MINUTES OF THE
SENATE Committee on Government Affairs
Seventy-First Session
April 30, 2001
The Senate Committee on Government Affairswas called to order by Chairman Ann O'Connell, at 2:00 p.m., on Monday, April 30, 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 Terry Care
COMMITTEE MEMBERS ABSENT:
Senator Dina Titus (Excused)
GUEST LEGISLATORS PRESENT:
Assemblyman Bob Beers, Clark County Assembly District No. 4
Assemblyman Lynn Hettrick, Douglas County Assembly District No. 39
STAFF MEMBERS PRESENT:
Kimberly Marsh Guinasso, Committee Counsel
Juliann K. Jenson, Committee Policy Analyst
Sherry Rodriguez, Committee Secretary
OTHERS PRESENT:
Stan Brokel, Concerned Citizen
Dick Flanagan, Concerned Citizen
Al Kramer, Treasurer, Carson City
Robin Reedy, Director of Debt Management, Office of the State Treasurer
Marvin Leavitt, Lobbyist, City of Las Vegas
Bill Moell, Chief, Purchasing Division, Department of Administration
Renee Lacey, Chief Deputy Secretary of State, Office of the Secretary of State
Bru Ethridge, Administrator, Digital Signature Coordinator, Notary Division, Office of the Secretary of State
Brenda Erdoes, Legislative Counsel, Legal Division, Legislative Counsel Bureau
Chairman O’Connell:
We will go ahead and open the hearing beginning with Assembly Bill (A.B.) 61.
ASSEMBLY BILL 61: Provides certain restrictions relating to regulation of amateur service communications. (BDR 22-672)
Assemblyman Bob Beers, Clark County Assembly District No. 4:
I am bringing before you today A.B. 61. There are three pieces of information in your packets, the first is the folder, “Protecting Amateur Radio” (Exhibit C). The second is “Memorandum Opinion and Order in Private Radio Bureau (PRB) - 1” (Exhibit D). Third, is a letter (Exhibit E), the author of which will be available to answer questions for you.
Assembly Bill 61 came about because, the City of Las Vegas passed an ordinance prohibiting all antennas in an attempt to minimize the impact of cellular antenna towers on citizens. In the process, they inadvertently included amateur radio antennas.
Assemblyman Beers:
Amateur radio is the hobby side of radio broadcasting. Basically, we are radio hobbyists, we are precluded by law from charging for our services. Consequently, we end up donating millions of dollars annually to federal, state, and local governments in emergency preparedness services and equipment. When a disaster strikes, the first communications in and out of an area are almost always through licensed operators of amateur radio stations (hams). It was true during the very large earthquake earlier during the session up in Seattle, Washington. The communications for the first half day in and out of Seattle were through amateur radio operators. Many of these operators spend a tremendous amount of time and energy gearing up for just such emergencies. They have solar panels to power their radio sets, and portable antennas. Here, living on the edge of the Sierra Nevada we have a constant earthquake danger. Probably, in our lifetime, Mammoth may well go up in a very large puff of ash and smoke. These are important issues for Nevadans.
In the first folder (Exhibit C), on the second page you will see a copy of a citation dated after the start of the session. This was a pre-filed bill, the citation is dated after the introduction of this bill. The citation was issued to an amateur operator, his antenna is pictured on the third page, notices from the homeowners association are on pages 4 and 5, and a copy of the ordinance the City of Las Vegas passed is on pages 6 through 9. On pages 3 and 4 of the ordinance you can see mounted antennas of 15 feet or less are restricted.
Chairman O’Connell:
Assemblyman Beers, you said they inadvertently passed an ordinance including amateur radio?
Assemblyman Beers:
They purposely passed the ordinance, but the ham who went and talked to a city councilman was told everyone agrees this was an unintended consequence of their attempt to restrict cellular towers. But, they do not appear too eager to fix it, which is why A.B. 61 was drafted.
Chairman O’Connell:
On the other side, did you have any testimony from the city contrary to what your belief is, as far as the consequence to amateur radio operators being unintentional?
Assemblyman Beers:
We had testimony from the city they were supportive of this measure. On the other side, as it was originally drafted, the bill precluded homeowners associations from outlawing amateur radio antennas, which turned out to be quite controversial and ended up being amended out of the bill. The key target here is the city’s homeowners association management groups have agreed to work with me, over the interim, to explore ways we could have some limited-basis amateur activity in the homeowners associations.
The Memorandum Opinion and Order in PRB-1 (Exhibit D) is a Federal Communications Commission regulation. There is some highlighted text on the last and second-to-last page. This regulation states amateur radio operators are very important to federal, state, and local emergency preparedness efforts, therefore, cities cannot outlaw their antennas. What this bill does, it codifies this Nevada state law, reiterating the importance of this document to Nevada.
Chairman O’Connell:
Committee, any questions for Assemblyman Beers? Mr. Brokel, would you like to add anything to the remarks Assemblyman Beers has made?
Stan Brokel, Concerned Citizen:
I wanted to reiterate the importance of volunteerism in the use amateur radio as a volunteer organization. My position is purely as a volunteer. Many amateurs throughout the state of Nevada have their own equipment for which, in many instances, they have invested thousands of dollars of their own money, and which they are willing to use in times of emergencies for the benefit of the state. I think it is very important to pass this bill.
Chairman O’Connell:
Yes, Mr. Flanagan.
Dick Flanagan, Concerned Citizen:
I am the director of the Carson Valley Radio Club, a local organization of amateur radio operators. I am also the assistant Nevada section manager for the American Radio Relay League, which is the national organization for amateur radio. In these two capacities I represent 100 local amateur radio operators and over 1100 statewide. A fundamental principle of all radio stations, whether they are commercial, amateur, or any other, is they require two parts, a radio and an antenna. Neither can function without the other. To restrict an amateur operator’s antenna, is to restrict his or her very ability to operate. It is in PRB-1 (Exhibit D), the second to the last page, one of the highlighted items said exactly that. An antenna is vitally important to any radio station.
Here in Nevada, ham radio operators are training and preparing for emergencies, they do it all the time. When I moved to Nevada, I made the mistake of moving into a planned community with highly restrictive covenants, conditions and restrictions (CC&Rs). Fortunately, I was able to move my family about 6 miles away into an unincorporated area of the county where amateur towers and antennas were not unreasonably restricted. Unfortunately, last year my local county passed a strong anti-tower ordinance severely restricting amateur radio towers and antennas. This was, again, similar to Las Vegas, they were trying to control cellular antenna growth, and they caught amateur radio operators in that big net of theirs. I was able to move out of the CC&Rs and into the county, but now, with the county having these higher restrictions, now where do we go? Without the protection proposed by A.B. 61, the answer for a great many of us is, we go off the air. I am asking you to support A.B. 61 so the amateur radio operators may continue to provide effective radio stations with which to prepare and train.
Chairman O’Connell:
Questions, committee?
Senator O’Donnell:
What happens when there is a community with CC&Rs prohibiting this?
Assemblyman Beers:
You would not have any amateur operators there. There are actually a couple of different answers. I know amateur operators who have CC&R-approved flagpoles in their yard with all kinds of odd ingredients inside of them. I know another person who has a pole and antenna set up in his attic in a fairly small-lot CC&Red community. For most people, the answer is they go off the air. But, theoretically you make the decision when you move there, you have read the CC&Rs and you have agreed to them. In my case, I am an amateur operator who agreed to move into a CC&R antenna-restricted community. I can still operate on a particular line-of-sight frequency - with a “hand talkie” with no external antenna. But, it is only local and does not give me any long-distance capability. I am hopeful I can educate the community of homeowners association managers and lawyers as to some benign ways we can allow amateurs to operate in these communities on the frequencies allowing them to participate in emergency preparedness functions. After my initial discussions with them, I am pretty optimistic.
Chairman O’Connell:
It would seem as though people would realize the important role, as far as safety is concerned, and it would take precedence over, I am assuming, the visual thing people object to.
Assemblyman Beers:
Amateur radio is a technology-driven beast. It gets better and better every year, more and more efficient. They have antenna technologies available today with some fancy electronics in them that were not available 30 to 40 years ago. Many people, I think, have memories of the 1960s and the 1970s when the big tower across the street blew their television out for duration of the transmission. It is actually against federal regulation for an amateur operator to do that and it is happening less and less because of the efficiency factor, that is the ability to convert the electricity from the wall into a radio wave is increasing every year with new technologies. A lot of things can be done in the close knit communities where amateurs can benignly operate.
Chairman O’Connell:
I would think the police departments might be very helpful to convince and educate the general public, and especially in the homeowners situation, where, I am assuming, your big problem lies now. They should be able to educate them as to the importance of what you do.
Assemblyman Beers:
The police departments have some crossings of paths with us, mostly it is the county and state emergency preparedness arms. Fortunately, the majority of the activity under that umbrella is practice. We do it weekly. There are five, six, or seven regularly scheduled emergency practice sessions held every night of the week on different frequencies around the Carson-Truckee Meadows area. We are always constantly practicing. Interestingly enough, we just closed the emergency management budget late last week, our Joint Subcommittee on General Government of the Senate Committee on Finance and the Assembly Committee on Ways and Means increased to full-time, the state’s position coordinating the amateur community’s and the state’s emergency preparedness efforts. It is definitely important and a priority.
Chairman O’Connell:
Thank you, very much. Would anyone else like to speak on A.B. 61? If not, we will close the hearing on A.B. 61 and open the hearing on A.B. 96.
ASSEMBLY BILL 96: Revises certain provisions governing financial administration of local governments. (BDR 31-338)
Al Kramer, Treasurer, Carson City:
I am here to speak on A.B. 96, just to briefly go through it, it is composed of seven sections. The first section gives county school districts and cities with populations of over 100,000 the ability to invest in collateralized mortgage obligations. There are certain restrictions placed on this ability. What we are really doing is seeking to emulate what this state can do on these same things.
Section 2 does two things, it puts a nonnegotiable certificate of deposit (CD) in the list of allowable investments for cities, counties, and school districts. As a restriction, those CDs must be insured or collateralized. The second thing it does is it allows money market accounts to invest in certain assets other than securities of the federal government or agencies of the federal government. In other words, it allows those money market accounts to invest in some of the same things we are already allowed to invest in other areas.
Section 3 basically strikes the language usage of the word bondsman. It limits the requirements of using local banks to just demand deposits, allowing CDs to be purchased from non-local institutions. Section 4 cleans up language concerning deposits and institutions. Section 5 cleans up language concerning how the bank deposit is named. Section 6 changes the date the ex officio tax receiver delivers the assessment roll to the county auditor from “the third Monday in June” to “no later than June 30” of that year, therefore that roll would be as of June 30. It seemed the numbers, depending on what you looked at, just never agreed with each other. We thought we should make it June 30 for everything.
Chairman O’Connell:
The only thing coming to my mind is in some of the smaller counties we have some pretty unsophisticated people. I am wondering, when you were putting this together, I noticed it was the County Fiscal Officers Association of Nevada, was that aspect discussed at all?
Mr. Kramer:
Madam Chairman, yes, it was. If you look on page 2 of the bill, line 13, you can see where there are some limitations on who can do it. Understand, Clark and Washoe Counties do have the skills and the staff to be able to do these things, whereas most of the other counties, including Carson City, really do not. I am content to let it be done through the local government investment pool, if indeed it is going to be done.
Chairman O’Connell:
Committee, questions?
Senator Care:
Subsection 2, paragraph (b) of section 1, where it says, “Not more than 25 percent of such investments may be in notes . . . and actually, subsection 2, paragraph (a), “Such investments must not, in aggregate value, exceed 20 percent of the total portfolio . . .” what does it mean? If you start out, and let us say, one day the market value is 10 percent and as it rises in value and hits the 20 percent mark, are you going to start to sell it off? The 20 and 25 percent figures, is it market value or initial investment?
Mr. Kramer:
Senator Care, yes, in fact that is what we are really talking about. We are talking about, if we get to be where we have committed so much of our portfolio to one particular type of investment, in this case, collateralized mortgage obligations (CMOs), yes, as it says in here, we will sell them off as soon as possible. I do not think any of us anticipate actually putting 20 percent of our portfolio into CMOs. Basically, what it is saying is we cannot have more than 25 percent of the 20 percent in one specific CMO. So, the requirement is you cannot tie up more than 5 percent of your assets in the paper of one particular issue or one particular investment. None of us had any concern at all with saying 20 percent and if it gets close to 25 percent, selling something off. I do not think any of us anticipate going anywhere near that amount but, we wanted to limit ourselves.
Senator Care:
Page 4, line 6, where it addresses repurchase agreements, you may not be aware of it, but I think State Treasurer Brian Krolicki had requested two bills dealing with the master settlement agreement funds. In one of those, I believe Senate Bill (S.B.) 487 as initially drafted, it would have permitted these repurchase agreements and, if I am not mistaken, the clause was amended out. What exactly are those?
Senate Bill 487: Authorizes additional types of investments for money in certain public funds. (BDR 31-359)
Mr. Kramer:
Repurchase agreements are a very secure way of generally investing short-term money. For example, if you have a security, I can say, “Let me buy that security from you on the basis I want to hold it for 4 weeks or 6 weeks and, at the end of that time, you are going to buy it back from me.” Part of the agreement is, you will collateralize it for me at 100 to 102 percent. So, if something happens and it needs to be recalled, you have got money sitting in the bank with my name on it insuring my position. What we are saying here, on this particular money market fund, is we would allow those mutual funds to invest in many things. We are already allowed to do repurchase agreements in many areas. What we are saying is these money market accounts can actually have repurchase agreements where they agree to buy something and, on a particular deadline, they mature, but not necessarily on the maturity date of the security itself, but perhaps, in 30 days or 90 days the people we buy it from will buy it back from us with the interest prescribed upfront.
Senator Care:
OK, by holding such an instrument or buying it back in 30 days, there is no problem with the commissions eating up the bulk of the principle?
Mr. Kramer:
To be honest, when I do this, when I ask what the commissions are, I do not care; what I want to know is what do I earn on this after everything is taken care of, which is how we will deal with it. So, when I do a 90-day repo, and it is going to give me 4.7 percent interest, I know 4.7 percent is net, and it is annualized. Typically, it is one payment amount, you do not get it in installments, you get it at the end of the time period, and they just pay you back more money than you paid.
Chairman O’Connell:
Any other questions from the committee?
Senator O’Donnell:
On line 9, page 6, is it just old unnecessary language, or is there a bondsman group?
Mr. Kramer:
I am required to have a bond, a bond is posted, and I have a $100,000 bond on me. However, what this language is about is, for example, when Carson City was started, there was no insurance company you could get a bond from, there was no agency you could go through and do background checks and that sort of thing. What you did is, you would get some people together who would vouch for so-and-so. They were your bondsmen, and if you went to do something, they had to agree to go ahead and second you on your decisions. That is basically what this was talking about, in which bank you could invest funds. You had to go to these people who were vouching for you. The fact of the matter is, we have not done that in maybe 100 years. The language just represents another era.
Chairman O’Connell:
It is just as I thought, any other questions? Is there anyone else here wishing to speak on A.B. 96?
Robin Reedy, Director of Debt Management, Office of the State Treasurer:
I am just here to express our support of A.B. 96.
Chairman O’Connell:
Do you have any kind of a problem with this, Mr. Leavitt, do you think it is the thing we need to be doing?
Marvin Leavitt, Lobbyist, City of Las Vegas
This is a bill I do not have a problem with on its face. I think we just need to understand, if we were to draw a graph and down the left side we have the rate of return, and on the bottom we have risk, what we are doing here is we are moving up to guarantee a little bit more return and, at the same time, we are investing in something which carries a little more risk.
When we invest in federal securities, we essentially have no risk on the liquidity; and on the other side, (we ask) are they really going to be able to pay the money back. The risk we take, particularly depending on the term, is the changing market interest rate affecting the value of our bond, so, if we have to redeem it earlier than we planned, will it bear an interest rate that such we cannot get our value out of it. It is based on the length of time the bond has to mature: the farther out, the more risk you take; but, if the market rate of interest is going up, no matter how secure your bond is, if you hold it to maturity, if you need the money immediately, the price of your bond is going to go down simply because you could go out, in the existing market, and get an interest rate higher than the one the bond you are holding bears. In this particular case, there is a 5-year limit; you cannot go out more than 5 years, which, I think, is a reasonable period.
There is a limit on how much you can have in there, 20 percent of the total portfolio. As long as you understand, we are sacrificing a little bit of security for the possibility of earning higher interest rates, then that is essentially what it does. I think there are reasonable protections in the bill to guarantee the normal thing which should be done is being done.
I think the provisions allowing only a local governing entity with authority in areas with populations greater than 100,000 the ability to do it, indicates we are not going to have those who really know nothing about the market and know nothing about investments, and we have some guarantee they will not be involved in the transaction.
I do not have a problem with repurchase agreements, as long as they follow the proper processes. As the treasurer mentioned, you collateralize a little bit more than the value so, in case you have a change in interest rates, you have a little bit of protection.
So, all of these things, if they are handled properly, I think are reasonable investments and I think the controls in here, the limits and such, adequately protect us.
Chairman O’Connell:
Yes, Senator Care?
Senator Care:
Mr. Leavitt, is there a national organization of fiscal officers or some committee that might occasionally issue a letter or something of cautions regarding going above a certain point along the bottom (risks) line you described? It is easy for me to see what would happen here, we might enact this and then 5, 6, 10 years later, somebody says, “Well, that was safe enough, why don’t we just notch it up a little bit?” It is just like a kid going on a frozen lake, how far can you go before the ice starts to crack, and then you hope you can run back to the shore?
Mr. Leavitt:
One of the problems is, essentially, there is a general rule: the farther out in time you are going to need the money, you are going to have to have the resources. The more generous you can be in the types of investments you can make, for example, Public Employees Retirement System (PERS) has a wide variety of investments all the way from equities, to real estate, to bonds, pretty much the whole range of normal investments available, PERS has a situation where this is a long-term fund, most of the money to pay current benefits is not needed immediately and is not going to be needed in the foreseeable future so you can logically invest in equities and other things that would not be appropriate for a local government, or even the state, under normal circumstances.
However, when we look at the money for the state or for a local government, in general, most of our money is not this long-term. It is money we are going to use for projects or, depending on our need for cash, most of it we will need to use over the next year or 2. Because that is an additional restriction, the availability of what we can invest in is much more limited. So, normally we do not get involved in equities because of the short-term volatility of the stock market. So, we restrict ourselves to bonds.
I think there is a general rule, the shorter the term is where you might need the money, the more secure you want the investment to be.
Chairman O’Connell:
Anyone else with any questions? OK, we will close the hearing on A.B. 96 and open the hearing on A.B. 427.
ASSEMBLY BILL 427: Revises provisions relating to contracts for state purchasing. (BDR 27-694)
Assemblyman Lynn Hettrick, Douglas County Assembly District No. 39:
Assembly Bill 427 is a pretty simple bill. The way the scoring works on proposals, it was possible they could be scored with the categories separated. I had a person call me and say it was inappropriate. So, I sat down with purchasing after this was drafted and we came up with the language you see here.
Section 1 requires the State Purchasing Division to put in minimum bidder requirements for submitting a proposal. This is not up to the specifications of the minimum requirements for things like Associated General Contractors of America (AGC) and building requirements for public works, but it does allow the division to put in some minimum requirements to be met.
On page 2, the new language simply clarifies the fact it is a requirement and there is a new prescribed section 1 of this act. Lines 23, and 24 were our agreed upon language, which says, “as determined by the total scores assigned pursuant to subsection 3,” making it impossible to separate the scores. The issue was in some places it was appropriate for them to separate the price of a bid from the performance aspects of a bid. They agreed in the end, they ought to be combined and the total score ought to be the determining factor. That was the language we agreed to and I do not think there was any opposition.
Chairman O’Connell:
Committee, any questions?
Bill Moell, Chief, Purchasing Division, Department of Administration:
This bill memorializes current procedures for services for the procurement section of the purchasing division. We request a do pass from this committee.
Chairman O’Connell:
Anyone else on A.B. 427? OK, we will close the hearing on A.B. 427 and open the hearing on A.B. 266.
ASSEMBLY BILL 266: Makes various changes regarding notaries public. (BDR 19-648)
Renee Lacey, Chief Deputy Secretary of State, Office of the Secretary of State:
Basically, this bill is to provide some clarification and give us some authority to reject documents that do not have proper wording, and to implement a fee and create a fund for providing notary training. We currently provide free notary training within the office, but we do not have it budgeted. What we are asking is to limit the scope of the fee allowing a nominal charge for the training class just to be able to pay for the room and the printing of the materials. With respect to the training, we do find we do not get as many complaints or have to impose fines upon notaries who have attended the class. Most of the complaints are in regard to notaries who have never attended a class, who have just come in and applied and have been appointed notaries. The training has been successful in that respect.
In section 5, we are asking to be able to adopt regulations to establish procedures for the notarization of digital or electronic signatures. A bill allowing electronic signatures, Senate Bill 49 which adopts the Uniform Electronic Transactions Act (UETA), was passed out of the Senate Committee on Judiciary and then passed out of the Senate. It is now in the Assembly. If the act is adopted, we currently have no procedures for electronic notarization. The National Notary Association submitted a letter saying they thought at the same time the UETA is adopted, we should enact procedures for electronic notarization. What we did, in speaking with the committee, we offered to revise this bill so we could adopt regulations as necessary. There is currently a lawsuit pending over procedures, somebody apparently patented an electronic notarization procedure, and some of the other states, while they have adopted regulatory authority the patent holders have said, “You can only do it if you only use our procedure,” and until the lawsuit is settled, there would not be any uniform standards, which the reason we put the provision in here.
SENATE BILL 49: Adopts Uniform Electronic Transactions Act. (BDR 59-258)
Senator Care:
I do have a question on section 5, the electronic signature, please give us an example of how this would work with an electronic signature.
Ms. Lacey:
What would happen is a person would go to a notary, taking all the paper work, the electronic signature is so broadly defined just typing an X on the screen can be an electronic signature. It is sent through the Internet, usually as e-mail, and it would be accepted on the other side as long as both parties agree it is a proper means of acceptance. The way it is contemplated now, you go to the notary, the notary would watch you type your signature in on the screen, and there would be a paper copy the notary applies her seal to.
Bru Ethridge, Administrator, Digital Signature Coordinator, Notary Division, Office of the Secretary of State:
What would happen is, the client would go to a notary bringing the document in on a computer disc. They would insert the disc into a computer and bring it up. The client would then attach his or her digital signature or electronic signature to the document, the notary would actually be sitting or standing behind the document signer, watching the document signer affix the signature to the document. Then the notary would replace the document signer in the seat and attach his or her digital or electronic signature to the document and the notary seal. This is the procedure, but it is also a procedure which has been patented by another certification authority out of Utah. The states are leery about using the procedure at this point because it is patented. In order to use the procedure, the client and the notary would each have to have an electronic signature issued by the company holding the current patent.
Ms. Lacey:
The notary would stand there and watch all this happen, and if you still wanted the paper copy, the notary would attach a seal to the paper copy and you would have it. It would all be entered into the notary’s journal. This is why we do not have a specific procedure to put into the statute at this point. If this is adopted, we would need the ability to go forward.
Chairman O’Connell:
How may different ways could you do something electronically?
Ms. Ethridge:
There is not any general consensus, whether it is actually typing in your name and you do not have a digital signature, or if you need to apply for an electronic signature through one of the companies issuing the encrypted codes for attaching a signature. Another way other states are viewing it is because there are very few documents actually needing notarization aside from legal depositions where the document signer would have to take an oath before the court, the document signer could simply acknowledge his signature on a document. We believe such declarations will actually one day replace the signature. When you sign your name using a declaration, a notary would no longer be needed. So, whether or not we are going to stay with the acknowledgement as we understand it today, or whether the states will eventually go to the declaration, we do not know yet, because electronic signatures are so new and there is some discussion as to which is the best way to go.
Chairman O’Connell:
Committee, any questions? Do you do the same thing with a fictitious name on a corporation?
Ms. Ethridge:
It would depend on the type of wording required on the document. I have never seen a form for a fictitious name. It depends on whether or not it needs to be notarized. The creator of the document would determine whether or not they want the document signer to swear to the truthfulness of the contents of the document, or simply if they want the document signer to declare the statements are true. I think it is something our attorneys would have to answer.
Chairman O’Connell:
Interesting. Now, your two fees are $10 and $20?
Ms. Lacey:
We are actually not adding anything for fee increases; I think it is because of the voluntary training class and the fact we would like to charge a reasonable fee to cover those costs. None of our other fees are changing in this bill.
Chairman O’Connell:
OK, committee, anyone else on A.B. 266? OK, we will close the hearing on A.B. 266 and open the hearing on A.B. 542.
ASSEMBLY BILL 542: Makes various changes relating to personal property of state. (BDR 27-528)
Assembly Bill 542 is an agency housekeeping bill proposing to accomplish three things. First section, Nevada Revised Statutes (NRS) 333.220, allows the State Board of Examiners to determine the value of personal property to be managed in the state’s fixed asset inventory. Presently, the threshold for tracking via an annual inventory and through transfer of fixed asset documents is $500. With this amendment, the board of examiners would determine the threshold value to be included in the inventory.
The second proposed amendment is to NRS 333.300 to relieve the purchasing division of the time and expense of notifying vendors of bidding opportunities by traditional mail. The Purchasing Division uses e-mail, faxed messaging, and Internet advertising to notify vendors. Traditional mail is the method of last resort.
The third section allows for the accounting of the federal donable surplus property in the purchasing fund rather than the General Fund. This technical adjustment completes the steps necessary to implement the legislative base budget review and Governor’s fundamental review recommendations to combine the federal surplus budget with the purchasing budget.
All other parts of this bill are wording modifications necessitated by bill draft and we urge passage of this bill.
Senator Care:
In section 2, when you talk about notice to vendors, you deleted firms and corporations, and the word remaining is persons. Does persons contemplate firms or corporations?
Mr. Moell:
Yes, I believe so, it was a technical correction out of bill draft.
Chairman O’Connell:
I have had some concerns raised to me regarding people who were interested in the bid never receiving the notification. Can you tell me what the division’s practice is? The charges were only the people “they” wanted to get the bid were notified of the bid, and the other people who had indicated their interest did not receive notification.
Mr. Moell:
We had a problem a year ago with the Nevada Department of Transportation. It was during the changeover of commodity codes with the integrated financial system; the commodity codes’ structure changed, and when we sent out the original bid notifications, we left off half the vendors. We left off the asphalt portion and sent the bid notification to the non-asphalt portion. We had to cancel the bid and reissue it. It compromised some of the pricing and it was a serious problem. We corrected it immediately. We really have not had those complaints since, and we have taken extra steps to make sure it does not happen again.
Chairman O’Connell:
Is this done on the purchasing for all of the equipment things as well?
Mr. Moell:
Yes, it is done on all services and all procurements. We have been able to increase our vendor pool by allowing for vendors to sign up on-line, which has made a substantial increase in our vendor pool. So, we are sending out a lot more bids and requests for proposals.
Chairman O’Connell:
So, we are now reaching everybody?
Mr. Moell:
We hope so, we are certainly trying. I can tell you every vendor in our pool is getting a copy of the proposal for any commodity they are signed up for. We have had a couple of complaints, but when we go back with them to check the vendor sign-up form, they have not really been signed up for the particular commodity.
What happens is, when vendors want to be in our vendor pool, we give them a form to go through and check any commodity they think they might want to receive proposals for, then we send out our notifications based upon the commodities a vendor has checked. So, if they did not check a commodity for 10-wheeled dump trucks, and they sell 10-wheeled dump trucks, I cannot anticipate it, but, if they have checked 10-wheeled dump trucks, I guarantee you, they get a copy of the bid.
Chairman O’Connell:
Any other questions? OK, we will close the hearing on A.B. 542 and open the hearing on A.B. 601.
ASSEMBLY BILL 601: Restricts ability of state agencies to enter into certain agreements to purchase real property. (BDR 31-1106)
Brenda Erdoes, Legislative Counsel, Legal Division, Legislative Counsel Bureau:
I would like to start by explaining what makes this bill or some action by the Legislature potentially desirable is a test case we just got the ruling on April 12, 2001. In the test case (Employers Insurance Company of Nevada v. State Board of Examiners), the Hancock decision, which was a long-standing case from 1970 (Nevada Building Authority v. Hancock, 86 Nev. 310,468 p. 2d 333 [1970]), was distinguished as to lease-purchase agreement for real property. What that means to you is, after the Hancock decision, any state agency could enter into a lease-purchase agreement using the rental payments in their budget and could commit beyond the biennium as long as they had a non-appropriation clause in the lease.
This was a very short and simple bill draft request (BDR), it just said, “A state agency cannot enter into such an agreement without that agreement being approved by the legislature or the Interim Finance Committee.”
What caused the first reprint on this bill was an amendment requested by the Assembly Committee on Government Affairs. It originally started out requiring such agreements be approved by the legislature, and the committee added the Interim Finance Committee. It was the only change they made.
This bill is very simple, it says you cannot do a lease-purchase agreement without approval of the legislature. This bill contemplates, as you authorize projects, you would also then, on a case-by-case, project-by-project basis, determine whether you wanted to authorize such things as certificates of participation or other added provisions to such leases. There is another bill, Assembly Bill 567, this bill was requested by the treasurer.
Assembly Bill 567: Revises provisions governing state financial administration. (BDR 30-358)
Ms. Erdoes:
The first 16 sections of it contain provisions very similar to this bill. What those sections do is provide a procedure through which a state agency could go forward with lease-purchase agreements. I would direct your attention to page 3, line 12, of A.B. 567. It says before a state agency may enter into such an agreement, if it is $50,000 or more per year in the agreement, it has to be approved by the State Board of Finance, if it is $100,000 or more per year, then it would have to be approved by the legislature. So, it is a big part of the difference between these two bills; A.B. 567 also has certificates of participation already in it, so if you approve A.B. 567, then you would not authorize projects or leases on a case-by-case basis. I think those are the major differences.
Senator Neal:
Let us get the benefit of your knowledge. Under what circumstances would a state agency be required to enter into a lease-purchase agreement outside of its budgetary restraints approved by the legislature?
Ms. Erdoes:
I think the answer would be, if the state agency felt it was going to stay on the property for the foreseeable future, and perhaps, it was more cost-efficient for them to enter into a lease-purchase agreement. In other words, I think the landlord would have to be agreeable. But, the idea would be for somewhat similar payments per month which you are going to make anyway, staying there to rent the building, you could ultimately purchase it and the state would own it.
Senator Neal:
Would it be better to have language in the law permitting them to enter into these agreements when it would reduce the costs to the state, rather than saying you have to have it approved?
Ms. Erdoes:
You certainly could. I think the concern or what you might want to balance with it is you would have a lot of different agencies out there determining what the state was going to eventually own. In other words, could it be, we have a number of state agencies renting space in strip malls, would the state want to purchase those kinds of strip malls? The ultimate decision may also be affected by the age of the building you want to buy in 20 years, the normal term of a lease-purchase. Will it still be worth what you are paying for it? That kind of a decision.
Senator Neal:
Would the agency have that thought process available to them with the passage of this bill?
Ms. Erdoes:
With the passage of A.B. 567, which is currently in the Assembly Committee on Ways and Means, the treasurer would actually work with them is how it would work. For the more expensive payments, perhaps there would be centralized expertise. I honestly do not know what the expertise of the different division heads would be, but it is the division head level where these decisions would be made.
Senator Neal:
But you would have that expertise with the finance group the Governor is a part of, the State Board of Finance?
Ms. Erdoes:
Correct. The other thing you might want to balance in here is, if the legislature decided to build a state office building, perhaps another one in Las Vegas or one here, the decision might need to be coordinated with these kinds of lease-purchase agreements. You would not want to have a lot of those out in an area where you were going to build a state office building.
Chairman O’Connell:
Committee, questions?
Senator Raggio:
The Senate finance committee and ultimately, the Assembly ways and means committee, are looking at a proposal the university has to acquire the Old Town Mall. I have been meaning to ask you whether this is tailored to be appropriate, since we have received that decision, what would be necessary to have the purchase qualify so the entire lease-back provision and the total cost is not chargeable or included in the state debt? Am I asking the right question?
Ms. Erdoes:
I think I understand the question; I believe the answer is, it may well be a good project for this because they have already estimated the rents they would have paid if they were not buying would pay for the debt service. Only one thing would have to happen here: the seller has to agree to the lease-purchase agreement arrangement. In other words, they would not get the money up front unless you went into a certificates-of-participation type of arrangement, in which case, they might get the majority of the money up front and it may not change the deal much.
Senator Raggio:
Would it have to have a non-appropriations clause in it?
Ms. Erdoes:
Yes.
Chairman O’Connell:
Committee, any other questions? Anyone else here who wishes to address A.B. 601?
Ms. Reedy:
One of the benefits of A.B. 567, as opposed to A.B. 601 would be everything would be centralized. The other is, it gives agencies some parameters they can follow, knowing the dollar amount and who they can ask. On the under $50,000 annual cost limitation, it still has the provision requiring it to be within their budget already. So, they could not just arbitrarily decide to buy a building or buy land. We have worked toward the supreme court case, I think we encountered everything one could encounter to define our bill, and we think we have covered everything the market would want if we were to issue certificates of participation.
Chairman O’Connell:
One thing has troubled me, because we have seen some situations where agency heads have entered into lease agreements and then broken those leases within a very short time, maybe it was a 10-year lease and they did not stay 2 years, do agency heads have the authority to do this without the consideration of any oversight?
Ms. Reedy:
I would not be familiar with that aspect, you would have to talk to a lawyer. But in the lease-purchase, we have set parameters: if it is under $50,000 in annual costs, there is a group of rules; when it goes to $100,000, there are those rules plus another set of rules which include approval by the head of the budget, and treasurer’s office, and it has to go through the board of finance. Then, more than $100,000, again, another group of rules come into play. So, it is fairly detailed to eliminate those problems to a degree.
Chairman O’Connell:
You are speaking to a bill we do not have in our possession right now.
Ms. Reedy:
Yes, A.B. 567 is still over in the Assembly.
Senator Raggio:
I did not quite get the connection, if A.B. 567 comes here and it is approved, do we still need A.B. 601?
Ms. Reedy:
I would think not, it would be an either-or situation.
Chairman O’Connell:
Yes, A.B. 601 leaves everything in the legislature’s hands, is my understanding; and A.B. 567 goes to the different committees, depending on the level of the lease-purchase we are talking about.
Ms. Reedy:
We picked those numbers, the $50,000 to $100,000, because of what it could potentially buy, knowing $50,000 a year probably is not going to get as much and would not need as much scrutiny as something between $50,000 and $100,000, and certainly something over $100,000 a year.
Chairman O’Connell:
Perhaps one of the reasons for the difference, even though one depends on the legislature and the other one depends more on the administrative area, is with A.B. 567, you can have a reaction before the legislature comes back into session. I do not know if interim finance could give the authority for doing something like this, I suppose they probably could, could they Ms. Guinasso?
Kimberly Marsh Guinasso, Committee Counsel:
According to subsection 1 of A.B. 601, you are correct; it would either be the legislature or Interim Finance Committee.
Chairman O’Connell:
In A.B. 567, it is totally within the administrative division, and A.B. 601 is in the legislature.
Ms. Reedy:
The legislation is involved. Again, it is still going through committee in the Assembly. We have discussed the possibility of changing the language to include the Interim Finance Committee. We also have language in there with the Division of State Lands, so there is coordination. In the development of our bill, we did talk with public works, state lands, and virtually every agency in the state to make sure we were not stepping on their toes, or thinking we understood something we did not understand.
Chairman O’Connell:
Do we know who requested A.B. 601?
Ms. Reedy:
All I know is it was suggested through the Assembly ways and means committee. I would have to assume it was because of the Supreme Court decision. There is definitely a need for a bill. We need to codify the responsibilities they gave us.
Chairman O’Connell:
Committee, questions?
Senator Neal:
In looking at A.B. 567 in which you referred to the definition of agreement, in section 4, you have disjunctive language there between the “form of a lease” and “agreement to pay in installments.” Can you tell me why the language “or” is necessary?
Ms. Reedy:
The lawyer suggested the specific language when we brought it to the bill drafter; I do not know.
Senator Neal:
The language seems to suggest, as it does in A.B. 601, we are talking about two separate things. I wanted to know whether or not it is the case, since we started this discussion off in terms of lease-purchase agreements. Now it seems to me, the language goes further and talks about paying in installments. Maybe Ms. Guinasso can help me out. The same language seems to appear in A.B. 601, at line 13 on page 1.
Chairman O’Connell:
Ms. Guinasso, what would happen if you were to have a balloon payment at the end of each year, so you have paid the regular lease payment, but at the end of each year you would pay a balloon payment?
Ms. Guinasso:
Yes, Chairman O’Connell, it would be another form. Both bills are trying to include examples of these types of agreements. You will notice the language says, “including without limitations,” so what is being contemplated is to give examples of these types of agreements without creating an exclusive list. There might be other examples not specifically contemplated here, but pursuant to the general description of what an agreement is for the purposes of these bills, the language from lines 9 to 14 on page 1 of A.B. 567 or lines 12 to 17 on page 1 of A.B. 601 would cover them. Does that answer the question?
Senator Neal:
I just wanted to know if we are talking about two separate things, and if we might allow something here we did not foresee.
Ms. Guinasso:
The limiting language would be found, for example, in A.B. 601, lines 12 through 17, what we are saying, generally, is it means an agreement to purchase property in the form of a lease or an agreement to pay in installments extending over the biennium, in other words, over a period beyond which a specific appropriation has been made. Subparagraphs 1 and 2 in A.B. 601 are an attempt to try to describe the types of agreements this would contemplate. But, it would be any agreement to purchase the property taking place over a period of time, for which installment payments were made, regardless of the timing or the method by which it occurs. For example, Senator O’Connell’s example where a balloon payment is due at the end of a period of time would also be included in this type of an arrangement.
Chairman O’Connell:
Anyone else on A.B. 601? OK, we will close the hearing on A.B. 601.
Chairman O’Connell adjourned the meeting at 3:18 p.m.
RESPECTFULLY SUBMITTED:
Sherry Rodriguez,
Committee Secretary
APPROVED BY:
Senator Ann O'Connell, Chairman
DATE: