MINUTES OF THE
SENATE Committee on Transportation
Seventy-First Session
March 1, 2001
The Senate Committee on Transportationwas called to order by Chairman William R. O'Donnell, at 1:33 p.m., on Thursday, March 1, 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 William R. O'Donnell, Chairman
Senator Mark Amodei, Vice Chairman
Senator Lawrence E. Jacobsen
Senator Maurice Washington
Senator Raymond C. Shaffer
Senator Terry Care
Senator Maggie Carlton
GUEST LEGISLATORS PRESENT:
Senator Ann O’Connell, Clark County Senatorial District No. 5
Senator Randolph J. Townsend, Washoe County Senatorial District No. 4
Senator Michael (Mike) A. Schneider, Clark County Senatorial District No. 8
STAFF MEMBERS PRESENT:
Donald O. Williams, Committee Policy Analyst
Alice Nevin, Committee Secretary
OTHERS PRESENT:
Ann C. Pongracz, General Counsel, Sprint
Gardner F. Gillespie, Lobbyist, Legal Counsel, Cox Communications
Elizabeth Sorenson, Lobbyist, Communication Workers of America (CWA) Local 9413
Danny L.Thompson, Lobbyist, Nevada State AFL-CIO
Berlyn D. Miller, Lobbyist, Nevada Development Authority
Karen L. Pearl, Lobbyist, Nevada Telecommunications Association
Steve G. Schorr, Lobbyist, Cox Communications
James T. Endres, Lobbyist, AT&T
Margaret A. McMillan, Lobbyist, Sprint
Stephanie Tyler, Lobbyist, Nevada Bell
Robert Gastonguay, Lobbyist, Nevada State Cable Telecommunications Association
Kami L. Dempsey, Lobbyist, Las Vegas Chamber of Commerce
Samuel P. McMullen, Lobbyist, AT&T
Ryan J. Works, Lobbyist, Nevada State Chamber Association
Frankie Sue Del Papa, Attorney General
Jeff Fontaine, Deputy Director, Nevada Department of Transportation
Brian Hutchins, Chief Deputy Attorney General, Transportation and Public Safety Division, Office of the Attorney General
John T. Price, Division Administrator, Federal Highway Administration
James A. Polito, Ph.D., Bureau of Consumer Protection, Office of the Attorney General
Robert A. Ostrovsky, Lobbyist, Cox Communications
Joe Crowley, Ph.D., Lobbyist, University and Community College System of Nevada
Edward Anderson, Director, System Computing Services, University and Community College System of Nevada
Chairman O'Donnell opened the hearing on Senate Bill (S.B.) 195.
SENATE BILL 195: Revises provisions governing issuance of certain permits to occupy or encroach upon state highways or rights of way. (BDR 35-932)
Senator Ann O’Connell, Clark County Senatorial District No. 5, stated currently there were government agencies that are holding up, or blackmailing, businesses who were working on certain projects. She stressed businesses were being stopped either in the middle of a project, or not allowed to begin a project until the government succeeded in getting what it wanted. She stated this was totally unacceptable.
Senator O’Connell continued she had been approached about this problem during the interim period. She noted a particular agency was asked to come before the Legislative Commission so that this issue could be resolved; but nothing was solved during those meetings. Senator O’Connell emphasized it was incumbent on individuals who felt strongly about economic development to see what could be done to resolve this issue. She continued there were also complaints about lack of information as to how the collection of certain funds would be used. She noted the Governor had become involved in this issue and had requested that it be examined and resolved within 20 days.
Senator Randolph J. Townsend, Washoe County Senatorial District No. 4, said the reason for this testimony was the issue of rights-of-way; how allocated and processed, and the payment potentially extracted from a particular utility. He stressed two points: government should not be extracting anything from the private sector, legally or illegally, because “the definition of extortion is something ugly.” He expressed if wires or fiber need to be laid, a Request For Proposal and the bid process should occur; this would allow a utility to proceed to work for the economic good of the state and all of its citizens. He said the second point was why businesses were stopped; and why this particular governmental agency had gotten into competition with private business in the telecommunications field. He voiced that there were plenty of private sector telecommunications groups to enter into competition to improve the technology. He said “to interrupt those market forces is inappropriate in a free enterprise society.”
Senator Townsend said he testified, on September 25, 2000, when the Legislative Commission conducted hearings on Nevada Department of Transportation (NDOT) activities. He stated at that time it was thought that the utilities and NDOT were attempting to negotiate a mutually acceptable resolution to these issues. He acknowledged public utilities were subsequently provided a bill draft request (BDR) from NDOT which sought legislation to extract payments to state agencies, as a franchise fee or a donation of in-kind facilities, as a condition of public utilities receiving access to state highway rights-of-way.
Senator Townsend continued the proposed regulations were circulated and workshops were held. These regulations placed new restrictions on the use of rights-of-way by public utilities; they suggested to gain right-of-way access, utilities were required to provide some economic benefit to the State of Nevada as an in-kind donation of facilities or fees in lieu. Proposed regulations, he stressed, also included provisions which appeared inconsistent with the Telecommunications Act of 1996, the state implementation of which was delegated by federal law to the Public Utilities Commission of Nevada and not NDOT.
Senator Townsend emphasized there were five basic issues on the bill:
First, the bill does provide legislative declaration that the efficient use of state highway rights-of-way, including construction and maintenance of public facilities, and those rights-of-way, is essential to the general welfare of Nevadans and the economic progress of this state.
Second, consistent with that public policy, the bill provides legislative guidance to NDOT on the basic process that should be used for processing applications for occupancy or encroachment permits by regulated public utilities. It goes on to talk specifically about those written regulations being promptly processed, with published notice, and it is very important that the public may participate in these. It also says specifically in that section that NDOT could not specify the size of the public utilities facilities, installed or maintained; the state cannot extract anything of value from the public utilities and certain practices cannot be applied because they would inhibit the expansion or improvement of the state utilities structure. Lastly, in that section, the public utility need only to prove its title of real property related to rights-of-way as a condition in the permit application process.
The third issue in this bill makes it clear that a permit issued by NDOT does not give a public utility anything but a license to occupy the state right-of-way, to the extent that NDOT’s interest and no interest in real property is given away to the utility.
Fourth, the bill allows public utilities to make emergency repairs without first obtaining a permit because the health and safety of the public of Nevada comes first.
Lastly, the final objective is to ensure that if state and local government agencies cause physical damage to the public utility, the government will pay for the damages.
This is a straightforward bill, one that has had a great deal of intellectual capital applied to it over the last 24 months or so. The people who will be testifying behind us, whether it is the telecommunications industry, the energy utilities or the important people that actually go out to dig the holes in the ground, lay the wires, and do all of those things, that actually make these things work, have a deep, deep concern about what is going on. That is the essence of the bill.
Senator Schneider stated that he served on the Legislative Commission, and emphasized Senator O’Connell’s testimony was totally accurate.
In response to Chairman O'Donnell’s request for examples of specific problems, Senator O’Connell said there were three projects brought to her attention during the interim period. She continued these projects were either under orders from the Public Utilities Commission of Nevada to begin work or stopped mid-term, with no reason given.
Senator Townsend said there was an incident in northern Nevada of a 9-month delay with no apparent rationale for stopping the project other than the need to develop a policy.
Senator Washington asked Senator O’Connell if there had been an opportunity to contact the director of NDOT to relay those concerns. She replied both sides were asked to meet and although it appeared after the meeting there would be cooperation of both sides, it did not occur.
Senator Care said he read the bill and wondered why it was needed. He expressed that this issue should have been resolved without a bill. He noted he could not comprehend why the state would be involved in blackmail and this issue needed to be resolved.
Chairman O'Donnell said, “There were several opinions as to what has occurred and this body will determine what is the best public policy and it will be done.”
Senator Townsend commented that agencies need things and if this was a creative way to enhance departmental budgets in order to serve the citizens of the state of Nevada, there would be respect in that. He added the Legislature respects the challenges faced in the various budgets; but there is a better way to do things.
Senator Washington said if projects have been stopped so that a policy can be formulated, there is a real problem to address and correct.
Ann C. Pongracz, General Counsel, Sprint, testified for S.B. 195. Ms. Pongracz noted that she was not intending to cast dispersions on any individuals at NDOT or on their willingness to make efforts to help solve these problems. She added, in working together on these problems, it was clear that their effectiveness in addressing the issues appeared to be constrained by the existing statute.
Ms. Pongracz said there had been a number of very serious problems in attempting to get Sprint’s facilities installed throughout the state of Nevada. She acknowledged the problems began in the spring of 2000, when there were severe delays in permit processing by NDOT. She noted this bill presented solutions to the major problems experienced in the year 2000, where there were substantial obstacles to the installation of telecommunications and cable television (TV) facilities needed to provide services to consumers throughout Nevada.
Ms. Pongracz said, in 2000, urban and rural telephone, and cable TV companies, began to experience severe delays in the processing of their permit applications for placing facilities on state highway easements. She noted this was due largely to two changes NDOT made to their processing of permit applications. First, NDOT began requiring applications to include proof of a recorded easement, instead of the consent of the underlying owner, which had been accepted in the past. Second, NDOT began to attempt to utilize the permitting process to require telephone companies and cable TV companies to donate facilities to the state as a precondition of being granted a permit.
Ms. Pongracz pointed out sections 1 through 4 of the bill were devoted to statutory references and definitions. She said these sections clarify the terms of the bill that apply to telephone and cable TV companies, as well as to other entities providing public utility services. She explained the more substantive provisions of the bill began with section 5.
Ms. Pongracz presented proposed solutions to S.B. 195:
Section 5, subsections 1 through 5, set forth process requirements similar to the statutory timelines applied by the Nevada Revised Statutes (NRS) to other state agencies, including the Public Utilities Commission of Nevada. These process guidelines are included to ensure that permit applications are processed fairly and efficiently.
Section 5, subsection 6, paragraph (c), prohibits NDOT from requiring proof of title prior to the granting of an easement. This provision straightens out the confusion regarding easements which began to slow down the permitting process in 2000. Prior to 2000, NDOT followed its regulations in Nevada Administrative Code (NAC) which allowed a permit to be granted if the applicant showed the consent of the underlying owner for the utility occupation of the property.
We did not object to this past procedure. But, in the year 2000, NDOT began to require provision of a proof of an underlying recorded easement. This single change has resulted in multiple delays in permitting for many companies. Mr. Gillespie will explain why such a requirement is not necessary or appropriate under federal or state law.
Section 5, subsection 7, makes it clear that obtaining a permit to locate facilities in state rights-of-way does not grant the public utility company any ownership rights or interest in the right-of-way.
Section 5, subsection 8, requires public utilities to indemnify NDOT as well as themselves if there is any challenge to the company’s right to occupy the state highway.
Section 6, subsection 1, and section 9, subsection 3, make it clear that construction of a public utility facility is a legitimate use of state highways, in accordance with a number of federal laws, which Mr. Gillespie will explain in a few minutes.
Similarly, section 7, subsection 1, paragraphs (a) and (b), confirm the authority of NDOT’s planning division to ensure the efficient maintenance and use of facilities located within the boundaries of state highways and rights-of-way.
Ms. Pongracz continued:
Other sections of the bill set forth the commitment of the industry to pay for costs incurred through the permitting process, in addition to our commitment to indemnify NDOT in case of a legal challenge to a utility’s right to use a highway easement contained in section 5, subsection 8. Section 8, subsection 1, specifies that public utilities must, at their own expense, return the highway to the same good condition it was prior to construction. Section 8, subsection 3, specifies that public utilities will compensate NDOT for all costs NDOT incurs in reviewing permit applications and supervising their implementation, to include inspection costs as well as the costs of NDOT’s initial permit review.
Section 5, subsection 6, [paragraph] (b), precludes NDOT from imposing a condition upon the issuance of a permit which requires the applicant to donate facilities to the state. The companies involved in developing S.B. 195 already pay substantial fees for use of rights-of-way in this state and in 2000 alone these fees ran into the tens of millions of dollars. In addition, the companies make a commitment in the bill to support NDOT’s recovery of all of the costs NDOT incurs in connection with processing and implementing permit applications.
Ms. Pongracz concluded her testimony saying:
We strongly oppose use of the permitting process to force applicants to donate facilities to government agencies. We believe that the various telecommunications and cable TV companies active in this state are quite able to provide the full range of services to residential, business, and government consumers throughout the state. We do not believe that the NDOT permitting process should be used to position government agencies to compete with private industry.
Ms. Pongracz introduced Gardner F. Gillespie, Lobbyist, Legal Counsel, Cox Communications, to discuss legal issues regarding the impact of the Telecommunications Act of 1996; federal legal limits on franchise fees; easements and whether this bill affects the ability of the state of Nevada to participate in federal highway programs.
Mr. Gillespie said he had dealt with right-of-way issues for many years. He stressed there were cases across this country of when an easement is given, the property owner gives up the right to complain about any use of that easement that is consistent with the original grant. He declared that easement may be apportioned for use by other entities as long as the use is consistent with the original grant. Mr. Gillespie noted there are many cases in which state highway easements have been held to be sufficiently broad to cover the use of utility facilities in those easements. He said the cases say the easements should be broadly construed for that purpose. He stressed the property has not been disenfranchised because the property owner has given up that right.
Mr. Gillespie said that he had prepared a memorandum for NDOT on this issue in December and he would make a copy of the memorandum available to the committee. He clarified when NDOT required a utility go back to the property owner and obtain another recorded easement or the consent of the property owner, the agency was giving the owner a right that the owner did not have by law. He noted, for example, Cox Communications would then have to go to the owner and ask for the consent or the easement. But if the property owner has already given away that right, NDOT has no right to require it to be obtained again.
Chairman O'Donnell reviewed:
When an owner gives away an easement, through a recorded document, there is no remuneration after that point. NDOT is exacting a fee and in-kind donations from the utility, in essence determining that the land that was supposedly “free” now has value and can be exacted in terms of dollar amounts.
Ms. Pongracz added the important proviso is it has to be use of the easement that is consistent with the purpose of the initial grant. She said if another type of company would want to come in and request a permit to construct an amusement park, for example, that would not fall within the case law because it would be outside the purpose of the initial grant.
Mr. Gillespie said when an easement is given for an electrical utility, to run wires across a property, the case law finds that the easement may then be apportioned to handle the next technology. He noted no additional compensation was due to that property owner when the telephone business came along to string telephone wire; and, cable TV had also been able to piggyback on those same rights.
Mr. Gillespie stated:
The bill is entirely consistent with both the communications act and also the federal highway statutes and regulations. The Communications Act of 1934 has been amended over the years in a couple of significant ways; there was a cable act amendment of 1984 [Cable Communications Policy Act of 1984] and the federal telecommunications act amendments of 1996.
The Telecommunications Act of 1996 has as a central tenet the belief that the public is benefited when there is private development of the communications infrastructure and that it should be encouraged. It is that central thesis which provides the basis for tens and twenties of pages in the Telecommunications Act of 1996. Specifically, in the cable act, which is part of the communications act, there is a provision that limits franchise fees that can be collected by state and local governments together, from cable operators, to 5 percent of gross revenues.
Cox Communications, for example, pays a 5 percent franchise fee on gross revenues in each of the jurisdictions in which it operates in the state. So, Cox is already at the federal limit and that limit would apply not only to the municipal governments, but also to the state. The cable act does not distinguish between the state and its political subdivisions. Cox itself cannot be charged any more than the fees it already pays which are significant.
I would also like to note that S.B. 195 was specifically drafted to be consistent with the requirements of the federal highway regulations and statutes; in particular we wanted to make sure that it would preserve the state’s rights to federal funding and we are confident that the bill, as drafted, does preserve the state’s rights to funding and it will not create any problems in dealing with the Federal Highway Administration (FHWA).
Senator Washington said it has been indicated that tens of millions of dollars had been extracted. He asked if there had been an accounting of that money.
Ms. Pongracz clarified there was no objection to the payment of franchise fees which were in the tens of millions of dollars. She said that was the most appropriate type of mechanism for companies to pay for the right to utilize rights-of-way. She stressed she would not want to use the term “extracted” in that context. She noted the fees were paid by Sprint and Cox Communications to each of the municipalities in Clark County and that was a matter of public record.
Mr. Gillespie presented two memos sent to Jeffrey Fontaine [Jeff Fontaine, Deputy Director, Nevada Department of Transportation] for the record (Exhibit C).
Senator Amodei verified the two memos had been sent to NDOT. Mr. Gillespie responded the first memo, “NDOT ROW Steering Committee Issues,” was sent on November 27, 2000; the second memo, “NDOT Proposal to Require Permission from Underlying Landowner to Use Public Highway Easements,” was sent December 6, 2000.
Senator Amodei asked Ms. Pongracz if she knew what “exactments” were required that this bill would seek to prohibit in terms of dollar value today. Ms. Pongracz answered no and she said one of the biggest concerns is that valuation of facilities is a complex matter and would be subject to having an unfair impact on one applicant versus another applicant. She noted legal tender would make it clearer.
Senator Amodei asked:
What is the scale of the conduct that is at issue for purposes of this bill? Has this been done in any contracts before today or is it all prospective in nature? Are there improvements in the ground that were placed there as a result of a condition of a permit?
Mr. Gillespie replied:
We do understand that there have been two companies that have agreed to provide in-kind facilities in order for them to be granted permits. I do not know what the valuations were for these but one company was reputed to have given facilities worth well over one million [dollars] and the other company has promised to give facilities that are well over one million [dollars] in their valuation.
Ms. Pongracz said:
We addressed this issue back in the early nineties in Clark County when, as part of the franchising process, a few new entrants were subjected to requirements by Clark County and the City of Las Vegas to donate facilities rather than paying a franchise fee. The administrative challenges, as well as our concerns about discrimination, gave rise to what became the Clark County Right-of-way Ordinance [Exhibit D]. This document provides a very useful mechanism and point for comparison because it shows how you can apply a franchise fee structure for subscriber services such as those that our companies provide; and a rental fee, a per-foot fee, for companies that wish to place facilities in a right-of-way but do not have subscribers.
Mr. Gillespie said this issue came up at the local government level about 6 years ago. He stated the Legislature adopted legislation that limited the ability of local governments to extract fees over and above the 5 percent fees that most telecommunications and cable companies are now paying at the municipal level. He stressed this prohibited the ability of local governments to extract in-kind compensation for this issue. He emphasized the Legislature has already agreed with the general policy that is contained within this bill, but it has not been applied to the state, only to municipal governments.
Senator Washington asked for clarification of the timelines discussed in section 5, subsection 2, of the bill. Ms. Pongracz said there were serious concerns about this provision. She emphasized there may need to be an exception mechanism written into the bill; if there is a very large project and NDOT feels additional time is needed for consideration, notice could be provided to the applicant and a process of negotiation would begin to determine the timeline. She noted the Legislative Council Bureau analyst may have inadvertently left this section out.
Senator Washington asked if an amendment was needed and Ms. Pongracz said following further discussion, it might be necessary to request an amendment.
Elizabeth Sorenson, Lobbyist, Communication Workers of America (CWA) Local 9413, said she supported the bill. Ms. Sorenson said she represented Nevada Bell employees and it was important to remove the red tape and allow the provision of the most up-to-date service for Nevadans.
Danny L. Thompson, Lobbyist, Nevada State AFL-CIO, testified in support of this bill. He noted rural Nevada is lacking in technology because of many delays and this bill will help resolve this problem.
Berlyn D. Miller, Lobbyist, Nevada Development Authority (NDA), testified in support of the bill. He said NDA had worked to encourage the installation of a more modern infrastructure in this state. He commented it was important to resolve this issue because the problem could prevent new businesses from coming into this state.
Chairman O'Donnell commented that action would be taken on this bill as soon as possible.
Karen L. Pearl, Lobbyist, Nevada Telecommunications Association, representing the small independent telephone companies in this state, presented (Exhibit E). She noted the exhibit contained information and statistics and her testimony for the record.
Chairman O'Donnell clarified that the company discussed received a denial and it was cheaper to go over private property than to expend the necessary time to comply with the requirements. He requested a copy of the letter of denial from NDOT. Ms. Pearl agreed to provide that information.
Steve G. Schorr, Lobbyist, Cox Communications, said concerns about this bill were two issues: the rural versus the urban communities. He stressed that to provide services to southern Nevada, permits were needed for new construction and for changing outdated cable and replacing it with fiber optics. He stated this would provide the broadband services that customers demanded. He acknowledged that there were several companies in competition to provide services and the competition ultimately would benefit consumers. He continued saying the concern was delays that had taken place in the permitting process.
Mr. Schorr continued that their franchise mandated when, how and at what time services have to be provided to customers who seek services. He stressed if the requirements are not met, a violation of the franchise would occur. He noted delays in the permitting processes have caused delays to local communities and the customers. He said:
Time is the essence. The need for speed within the community for the broadband services is growing on a daily, if not a minute-by-minute, basis. Those are the concerns that we have and those things that delay that service to the customer put us in a competitive negative position and also in a position of where we are unfortunately seen as the bad player on the part of the customer.
Senator Jacobsen asked the average time of the delays. Mr. Schorr said the delays vary, but currently a project requested in November 2000; and one in December 2000, both broadband enhanced projects, have not been permitted.
James T. Endres, Lobbyist, AT&T, said AT&T supports the bill. He noted AT&T had a similar experience with a small upgrading project to the cable network in Carson City. He said the project was stopped and delayed for examination because one facility employed in the upgrade was a fiber optic facility.
Mr. Endres said the industry worked with local governments in 1995 to construct a process where in-kind matter could be dealt with. He noted it was felt that a model had been developed which local and state governments could adopt as a method to receive franchise fees. He continued saying they could use the competitive open-market bidding process to acquire the necessary facilities and infrastructure they needed to expand and provide services to rural Nevada. He declared that AT&T is concerned with the whole in-kind notion and what it means. He questioned how much in-kind facilities a state agency can acquire and accumulate over time; thereby encumbering the state to continue the management, maintenance, repair and upgrade of the technology; thereby avoiding the process of examination that other agencies must do. Mr. Endres said he hoped this matter can be resolved quickly to provide relief for both the state and the industry.
Senator Carlton clarified if it costs the industry more to do business, those costs would be passed on to the consumer. Mr. Schorr replied that costs are passed directly on to the consumer through higher rates. Senator Carlton asked Ms. Pearl for her figures in rural Nevada and Ms. Pearl replied that the right-of-way application was abandoned altogether in one instance and the project was constructed through private property.
Chairman O'Donnell asked if Mr. Schorr, Mr. Endres and Ms. Pearl would work with the opposition to resolve this matter. Mr. Schorr answered yes, and stated the industry is very willing to work on this issue so that it can be resolved as quickly as possible.
Senator Amodei asked what had been done to work out the issue up to this point. Mr. Schorr said his company was involved in the September 2000, meetings and those discussions were not as successful as had been hoped. He noted it was felt that a committee should be established to discuss the issues over time. He stated he, Ms. Pongracz, and other industry representatives were involved in those discussions, but nothing was resolved. He explained in some cases there was no response to specific memos that were sent.
Margaret A. McMillan, Lobbyist, Sprint, stated that Clark County is growing rapidly and the most up-to-date technology is important to the area. She noted that permits must be processed as quickly as possible.
Stephanie Tyler, Lobbyist, Nevada Bell, said the bill represented a road map to create a fast-track process that encouraged infrastructure investment and private sector deployment of new technology in Nevada. She stated that over the past year, NDOT had struggled with how to handle an increasing number of permit applications for access to the public rights-of-way. She continued, stating the agency is the victim of an arcane permitting process that was based on an old utility monopoly model. She stressed it is NDOT’s primary job to build and maintain roads; however, those same roadways now represent the arteries that will carry the technology future of this state.
Ms. Tyler stated:
State policy makers say that competition and technology investment is a good thing but to benefit from this activity, and private investment, we need policies that will make it attractive for business to put dollars into Nevada. Most of these companies are national corporations that make business decisions as to where they deploy their capital investments. If they are given a choice between investing in a state that has clear, fair and non-burdensome right-of-way policies versus a state that has maintained outdated, drawn out and costly procedures, they will invest in the former. NDOT’s current policies dissuade capital investment and thereby cut into the property tax revenues that could be generated from the investment. From an economic development and technology friendly standpoint, we need to be able to say that Nevada is open for business.
Senate Bill 195 makes a clear policy statement that NDOT may charge a utility all the costs associated with processing right-of-way permits and managing the public rights-of-way. No more, no less. The bill also clearly places the liability on the utilities for any damage done while working in the right-of-way.
This legislation represents a crossroads for the state. The policies which guide future technology investment must be laid out in a clear established set of rules that encourage investment, not dissuade it. The future of remote Nevada communities is tied to the deployment of high-speed fiber optic links to these small towns. Similarly, our urban areas are experiencing constant demand for better, faster and higher-capacity facilities. We need a statewide set of rules that are fair to property owners, the state and companies that want to invest here.
Senator Washington said this issue should have been resolved so that the state can move forward. He stressed businesses have been lost because of the current procedures.
Ms. Tyler responded that legislative authority may be needed to establish the basic parameters that will create a policy to drive economic development in this state.
Robert Gastonguay, Lobbyist, Nevada State Cable Telecommunications Association, said a project in Carson City was stopped by an inspector from NDOT because of a permit technicality. He stated he had worked with NDOT to get the proper permit, allowing work to continue on the project within 1 week. He noted that he served on a steering committee during the interim which formulated some new policies so that maintenance-type projects, such as this project, would be expedited.
Kami L. Dempsey, Lobbyist, Las Vegas Chamber of Commerce, testified in support of the bill. She noted that the chamber opposed government in competition with private industry; had a strong interest in the technological infrastructure of the state and felt it is important to encourage technological development for businesses in the state of Nevada.
Samuel P. McMullen, Lobbyist, AT&T, discussed a possible amendment to section 7 of the bill. He suggested it be amended to add language “to promote and encourage the private sector development of the technological and communications infrastructure of the state.” He noted this should be a concurrent goal and planning objective. He stated, if requested, he would be happy to prepare an amendment to the bill.
Chairman O'Donnell asked if Mr. McMullen would work with the ad hoc committee to resolve this issue. Mr. McMullen answered that this is an extremely important issue for the future of the state. He stressed he would be glad to work on the committee.
Ryan J. Works, Lobbyist, Nevada State Chamber Association, said members enjoy the use of technology and benefit from private-enterprise endeavors as opposed to the expansion of the state bureaucracy.
Frankie Sue Del Papa, Attorney General, stated that she was observing the meeting from the Grant Sawyer State Office Building in Las Vegas.
Jeff Fontaine, Deputy Director, Nevada Department of Transportation (NDOT) said:
I want to diffuse one big issue right off the bat and I think that will allay a number of concerns and issues that have been discussed today. The compensation matter discussed in this meeting, of NDOT exacting, blackmailing or extorting financial compensation or in-kind service, we have done none of that. There was discussion about two utilities that did provide NDOT in-kind service; I assure you that those two particular utilities did so voluntarily. They came to the table willingly and felt it was the right thing to do. NDOT has not denied a permit based upon a utility’s unwillingness or uncooperativeness in regards to compensation and NDOT has no authority to require compensation except for one particular case. The department has the existing authority to lease the right-of-way that it owns.
We have not even exercised that option for utilities but we do routinely lease right-of-way for other purposes. The department recognizes the vital role utilities play in this state and are acutely aware of the needs of the telecommunications industry to rapidly expand their networks to meet their customers’ demands for service. I believe over the years NDOT has tried to work cooperatively with utilities to allow them to occupy rights-of-way.
Last year alone NDOT received and processed 610 requests for permits to place utilities in highway rights-of-way, denying none. That does not include the dozens of requests for permit amendments to do maintenance activities, install additional fiber or things of that nature. I appreciate Mr. Gastonguay’s remarks regarding the particular incident that occurred on Ormsby Boulevard [Carson City]. That permit was actually turned around in 24 hours, not 1 week. The point is when we recognize that there is a need to try to get something installed quickly, we try to do that. In fact, that is a process that we have separated out to try to accommodate those particular needs for quick turnaround.
Mr. Fontaine continued:
In recent months, there has been some discussion about this. NDOT has worked with the telecommunications companies to address the specific issues including development of regulations to open up the interstate highways for the placement of utilities, which had previously been forbidden by the Federal Highway Administration (FHWA) regulations and NDOT regulations.
I will admit there are issues that still need to be overcome but at least there has been a dialog and a commitment to work together and I am encouraged to hear that again today. I think S.B. 195 just creates a chasm in this effort. NDOT wants to reaffirm their commitment to work with utilities to address the issues but we have to oppose this bill. We believe if this bill is passed, it would have disastrous effects on NDOT and the public as well. It removes our authority to manage our rights-of-way and basically would give the telecommunications companies and other utilities unrestricted access to highway rights-of-way.
Senate Bill 195 restricts NDOT from imposing conditions on how a utility facility would be installed and repaired on the highway right-of-way. Taken to the extreme, the language of this bill would allow a utility company to construct an irrigation ditch or put up a port to satellite dishes in the middle of an interstate highway. It would prohibit NDOT from requiring a utility to repair a facility even if it broke and closed a highway. Most importantly, this bill would restrict NDOT’s authority to impose basic safety requirements; and the bill could result in the loss of over $200 million a year in federal highway funding and would open the state to millions of dollars of liability.
Mr. Fontaine continued:
We believe it is a circumvention of the federal telecommunications act which clearly recognizes the state’s ability to impose requirements necessary to protect public safety and welfare; the Federal Highway Administration (FHWA) policy regarding the management and administration of federal highways; it is contrary to the Federal Highway Administration guidance on longitudinal telecommunications installations and to the association of state highway and transportation officials policy resolution.
If S.B. 195 is passed, the FHWA has determined NDOT would not be able to carry out its responsibility to protect its highway rights-of-way from unsafe and inappropriate encroachments and the FHWA would exercise broad authority under 23 C.F.R., section 1.23, to withhold federal highway funds. The bill creates significant liabilities to the state: motorist accidents caused by utilities if they don’t have a permit and they are working on a right-of-way, the issue of the underlying property owner’s claims against the state, what if NDOT accidentally severed a fiber optic line and that line were out there without the benefit of a permit and we did not know where it was. This state would be held liable. What about a utility out in the highway right-of-way that was interfering with a highway construction contractor. The contractor would have to shut that job down and file a claim against the state. There are other concerns about liabilities.
I want to assure this committee and the utilities that the Governor and NDOT recognize the need to work with the industry to try to overcome these processing issues…but this is a two-way street. We have to act on permits that are complete. We cannot act on permits that are incomplete. We want to do that, but the bottom line here is that we believe S.B. 195 is not the way in which NDOT and the utilities can reach these goals. These issues are administrative issues. We have not overstepped our authority, but have exercised our authority within our existing regulations; but we believe we can adopt new regulations in conjunction with the industry to provide what they want and meet our needs to protect the public safety. The NDOT Board of Directors has existing authority to adopt regulations to address each and every one of these issues, and again we are more than willing to continue working with the utilities.
Senator Amodei stated:
I have looked at your board minutes from the September 2000 meeting. You provided a report to the board, an update on telecommunications facilities within NDOT rights-of-way. I understand people who generate minutes (no disrespect to our staff) sometimes do not catch the spirit or context, so I will indicate with that disclaimer that in your presentation you had indicated two reasons for proposing regulations: significant interest by the telecommunications companies, which are market driven, and the telecommunications act which was passed by Congress in 1996 and states (these are your minutes and you are secretary of the board…) “no state or local statute or regulation may prohibit the ability of an entity to provide any telecommunications.”
Maybe I am missing something in the context of this. You go on to say, “There is a need to balance our interests in the state in promoting telecommunications service by accommodating these facilities in the right-of-way, while managing our rights-of-way to protect public safety, limit disruptions to motorists and not affect our ability to use those rights-of-way for future purposes. We also need to provide equal access to all providers.”
I am not sure I heard any of the testimony before you where anybody said we do not care about public safety issues or making sure there is room left for people to drive on surface transportation. What I am concerned about is when I hear a process described and I see the chairman of the Legislative Commission testify, along with two other senators, and say we’ve got a problem and we think that things are being done which are a little bit outside of what was intended by federal acts,…and to have you say you haven’t done any of this. My question is why are we here today then?
Mr. Fontaine responded:
We had proposed regulations before the first public workshop, when the Legislative Commission hearing was convened. We met, we heard concerns from the industry and the regulations were withdrawn. Since that time we have been trying to work with the industry. We have put together a steering committee and have whittled down the issues. I think we have made progress, contrary to what others have testified to, with all due respect to Senator O’Connell.
We have made some progress. One example is one of the issues we heard was that we were holding up permits on things like being able to provide quick turnaround time on simple maintenance functions; or simply going into to an existing conduit in the street and blowing new fiber through; or even putting an interduct so that they can increase the capacity. We looked at that issue and we said this does not have to be processed in the same manner as we would if we were looking at an application to construct a fiber optic line across Interstate 80. We separated out that process and now we have a process in place where an applicant simply needs to send us a letter, give us a written description of what needs to be done, give us a stick figure drawing and a traffic control plan, and it is turned around in 48 hours, and in many cases, as long as they are not within the travel way, we will give them verbal approval immediately. This does not solve all the problems, but this is a huge, very complex process, a tremendously complex problem. It just takes time. It is not because of a lack of willingness on anybody’s part.
Senator Amodei said:
I do not mean to imply there is a lack of willingness on anybody’s part. When I look at these minutes, it indicates that you are talking about promulgating regulations on this issue. Prior to the start of the promulgation of regulations, are you aware, as secretary of the board [NDOT Board of Directors], if the board has specific policy in this area.
Mr. Fontaine answered:
The board does not have specific policy in the area of telecommunications; the board does have specific policy, and the regulations that were proposed were amendments to existing regulations of Nevada Administrative Code (NAC), chapter 408. We thought we could amend those regulations in a one-page add-on to address the specific issues related to telecommunications.
Senator Amodei asked:
Are you aware if the board has a policy on exactments as a condition for encroachment permits for telecommunications in state rights-of-way prior to the initiation of promulgation of regulations in these minutes?
Mr. Fontaine answered, “No, the board had no such policy regarding exactments.”
Senator Amodei asked:
Were any exactments processed by NDOT, prior to you as the presenter for the board in that meeting? Were any exactment requests processed prior to this November meeting which involved, I’ll use your words, ‘voluntary and doing the right thing sorts of things’ by people who wanted to put telecommunications infrastructure in rights-of-way?
When you referred in your initial testimony to ‘you have done none of that,’ and ‘there had been in-kind service provided and it was done voluntarily and it was the right thing,’ had any of those instances where in-kind service was provided voluntarily in the context of doing the right thing, been processed by the department prior to the initiation of promulgation of regulations that you have referenced to the board in the November 2000 meeting?
Mr. Fontaine answered:
There was one application from a company called WCI [Williams Communications Inc.]. The application was processed in 1999 and the department’s role was primarily processing the permit. As far as what other discussions took place regarding services being provided, there were other agencies involved in that, we were a party at the end. That was not primarily an NDOT activity. The university and the Department of Information Technology [DoIT] were involved in the process. Those two agencies are participants in the steering committee which is trying to resolve these issues.
Senator Amodei summarized:
Your testimony was that the allegations of exactments being required by NDOT, as part of the permitting process for communications infrastructure being installed in NDOT rights-of-way, did not happen. Anything that happened prior to this was done as an in-kind service voluntarily and by entities that wanted to do the right thing. That was not a condition of approval for any of the ones that preceded prior to that.
Mr. Fontaine said:
As far as WCI’s application, that went on for a very long time. I was not involved in the details of how that occurred, just that there was involvement in processing the permit. There was give and take in terms of what we required for that permit to be approved. That was the first time NDOT opened up the interstate for access for any kind of utility of that length but how those negotiations took place, NDOT’s role was primarily in the permitting process. After that, the other applicant that we are currently working with, again, there have been no exactments. As far as any other application that has come in, yes, we have asked if they would be willing to, but if they are not, we have decided we do not have the authority to require monetary compensation beyond what our administrative costs are; and we have no authority to require, blackmail, extort, or to provide in-kind service with the exception of the authority to lease rights-of-way that NDOT owns and we have not used that.
Senator Amodei asked if requests were taken to the board on a case-by-case basis. Mr. Fontaine answered that the applications would not go before the NDOT Board of Directors as they were done administratively. He noted the board does set policy but applications were an administrative item.
Senator Amodei asked if the NDOT Board of Directors was setting policy with the proposed regulations that were in the minutes of the September 20, 2000, board meeting. Senator Amodei queried if the board was in the process of setting the policy through the regulations. Mr. Fontaine answered yes.
Attorney General Del Papa said:
I work with NDOT, we represent them, and I have the privilege of serving as a member of the NDOT Board of Directors and am a longtime member of the board. I spoke today with the Governor and he asked me to convey to this committee that both of us feel very strongly that this is something the NDOT Board of Directors is committed to working on and has a strong commitment to working with the business community to fulfill our obligation to protect the public. I have sat through most of this hearing and I am disappointed in the free use by the legislators of the words “blackmail and extortion.” I would remind every one of you, from a law enforcement perspective, that when you use those words, there are meanings attached to those words. And I think to have them used in the context that has been used today in this hearing, I can only surmise that the individuals who used them are either uninformed or have been misinformed by biased information.
Those are very heavily charged words. I am also surprised by the willingness of some members of this committee to perhaps jump to conclusions without the benefit of the full presentation. I commend you, Mr. Chairman, for bringing everyone back to the fact that there is another side to this story and the NDOT Board of Directors, and I cannot speak for all of them, but as a member of the board, I think the board would be willing to work with the business community to come up with a process that is as fair to all concerned as possible.
I would remind us all that this Legislature has throughout the many sessions that I have observed it, also asked all of us, who work in the Executive Branch of government, to represent the interests and to assist with the providing of services as we move forward in the twenty-first century, particularly what we can do to help rural Nevada. I think there is another side to this story and frankly, this bill, as drafted, gives control of the rights-of-way to the telecommunications companies. I do not see the need for the legislation given the Governor’s commitment and what I think the NDOT Board of Directors is in a position to do.
I have some real problems with this bill in its current form. I also think, the good people that work at NDOT do not deserve to be beat up at all in terms of what they try to do and I think there is another side to the story, as Mr. Fontaine tried to point out to you, in terms of when they get an application that is not complete and the engineering has not been done and there are problems like that, they have no other alternative but to try to get it right. We face a lot of legal issues which Brian Hutchins is prepared to present today.
Senator Amodei asked if this was an inappropriate area for legislative attention. Ms. Del Papa answered nothing is inappropriate for the Legislature as long as it comports with the separation of powers. She declared this matter can be handled through the NDOT Board of Directors because the existing authority is there to handle this issue, with regulations in place and policies and procedures defining new concerns.
Brian Hutchins, Chief Deputy Attorney General, Transportation and Public Safety Division, Office of the Attorney General, said he would speak as counsel to NDOT.
Mr. Hutchins presented “Legal Issues Concerning Senate Bill 195” (Exhibit F). He reviewed the following points contained in the exhibit: “Approval of Permit Application,” “Permit Conditions,” “Indemnification,” “Oversight of Utility Facilities and Promotion of Safety.” Mr. Hutchins concluded his remarks saying a fiscal note was being prepared to indicate how much additional legal resources would be necessary as a result of this legislation.
Senator Amodei asked for a definition of “discretion of the director” under the existing framework. Mr. Hutchins answered there is broad discretion in Chapter 408 of Nevada Revised Statutes (NRS) to the board of directors generally. Senator Amodei stated that he had heard much of this was done administratively and did not rise to the board level on a case-by-case basis. He questioned the director’s discretion in the administrative area. Mr. Hutchins said the director had to follow the broad policy guidelines given by the NDOT Board of Directors and he also has the statutory obligations to follow. He clarified that the director had the authority to adopt regulations and could use that discretion, although, as with all department heads and state officials, the discretion had to be reasonable.
Senator Amodei queried if an entity comes forward and wants to provide cable, were there costs associated with the donation, such as operations and maintenance issues. Mr. Hutchins said the fiscal note was referencing any impact this legislation would have on the legal services provided to NDOT and the liability concerns. Senator Amodei said he would like to have information on the operation’s costs after fiber is donated, under appropriate circumstances, and what the startup costs and maintenance potential would be.
In answer to a question, Mr. Hutchins said the department currently has authority in NRS 408.215, subsection 4, to adopt regulations to carry out and enforce the provisions of the chapter. Chairman O'Donnell asked if the NDOT Board of Directors was a statutory board and the answer was yes.
Chairman O’Donnell stated:
You don’t get this much support for a bill that does not have any merit.… There has to be some unfairness that has been received by the people favoring this bill; people feel disenfranchised and when they feel disenfranchised they come to their only redress which happens to be us. I am going to ask you and Mr. Fontaine to work with the affected parties and come up with some kind of solution on this issue within 10 or 15 days.
Ms. Del Papa said the objective is that everyone here has to try to come to some sort of resolution. She noted there are differing opinions as to whether this legislation is needed or should be amended. She remarked that the Governor is very interested in resolving this issue.
Senator Jacobsen asked if there were other departments responsible for the highway rights-of-way. He queried if private enterprise puts in gas lines, for example, and goes defunct, who is responsible? Mr. Fontaine said NDOT manages state rights-of-way; other public rights-of-way are managed at the state and local government level. He noted in highways where federal highway funds were used, the FHWA had a role as well. Mr. Hutchins said there would be significant concerns if a private company abandoned something within the right-of-way. The department would then have the responsibility to warn the public and to make the hazard safe.
Senator Washington noted that those people supporting the bill were concerned about appropriate timelines to grant permits. Mr. Hutchins said currently there are no specific timelines for providing permits. He noted his concern, from a legal standpoint, was the verbiage in the bill that provided a default. He continued, stating the bill says if action is not taken within a certain timeline, the application would be approved. He said it is not clear in the legislation what that would mean.
Senator Washington asked for clarification of section 5, subsection 5, of the bill [S.B. 195]. Ms. Del Papa said she would reserve testimony on this issue until an attempt is made to resolve the entire issue. Senator Washington noted that there have been problems with the timelines and he wanted to ensure attention would be given to this matter.
John T. Price, Division Administrator, Federal Highway Administration, testified that as a condition of federal aid on a project, the state must agree to certain terms and conditions to maintain highways. Permits issued include maintenance of the highways. He said the state is required to approve permits on the highways built with federal highway funds; and the state is required to have an accommodation policy that outlines procedures by which utilities will be accommodated. He stressed if a permit is sought that differs from the current arrangements, the permit would need to come to the FHWA.
Mr. Price stated the previous policy had not addressed telecommunications issues. He concluded that the proposed bill says under certain conditions the state would lose the ability to control permits for utilities on federal highways. He said that terminology changes their practice, they would have to change their accommodation policy and FHWA would need to approve a change. He emphasized that a policy that says after 60 days a company can do what they wish is unacceptable to the FHWA and the only recourse would be to withhold federal highway funds. Mr. Price said his staff had been part of the group working to resolve this issue. He noted that the telecommunication act had unique features that changed then existing federal highway regulations and FHWA would need to make accommodations also.
Senator Amodei asked if the main concern was the time frame and Mr. Price said his concern was the verbiage about acting within 60 days. Senator Amodei asked if there were policies regarding exactments as a condition granting a permit.
Mr. Price said:
FHWA [Federal Highway Administration], as part of the telecommunications act, was encouraging states to see what needs they had and to negotiate those needs as part of accommodating telecommunications within the FHWA rights-of-way. We have been encouraging that as a practice, as part of negotiating the accommodation. Heretofore, especially on freeways, our policy and NDOT policy has been we don’t accommodate utilities on the interstate unless it’s a last resort. We’re not in the business of trying to provide but because of the importance of high speed and the volumes there, our position in the past has been to discourage accommodation of those on the interstates.
Senator Amodei asked, “If the state decided to enact a policy on exactments, either through the Legislature or through the NDOT Board of Directors and that policy was appropriately enacted, would there be a problem with that?”
Mr. Price answered no.
James A. Polito, Ph.D., Bureau of Consumer Protection, Office of the Attorney General, presented “Right-of-Way Resource Agreements and Senate Bill No. 195” (Exhibit G). He commented that he was extensively involved in the state’s first shared agreement between WCI and the University and Community College System of Nevada (UCCSN). Dr. Polito said:
This public utility [WCI], who otherwise made no payment to the state in the form of franchise or licensing fees, approached the state and asked to form a collaborative partnership in which the state provided administrative advocacy on behalf of the public utility before federal agencies. In return, WCI provided or donated certain private facilities to the state. It was a willing arrangement on behalf of the public utility who approached the state.
Dr. Polito commented briefly on the value of highway rights-of-way in shared- resource agreements. He noted Exhibit G contained a briefing memo that detailed Nevada’s first shared-resource agreement and the process behind it.
Dr. Polito said right-of-way is an input that public utilities use in their production process. He stated that it is usually the case that public utilities incur a cost to use an input, rather than to incur no cost. Highway right-of-way, he said, is a very cost-effective means of installing utility facilities, as there are certain construction advantages. He mentioned public utilities have alternatives. He continued saying the Union Pacific Railroad right-of-way is a viable alternative to the Interstate 80 corridor (I-80) right-of-way; however, public utilities prefer state rights-of-way because construction costs are lower.
Dr. Polito said:
Use of state rights-of-way confers certain cost advantages upon public utilities that those not using such rights-of-way do not obtain. Section 253C of the federal Telecommunications Act of 1996, preserves the right of a state or local government to manage its right-of-way and obtain fair and reasonable compensation on a competitively neutral [and nondiscriminatory] basis. The FHWA allows states to decide if they wish to grant access to highway rights-of-ways and if so, to what extent and under what conditions. Shared-resource agreements are not exactments, they are a form of right-of-way management in which a public-private partnership is formed to share private communication facilities. Public utilities often donate certain facilities in recognition of the value of right-of-way and the administrative assistance the state may provide.
In the WCI agreement, aggressive administrative advocacy was provided in front of the FHWA and Bureau of Land Management, including both administrators of state government agencies and representatives from the Nevada congressional delegation, which participated in bringing this agreement about. An increasing number of states are entering into highway shared-resource agreements and it is a new and different process. That is perhaps why there is much objection to this.
The state of Nevada has successfully entered into a shared- resource agreement with WCI and they received nonexclusive access along the entirety of the I-80 corridor. As part of it, they donated significant communications capacity, not just dark fiber that imposed the liability upon the state, but lit communications capacity that provided a connection to the Internet II for the UCCSN; therefore, avoiding the potential loss of university research grants because the required Internet II capacity was not available. It provided for a tenfold or a 1000 percent increase in the north-south communications capacity and additional infrastructure to provide communications to areas that are currently not served by the providers including Wadsworth, Fernley, Lovelock, Winnemucca, Imlay, Battle Mountain, Carlin, Elko, Wells and West Wendover.
We estimated the net benefit of the package at approximately [$] 5.8 million per year, just the lit capacity component. We estimated that by extrapolating estimates we got for cost of providing or purchasing similar services. In-kind services were chosen over cash compensation because it provided greater flexibility. It was thought at the time that in-kind services would allow better extension of vital communications capacity to the rural communities. We anticipate using the infrastructure for the development of such applications as an intelligent transportation system, integrated statewide PBX systems and expanded distance learning opportunities in rural Nevada.
Dr. Polito said S.B. 195 revises provisions governing issuances of permits and prohibits NDOT from issuing encroachment permits that require a public utility to dedicate, donate or otherwise provide communications or other facilities to the state. It would preclude the state from entering into any shared-resource agreements and repeating the success previously obtained. He noted since the WCI agreement, additional carriers have approached the state, and it has been stressed that there is nothing mandatory about such an arrangement. He said when utilities respond they seek the administrative advocacy, project management and project championship as described.
In summary, Dr. Polito said rights-of-way have substantial economic value and confer a cost advantage on the public utilities. He noted Nevada has successfully negotiated and entered into shared-resource agreements that have a demonstrated capacity to help address the provisioning of telecommunications service to public schools, public libraries, medical facilities and local governments in rural counties.
Chairman O'Donnell queried about the value in aggregate of the shared- resources agreement.
Dr. Polito replied:
It was estimated just the lit capacity which was OC12 capacity from Reno to Utah to Las Vegas; OC3 capacity from Reno to Sacramento, California, and Las Vegas to Anaheim, California, was an approximate retail value of [$] 5.8 million per year, including certain costs NDOT incurred in inspection and implementation of the project.
Chairman O'Donnell asked if there was a provision in the law that requires notification of the Legislature as to any kind of donation received by a state agency. Dr. Polito replied that he would need to research the agreements with WCI to see if they were considered a donation or a dedication for certain administrative advocacy. He noted the state Board of Examiners approved the contract which was viewed as a no-cost contract at the time.
Senator Amodei asked if WCI paid any franchise fees and the answer was no. He questioned why there was an objection to this bill which would require to continue to be voluntary by saying this cannot be required as a condition of permit approval. Dr. Polito answered that it was a complex set of legal documents and those agreements required the state to provide certain administrative advocacy on the utility’s behalf; and, in order to ensure WCI upheld its part of the agreement, certain provisions required WCI to enter into the fiber optic services agreement so it was the intertwined nature of the three agreements that required the specific provisions.
Senator Amodei asked if the point of contact for negotiations at WCI could be provided; Chairman O'Donnell asked for a copy of the three contracts. Dr. Polito agreed to provide this information. Chairman O'Donnell clarified that the three contracts were agreed upon by both parties. He asked if the in-kind donation was part of the contract and Dr. Polito replied yes. Chairman O'Donnell asked for clarification of the term “voluntary donation” versus “shared-resources agreement.” Dr. Polito said it was arms-length negotiations between a willing buyer and a willing seller. He noted WCI approached the state. He stated they had title perfected to the Union Pacific Railroad right-of-way but there were various advantages to them if they could construct along the I-80 corridor. He said he was involved extensively in developing policy, reviewing contracts, but was not involved in the actual decision. He noted the fiber optic service agreement was entered into between DoIT, UCCSN and WCI; the permittee agreement was entered into between NDOT and WCI.
Senator Carlton referred to Exhibit G and asked if the state had developed a master plan for telecommunications. Dr. Polito answered it was his understanding the master plan had not been completed.
Ms. Del Papa said the Office of the Attorney General is committed to facilitating this issue and it will be discussed with the Governor and members of the NDOT Board of Directors at the March 9 meeting.
Ms. Pongracz addressed the concerns raised by NDOT that the bill could limit their ability to regulate the permitting process; and, if the bill was approved that NDOT would no longer regulate the rights-of-way on the state highways in Nevada. She emphasized this was totally incorrect. Ms. Pongracz pointed out:
Section 5, subsection 5, of the bill, and the procedural timeline laid out here, merely requires that the director either approve or deny an application for a permit within the statutory time period so NDOT retains the ability to apply the full statutory criteria that exists today plus the statutory criteria that would be approved in the bill. The only requirement or change here is the timeline and there is no requirement here that NDOT approve everything that comes through, they merely must issue a decision approving or denying within that period of time.
Furthermore, I mentioned during my initial remarks that we would be willing to entertain an amendment under which there would be some opportunity for NDOT to make an exception to the statutory timeline in the event that certain conditions were met; for example, a huge project. Counsel for Nevada Bell, Dan Reaser, drafted something up, which I will read for the record because I think it would accomplish that objective very handily. It would amend section 5, subsection 4, to state, “the director shall approve or deny the application within 20 days after it is submitted to him or ‘inform the public utility in writing that additional investigation and review of the application is necessary.’” The paragraph would then continue as written. That would create an exception opportunity for NDOT in case they do require additional time to review a permit while at the same time preserving the utilities’ opportunities to have their permit applications handled in a timely fashion for the more routine applications.
Senator Washington said this explanation made sense and he hoped this would not obligate or cut off federal highway funds.
Chairman O'Donnell asked Mr. Price if the suggested amendment would suffice.
Mr. Price said this issue is the major concern, but other concerns expressed by NDOT legal counsel need to be addressed also as part of the legislation. He stated he would prefer to work with the industry and NDOT, to be part of the solution. In response to Chairman O'Donnell‘s question, Mr. Price stressed highway funds are only withheld as a last recourse.
Robert A. Ostrovsky, Lobbyist, Cox Communications, clarified that the problem started with the WCI agreement, where UCCSN and DoIT received financial gains. He noted NDOT lost $1 million administering the agreement and the Legislature had no chance to appropriate the funds which might have been paid by WCI across the state. He stated local providers feel they are being punished for what another company decided to give away. Mr. Ostrovsky said the testimony from legislators used language which brought criticism from the attorney general, but he noted, this is an emotional issue. He stressed that the industry is willing to work with NDOT and other agencies, and there is no intent to infringe upon any federal issues. He stated, “Our industry is prepared to make changes to resolve these issues, to meet with representatives of departments, and come to an agreement.”
Joe Crowley, Ph.D., Lobbyist, University and Community College System of Nevada, testified he did not support or oppose the legislation because there had not been time to study the issue. He noted the issue had implications for the system, possibly cost implications, and the University and Community College System of Nevada (UCCSN) would want to be part of the meetings to seek resolutions.
Chairman O'Donnell asked if Dr. Crowley was part of the system when these negotiations came about. He answered that Mr. [Edward] Anderson was directly involved in the negotiations.
Edward Anderson, Director, System Computing Services, University and Community College System of Nevada, said negotiations took place before he was hired, but he understood WCI approached NDOT, who contacted the UCCSN, and negotiations then began. Dr. Crowley said he would provide information on this subject.
Chairman O'Donnell asked if there was a federal requirement that the system have a certain communications capability. Dr. Crowley said the system worked closely with DoIT and NDOT to find a way to make a connection to Internet II. He noted Internet II was the telecommunications gateway for federally sponsored research which was a large part of the higher education enterprise in this state. He said he understood that connection could have cost $4 million a year which would have required legislative approval.
Dr. Crowley emphasized that Nevada was one of the last two states to make that connection.
Chairman O'Donnell clarified:
The amount which does not have to be paid, as a result of the NDOT negotiations on a voluntary basis, has saved the state $4 [million] to $5 million a year. The way the agreement was procured may not have been the most ethical of ways and a long, hard look should have been taken at the way it was done.
Dr. Crowley asked to return to the committee with more complete information. He said the university had reached the point of losing a very large part of its reputation as a research and graduate institution if this connection had not been made. He asserted that to be one of two states not connected meant a loss in research funds. He stressed this may have caused those doing the negotiating to move forward with as much dispatch as possible.
Chairman O'Donnell asked if the affected parties would meet and come back in 10 or 15 days with a resolution.
Chairman O'Donnell requested an introduction to Bill Draft Request (BDR) 58‑533.
BILL DRAFT REQUEST 58-553: Makes various changes to provisions governing fully regulated carriers. (Later introduced as Senate Bill 270.)
SENATOR AMODEI MOVED TO INTRODUCE BDR 58-553.
SENATOR WASHINGTON SECONDED THE MOTION.
THE MOTION CARRIED. (SENATOR CARE WAS ABSENT FOR THE VOTE.)
*****
There being no further business, Chairman O’Donnell adjourned the meeting at 4:57 p.m.
RESPECTFULLY SUBMITTED:
Alice Nevin,
Committee Secretary
APPROVED BY:
Senator William R. O'Donnell, Chairman
DATE: