McKnight [Jerry McKnight, County Manager, Nye County] were here, they pledged to go to Gabbs, talk about the different options that they would have, even if it is an advisory board. The county has been more than supportive, at this point. I do not see that going away.

Senator Neal:

Is that done before we vote to dissolve them, or what?

Senator McGinness:

I do not think it can be done until we dissolve it. I mean it would be nice, but I do not think we have that option.

Senator Neal:

Well OK, all right.

Senator Raggio:

Madam Chairman, if a motion would be in order, I would move the committee authorize a bill draft request, for which you have termed as draft 1 [Exhibit C], that is the repealing of the law which incorporated the City of Gabbs.

SENATOR RAGGIO MOVED TO REQUEST A BILL DRAFT TO REPEAL THE INCORPORATION OF THE CITY OF GABBS

SENATOR O’CONNELL SECONDED THE MOTION.

Chairman O’Connell:

OK, it has been moved and seconded, is there any opposition to the motion?

Senator Porter:

Excuse me, Madam Chairman I am sorry I missed part of this debate, but regarding the county of Nye, have they taken a formal board position?

Senator McGinness:

I cannot speak for Nye County. I am not sure they have taken a formal board position, but obviously they have taken some votes authorizing the expenditure of money to repair equipment, do roads, and do maintenance. . . . I cannot say that for sure, but they have made the monetary commitment to do that.

Senator Porter:

Realizing that this is an issue of urgency, I would sure like some resolution from the Nye County board encouraging these actions. I understand that they were here, but we have been through this so many times when individual members of counties and cities come and testify. I just want to make sure that their whole board is in unison.

Senator McGinness:

I cannot say that for sure.

Senator Raggio:

I think from what we heard last time, and from what counsel tells us, Senator, there is not really any need for them to undertake this. I mean, once we disincorporate the city, they become part of the unincorporated area of the county and the county commissioners have the obligation whether they took any formal action or not. Is not that correct? That is what I understood.

Senator Porter:

I would not argue with that point, Senator, I would sure like to see that there is some action to be taken by the county commissioners, formally. But again, it is up to this committee to make that suggestion, but I think it would be a good thing.

Chairman O’Connell:

Committee, is there further discussion on the motion? If not, is there any opposition to the motion? OK then, Kim [Ms. Guinasso], if you would prepare the bill draft for us.

THE MOTION CARRIED UNANIMOUSLY.

*****

Chairman O’Connell:

We will close the hearing on the Gabbs situation.

(The following are exhibits prepared by Committee Counsel Kim Guinasso and given to committee members regarding Gabbs, but were never discussed: Gabbs City Charter, chapter 265, Statutes of Nevada 1971 [Exhibit E.]; Local Financial Administration, chapter 354, Nevada Revised Statutes [Exhibit F]; Unincorporated Towns, chapter 269, Nevada Revised Statutes [Exhibit G. Original is on file in the Research Library.]; and, Case Filings Per Judicial Position, Municipal Courts [Exhibit H].)

Chairman O’Connell:

We will be opening the hearing on Senate Bill (S.B.) 46.

SENATE BILL 46: Increases maximum fee secretary of state may charge for providing special services. (BDR 18-262).

Dean Heller, Secretary Of State:

Actually this S.B. 46 is not our bill. This bill has come out of S.C.R. 19 [Senate Concurrent Resolution [S.C.R.] 19 of the Seventieth Session]. It was a reorganization of business conduct in Nevada, a committee during the interim, but I am happy to testify on it. Obviously our office was very involved in this. As you can see on this particular bill, there is an increase. Obviously it makes a lot of sense for me to be here to discuss what this increase provides. But if you can see on page 2 [S.B. 46], we are changing a fee for special services so that we can charge a reasonable fee, not to exceed $500.

SENATE CONCURRENT RESOLUTION (S.C.R.) 19 OF THE SEVENTIETH SESSION: Directs Legislative Commission to conduct interim study of methods to encourage corporations and other business entities to organize and conduct business in the state. (BDR R-534)

Let me tell you what that is about, what the arguments were. This was testified during the hearings by the Nevada Bar Association [State Bar of Nevada], the business section, and also the Resident Agents Association. What this would provide is a service that the Secretary of State’s office today does not provide to the business community, is the ability to file an amendment, to file a business to incorporate in our office within a 2-hour period.

We do not do that because of the difficulty it would cause the office when someone walks in, walks up to the counter and wants to file right now. Presently we offer an expedited service that says if you pay a fee of $50, we do it within 24 hours. So it provides us with the mechanism, because our office does want to provide 2-hour service. There are times, especially in the situation with amendments and corporate mergers, you have these attorneys that are sitting around the table making $500 an hour; that the quicker that they can get things done probably the better for all parties involved. There are some real arguments and there is some real need for this kind of a service. It would not change, but what it would provide, hopefully, is the opportunity for a 2-hour service, 2-hour expedited service in our office.

We are saying that if we have to stop everything that we are doing in order to provide that kind of service, there should be an additional fee. This fee increase to $500 is in line with what states like Delaware, California, and other states charge for that kind of an expedited service. People realize that you have to drop everything you are doing in order to provide that kind of service at the counter, and so that is where that fee would be increased. It would not be increased under the regular 24-hour service, which would remain the same. But, if someone does come into our office and wants this done right now, we do have to drop everything we are doing, there is an expedited fee that would be equivalent to the cost of doing that kind of business in our office.

Chairman O’Connell:

Mr. Secretary, are you telling us that you would go immediately to the $500 fee?

Secretary Of State Heller:

No fee structures that we have now would change. The expedited fee for 24-hour service would remain the same. All we are saying is that if we provide an additional service for someone to walk into our office and have it done immediately, right there on the spot, that is the only fee that would meet the $500 limit. We are adding an additional service, and that fee would match it. So, no other service in the office, we would not increase the 24-hour fee or anything of that nature.

Senator Raggio:

If that is the case then, and I realize this was not your bill, but should we not specify that the law presently authorizes a fee not to exceed $100 for the 24-hour service? Should we leave that fee in and then add a special fee not to exceed $500 for any 2-hour expedited service?

Secretary Of State Heller:

I would not be opposed to that. Yes.

Chairman O’Connell:

OK, now you are offering an amendment to the bill, as well?

Secretary Of State Heller:

Senator, I was not 100 percent sure that this was the place to do it, but since this issue was being discussed in front of you, it is an issue I am sure Senator Raggio and those on the finance committee would like to discuss in our budget hearings. Since this bill was proposed in front of your committee, I just want to make sure that we are consistent in all of our hearings. This is an argument that we have brought before the Senate [Committee on] Finance and the Assembly [Committee on] Ways and Means and that is our expedited account. These fees, the $100 or $500 fee, go into a special revenue account. Several sessions ago there was a threshold of $2 million. Anything at the end of the fiscal year would revert to the General Fund. Having sat on your side of the table, I understand, and frankly would not argue with the fact, that this particular account was accumulating so much money and was not currently being used in the office.

With the new technology that we are now adding to the office, and in addition to services like a 2-hour expedited service, it is becoming more critical that we have more flexibility and are able to meet the necessary technology in order to provide those kinds of services.

Just as a matter of record, of the $2 million that is the threshold today, $1.9 million is now taken up in salaries. We end up at the beginning on July 1, after the June 30 sweep, of having about $40,000 in the account and then it builds from there. That account, if I am correct in my memory, accumulates about $300,000 a month through expedite fees. But we do start at $0. What we are asking is, if we can, because of the number . . . brought before fundamental review, . . . they thought this was an issue that should be discussed. . . . . Having just come back from the National Association of Secretaries of State convention in Washington, D.C., I assure you that states are looking at what we are doing. We are far ahead in our progress with how we use the Web site, how we use the Internet services, and we want to remain right in front of some of these states because that is what is bringing these businesses into Nevada. And we believe by increasing that threshold from $2 million to $3 million will help provide the necessary technological advancements so we can stay ahead of the curve. That is why we are providing this particular amendment [Proposed Amendment to Senate Bill No. 46, Submitted by Secretary of State Dean Heller (Exhibit I).]

Senator Raggio:

Well, I appreciate the comments. I think the appropriate place to discuss this is really in the Finance and Assembly Ways and Means committees when we take up your budget, because the effect of this would be to reduce the General Fund by $1 million immediately. As far as this being used to pay for positions, primarily, that can be accomplished through the budget without the necessity of taking off this cap.

Secretary Of State Heller:

Right, those are the two options: Removing the positions or raising the cap.

Senator Raggio:

I think, just automatically, it is a pretty important concession. Because yours is one of the few agencies, if not the only one, that has this kind of a fund that you are allowed to keep there and really use for your own purposes. I think that we can discuss this, but I would suggest that the more appropriate place would be in the budget hearings, and all on your budget. It certainly was not contemplated in the Executive Budget that another $1 million be taken from the General Fund, presently.

Secretary Of State Heller:

. . . I do not want you to think for a minute we are trying to do an “end around” here. It is because this budget was in front of this committee, we just want to be consistent when we go to every committee. I do appreciate your comments, and do agree, probably the more appropriate place to discuss raising this threshold would be the money committees.

Senator Neal:

Madam Chairman, could we amend it in and just re-refer it to the Finance Committee?

Chairman O’Connell:

Senator Raggio, Senator Neal has suggested we amend it in, then refer the bill to Senate Finance.

Senator Raggio:

Well, that would not be my preference as Chairman of Finance, I think this should be discussed under their budget, when we discuss their budget.

Secretary Of State Heller:

Madam Chairwoman, just so that you know, we do have a bill draft [bill draft request (BDR)] in BDR 18-627 that is identical to this bill but does not include the increase. Whether that would come here or to Senate finance, I do not care how you want to work that, but there is a similar bill . . .

BILL DRAFT REQUEST 18-627: Makes changes concerning fees charged by the Secretary of State. (Later introduced as Senate Bill______ ).

Senator Raggio:

Well, if we act on the main part of this, then that bill should go to Finance, at that point.

Secretary Of State Heller:

OK.

Chairman O’Connell:

. . . I just have something that I want to ask you about that has to do with corporations, since this is what we are dealing with here. I have had several requests from constituents to have a bill that requires your office, when a corporation board is filed, that somebody cannot come in off the street and change the filing of that corporation without at least some record of minutes or some action by the corporation to allow that change. We have had a man’s business stolen from him, and a loss of $250,000 on a particular contract. When I checked with your office, I was told that “we are an administrative office not a regulatory office.” So anybody can go in and change a corporation without the person who is in charge of the original corporation knowing anything about it . So, they have taken over the business. When we are talking about being on the cutting edge of doing things, that seems to me pretty archaic that we are not addressing that issue.

Secretary Of State Heller:

Senator, you raise a great question, several times a year we run into those kinds of situations. We had a situation recently at the Stewart Indian Museum where a group came in that was unhappy with the way it was being managed and just changed the corporate paperwork on it and ended up, according to our office, being president, vice president and sitting on the board of directors. Those problems, of course, they come to our attention and what we do is we defer them to the district attorney’s office because we do not have any authority to deny a filing that does come into our office.

Ten years ago, under one of my predecessors, we changed the corporate laws in an effort to make it as easy as possible to do work here in the state of Nevada with as few regulatory layers as possible. This is one of the products that it does produce. So, yes, when you do have a situation like this that does occur and a complaint comes into our office, we have no authority to investigate it. The only thing we can do, if we feel it is a legitimate complaint, we get a lot of complaints, but if we feel it is a legitimate complaint then we turn it over to the district attorney’s office and it ends up in court. This is what happened in the case of the Stewart Indian Museum ending in district court and the court overturned the hostile group that came in and took over the company. So yes, those are concerns, but again without regulatory authority or some kind of layer of being able to police this, it is a very very difficult situation when you have a quarter of a million filings coming into our office every year. How much time do we spend on each one to make sure? If you are going to regulate that, what kind of policing arm would we have to have and what size to cover the tens of thousands of filings that come through that office every year?

Chairman O’Connell:

Could you not do it with a simple letter or request for the minutes showing where this action took place, as far as the board was concerned or the corporation was concerned? Would that not be a simple thing to have with the filing?

Secretary Of State Heller:

We could take a look at that as an option and the necessary statutory changes to do that. That was one of the arguments in the Stewart Indian case. They wanted to see the minutes of the board hearing that allowed them to take over this company. They did not have any minutes, although they claim they did have a board hearing. They just said they did not have any minutes. So, again we would be happy to work with you on that.

Senator Raggio:

Secretary Heller, is there any provision in the law that makes it unlawful to file an unauthorized document with respect to corporations of any kind, is there some law?

Secretary Of State Heller:

It is the district attorney’s office that does aggressively pursue this under fraud statutes. So, yes.

Senator Raggio:

There is a specific law?

Secretary Of State Heller:

It is against the law to come in and do that, but we do not send it to the attorney general’s office, since the jurisdiction is Carson City. We send all those over to the district attorney’s office, as opposed to sending it to the attorney general’s office. I do not know if that makes a difference since it is filed in our office. I have always thought that was odd that we would send it to a local district attorney’s office, as opposed to the state being more involved in the regulatory or the policing of this. But it does go to the local district attorney’s office and the attorney general’s office has told us that that is where those complaints are to be filed.

Senator Raggio:

I would like to ask our counsel to check that what specific provisions cover this kind of a situation. In other words, if somebody has filed a corporation they have a list of officers and somebody comes in and files an amended list of officers that is completely unauthorized. Could you check that for us?

Chairman O’Connell:

Well, I know that the two that are the most current that I brought with me, they have been dissuaded from doing anything but refiling. They have been told you can come back in and pay your money again and refile it even though the money that you paid is less than a year old and the new renewal has not even come out.

Secretary Of State Heller:

Well, their other option is to hire an attorney and take legal steps. I will tell you that this is not a huge problem in our office. Yes, this problem does occur.

Chairman O’Connell:

I think it is probably because people do not know about it. I wanted to bring that to your attention because I am thinking very seriously about a bill draft since we have one left. I wanted to hear if you thought there would be a big problem by simply requesting that they have to bring the minutes of a corporation with them in order to change.

Secretary Of State Heller:

I was going to say, if they are going to walk in and have the gumption to take over a company or file an amended list of officers, what would keep them from forging minutes of a board meeting?

Chairman O’Connell:

Well, I do not know that they would be that aware of all of the people on the original corporations listing. This is an area, I think certainly with the more that we are soliciting corporations to file here, that we need to address.

Secretary Of State Heller:

Just one question, are you requesting that every list of officers that is filed with our office include minutes?

Chairman O’Connell:

No, I am just saying if they come in and ask to change the slate of officers, they must have some evidence that this was an action taken by the corporation,

as opposed to just coming in and saying you know I want to pay my $85 and refile on this corporation.

Secretary Of State Heller:

I think a committee hearing with the Nevada bar [State Bar of Nevada] and the Office of the Secretary of State, and yourself and anyone else who’s interested, I think would be a healthy discussion.

Chairman O’Connell:

OK, anybody else with any questions for the bill? OK, thank you very much.

Secretary Of State Heller:

By the way, this is Renee Lacey, she is the new Chief Deputy Secretary of State, so I want to introduce her at this time. You will be seeing probably a lot more of her than me, if I am lucky.

Chairman O’Connell:

Committee, I know everybody is anxious to leave and if there is no further business to come before the committee at this time we will adjourn.

Senator O’Connell closed the hearing S.B. 46 and adjourned the meeting at 12:25 p.m.

RESPECTFULLY SUBMITTED:

Sherry Rodriguez,

Committee Secretary

APPROVED BY:

Senator Ann O'Connell, Chairman

DATE: