MINUTES OF THE meeting
of the
ASSEMBLY Committee on Ways and Means
Seventy-Second Session
February 24, 2003
The Committee on Ways and Meanswas called to order at 8:13 a.m., on Monday, February 24, 2003. Chairwoman Chris Giunchigliani presided in Room 3137 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Guest List. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.
COMMITTEE MEMBERS PRESENT:
Ms. Chris Giunchigliani, Chairwoman
Mr. Walter Andonov
Mr. Bob Beers
Mrs. Vonne Chowning
Mrs. Dawn Gibbons
Mr. David Goldwater
Mr. Josh Griffin
Mr. Lynn Hettrick
Ms. Sheila Leslie
Mr. John Marvel
Ms. Kathy McClain
Mr. David Parks
Mr. Richard Perkins
COMMITTEE MEMBERS ABSENT:
Mr. Morse Arberry Jr.
STAFF MEMBERS PRESENT:
Mark Stevens, Assembly Fiscal Analyst
Steve Abba, Principal Deputy Fiscal Analyst
Russell Guindon, Deputy Fiscal Analyst
Linda Smith, Committee Secretary
Connie Davis, Committee Secretary
Assembly Bill 69: Expands exemption from requirement that State Public Works Board furnish engineering and architectural services for buildings constructed on state property or with legislative appropriation to certain improvements made by Division of Wildlife of the State Department of Conservation and Natural Resources. (BDR 28-521)
Terry R. Crawforth, Administrator, Division of Wildlife, said the Division operated 13 wildlife management areas on approximately 200,000 acres. Operations included 4 fish hatcheries, 6 customer service offices, and numerous dams, boat ramps, and dikes. The Division employed a registered professional civil engineer and an engineering intern. A.B. 69 would exempt the Division from involvement with the State Public Works Board in project development. The Board would continue to check plans and conduct inspections for the myriad of small maintenance and enhancement projects, especially in the wildlife management areas. Mr. Crawforth said he hoped A.B. 69 would be “an efficiency in government bill.”
Chairwoman Giunchigliani asked if the Division had sufficient staff to accommodate the new duties that would be required by passage of A.B. 69. Mr. Crawforth indicated no new staff would be required. Mr. Crawforth said he did not think passage of A.B. 69 would have an impact on the budget of the State Public Works Board. The Division would continue to work with the Board on the Division’s larger projects. Chairwoman Giunchigliani asked about the fees charged by the State Public Works Board. Mr. Crawforth explained the costs for major jobs, such as the hatchery refurbishment project, were built into the project.
Assemblyman Marvel asked for a definition of a small project. Mr. Crawforth said some projects, such as a new boat ramp at Walker Lake, might cost $100,000, and improvements to a house might cost a few hundred dollars. The amounts varied substantially.
Assemblywoman Chowning wanted to make certain A.B. 69 did not send a message that the state was not concerned about the safety of workers, or the safety of the public. Mr. Crawforth emphasized that even with the passage of A.B. 69, the State Public Works Board would continue to be involved in plan checks and inspections of all of Wildlife’s construction projects.
Chairwoman Giunchigliani thought perhaps the Committee should revisit lines 4 and 5 on page 2 of A.B. 69 because 1,000 square feet of floor area did not necessarily tie to some types of projects that State Parks or Wildlife might have. The Chair asked if the Division had reviewed the language to determine if there might be more appropriate verbiage. Mr. Crawforth said the Division felt 1,000 square feet was sufficient. A small project might include drilling a well and constructing a small pump house—the pump house would not be included in the 1,000 square foot requirement. Public Works projects would include the construction of a large shop or an office building. Chairwoman Giunchigliani said it needed to be determined if the Public Works Board charged for plan review.
Evan Dale, Deputy Manager, Administration and Finance, State Public Works Board, said the Board supported A.B. 69. In the past, the Board had typically delegated many of the smaller projects. Passage of the bill would streamline the process and the Board would not have to go through the delegation of authority process when the Division of Wildlife had a small project. A.B. 69 would allow the Division to do residential projects and small commercial projects. The Board would continue plan checking and inspecting those projects, as a typical building department would for a county.
Chairwoman Giunchigliani asked about the involvement of the State Fire Marshal’s Office, and Mr. Dale stated the Office would continue to be involved in the plan review process. Chairwoman Giunchigliani asked if Mr. Dale had suggested language, or would consider suggested language, that dealt with Parks and Wildlife somewhat differently than the verbiage included in the current legislation. Mr. Dale said the Board had not considered a change in the verbiage.
Mr. Marvel asked if the Board charged the Division a fee for plan checks. Mr. Dale answered in the affirmative and said the fees were based on the schedule set forth in the Uniform Building Code, the code adopted by the State Public Works Board. There was an administrative section included in the code that set forth typical fees charged on projects. The Board typically set fees according to that schedule and thought the fees were fair.
Chairwoman Giunchigliani closed the hearing on A.B. 69 and referred the Committee to the Tourism and Economic Development budgets.
COMMISSION ON ECONOMIC DEVELOPMENT (101-1526)
BUDGET PAGE TOURISM & ECON DEV-1
Robert Shriver, Executive Director, Nevada Commission on Economic Development (NCED), introduced Gerald Sandstrom, Deputy Director, and Margene Stenger, Administrative Officer. Mr. Shriver began the budget presentation and said the goals of the Department included:
· Helping assist Nevada-based businesses to develop, grow, and prosper
· Attracting Nevada industry expansions and out-of-state relocations
· Providing resources necessary to identify business incentives and other programs to encourage a more diversified economy for the state
· Advocating public/private partnerships to develop programs necessary to provide a labor force capable of meeting business needs for basic and highly skilled technical positions
· Continuing comprehensive community development, planning and implementation, and infrastructure needs
Mr. Shriver referred to the marketing program included in BA 1526. The function of the program included oversight of comprehensive advertising and public relations campaigns designed to communicate the message that Nevada was a viable state in which to conduct business. The program also supported and nurtured existing businesses within the state. The tools used in marketing included paid advertisements, a postcard campaign, an e-mail campaign, and a Web site.
Mr. Shriver displayed various image ads that identified prominent brand names with Nevada. Mr. Shriver said the black and white advertising campaign appeared in business newspapers up and down the West Coast, including British Columbia, the Puget Sound region, Silicon Valley, and southern California. The ads touted the low cost of doing business in Nevada and the quality of life. Each ad directed people to the agency’s Web site or toll-free telephone number. Mr. Shriver said the handout (Exhibit C) included a copy of an ad that appeared in the San Jose Business Journal. The marketing section of the Nevada Commission on Economic Development (NCED), in conjunction with the Nevada Commission on Tourism, had paid for advertorials that appeared in the Nevada Business Journal. Each advertorial profiled a rural Nevada county. The advertorials showcased the tourism and economic development possibilities of rural Nevada. Mr. Shriver said the NCED felt it was important to inform Nevadans about events that occurred outside Clark and Washoe Counties.
Mr. Shriver continued his presentation and referred to the postcard campaign, which targeted more than 1,200 site selectors nationwide and touted the benefits of doing business in Nevada. The advertising campaign was a springboard for the postcards. The NCED had incorporated the use of e-mail into the marketing mix. E-mails were sent monthly to more than 1,200 site selectors and key business decision makers throughout the country. The e-mail provided updates about the economic development activities in the state. The site selector list was updated regularly. Mr. Shriver said the Web site was the foundation for the marketing campaign and was the most cost-effective tool. The Web site included a great deal of information and was clean and easy to navigate. The site included a “how-to” guide to open a business in Nevada. The site received an average of 10,000 “hits” per month.
Mr. Shriver referred to the Made in Nevada program, an extension of the marketing arm, which was designed to build demand for Nevada products and services while creating a strong network for the small businesses. The initial targets were the cottage industries. The NCED felt the program was a springboard to future businesses in the state. Rural areas were particularly targeted. The program was fee-based and was self-supporting.
Mr. Shriver said a state economic development conference would be held early in the fall of 2003. The conference would provide an opportunity for state policy leaders, community leaders, business leaders, and education leaders to discuss economic development issues. Economic development stretched across a broad range of interests.
Mr. Shriver explained that the business development and research operation responded to questions related to economic, business, and location issues. Other areas addressed included tax advantages, regulatory climate, labor, transportation, cost of doing business, and quality of life. Mr. Shriver said the NCED worked with a number of impact and policy analysis tools, including the nationally recognized Regional Economic Modeling Inc. (REMI). Mr. Shriver referred to the incentive programs which were key to attracting new businesses to Nevada as well as supporting existing businesses in their efforts to grow and add jobs. The Business Development and Research Division assisted companies in applying for the incentives as well as processing all applications received so the businesses would be consistent in their presentations for consideration by the Commission at the monthly meetings. The handout (Exhibit C) included a copy of the Biennial Report of Incentive Activity, forwarded to the Legislature in January 2003. The Business Development Division worked with new and expanding businesses and “leads” were then provided to Nevada’s Development Authorities via a state-of-the-art Web‑based database. Exhibit C included a list of new and expanded companies the Commission worked with during FY2002. There were 78 new primary industries and 13 expansions that created 4,652 new jobs.
Mr. Shriver said the Division had worked to find a tool to help retain existing Nevada businesses and had found that tool in a program called Synchronist, a nationally recognized, Web-based application, currently being implemented. The Economic Development Authority of Western Nevada (EDAWN) in Washoe County was using the program and planned over 1,000 visitations to established primary businesses.
Mrs. Chowning said in the past individuals considering establishing a small business had gone to chambers of commerce or the Commission on Tourism. A Small Business Help Center had been established within the University and Community College System of Nevada (UCCSN). Mrs. Chowning wanted to know if the NCED worked with the help center. She asked if money was being spent in two places for the same purpose.
Mr. Shriver said the NCED worked closely with all information groups. The Commission did not purport to be the end all and be all. The “How to Start a Business” guide actually directed individuals to such groups as the Small Business Development Center, which was funded by a Small Business Administration (SBA) grant awarded to the UCCSN. The center helped small businesses develop plans to acquire financing. Mr. Shriver emphasized the NCED provided services different than those offered by the center. The NCED focused mainly on primary industries. A primary employer earned income outside the state of Nevada. Mr. Shriver said, “We want to bring fresh dollars into the state, we do not want to keep recirculating the same dollars. That’s not growing your economy.” Mr. Shriver explained that all of the information groups were attempting to work together to make certain businesses received answers in the most efficient manner.
Assemblywoman Gibbons asked Mr. Shriver to share some of the reasons businesses decided to come to Nevada. Mr. Shriver said each company had different decision factors and location was a key factor. National corporations wanted to be close to California, the fifth largest market in the world. Mr. Shriver noted that the cost of operating a business in California was prohibitive and getting worse. Mr. Shriver explained that labor was also a critical issue and was the highest cost factor of operating a business. Depending on the type of company, taxes played a role. National firms had originally been attracted to Nevada because there were no inventory taxes. Mr. Shriver noted that manufacturing played a significant role. The number of manufacturing operations locating in southern Nevada was tremendous. Financial service centers, such as Ford Motor Credit, were moving into the state. The service centers employed highly skilled and trained people; the average wage exceeded $20 an hour. Mr. Shriver indicated taxes and labor also played a significant role for the smaller companies. He noted that regulatory climate was always a concern. Mr. Shriver said the NCED had conducted an entrepreneurship study funded by the National Governor’s Association and the Ewing Marion Kauffman Foundation. The Commission had always focused on the small size of Nevada and the ability to access public policy leaders. The whole concept of customer service that emanated from industry was critically important for governments to understand. Mr. Shriver said the Commission had been quite successful in bringing new businesses into the state.
Mrs. Gibbons asked for a definition of “transportation costs.” Mr. Shriver said the transportation costs, or network, referred to the roads, airline schedules, freight and cargo availability; all played a role in costing. Las Vegas and Reno had extremely large consuming product markets due to the large hotels that consumed large quantities of perishable products.
Mr. Shriver said the Global Trade and Investment Program helped existing Nevada businesses develop and grow their markets and Foreign Direct Investment (FDI) activities. The program provided a forum on global trade and investment issues by:
Mr. Shriver referred to the permanent career consul from Mexico, who was based in Las Vegas. Mr. Shriver offered “significant kudos to everyone in making that happen.” During the past biennium the Global Trade and Investment Program generated more than $450,000 in new federal grant money for export programs that helped Nevada companies generate in excess of $10 million, more than double the results achieved during the 1999‑2001 biennium. Mr. Shriver said he had recently returned from Mexico on a trade mission related to white onions. Because Nevada’s growing season was opposite the growing season in Mexico, the Commission felt there would be significant opportunities for many of the growers in Nevada.
Mrs. Chowning asked for an explanation of the first performance indicator. Mr. Shriver said staff had assisted 90 Nevada-based businesses in the areas of export trade and investment during FY2002. The state was well positioned for exporting to the Pacific Rim countries and the Commission was focusing in that area.
Mr. Shriver stated that the Global Trade and Investment Program had also developed two trade representative offices in the People’s Republic of China, one in Beijing and another in Shanghai. Another office was expected to be opened in Taiwan. The trade offices had been developed with no cost to the state. Mr. Shriver explained that trade groups wanted access to Nevada companies and the Nevada companies desired entrée into those foreign marketplaces. The program was beneficial for all. Mr. Shriver said the Commission, Tourism, and the Lieutenant Governor planned a trade mission to China for the end of June 2003 to open the trade offices. The Commission thought China represented the greatest emerging middle-class market in the world and wanted to be a part of that.
Mr. Shriver said the handout (Exhibit C) included a listing of many of the export companies and included data on projected sales for some of the companies.
Mr. Shriver explained that rural economic development activities were focused in eight areas:
Mr. Shriver referred to a strategic plan called Building Prosperity, which was adopted two years ago and was the cornerstone of the development efforts in rural Nevada. The Commission also wanted to enhance responsiveness to the needs of rural Nevada. Efforts continued through federal, state, local, and private entities. Infrastructure for Nevada included agencies funding water and sewer projects in rural communities, critical areas of need. The Rural Nevada Network (RNN) was made up of a group of agencies that addressed community development throughout the state; the Business Assistance Roundtable (BAR) encouraged information exchanges between programs that provided financing and assistance in rural communities.
Mr. Shriver said a list of the development authorities was included in the handout (Exhibit C). The Commission required semi-annual reporting by the authorities. The urban authorities of Clark, Washoe, Carson City, Douglas, and Storey Counties were required to report on companies, capital investments, and jobs. The rural areas reported on development of leadership, workforce, infrastructure, existing businesses, entrepreneurship, and recruiting.
Mr. Marvel asked if the Commission still had an advertising contract with Trahan, Bruden & Charles, Inc. (TBC). Mr. Shriver explained that the contract was severed when it was discovered TBC had relocated to another state. Because of the terms of the contract, TBC would continue with the “buys for the media made through June 30.” Mr. Shriver noted there were extremely competent ad agencies located in Nevada, and the Commission did not feel it was appropriate to contract with an agency located outside the state. The Commission was completing the Request for Proposal process and needed to determine if it would be cost-effective to have a full service agency, or if it would make sense to piggyback on some other contracts. Mr. Marvel asked if the TBC had been successful in the marketing provided to the Commission. Mr. Shriver answered affirmatively.
Chairwoman Giunchigliani asked Mr. Shriver to provide additional information on the Train Employees Now (TEN) program. Mr. Shriver said the TEN program was funded through the General Fund and was developed to provide a skills training base for Nevada citizens. Workforce development skills training was essential for companies new to the state. Mr. Shriver said the Commission thought the training program was one of the key elements that companies looked at when considering Nevada. The Commission was allocated $500,000 each year and, through the wisdom of the Legislature, unused funds could be carried forward into the next fiscal year. Mr. Shriver noted it was important to have the ability to carry forward funds and not have to request additional funding through the Interim Finance Committee.
Chairwoman Giunchigliani thought the issue of reversion would have to be revisited since approximately $112,000 was expended in FY2002 and $99,000 in FY2003, leaving a balance of $1.27 million. Mr. Shriver stated that three companies were approved for the TEN program in February and there would be another two in April. Mr. Shriver explained that the companies had to qualify, and at the end of the training had to pay 80 percent of the statewide or county wage, whichever was higher. The statewide average wage was $15.48 an hour, which did not include managerial salaries. Mr. Shriver said there were no reporting mechanisms to find a median wage in Nevada. Chairwoman Giunchigliani indicated she was sponsoring a bill to find the median average wage.
Chairwoman Giunchigliani noted that less than one-third of the $500,000 had been expended during the current biennium and asked what would be a reasonable dollar amount to maintain the program. Mr. Shriver said $500,000 was the minimum needed each year for the TEN program, and he thought the majority of the $500,000 would be expended by the end of FY2003. The Commission was trying to raise skills and the salary levels within the state. Mr. Shriver felt it was imperative to continue to fund the TEN program at the current level because of competition from other states. Neighboring states were annually providing between $1.5 million to $4.5 million for the program. Chairwoman Giunchigliani asked if training funds could be allocated separately for businesses. Mr. Shriver thought that was possible, but he cautioned that the companies needed to be qualified to make sure the average wage requirement was met. Chairwoman Giunchigliani asked what type of training the TEN program had provided to the Inta-Aussie South Pacific company, which was included on the incentive activity report in the handout (Exhibit C). Mr. Shriver replied that the funding had been used primarily for computer‑training skills. The company had a specialized need, presented that need to the Commission, and received the funding. Mr. Shriver offered to provide the Chair with additional information.
Mr. Marvel referred to the layoffs that had occurred in the northern part of the state due mainly to reduced mining activity, and asked if any of the individuals that had been laid off had received any additional training. Mr. Shriver explained that the training provided through the TEN program had to be requested by a business and approved by the Commission. He thought the Employment Security Division had a career enhancement program that addressed training for unemployed individuals.
Chairwoman Giunchigliani referred to EDAWN and the Nevada Development Authority (NDA) in the urban areas and said the funding needs seemed to be greater in the rural areas. Mr. Shriver said rural areas received grant authorizations in the amount of $398,000. Chairwoman Giunchigliani thought there might be a need for the rural areas, but the Committee would be looking at consolidating or dealing with the budget. The Chair stated duplication of services needed to be avoided and recognized that developmental authorities were already working in the urban areas.
NEVADA FILM OFFICE (101-1527)
BUDGET PAGE TOURISM & ECON DEV-7
Mr. Shriver said the objective of the Nevada Film Office (NFO), established in 1983, was to promote and support the use of Nevada cities, rural locales, and services in the production of motion pictures, television films and episodes, commercials, documentaries, corporate and industrial films, music videos, and other multimedia projects. The Office provided services ranging from scouting and site planning to the publication of the Nevada Production Directory for studios, agencies, and independent producers interested in saving time and money by filming in Nevada. The NFO also worked to develop a permanent base for the expansion of the production industry in Nevada.
In efforts to help diversify Nevada’s economy, it was critical that the Office provide assistance and direction to companies interested in filming in Nevada. The Office had an in-house library of tens of thousands of photos that highlighted potential film locations. The Office was a “one-stop shop” that provided permits, personnel, and service, and served as an informal networking and problem-solving agency for local industry professionals.
Budget Account 1527 was unique in its funding—100 percent of the funding was a transfer of room tax revenue from the Commission on Tourism. Additionally, A.B. 762, passed by the 1991 Legislature, established a $60,000 authority to collect advertising revenue for the directory; the amount had increased to $110,000. Mr. Shriver displayed a copy of the 2003 Nevada Production Directory, and explained that selling advertisements to be included in the directory helped to supplement the budget. Mr. Shriver said a copy of the directory would be provided to Committee members.
Mr. Shriver said final figures for calendar year 2002 for film, television, commercials, and other multimedia productions totaled $125 million, the third consecutive $100 million-plus year. Since the inception of the Nevada Film Office, more than $1 billion in filming revenue had been generated.
Mr. Shriver referred to a breakout of economic impact included in Exhibit C. The formulas were based on industry projections and were used by the Association of Film Commissions International (AFCI).
Mr. Shriver said the Film Office had performed well during a difficult year. The high-end, major production, America’s Sweethearts, which was filmed at the Lake Las Vegas Resort, had a direct economic impact to the community of $95,000 per day. Only the production value within the state of Nevada was included in the impacts. Some of the other states had included total production costs. Mr. Shriver referred to a list of productions produced in Nevada. The list included films, television programs, commercials, print ads, and still photography (Exhibit C). Mr. Shriver then displayed an accordion-type message that the NFO handed out at trade shows. Mr. Shriver said Web site hits for the Office exceeded 10,000 per month. Many car commercials were filmed in southern Nevada.
Mr. Shriver said the state received $40 million from the production of major motion pictures during 2002. He noted the majority of movies that were made for television were produced in Canada. The film Chicago was filmed in Toronto. Mr. Shriver said, “For Nevada to grab $125 million this past year was significant.”
Assemblywoman Chowning referred to the performance indicators and asked about the $110 million included in the performance indicators versus the $125 million reported by Mr. Shriver. Mr. Shriver said the numbers conflicted because one was based upon a calendar year and the other on a fiscal year. The amount for the calendar year was $125 million.
Mrs. Chowning said decision unit E-150 provided increased funding for marketing to “keep up with demand,” but it did not appear there was a need for the increased funding based upon the level of activity. Mrs. Chowning then referred to film industry productions that were being lost nationwide to Canada. Mr. Shriver said the Association of Film Commissioners International (AFCI) indicated Canada had received $1 billion from the nation’s film industry; however, Nevada had also done quite well. Mr. Shriver noted that California had a program called “California First” that provided tax credits and reimbursements to production companies to remain in the state. However, because southern Nevada was close to California and transportation costs were reasonable, some California filmmakers continued to come to Nevada for filming. Mr. Shriver said there had been a large increase in production companies in southern Nevada. Mrs. Chowning asked if there were more production companies in southern Nevada that had facilities for indoor productions, and Mr. Shriver replied that the number of studio production companies had increased. Mr. Shriver thought there was a great market for lighting, sound, and film editing that could be completed within Nevada.
Chairwoman Giunchigliani referenced decision unit E-150 and asked the Commission to provide clarification on the discrepancies in the numbers included in the performance indicators versus what had just been reported by Mr. Shriver.
PROCUREMENT OUTREACH PROGRAM (101-4867)
TOURISM & ECON DEV-15
Mr. Shriver said the Procurement Outreach Program (POP) helped Nevada businesses access government contracts. The program helped local Nevada companies increase the flow of federal, state, and local contract dollars by providing training and technical assistance to identify, bid, win, and successfully complete government contracts. Many businesses thought that selling products or services to government much too complicated and daunting. However, the POP helped simplify the process and connected Nevada businesses with lucrative opportunities. The POP provided electronic programs directly to businesses, which allowed direct daily e-mail downloads of bids. One-on-one counseling services were also provided and helped in the development of marketing plans.
Mr. Shriver said funding for the POP came from the U.S. Department of Defense through the Defense Logistics Agency (DLA) and the state General Fund. Nevada had administered the program since 1985. The Commission had administered the programs since 1989. To supplement the General Fund allocations, the enrollment fee was increased to $50 for each firm. The program had recently completed the fourteenth consecutive year of partnership between the DLA and the Commission on Economic Development.
Mr. Shriver explained that the POP had increased the client base to over 2,300 firms, 70 in FY2002 alone. Services included counseling sessions, sponsored events for attendees, and training events. There were 1,198 contract awards reported during FY2002 with a dollar value exceeding $387 million. Of the total awards reported, 98 were subcontract awards and only 15 percent of the clients reported awards. The awards were broken out by:
Mr. Shriver said the Department of Logistics Agency reported Nevada’s program performance reflected that over 5,500 jobs were retained, or in many cases created cumulatively, during 2002.
Chairwoman Giunchigliani said the workload data included in The Executive Budget did not agree with the information included in the expanded program narrative. Mr. Shriver explained that when the budget numbers were compiled, the numbers reported by the POP had been received directly from the businesses. The DLA was now providing printouts that truly reflected actual numbers.
Chairwoman Giunchigliani asked for an explanation of the $400,000 in federal funds included in the budget for the 2003‑2005 biennium. Mr. Shriver said the DLA’s contribution was $300,000 and the balance was from the Federal and State Technology (FAST) Partnership sponsored through the Small Business Administration. The FAST identified and assisted technology-based industries. Mr. Shriver confirmed that the $300,000 was guaranteed for each year of the biennium.
Chairwoman Giunchigliani asked about the $50 enrollment fee referred to earlier, and Mr. Shriver said the fee was a membership fee. The POP thought the fee was reasonable. The businesses received e-mail updates constantly. Chairwoman Giunchigliani recognized the impact on the General Fund was quite large and asked if there was a way to maintain the program through the next biennium without the General Fund allocation. Mr. Shriver thought it would be difficult because the counseling services provided by the POP staff generated the majority of costs incurred. Chairwoman Giunchigliani thought perhaps federal dollars should not be accepted due to the impact on the state. Mr. Shriver explained, like any federal funding, there was a state match. Mr. Shriver said the POP budget was 41.87 percent federally funded and the match was 58.1 percent. Chairwoman Giunchigliani asked Mr. Shriver to provide information on the minimum state match amount.
Chairwoman Giunchigliani asked for an explanation of M-100, the statewide cost allocation revenue. The budget indicated the state was appropriating General Fund dollars to pay the General Fund.
Jim Manning, Budget Analyst, Budget Office, said he needed to review the budget and would provide an explanation to the Committee. Mr. Manning said he would work with LCB staff to correct any errors.
RURAL COMMUNITY DEVELOPMENT (101-1528)
BUDGET PAGE TOURISM & ECON DEV-11
Carl R. Dahlen, Director, Rural Community and Economic Development, Commission on Economic Development, said Budget Account 1528 consisted primarily of the Community Development Block Grant (CDBG) and the program that came from the block grant. The funding was provided by the U.S. Department of Housing and Urban Development and was disseminated to 28 rural cities and counties to assist with infrastructure activities, such as public facilities, planning, and economic development activities. Since 1981, the Commission had endorsed the Community Block Grant program and had enabled $42.8 million to be invested in the Rural Community and Economic Development projects throughout rural Nevada. Through a collaboration of various government agencies, businesses, and nonprofit groups, the program had assisted in the development of healthy and viable communities by improving living conditions and economic opportunities. The CDBG program also provided technical assistance to support small town diversification efforts and encouraged sustainable development. The program had helped to build local business capacity through direct training and technical assistance to the rural partners, encouraged and helped local communities in planning activities, and provided funding for actual “brick and mortar projects.” The CDBG funds could be used as up front engineering costs and as matching dollars, thus enabling communities to access other state and federal loan grant dollars. The planning category of the CDBG allowed the program to conduct preliminary engineering reports, which were required by other agencies, but not funded by those agencies. Without the engineering reports, communities could not apply for funding from the United States Department of Agriculture, rural development, A.B. 198, or the state revolving funds for water and wastewater. In conclusion, Mr. Dahlen said the CDBG program had invested $5.6 million in 24 communities for 60 separate projects over the biennium. The CDBG funds had leveraged over $31.8 million from other public and private sources. Mr. Dahlen offered to answer any questions. Chairwoman Giunchigliani thanked Mr. Dahlen and asked him to keep up the good work.
COMMISSION ON TOURISM (225-1522)
TOURISM & ECON DEV-19
Bruce Bommarito, Executive Director, Nevada Commission on Tourism (NCOT), began his presentation (Exhibit D) and said he had served in executive positions within the private sector for 28 years, including general manager of a Native American casino. During that period of time Mr. Bommarito had served on numerous boards and commissions for tourism at the state and local levels. During 2001 and 2002, Mr. Bommarito had served as chairman of the Nevada Hotel and Lodging Association and said he felt comfortable with his new position as Director of the Commission on Tourism.
Mr. Bommarito said 47 states had gaming and 23 of those states had full-sized casinos. However, Nevada still ranked sixth in the nation in total tourism revenue, and thirty-second in tourism promotion. The Commission faced challenges as a result of the terrorist attacks of September 11, 2001, including economic challenges and the possibility of a potential war in the near future. The mission of the NCOT was to generate revenue for the state of Nevada. The Commission’s philosophy included:
· The highest and best use of every dollar.
· Return on investment—Every program was reviewed individually and collectively with an internal measure of trying to generate a minimum of $121 for every dollar spent on marketing.
· More is better—The Commission was in the marketing business; the more exposure, shows, and media brought to the state made the projects better.
Mr. Bommarito explained the $121 was the internal measurement for every dollar spent on marketing and advertising with no multipliers. Based on a request made by Chairwoman Giunchigliani, Mr. Bommarito agreed to provide a definition of marketing. Assemblyman Goldwater said he understood the Commission had spent approximately $4.5 million in advertising and public relations and asked if the $4.5 million multiplied by the $121 would indicate the return on investment. Mr. Bommarito stated that the $121 was a fairly good number based on the Commission’s surveys.
Mr. Bommarito continued and told the members new growth was essential. The Commission continued to look for new ways to expand and grow new markets, such as the new Adventure Campaign directed toward adventure travelers. Mr. Bommarito stated that Nevada was the most mountainous state in the nation with over 314 mountain ranges. He referred to a booklet titled “The Dirt” (Exhibit E) and said the Commission was actively promoting the adventure market. Mr. Bommarito said the People’s Republic of China had a newly created middle-class of 131 million and would reach the 400 million mark in the next five years. He thought Nevada led the nation in marketing China.
Mr. Bommarito then referred to the techniques used by the Commission (Exhibit D):
Mr. Bommarito pointed out there were opportunities available, but those projects would require additional funding. Mr. Bommarito stressed that the Commission was part of the team and recognized, because of the budget shortfall, it would be inappropriate to request additional funding. The handout (Exhibit D) included a list of those opportunities that hopefully could be addressed in the future. Mr. Bommarito said as time goes on the Commission hoped to convince the Legislature that transfers to other agencies should be evaluated on highest and best use in order to bring more revenue to the state of Nevada. The state lost revenue for every dollar transferred from the Commission that did not generate $121.
Mr. Bommarito said the Commission’s budget was flat and he requested that the reserves be protected. The budget included a $1 million reserve that the Commission felt was now, more than ever, essential. Mr. Bommarito stressed that the productivity of the Commission was up between 40 and 50 percent with the same existing staff working harder and smarter.
Mr. Marvel asked if room taxes were going to meet projections. Mr. Bommarito felt the Commission’s projections were realistic, barring a disaster. The impact of a possible war was unknown. The room taxes had almost returned to the amounts generated prior to the terrorist attack of September 11, 2001. Mr. Marvel recalled the state audit included eight recommendations and asked how close the Commission was to being in compliance. Mr. Bommarito said the Commission had complied with each of the recommendations.
Chairwoman Giunchigliani asked for information on the Commission’s bill draft request (BDR). Nancy Dunn, Deputy Director, Nevada Commission on Tourism, said during the 2001 Legislative Session, the Lieutenant Governor, who chaired both the Commission on Economic Development and the Commission on Tourism, had asked if there was a way to bridge the gap in rural Nevada. There appeared to be program funding available on a federal and state level for infrastructure needs in rural Nevada and also for tourism advertising dollars through the Nevada Commission on Tourism. The question in rural Nevada became how to arrive at a point to actually begin to build a facility such as a rodeo ground or a fairground. The rural communities were not eligible for advertising dollars through Tourism until an event center was built and were not eligible for CDGP funding through Economic Development until the infrastructure was in place. A program was created to bridge the gap between the two programs and make rural Nevada eligible to begin the process to develop tourism projects. The language included in the bill draft required a cap of $200,000 on the funding program, and the Commission was required to go before the Interim Finance Committee before funding could be obligated or spent. Ms. Dunn said because the Assembly Committee on Ways and Means and the Senate Finance Committee had to approve funding before it could be committed, the Commission thought perhaps the requirement to go before the Interim Finance Committee (IFC) was duplicative language. Therefore, the BDR requested that the requirement be removed from the law.
Assemblyman Goldwater said he appreciated the Commission’s budget and had, in the past, been more critical of the budget than many of his colleagues. Mr. Goldwater mentioned that it had been difficult to explain the $1.9 million expended by the Commission over the past biennium on recreational vehicles and promotional items that were given away at travel shows. He wondered why private companies were not spending the same amount for promotions. Mr. Bommarito indicated private companies were spending large amounts for promotions. Statistics provided by the Travel Industry Association of America (TIA) revealed the recreational vehicle (RV) market was one of the fastest growing tourism markets.
Mrs. Chowning asked for information on the number of entries for the RV sweepstakes and the amount of revenue the state received in return for the state having purchased the RV. Ms. Dunn said the Commission did not have a base upon which to build when the RV program began, but had recognized there was a strong interest in “RVing” in rural Nevada. The Commission began to establish a base that included the number of RV travelers actually coming into the state and how much was being spent within the local communities. Ms. Dunn said it took a while to collect the information, but the Commission was almost to the point of having the information available to determine a return on investment. The answer was not currently available, but the Commission hoped to have the information prior to the end of the 2003 Legislative Session. The Commission had promised the IFC the RV program would be discontinued if not successful, but all signs indicated the program had been extremely successful for rural Nevada. Ms. Dunn said the Commission’s research analyst had provided the entry numbers and in FY2001 there were 8,436 entries into the sweepstakes program and in FY2002 there were 17,534 entries. Mr. Bommarito asked the members to keep in mind only one entry per vehicle was allowed statewide. Mr. Bommarito noted a couple from California had won the first motor home and a couple from Indiana had won the other.
Assemblyman Hettrick asked Mr. Bommarito to explain the entry requirements again. Mr. Bommarito said in order to enter an individual had to spend one night at a campground in Nevada in order to register. If the individual spent multiple nights and registered more than once, the first registration would be the only one counted. The sweepstakes house narrowed the entries to one per person. In order to qualify an individual had to come to Nevada, bring an RV, and stay in an RV park in the state. Mr. Hettrick felt that the 17,534 entries were reaching the point of being cost-effective. Mr. Hettrick felt it would perhaps be better to have a requirement for staying two nights in two different Nevada RV parks to avoid having individuals pull into an RV park in Jackpot and spend an evening and then return to Idaho. Mr. Hettrick thought the program was good and promoted some good things in rural Nevada, but he stressed the program had to be cost-effective.
Mr. Goldwater thought it would be beneficial for the Commission to develop performance indicators that reflected what would have happened without the Commission on Tourism, and what happened with the participation and impact of Tourism. Mr. Bommarito agreed with Mr. Goldwater that performance indicators were important and the performance indicators had been updated. One indicator required an accounting of the total number of visitors to the Web site. Mr. Bommarito noted the Web site had received 150,000 visits. The indicators looked at leads and actual contacts and there were many other real indicators. Mr. Goldwater acknowledged the performance indicators were good and the Web site was great and the performance measures were what the Committee was looking for. Mr. Goldwater said when there were large expenditures, it was important to know what would have happened with or without the program.
Chairwoman Giunchigliani thought the real issue was whether to continue rolling room tax revenue into the Tourism budget in order to create additional programs. Perhaps it would be better to have the room tax revenue revert to the General Fund. The Chair asked for further information on the disbursement of the room tax. Ms. Dunn said statutes required the state to collect 1 percent of the statewide lodging tax and 3/8 of 1 percent was committed to the Nevada Commission on Tourism for the promotion of tourism; the remaining 5/8 of 1 percent was returned to the community in which it was collected. The Chairwoman was not certain why state revenue was being allocated to local governments and thought it was time to review the process.
In response to a question posed by Chairwoman Giunchigliani on the reserve included in the budget, Mr. Bommarito said transfers to the Department of Cultural Affairs were included in the budget in the second year. Ms. Dunn said currently the budget was showing a reserve of $1.1 million per year, but she thought the fiscal analysts were reconsidering transfers from the Joint Research Office. Ms. Dunn explained that the Joint Research Office designation was incorrect, the funding was actually a commitment that the Nevada Commission on Tourism and the Interim Finance Committee had made to the Virginia and Truckee Railroad (V&T), and that commitment had not changed. The commitment was made in the amount of $1 million and was split in The Executive Budget into $500,000 per year. Ms. Dunn believed the language included in the law was for $1 million in the first year of the biennium. If the commitment was increased to $1 million, it would result in a reduction of the reserve to slightly over $600,000, not $1.1 million. Chairwoman Giunchigliani said the Committee would revisit the issue.
Mr. Manning said the reserve issue was not easy to address when working with the Division in building the budget. From the beginning it had been necessary to reduce some of the enhancement requests and those enhancements were being funded by reductions in the General Fund transfers. While revisiting the budget and attempting to use General Fund transfers, Mr. Manning had discovered there would be a shortfall due to the loss of revenues in FY2002 and the projected loss of revenues in FY2003. The Budget Office had attempted to fund the budget and leave a $1.2 million reserve, which covered 30 days of operating. Mr. Manning explained he had attempted to fund the reserve at a normal level, which resulted in the reductions in the transfers; approximately $124,000 in the first year. In the second year, the Department of Cultural Affairs and the Division of State Parks would each receive approximately $716,000. Mr. Manning agreed with Ms. Dunn’s assessment that the $500,000 included for each year of the biennium for the V&T Railroad should be included in the budget as $1 million in the first year of the biennium.
Chairwoman Giunchigliani asked about the match required for the V&T to qualify for the funds. Mr. Bommarito said the amount was not based on a match, but was based on a plan and an assurance the remaining $19 million could be raised. Chairwoman Giunchigliani thought the legislation, S.B. 583, should be reviewed “if it was just betting on the come.” The Chair asked if the funds that would be transferred reduced the enhancements and were actually one-shot funds. Mr. Bommarito said during the last legislative session, funding for the non‑tourism areas was based on large reserves. Because of the poor economy, those one-time reserves no longer existed, which resulted in reduced funding for the Department of Cultural Affairs. Mr. Bommarito said the Commission’s enhancements had been taken, not theirs, and there was still less money left over because there were not large reserves and they could not fund them to the same degree.
Mr. Manning said he believed $1 million in one-shot monies in the Parks transfer would not be ongoing had the funding provided in FY2002 continued. Chairwoman Giunchigliani asked Mr. Manning to provide the Committee with a breakout on exactly how the funds included in the transfers would be used. Chairwoman Giunchigliani recognized there was a duplication of services and thought there should be a review of consolidating the budgets or maintaining the room tax at the state level, rather than dispersing it to the local governments. Chairwoman Giunchigliani asked Mr. Bommarito to provide a list of the projects the Commission was planning on bringing in-house and what the cost savings would be. She understood the rural counties needed assistance in many areas but was not certain the urban areas needed the same assistance. Perhaps some of those dollars could be recaptured. Chairwoman Giunchigliani thought it might be time to look at the entire funding formula.
Chairwoman Giunchigliani asked about the proposed grant program, and Mr. Bommarito acknowledged he was actively involved with the grant in conjunction with the Department of Commerce. A committee was being formed to determine how the funds would be disbursed. The grant money had to be used for international advertisement. The initial federal bill, known as the Foley Bill, was based upon existing spending, which hurt Nevada since the state did not spend as much as other states.
Chairwoman Giunchigliani asked how many international programs there were. Mr. Bommarito said the Commission on Tourism and the Commission on Economic Development would both be visiting China even though the agencies were quite different. The largest international customers were Japan and the United Kingdom. Chairwoman Giunchigliani said she had traveled the whole world at one time and people everywhere had heard of Nevada because of the slot machines, not because of the Department of Tourism. Mr. Bommarito said China was formally against gaming, so the large Las Vegas resorts were advertised as resorts and entertainment centers, rather than gaming establishments. The Chair asked about the grant time lines, and Mr. Bommarito said the committee had to be in place within 30 days and then the criteria would be developed. There was not yet a time line for distribution.
NEVADA MAGAZINE (530-1530)
TOURISM & ECON DEV-25
Richard Moreno, Publisher, Nevada Magazine, said the recommended budget was a status quo budget. No new programs or positions were being proposed. The only change was a slight increase in the transfer of funds from the Commission on Tourism to cover production of some of the Commission’s publications. Mr. Moreno explained that Mr. Bommarito desired to have more projects produced in-house. The Division tried to take advantage of staff expertise as much as possible. Mr. Moreno referred to a packet distributed to members that included some of the Division’s publications. The packet included:
Mr. Moreno referred members to a handout titled “Nevada Magazine Highlights” (Exhibit J), which covered the Division’s accomplishments during the 2001‑2003 biennium. The Best of Nevada program, a reader poll, had been very successful in drawing new advertisers to Nevada Magazine. Beginning in 2002, Nevada Magazine assumed responsibility for producing several publications for the Nevada Commission on Tourism, including the Nevada Visitors Guide. The Nevada Magazine operated as a small business and Mr. Moreno was pleased at the success of selling advertising. Part of the synergy that came from the magazine selling advertising and publishing the Visitors Guide had resulted in a savings in printing costs to the Commission. In the past there had been no advertising. Mr. Moreno said in FY2004, the Division would be publishing “the six territory brochures.”
Mr. Moreno said since September 11, 2001, there had been a slump in advertising sales so the Division had been aggressive in addressing the problem by reorganizing the advertising department. Private contractors now sold advertising and worked on a commission basis. As a result of the shift, one full‑time position had been eliminated.
Mr. Moreno explained the Division’s promotional budget was small, which required the formation of partnerships with various public and private entities. The Division had a partnership with the Wild Nevada Program, a Public Broadcasting System (PBS) program, and was also working with State Parks in the development of a guidebook to Nevada State Parks that would include information on all state and federal parks within Nevada. The only way to obtain the guidebook was by subscribing to Nevada Magazine through an offer made by State Parks. Mr. Moreno said Nevada Magazine also had a successful partnership with the Department of Motor Vehicles to include a Nevada Magazine subscription offer in the license renewals; the program yielded between 3,000 and 4,000 new subscriptions each year. Mr. Moreno concluded his presentation and offered to answer any questions.
Mrs. Chowning asked about the cost of having the Nevada Magazine printed in Minnesota and wondered if the magazine could be printed in Nevada. Mr. Moreno said having the magazine printed in Nevada was preferable and there were qualified Web-press printers. However, the Division had received six bids through the RFP process, and Nevada vendors submitted the two highest bids. The cost would be $138,000 annually to go with the lowest Nevada vendor, a difference of approximately $23,000 per issue. The contract with the current vendor in Minnesota would expire in 18 months. Mr. Moreno hoped the Nevada vendors would take a hard look at what the Division was currently paying and submit competitive bids. Mrs. Chowning asked about the current costs, including transporting the magazines back to Nevada. Mr. Moreno said the shipping and freight charges were included in the contract and the print contract amount was approximately $600,000 per year.
Mr. Goldwater asked if the advent of technology and Web sites had resulted in declining printing costs. Mr. Moreno replied that there had been some savings; the Division was completing many more functions in-house. The entire magazine was forwarded to a Web site, which had helped to keep personnel costs down. Mr. Moreno recognized the Division would be hard pressed financially to produce the magazine with the technology used ten years ago.
Chairwoman Giunchigliani said Committee staff would be working with the NCED staff to reconcile some of the budgets presented during the hearing.
Chairwoman Giunchigliani noted that Mark Stevens, Assembly Fiscal Analyst, LCB, had distributed copies of the first round of budget modifications received from the Budget Office. The Chair indicated the Committee had been concerned because modifications had not been received earlier and requested that a representative of the Budget Division “walk through” the modifications.
Andrew Clinger, Deputy Director, Budget Division, said a list of 46 adjustments had been forwarded to LCB last Friday. The majority of adjustments were minor technical adjustments. The largest adjustment was approximately $20.7 million in additional funds for the Distributive School Account (DSA). Mr. Clinger explained that in all other state budgets, the increase in the contribution to the Public Employees Benefit (PERS) program was split between the state and the employee. Mr. Clinger explained that local school districts funded 100 percent of the retirement contributions. However, when the budget was initially constructed, the school districts were treated the same as all state agencies.
Mr. Stevens pointed out that committee staff had reviewed the budget modification for the DSA, and the last time the employer-paid retirement contribution had been increased was during the 1995 Legislative Session. At that point in time, K-12 employees were treated the same as all other employee groups and one-half of the PERS contribution was allocated to the employee.
Chairwoman Giunchigliani asked Mr. Clinger to speak briefly on the motor pool and prison medical care issues. Mr. Clinger said initially the wrong base amount was used to calculate inflation, and the modification was merely a technical correction. The Chair asked if the medical care issue had anything to do with the state picking up the higher-end costs because of the medical contract, for example at Ely, or was this just over the system itself. Mr. Clinger said he would have to get back to the Committee with a response to the question. Chairwoman Giunchigliani said the response would be helpful because the Ely contract diverted the higher-end costs back to the state after the contracts were renegotiated and there had been some concerns with the women’s prison.
Chairwoman Giunchigliani adjourned the meeting at 10:32 a.m.
RESPECTFULLY SUBMITTED:
Linda J. Smith
Committee Secretary
APPROVED BY:
_ __
Ms. Chris Giunchigliani, Chairwoman
DATE: