MINUTES OF THE ASSEMBLY COMMITTEE ON COMMERCE Sixty-eighth Session June 7, 1995 The Committee on Commerce was called to order at 3:30 p.m., on Wednesday, June 7, 1995, Chairman Larry Spitler presiding in Room 332 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Mr. Larry L. Spitler, Chairman Ms. Sandra Tiffany, Chairman Mrs. Maureen E. Brower, Vice Chairman Mr. Richard Perkins, Vice Chairman Mr. Dennis L. Allard Mr. Morse Arberry, Jr. Ms. Barbara E. Buckley Mr. Thomas A. Fettic Ms. Chris Giunchigliani Mr. Lynn Hettrick Mr. David E. Humke Mr. Michael A. (Mike) Schneider GUEST LEGISLATORS PRESENT: Assemblyman Bob Price, District 17 Assemblyman Pete Ernaut, District 37 Assemblyman Jack Close, District 15 STAFF MEMBERS PRESENT: Paul Mouritsen, Senior Research Analyst OTHERS PRESENT: Linda Stetter, Builder's Association John Gibbons, Real Estate Division Jolene Rose, Real Estate Division Paula Berkley, Lobbyist Bill J. Bailey, Chiropractic Board Cindy Wade, Chiropractic Board Dave Badger, Personnel Department Willis Shepard, Willis Electric Lon Harter, Nevada Chiropractic Association John Sande, Nevada Banker's Association Margi Grein, State Contractor's Board Bill Bernard, Western Titel Company Jean Hiesl, Real Estate Division Tom Skancke Christopher Logan, Nevada Society of Respiratory Care Stan Warren, Sierra Pacific Ike Yochum, IAP Following roll call, Chairman Spitler opened the hearing on A. B. 582. ASSEMBLY BILL 582 - Revises provisions governing right of publicity. Chairman Spitler indicated A.B. 582 was an issue brought forth from the Las Vegas Convention Authority. The Committee had been distributed a petition created by Myram Borders from the Las Vegas News Bureau (Exhibit C). Andy Engleman had worked with Ms. Borders on an amendment defining government (Exhibit D). Section 1, number 2, defined "government agency"; on lines 7, 8 and 9, their recommendation was to redefine "government agency". Those changes would make them pleased with the bill. Mr. Fettic had received a call from Sue Morrow who told him to pass on to the Chairs that the Nevada Press Association supported the bill. Ms. Giunchigliani asked if they had three choices on how to define "government agency"? Chairman Spitler indicated when they were in their work shop they defined three different definitions for "government agency" and decided to recommend the first one. ASSEMBLYWOMAN GIUNCHIGLIANI MADE A MOTION TO AMEND AND DO PASS A.B. 582 TAKING THE FIRST DEFINITION OF "GOVERNMENT AGENCY". ASSEMBLYMAN HETTRICK SECONDED THE MOTION. THE MOTION CARRIED. Chairman Spitler requested Ms. Giunchigliani to handle the floor statement on A.B. 582. Chairman Spitler opened the hearing on A.B. 675. ASSEMBLY BILL 675 - Creates licensing board for electricians. Chairman Spitler said there had been a request to reschedule A.B. 675 and it had been re-posted for Monday, June 12, 1995. However, testifiers were present and Mr. Price had asked if the bill could be heard. His request was honored. Assemblyman Bob Price, District 17, North Las Vegas, Clark County, expressed appreciation for the re-posting of A.B. 675. He was not prepared for presentation and the individuals requesting the bill were not in attendance. There were amendments to be presented at the next scheduled hearing. Mr. Price indicated the bill would set up a new board for licensing of electricians throughout the state. It was not an uncommon situation and there were several states around the country that had done it. Chairman Spitler requested Ms. Buckley to be a subcommittee of one to study A.B. 675. Ms. Buckley answered, yes, certainly. Chairman Spitler indicated testimony would be heard from the individuals in attendance and Ms. Buckley would get together with Mr. Price to discuss the bill. Mr. Price requested the rescheduled meeting on June 12, 1995 be cancelled and he would interface with Ms. Buckley. His request was granted. Mr. Stan Warren understood the bill was going to be reheard at another time, therefore, he had told his witness not to attend. He felt it best to put it into a subcommittee. He was looking for a utility exclusion for the extremely high voltage aspects of the bill, which he had discussed with Mr. Price and received his "nodded" concurrence. Ms. Linda Stetter, Executive Director of Associated Builders and Contractors (ABC) of the Northern Sierra Chapter, said on behalf of the ABC legislative committee and the Electrical Contractor's Consortium, she opposed A.B. 675. She gave her testimony (Exhibit E). She said she would be happy to work with Ms. Buckley in the subcommittee. Mr. Willis Shepherd, owner of Willis Electric in Carson City, Nevada, gave his testimony (Exhibit F). Mr. Ike Yochum, representing the Independent American Party and himself, indicated he had been in the electrical trade for many years. He pointed out page 1, line 12 of the bill said four members who were licensed electricians shall be appointed by the Governor. On page 2, line 5, it said the board shall review and evaluate applications for the licensing of electricians. Mr. Yochum asked how they were going to get those four members who were licensed electricians in front of the review and evaluation of applications. He observed it was like starting to build a building on the second story. Chairman Spitler replied sometimes when boards began, things of this type happened. They had to start somewhere, because the board had to be named before the board "shall". Mr. Yochum asked who was going to qualify the four members? Chairman Spitler indicated the Governor would appoint the members and the board did the other section. Mr. Yochum expressed his opposition to the bill. Chairman Spitler asked Mr. Yochum to leave his telephone number with the Secretary in order to be contacted for the subcommittee. Ms. Margi Grein, State Contractor's Board, stated the board did not have an official position on the bill, however, some concerns had arisen. - Section 2, subsection 2, defined licensed electrician, which appeared to be a definition of licensed journeyman electrician. She asked who licensed the electrical contractor? - Section 3, subsection 6, stated a member of the board may be held liable in a civil action for any act which he performed in good faith and the execution of his duties pursuant to this chapter. She asked why a board member would be liable for something he did in good faith? - Section 6 defined the process for the board members reviewing applications, investigating and disciplining. There was a conflict because it required board members to initiate and investigate complaints and pose penalties, which was a violation of Nevada Revised Statutes (NRS) 233B.122, which prohibited board members from acting as investigators and prosecutors and taking part in adjudication of a case. - Section 16, grounds for initiating disciplinary action, Ms. Grein did not see anything regulating or governing the workmanship of the contractor. She asked was the bill protecting the public and where did they go with a complaint? Who was the responsible party since it was removed from their statute? - Section 22 amended the language where they did not issue any license to any electrical contractors anymore. Once again, who enforced the contractors licensing law and who imposed the discipline for violations of NRS 624.300 through 3017, all the contracting licensing laws? Ms. Grein wanted clarification on what protection was offered to the consumers with complaints and failure to comply with terms of a contract. If it was all the electricians who were licensed, who was the responsible contractor? Chairman Spitler indicated Ms. Grein had some valid points and asked her to work with the subcommittee. She said she would be happy to do that. She continued on with her concerns with the bill. - Section 25 said they shall notify each person licensed to practice electrical engineering and, once again, a definition was needed for electrical engineering. It referred to that, and then it referred to electricians, and she was not certain of the differences between those two. - Section 26 discussed "grandfathering" people in and she asked what happened to the contractor's license that was issued pursuant to NRS 624. Finally, all licensing occupational and professional boards were created out of a need to protect the public. If the public had lost their ability, through the legislation, to file complaints against contractors, how would they be protected by A.B. 675? Leaving the subcommittee in the capable hands of Ms. Buckley and Mr. Price, the Chair closed the hearing on A.B. 675, and opened the hearing on S.B. 252. SENATE BILL 252 - Authorizes manufactured housing division of department of business and industry to establish trust account for advance fees. Chairman Spitler indicated on June 2, 1995, the Committee had voted a Do Pass on S.B. 252. It was taken to the floor where he moved it to the desk because of an error. The Division of Housing and the Manufactured Housing Association had asked if they could put an amendment on it to clarify the role of a board member. He moved it to the desk to have the amendment done and planned to bring it back to the Committee for discussion. He suggested doing an amendment on the floor from the Commerce Committee. In Chapter 489, sections 1 and 2, it said all the board members had to be designated, and they wanted it changed to have one person responsible, designated by the board. They had to change the NRS code so public hearings would be required. Both parties had agreed to the action. Chairman Spitler indicated he would do the floor statement. He entertained a Commerce Committee amendment to narrow it down so only one board member was responsible. ASSEMBLYWOMAN GIUNCHIGLIANI MADE A MOTION TO DO A COMMERCE COMMITTEE AMENDMENT TO S.B. 252. ASSEMBLYMAN FETTIC SECONDED THE MOTION. THE MOTION CARRIED. Chairman Spitler opened the hearing on A.B. 667. ASSEMBLY BILL 667 - Requires verification of registration of qualified intermediaries in certain real estate transactions. Mr. Hettrick, Assembly District 39, indicated A.B. 667 was a simple change to a bill the Commerce Committee passed two years previously. He thought some of the Committee members would remember it as the "1031 exchange" bill. It had been effective according to the feedback he had received from the Real Estate Division and some individuals involved with 1031 exchanges. It had made the state of Nevada significant money and he expressed appreciation for the support of the Committee during the 1993 legislative session. He remembered the people who agreed to support the bill had backed away and hoped it would die. The Commerce Committee was helpful in passing the legislation which had been good for the state. The bill started out to correct some minor issues and had grown a bit. Mr. Hettrick explained the bill. - The first issue was on line 5, which were "tax deferred" exchanges. They were not tax free. They did not wish to have any discrepancy in the law, therefore, it was to be changed to "tax deferred". - Lines 12 through 15 were requesting title companies, escrow officers, and title agents to verify the person requesting to do a 1031 exchange was, indeed, a qualified intermediary under the law passed in 1993. There were some concerns it required the title company to call up and verify in some fashion. - He indicated a list (Exhibit G) of people qualified thus far in the state of Nevada to do it. He pointed out: (1) that was the list they would verify off of; and (2) on line 14 it said "first verifies". Mr. Hettrick indicated it meant to him they could make a telephone call to the Division and find out who was on the list, or they could make a call to the Division and request the list and verify it for themselves. Mr. Gibbons had indicated the people who would be required to do it could also make one telephone call and be put on a list that would allow them to receive it anytime it was updated. He did not believe it was a prohibitive or punitive measure, they were simply asking for verification. Title companies did much of it and were accustomed to verifying and checking various information on a piece of property before a transaction took place. He did not think it an onerous provision. Mr. Hettrick indicated it was a simple bill. In addition, he asked the Committee to peruse two bill drafts which had been distributed to them. The Real Estate Division had put in two bills on the Senate side. By the time the Senate had introduced them they were "stale" bills. Mr. Gibbons tried to get them done in the Senate but was told they needed to find something to amend into them in the right NRS section because it was too difficult to accomplish otherwise. Mr. Hettrick had reviewed the bill drafts and Mr. Gibbons would address them. He did not have a problem with the attempt to incorporate the two bills if the Committee did not have a problem with it. He did not wish to kill his bill and neither did the Division because they were the ones who asked Mr. Hettrick to make the provision. Mr. John Gibbons, representing the Department of Business and Industry Real Estate Division, indicated the first Bill Draft Request (BDR) being considered as an amendment to Mr. Hettrick's bill was BDR 54-2080 (Exhibit H). Chairman Spitler asked for clarification that Mr. Gibbons was in no way addressing A.B. 667, just addressing the two BDR's. Mr. Gibbons said they had no objections to A.B. 667 and were asking the two BDR's be added as amendments on the bill to get them into law. When they were introduced in the Senate Commerce and Labor Committee they were found to be "stale" BDR's which required new BDR numbers. Mr. Gibbons received them back and he and Mr. Hettrick discussed an attempt to amend the bill as an appropriate rider. Mr. Hettrick agreed to allow it. The first BDR 54-2080 was a result of their legislative audit and it was suggested the appraiser's licensing and examination fees be set by regulation instead of statute. Currently the statute set the application and testing fees. The second BDR 54-2122 (Exhibit I) was a division bill. It allowed the Director of the Department of Business and Industry to establish where the location of the Administrator of the Real Estate Division was located. They had two offices, one in Carson City and one in Las Vegas. Currently it was established that the Carson City office was the principal office. This would allow the Director to designate the principal office, either in Las Vegas or Carson City, and also where the Administrator would be housed. The second portion of the bill changed the composition of the Real Estate Commission by changing it from two members to three members from any one county. The change was opposed by the Nevada Association of Realtors and they suggested it not be included when it was incorporated and leave it at two members from any one county. The last portion was the most significant. During the licensing application they wanted to have ability to deny a real estate license to a person on probation, parole or had restitution to make. It had been put into the "grape vine" of the prisons that if a person took correspondence courses, passed them, took the examination, passed it, and got someone to sponsor them upon release, they could get out on parole and be licensed to sell real estate. They wished to eliminate that so a person could not apply for a license until they had completed probation and parole and had successfully waited three years without getting into trouble before applying for a real estate license. Mr. Allard asked if there had been problems with brokers or salesmen that were on parole? Mr. Gibbons answered, no, none of which he was aware. Mr. Allard asked if the legislative auditor had recommended BDR 54-2080? No answer was forthcoming. Chairman Spitler expressed concern regarding the section on parole. He felt it needed a broader public hearing and noticed. The other things he observed were "housekeeping" and he had no problem with them. He wondered if he was the only member with a concern and asked the Committee for their thoughts. He indicated willingness to renotice the bill and stated there were significant changes in terms of proposed amendments, or remove the section and process the bill. He suggested the first hearing date available would be June 16, 1995. Ms. Giunchigliani said a third idea could be an amend and rerefer and post the rereferral with a full reprint for full hearing as well. It would get it into the system and produce a full document to which the public could react. Mr. Hettrick understood the lateness of the session, and had no problem with it. He said it was actually a request from the Real Estate Division, including the amendment to clean up the language. Therefore, if they were willing, he was willing as well. ASSEMBLYWOMAN GIUNCHIGLIANI MADE A MOTION TO AMEND AND INCORPORATE THE LANGUAGE OF BDR 54-2080 AND BDR 54-2122 INTO A.B. 667 AND REREFER IT UPON REPRINT BACK TO THE COMMITTEE FOR HEARING. THE MOTION WAS SECONDED BY ASSEMBLYMAN BROWER. THE MOTION CARRIED. The hearing was closed on A.B. 667, and opened on S. B. 344. SENATE BILL 344 - Revises provisions relating to licensing of chiropractors and chiropractors' assistants. Dr. Bill Bailey, Secretary of the Nevada State Board of Chiropractic Examiners, was present to testify on behalf of S.B. 344. It was truly a "housekeeping" bill and he submitted the suggested changes (Exhibit J). Mr. Spitler asked what was the function of a chiropractor's assistant? Dr. Bailey replied the chiropractor's assistant assisted the chiropractor in those ancillary procedures dealing with patient care. For example, applying and removing hot pads, taking patients back to treatment rooms, and applying physical therapy modalities. Mr. Spitler asked if doctor's assistants were required to be licensed or have certificates? Ms. Paula Berkley indicated there was a "physician's assistant". Mr. Spitler clarified, just in a doctor's office who assisted the doctor. Ms. Berkley said she did not know. He asked what was the rationale for this legislation? Dr. Bailey said there was a section in the statutes requiring chiropractic assistants to be licensed. Ms. Berkley explained any time a patient was touched by another person, he/she had to be trained and qualified because the chiropractor was liable for their actions. Mr. Spitler asked what was the fee at the present time? No one seemed to know the answer. Mr. Fettic indicated section 4, subsection 6, lines 33/34, said "automatic loss of certificate". Dr. Bailey agreed and said it was an annual recertification. If the assistant failed to recertify and pay the fee, it was automatically suspended. Ms. Berkley reiterated they were attempting to ensure who was in the field and who had a license. She further explained, at the beginning of the year the applications for recertification began "dribbling" in. If a liability case arose in January and the recertification had not been updated in June, the person was not legally a chiropractor's assistant at the time of the liability. This was a motivation not to let the license lapse as it could cause the chiropractor liability problems. Therefore, the fine was placed on it not so much to get the money, but to make sure they would pay attention to the issue. Mr. Arberry pointed out page 3, line 14, and asked what 12 hours of continuing education meant? Dr. Bailey defined "continuing education" as a seminar or some type of class pertaining to the academic advancement of chiropractic education, having to do with clinical issues, methods of technique, and/or something applicable in the clinical realm. They did not allow financial or practice billing type classes to be included in continuing education. Mr. Arberry then indicated page 3, line 15, which was existing language, where it said, "a licensee who had reached the age of 70 years". He asked what they were trying to say -- that a person at 70 years old could not practice anymore? Dr. Bailey answered, no, after the age of 70 they no longer had the continual education requirement. Mr. Arberry asked how chiropractors determined when they were no longer able to do the chiropractic manipulations/adjustments. Dr. Bailey said the Board, per se, did not retest anyone once they received their license. Essentially, the public were the ones who informed the Board if the doctor was not practicing up to the standard of care. Once the doctor received his/her license and complied with the continuing education requirements as set forth in the NRS and did not violate them, they were free to practice as they chose. Mr. Arberry asked where the line was drawn when a doctor called in a substitute for illness or vacation. Dr. Bailey explained they had a provision for temporary licensure in which a doctor could apply for a temporary ten day license to fill in. There was a series of requirements to which the replacement doctor had to comply in regard to being in good standing with whatever state Board he was licensed. The doctor could have no current disciplinary actions pending. It had to be approved by the Board. There were time limits for submitting the application to the board. Therefore, they were investigated before they granted any temporary state licensure. Mr. Arberry asked where did they draw the line between body size of the patient versus stature of the chiropractor. He gave an example of an experience he had where a person was filling in for his regular chiropractor. He was an older, small boned person who attempted to handle Mr. Arberry, who was a much larger person. It did not work too well. Where was the line drawn in a case of this sort? Dr. Bailey said, unfortunately, the board had no "say" regarding physical stature. As long as they were complying with their scope of practice they were free to pursue chiropractic in the state of Nevada. Obviously in the profession there were certain advantages and/or disadvantages to size and dexterity, however, they were not mandated by law. Dr. Lon Harter, D.C., from Carson City, the Legislative Chairman of the Nevada Chiropractic Association, offered some amendments to the bill (Exhibit K). The lateness of the amendments were the result of a Board meeting conducted Saturday, June 3, 1995, in Reno, Nevada. There had been no intention of offering amendments to the bill until certain actions took place at the Board meeting. They had discussed the 75 percent grade average and submitted an objection to it in writing to the Board. They knew chiropractors had been refused license because they had failed the rules and regulations section of the test by a less than 70 degree average. There were not many pages in that section and Dr. Harter felt it should not preclude a person from actual practicing of chiropractic in the state of Nevada for a period of six months or a year until he/she passed the test successfully. They had no problem with the other sections. Maintaining an absolute 75 percent average in all cases was not necessarily a guarantee of quality. The state of Nevada happened to have the highest failure rate in the United States. Irene Gold, who put on seminars for individuals preparing for licensing in various states, had indicated only the state of Nevada had to pay to retake the seminar if they failed the test. All other states gave the seminar free if an individual failed to pass the test. Therefore, the quality of the examination posed difficulty. Chairman Spitler asked Dr. Harter what was his amendment? Dr. Harter replied they wished it to remain the same insofar as the particular area was concerned. Mr. Spitler asked him what group he represented? Dr. Harter said the Nevada Chiropractic Association. Mr. Spitler clarified it was different from the Nevada State Board of Chiropractic Examiners. Dr. Harter said, "Absolutely, we're the chiropractors who are practicing, they're the guys who keep telling us what we can't do." Dr. Harter explained the amendments, (Exhibit K). Ms. Brower indicated page 3, section 4, subsection 5, where the bill addressed the license automatically being suspended, and assumed the chiropractors were sent notices. Dr. Harter stated there were notices sent. Ms. Brower asked how many notices were sent out? Dr. Harter had no idea. Ms. Ronda Moore, Deputy Attorney General and Counsel for the Nevada State Board of Chiropractic Examiners, said approximately a couple of months before January 1, renewal notices with the bills were sent out to the chiropractors. When the renewals were late, another notice was sent which stated their license was automatically suspended pursuant to the statute, they should not be practicing and would only be reinstated when they paid the late fee. Another letter was sent out as many times as the Board director felt appropriate before calling in Ms. Moore. Within a period of two months most people were paid up and reinstated. After that time frame and deliberate defiance had been displayed, disciplinary action would be taken. Dr. Harter indicated one should not have the ability to ignore payment of fee, however, if there was a suspension there should be a hearing. The service should be in person. Dr. Harter felt the word "automatic" was not appropriate. In all other instances a hearing was required before a license was suspended. The Nevada Chiropractic Association felt there should be actual service and hearing before suspending a license. Chairman Spitler asked Dr. Harter if he had testified in the Senate hearing on S.B. 344? Dr. Harter answered no, they had no intention of testifying until June 3, 1995. Mr. Allard commented in his line of work they were given notice and they either renewed or were suspended. Teachers were given no notice whatsoever. He asserted people had to accept the responsibility of renewing their license. It was their livelihood and they needed to keep abreast and on top of it. He felt a personal hearing for each suspension was not appropriate. Dr. Harter clarified only before a suspension took place. They were not asking the suspension be removed after a legitimate hearing. He pointed out if he were in an automobile accident or out of the state, he received an automatic revocation. The Board's hands were tied by the word "automatic". He emphasized the word "automatic" should be removed from the bill. When the Board decided to suspend a license a person should be brought in for a hearing and insure he/she received an actual service. Dr. Harter indicated line 40, page 3, which was the fee schedule. Due to the fact the Board of Examiners decided to make specialties within the realm of chiropractic most of them felt it was improper. Ninety-nine percent of the chiropractors felt any manipulation under anesthesia was definitely not chiropractic because it required the person be under influence of a controlled substance while being adjusted. It was contrary to the law. Since they insisted they have the ability to do those things the Nevada Chiropractic Association set up a licensing fee if an individual wished to be licensed as a specialist. They now claimed specialties in pediatrics, radiology, orthopedics, diagnosis, sports medicine, and now the latest -- manipulation under anesthesia. There were only six people in the state who performed it. Chairman Spitler asked where that was in the bill. Dr. Harter indicated it was not in the bill, they were adding additional fees into the schedule to cover those specialties. The state of Nevada and the Board would be happy since they would be getting a lot of money out of it. Dr. Harter indicated manipulation under anesthesia was a very dangerous procedure. In the past the State Industrial Insurance System (SIIS) had paid for it when performed by an orthopedic surgeon. Dr. Harter had been an advisor at SIIS for 17 years and informed the Committee SIIS ceased paying for it a few years ago, however, they claimed they were paying chiropractors for it at the present time. He was no longer an advisor so was unable to say for sure if that was the case. He asserted it should not be done unless there was adequate surgical type malpractice insurance, not just general malpractice insurance usually carried by chiropractors. Ms. Stephanie Tyler, representing the Nevada State Chiropractic Association (NSCA), indicated there were two separate Associations in the state. She had represented the NSCA for the last four years indicating it had been in existence for about ten years. The NSCA had reviewed the legislation and considered it "housekeeping" legislation, particularly regarding Dr. Harter's comments concerning section 2 -- the 75 percent examination passage rate. She understood it was a national standard. Ms. Tyler recalled, when she had been before the Commerce Committee a few weeks previous, and Assemblyman Brower had commented the Dental Board had dropped their examination score from 80 percent to 75 percent to meet the national standard. She stated the NSCA had no problem with licensure of Chiropractic Assistants and encouraged them to pay the fees on time in order to keep track of how many were practicing and their location. Ms. Tyler was not comfortable commenting upon Dr. Harter's final comments regarding chiropractic under anesthesia. She said it was a unique situation and requested an opportunity to review it before action was taken upon that amendment. Dr. Bailey addressed Dr. Harter's comments: Dr. Bailey indicated motivation was needed for licensees to fulfill requirements to continue practice, such as continuing education, self-inspection forms, and updating the NSBCE with any status change in their practice over the previous 12 months. Their law required them to maintain certain information. Unless there was some way to ensure information was received in a timely manner, their office would turn to chaos. Concerning the automatic suspension of license, the applicants received their notice of license renewal approximately two months before the end of the year, along with other forms and information they were required to supply to the NSBCE. If the NSBCE did not receive the relicensure information and fees, postmarked by the first of year, the license was automatically suspended. Regarding the 75 percent examination passage rate, he indicated they felt strongly that applicants applying for license to practice in the state of Nevada should be qualified. They did not think 75 percent was a punitive score. It was a score required by most chiropractic colleges to achieve a passing rate in the courses normally taken. They were attempting to maintain the standards in existing schools. In regard to the Nevada test being the most difficult in the nation, Mr. Bailey had not heard that nor seen any factual information substantiating that claim. Regarding the specialty amendments and fees proposed by Dr. Harter, it was clearly defined in the NRS what was, and what was not, in the scope of chiropractic. There were, in fact, specialty national boards that had been developed if a doctor of chiropractic pursued post graduate education and demonstrated his/her abilities in those areas of specialty. However, it did not allow a chiropractor to practice any greater scope of practice, it just indicated the doctor had specialty training. Therefore, in order to practice a specialty and require an extra fee, since anyone who had received specialty training had no additional scope of practice, it seemed punitive to require a $5,000 additional fee from those doctors who tried to advance themselves academically. The practice of manipulation under anesthesia had been performed and was within the scope of practice as defined in the law. Chiropractors did not administer anesthesia. There were well defined protocols which included medical doctors and anesthesiologists who handled anesthesia. The service provided by the chiropractor was only that of adjustment which was defined in the law under the definition of adjustment. The fact that a person was under a controlled substance during the manipulation had nothing to do with their law. It was much the same as if a patient was treated while under the influence of a narcotic pain medication. Their opinion was this was not a violation of their statute. Dr. Bailey asserted the amendments presented by the Nevada Chiropractic Association would not benefit the citizens of the state of Nevada. Chairman Spitler clarified the "bottom line" was Mr. Bailey did not support any part of the amendment. Dr. Bailey said they did not. There being no more testimony or questions, the hearing was closed on S.B. 344, and opened on S.B. 404. SENATE BILL 404 - Provides for organization of banks as limited-liability companies. Mr. John Sande, representing the Nevada Banker's Association, indicated he had two witnesses accompanying him who would address the bill. He said although the bill was thick, it was fairly simple in its intent. He indicated there were two major items accomplished in the bill. The first item was on pages 11 and 12, sections 31 and 32. Current state law did not allow a bank to pay dividends out of its capital, or if it did not have sufficient surplus or profit to pay dividends. This was contrary to federal law which allowed, under certain circumstances, regulators to approve payment of a dividend even if it was out of capital. They proposed to mirror federal law which would provide in state law if the bank received prior approval of the Commissioner of Financial Institutions in Nevada and the holders of two-thirds of each class of its stock outstanding or two-thirds of its member's interest, if it were a limited liability company it may pay a dividend or make a distribution greater than its undivided profits. He indicated Mr. Arvind Menon, the Chief Financial Officer of the Bank of America, would go into more detail as to why it was a desirable change in Nevada law. The second major part of the bill, sections 1 through the entire bill with the exception of sections 31 and 32, would allow banks to conduct business limited liability companies. Under present law only corporations could be banks. He indicated Mr. John Dedolph, of Sun State Bank, would address the desirability of those changes. Mr. Sande pointed out a limited liability company was a new "creature" created in Wyoming for smaller companies because it did not work with publicly traded entities. It allowed an entity to receive the benefit of limited liability but still get partnership taxation so there would be only one tax. That would be a tax to the owner of the business. In a normal corporation, called a "C Corporation", there was a tax on the corporation's earnings and when the corporation paid out a dividend the stockholder paid a tax on the dividend, therefore, it was double taxation. The limited liability company was designed to "flunk" one of the two of the four tests that the Internal Revenue Service (IRS) had established to be taxed as a C Corporation. It intentionally "flunked" the two tests, one of those being perpetual existence. It was not perpetually in existence, normally they lasted about 30 years or so. The second test was the member's interests in the limited liability company were not freely transferrable as was stock in a corporation. Therefore, the state law would receive private letter rulings from the IRS saying those types of organizations in Nevada, if created in certain ways, would be taxed as partnerships. There were different descriptions to describe how a limited liability company worked as compared to a corporation and that was what most of the bill was addressing. For example, in a corporation there were stockholders; in a limited liability, there were members. In a corporation there were directors; in a limited liability company there were managers. In a corporation there were by laws, in a limited liability company there was an operating agreement. In a corporation there were articles of incorporation; in a limited liability company there were articles of organization. The bill cleaned up the banking statutes so they could apply to limited liability companies. Mr. Scott Walshaw, the Commissioner of Financial Institutions, amended the bill to make sure all the protections he wanted were included on the Senate side. They put in section 63 of the bill transitory language indicating the intent of the statute was to ensure limited liability companies would comply with all requirements of federal and state statutes regarding safety and soundness. Ms. Giunchigliani asked what applying "to a limited liability company" meant? Mr. Sande answered they could organize as a limited liability company. Since he outlined all the pros of the bill, she asked what were the cons? In his opinion there were no cons. Ms. Giunchigliani clarified there would be no adverse impact upon businesses. Mr. Sande reiterated there was none. Ms. Brower asked if a limited liability company would operate similar to a bank other than the things he had listed. Mr. Sande said, yes, instead of being a corporation with stockholders and Boards of Directors, the limited liability company would have members and managers. However, both would operate exactly the same. It was a fiction created statutorally in Nevada to allow favorable taxation. Mr. Humke asked if there was a body of case law or were there any cases from the Nevada Supreme Court dealing with disputes that had arisen as a result of the governance through the Limited License Corporation (LLC). Mr. Sande replied, no, not to his knowledge. There had been no disputes as to LLC and it mirrored the way a corporation operated except for different names for the various players. Also, the interest was not freely transferrable and the entity did not last forever. Mr. Humke asked if there were other state Supreme Courts who had built up a body of case law governing LLC's? To Mr. Sande's knowledge there was not a large body of case law and no problems experienced in the operation of LLC's. They had become very popular and one of the most common ways of doing business, especially for the smaller entity. Mr. Humke asked if it served as a weakness not to have case law from the Judiciary? Mr. Sande responded, not necessarily, because one could borrow from corporate case law insofar as the operation of the entity. Mr. Humke asked if the attorney helping the LLC with their governance looked to corporate law and reason by analogy? Mr. Sande replied corporate law and, as to taxation, they looked to partnership law. Usually the practitioners were familiar with tax law if they were setting them up regularly. Mr. Arvind Menon, Chief Financial Officer of the Bank of America/Nevada, was present to testify in favor of S.B. 404 primarily as it pertained to the dividend payout portion of the bill. B of A/Nevada was in favor of the proposed amendment primarily for the reasons indicated by John Sande. Banks were heavily regulated and one of the primary regulations was they maintain a minimum level of capital at all times. Regulatory capital ratios were calculated using all capital accounts, and he stressed all! There was no distinction between different types of capital accounts when regulatory ratios were calculated. The distinction between accounts with dividend payment purposes currently the law prohibited optimization of capital. That was the primary reason for the amendment. As an example, there were two banks identical in all respects. They had the same amount of capital and assets. The regulatory capital ratio for both banks would be identical. However, if one bank had more capital in an undivided profit account that bank would have more flexibility as to what it could do with its excess capital, versus the bank that might have more in one of the other two accounts. Mr. Menon continued, secondly, as Mr. Sande had mentioned, the proposed amendment would make the NRS consistent with federal regulations followed by other bank regulators, such as the Federal Reserve Bank and the Office of the Comptroller of the Currency (OCC). Consequently, everyone would be following the same rules and regulations as opposed to having different regulations for different regulators. Mr. Menon said if the amendment passed, the state Banking Commissioner would still continue to maintain oversight and control over an institution's activities, vis a vis, its capital. The institution could not unilaterally decide to pay dividends, or what have you, and thereby jeopardize the bank's condition. It would still have to receive permission from the state Banking Commissioner before being allowed to declare a dividend that would be coming out of an account other than undivided profit. The last point Mr. Menon wished to make related to B of A/Nevada in particular. Three years ago they acquired Valley Bank which had substantial undivided profits at the time. Due to an accounting convention for merger transaction, all the undivided profits at the time were swept into additional paid in capital and consequently the present law prohibited them from paying any dividends out of that account. B of A/Nevada felt it was an artificial issue that had arisen only because of the present law. For those reasons they were in favor of the amendment. Mr. Allard asked if B of A/Nevada was a publicly traded company? Mr. Menon answered it was. Mr. Allard asked if the provision would apply to B of A/Nevada? Mr. Menon replied the particular provision regarding the dividend payout would apply. Mr. Allard said insofar as being a LLC. Mr. Menon said it would not. Mr. John Dedolph, President of Sun State Bank, a $100 Million community bank in Las Vegas, distributed (Exhibit L) to the Committee and explained it. He had two reasons why it should be done in the state of Nevada. First, when double taxation was eliminated, real motivation would be offered to have more investment in community banks in the state of Nevada. In recent years local institutions had been the most dependable source of credit. One major bank had severe problems in California, Arizona and Texas and lending in Nevada was affected by that. LLC's formed as banks in Nevada would be immune to that and provide more benefit for Nevada's borrowing citizens. Additionally, if Nevada had LLC banks there would be additional return and it would allow the bank to be more competitive in its interest rates which would follow through with lower interest rates and higher deposit rates. More local lenders would benefit because they usually had a closer tie to the community and its borrowing needs. Lastly, local lending institutions would tend to leave their earnings in the community rather than transfer them out-of-state. Another positive aspect of it, although a little less meaninful than the first, when interstate branching becomes law on June 1, 1997, there would be a place for larger institutions that were very narrowly held to move their headquarter's charters to the state of Nevada, do interstate branching across state lines and have their headquarters in Nevada. Mr. Dedolph felt nobody would disagree that the arrival of City Corp, Household Finance, General Electric Credit Corporation to Nevada had createe very clean, positive type jobs to square the economy. Nevada could use more diversity in the economy. He pointed out the whole thing was modeled after what the state of Texas had done. There were LLC's operating in Texas called limited banking associations. They would probably be called that in Nevada. Chairman Spitler complimented Mr. Dedolph on the chart which made his testimony easier to comprehend. There being no more questions or testimony, the hearing was closed on S.B. 404, and a work session opened on A.B. 497. ASSEMBLY BILL 497 - Provides for licensure and regulation of professional counselors. Mr. Schneider indicated he and Ms. Brower had worked with the psychologists and counselors. They had reached agreement on everything with the exception of one word -- "affective". He indicated (Exhibit M) supplied by the University of Nevada Reno (UNR) which explained "affective"; and statements from the counselors that their job included "affective" and without it they could not do counseling. The psychologists said it crossed over into their area. Mr. Schneider observed counselor's and psychologist's areas were going to overlap somewhat, just a psychologist's and psychiatrist's areas did. The psychiatrists had indicated they had no problems or objections to the bill. Therefore, it had narrowed down to the one word "affective" and he wished to hear the Committee's thoughts on the matter. Mr. Schneider indicated attached to and part of (Exhibit M) were "Bullets 497". There were over 700 counselors in the state at the present time working daily and in full operation without any board or licensing. Ms. Brower pointed out during the subcommittee hearing that there was a board for hair cutters and a bad haircut only lasted two weeks. The counselors were dealing with psychological problems and performing family counseling and felt they should have a board. He agreed they should be regulated because they could do more damage than two weeks could repair! Mr. Schneider returned to the word "affective" and said it related to the personal value and the spirtual part of a person. Chairman Spitler stated it was not the intention to have a rehearing on A.B. 497, it was to be looked upon as a work shop. Ms. Giunchigliani asked if there had been a discussion about "grandfathering" the individuals? There were many groups exempted, such as social workers. Two or three other boards "grandfathered" to allow a time period in which to come into compliance. There were many people who overlapped. They may be school counselors, but also wished to be professional counselors. She felt there should be a time period to allow that phase in because there may be those who would be caught in a "catch 22". Mr. Schneider said there was no talk about that aspect. They would license all counselors at once. It was Ms. Giunchigliani's understanding counselors in schools, in the Board of Alcohol and Drug Abuse (BADA), and in the State Industrial Insurance System (SIIS) would be exceptions. Mr. Schneider said school counselors could come in altogether. A brief discussion ensued. Ms. Buckley indicated she was generally skeptical of generating addition boards unless she felt there was real need. She had been persuaded, due to the seriousness of this profession compared with others, and the fact that there was a "patchwork" system at the present time, that it made sense. She asked if the subcommittee had a recommendation with regard to the word "affective" based upon its listening to the full testimony. Ms. Brower stated overall they had worked through a number of problems and it had come down to one word. There was not a great deal of question about effectual and what it meant, it had more to do with feelings. How do you feel about this? How do you feel about that? She did not feel it was a major roadblock and she did not see major opposition from the psychologists. Ms. Buckley clarified the subcommittee was recommending to leave "affective" in. Ms. Brower and Mr. Schneider agreed. Mr. Fettic asked if currently he could hang up a shingle and call himself a marriage counselor? The answer was yes. Mr. Allard recalled testimony from the previous hearing regarding which boards were in existence at the present time. He remembered discussion regarding an omnibus board which would negate the creation of another new board. There would be some professional counselors on the board to regulate that portion since they all overlapped somewhat. He asked if the subcommittee had discussed that. Ms. Brower said she did not recall if there was any discussion regarding an omnibus board. Mr. Schneider indicated they had dropped that idea because they did not think it would work. They were recommending a regular board. Mr. Allard asked why it was not a good idea? Mr. Schneider indicated there was not time to get everybody together to do it during this legislative session. They wished to move forward to create a board, get regulated and merge sometime in the future if it could be worked out. Dr. Robert G. Whittemore, Lobbyist for the Nevada State Psychological Association (NSPA), reminded the group that the "helping field" had psychiatrists, psychologists, MFT's, LCSW's, CDAC's, and CRC's. The need for one more group with an additional board had not been demonstrated to him. Nonetheless, NSPA had worked collegially with proponents of A.B. 497. The proponents of A.B. 497 had made changes, especially deleting the word "diagnosis" and "mental and emotional disorders". They left in the word "assessment" but that was "no big deal". Deleting "mental and emotional" clearly recognized the mental and emotional disorders in psychology's scope and practice, NRS 641.025, item 4, which read: "The diagnosis treatment amelioration and prevention of emotional and mental disorders". The insertion of the word "affective" threw the group right back into emotional and mental disorders. He thought perhaps an interpretation was the realization that in the American Psychiatric Diagnostic and Statistical Manual the word "affective" meant in essence the same as mood disorders, an absolutely general heading. If the bill proponents insisted upon "affective" in line 1, page 2, then the NSPA would have to stand on record as opposing it. They welcomed, were delighted and grateful for having worked with them, with the exception of that one word. Ms. Elizabeth Harrison indicated they had worked diligently with psychology during the subcommittee hearing and took out two of the three of their requests. She felt they had been cooperative and flexible. They removed the word "diagnosis" which was of concern. They also took out "mental and emotional". They put in place "cognitive", and put "affect" in for emotion because it was impossible to separate how someone "feels" from the whole person. She agreed with Mr. Schneider that it was not a perfect world so there was some overlap. What they had was "affective of or arising from affect or feelings". They were asking for the same privileges as marriage and family therapists and social workers. They had parity with them in terms of their training and they believed to remove the word "affect" would not do their clients justice, in fact, it could cause harm. Mr. Humke indicated Dr. Whittemore had discussed the Diagnostic and Statistical Manual (DSM) which was in its fourth edition. He asked if professional counselors had input into the drafting of such a manual? Dr. Whittemore answered, they did not. Mr. Humke asked would professional counselors work under or make use of that manual? Dr. Whittemore replied, that was precisely the point, and maintained leaving in the word "affective" would give them ability to utilize the manual. He did not believe their scope of practiced allowed them to use it. Ms. Harrison stated the counselors currently were trained for and used the DSM Four, therefore, she disagreed with Dr. Whittemore's statement. Mr. Humke clarified Ms. Harrison was testifying the counselors used it now. She said that was correct -- she was using it at the present time. ASSEMBLYMAN BUCKLEY MADE A MOTION TO AMEND AND DO PASS A.B. 497 AND REREFER TO THE COMMITTEE ON WAYS AND MEANS. ASSEMBLYMAN FETTIC SECONDED THE MOTION. THE MOTION CARRIED. ASSEMBLYWOMAN GIUNCHIGLIANI AND ASSEMBLYMEN ALLARD, HUMKE AND TIFFANY VOTED NO. Mr. Humke asked for an explanation of the amendments. Chairman Spitler repeated the motion, and stated the amendment accepted the word "affective" in counseling; removed the word "diagnosis" wherever it appeared; and on page 2, line 1, added the words "cognitive", "affective" and "behavioral". Ms. Giunchigliani indicated she was uncomfortable with passing the bill without "grandfathering", therefore, she would not support it. Chairman Spitler opened the hearing on A.B. 594. ASSEMBLY BILL 594 - Revises provisions relating to sale of alcoholic beverages. Assemblyman Pete Ernaut, District 37, indicated he had seen Ms. Tiffany's amendments and submitted his amendment to the Committee. He was in full agreement with Ms. Tiffany's amendments and if the Committee wished to deal with both his and her amendments together he was amenable. He was working on an amendment of great substance which was a "sunrise" provision to allow the complete deregulation of the brew pub industry in two years. He was still working on it and asked the Committee to allow him the discretion of working it out in the Senate if that was their pleasure. Ms. Giunchigliani indicated it appeared that both amendments would be taking out C.O.D. which was what she had planned to recommend as well. She noted Ms. Tiffany had worked on the "good cause" language which she intended to review. At the appropriate time she would offer an amendment to strike the wine and liquor sections because it was a brew pub bill and it should focus on them. She appreciated Mr. Ernaut's opinion that it should be opened up to breweries wherever they were located. In contemplating "sunrise" or "sunset", she suggested sections 16 and 17 be "sunset" in the present legislation. It then would become effective on whatever date was designated. She indicated the taxation issue had been raised and cited excise tax in NRS 369.270 which had not been discussed in Committee. At some point she wished to offer suggestions on how they might deal with it but she wished to hear input from other Committee members. Chairman Spitler asked Ms. Tiffany to go through her amendments, as well as Mr. Ernaut's. Ms. Brower indicated her concerns had been covered in Ms. Tiffany's amendments and appreciated Mr. Ernaut's intent to "sunrise" the bill in either the Assembly or the Senate. Ms. Tiffany explained Mr. Ernaut's amendment (Exhibit N). Before she explained her amendment she wished to recap her progress on the bill. When she first saw A.B. 594 she thought "good cause", or the franchise law, was inappropriate and did not belong in the bill. It bothered her that they were rewriting the franchise law on top of brew pub. Subsequently she had called many friends, contributors, associates, and business people in the north and south, and ended up focusing upon the wine and spirit wholesalers. She found that the beer distributors had contracts. In those contracts their territories were defined and there was an "equity clause", which meant if the supplier decided, under good cause, they did not want the distributor to carry their line anymore, they had a three year buyout. She then spoke with wine and liquor people and found they either did not have a contract or if they did have one, good cause was not well defined. She gave an example wherein a supplier wished to consolidate his line with a distributor. They ended up in court and under the term of reconsolidation they were able to remove the entire line. There was a distributor in Clark County with significant line for wine and liquor. If that was removed without a negative good cause it would take him one year-and-one-half to recover his business. Therefore, she specifically focused on wine and liquor because beer was already being handled. From dislike of the franchise law and talking to the industry, she then went to Legal and obtained statutes from two other states to come up with the language. She appreciated Ms. Giunchigliani's intention to strike wine and liquor, however, she recommended not striking it because there was no protection on territories, what they handled and how they handled it. Ms. Tiffany explained her amendment (Exhibit O): Page 3, section 6, 1 (a)(b), 2, she wanted to define "good cause" because contracts had stated "refer to state law"; the state law had no definition; it went to court; and the courts gave the supplier any reason to remove a line. The wine and liquor industry had investments in warehouses, trucks and they hired union people who made $15 - $16 per hour which was a supplement to the local economy. In section 12, page 5, lines 19 and 20, she explained it was about "exclusive territory". She did not intend to have exclusive territory in the bill, but it had been explained to her if a territory was not exclusive but there was a defined distribution network, if the supplier did not wish a distributor to take their line anymore and decided not to follow the good cause terms, they could add three or four other distributors. When she put in "exclusive", she added unless it specified by contract. If the supplier returned to the wine and liquor wholesaler and had a contract that defined an area, the clause did not count. However, if there was none that existed there would be an exclusive marketing area. That went back to the good cause portion. Section 9, (2) remained the same until (i) where she wanted to more tightly define "transferred his business". Section 9, (2) (j) (2), that was to protect the supplier so there would not be any switching around of the benefits, stocks or transfers. To summarize, Ms. Tiffany wished to define "good cause", redefine a specific exclusive area, and tighten up what transferring a business meant. She had left the remainder intact. She came to these conclusions after working with Kim Morgan, taking two other state statutes under consideration, and talking to the industry. She asked the Committee to support the amendment when a motion was entertained. Ms. Buckley said generally she encouraged the free market and private enterprise. The disputes between a wholesaler and a supplier could be contractual disputes and could be business disputes. She asked why legislative intervention was necessary in the free market between those individuals? Ms. Tiffany had wrestled with that question significantly. In fact she had not supported the franchise portion at the beginning. However, when she began talking to the industry she found similarities to the divorcement bill wherein there was one contract offered, one either signed it or walked away. The same type of thing was happening in the wine and liquor business. They either did not have it and the description was left up to the courts, or it was take this or nothing. It was a very hostile environment and enough specific incidences to define "good cause". It was not a free market enterprise. Ms. Giunchigliani asked Ms. Tiffany to clarify what she meant by "the industry". Ms. Tiffany answered the amendment came strictly from wine and liquor and the wholesaler industry, the second tier. Ms. Giunchigliani did not recall in the testimony of the wine industry that they had a problem and wanted government to regulate them. In this day-and-age where talk was for less government regulation -- the new theme of the Newt Gingrich campaign which had been carried on to the legislative body -- why would the Committee wish to regulate an industry that had not asked to be regulated in any way? Ms. Tiffany indicated she had that question to begin with as well. She had wondered why nobody at the wholesaler level saying anything. She had found through discreet telephone conversations, and indicated she would not divulge with whom she spoke, it was difficult for them to come forward because a supplier could pull their lines. Privately, one-on-one, she received what she considered the true market information. Ms. Giunchigliani believed their testimony was they already had contracts in place. Ms. Tiffany replied there were not always contracts, in fact, there were rarely contracts. Chairman Spitler interjected requesting the audience to cease separate conversations out of courtesy for the Committee. Ms. Giunchigliani, quoting Mr. Whittemore's testimony, said there were no contracts in the beer industry. Ms. Tiffany said there were none at the lower level but in talking to the main beer distributors, such as Budweiser, Coors and Miller, there were contracts. Ms. Giunchigliani understood how people in the wine and liquor industry, under duress, would refuse to come forward. However, it was difficult for her to make a decision based upon private conversations experienced by one or two other people. She totally supported brew pub and wanted to move forward, but had a problem forcing regulation on an industry that felt no need for it. She thought it flew in the face of what had been said by many about free market enterprise and open competition. Ms. Tiffany realized the difficulty of her fellow Committee members having to trust the information submitted by her was accurate. Insofar as free enterprise -- she was the last one to like government regulation. She was the last one to put it into statute instead of contract. She truly found a problem and believed it needed to be addressed. She felt it did not belong in brew pub. After looking at it she had found it did not impace brew pub one way or the other. It was already in there and she felt something needed to be done. Ms. Giunchigliani asked in section 12, subsection 4, if the supplier chose to have a contract with the wholesaler they could have more than one market, but if the supplier did not wish to offer a contract to the wholesaler than they could restrict the market. Ms. Tiffany indicated she had attempted to force contract in that case so they did not have to refer to statute. If they did not want to sign a contract and were not offering a contract, then it would be a default which would be a defined area. Again, under the loose existing laws, if they did not pull a line they could put other people in the area. It would effectively do the same thing. It had more flexibility than the exclusive territory on line 4. Ms. Giunchigliani clarified what was being done by that language or the current language was forcing everyone to go under a contract with their supplier whether they wanted to or not. Ms. Tiffany said it was not forcing them. Ms. Giunchigliani asserted if they wanted to be able to market in more than one area they would be forced under a contract. Ms. Tiffany explained if they did not want an exclusive territory they had to define it in a contract, which was the way it should be done. Mr. Schneider indicated he had been absent from the original hearing on A.B. 594. He asked how many liquor distributors there were in Nevada at the present time? Ms. Tiffany said there were at least four in Clark County of which she was aware. Mr. Schneider asked if they were liquor distributors. She answered, wine and spirits, which were liquor. He asked how many there were ten years ago? Ms. Tiffany had no idea. Mr. Schneider indicated there were two major companies left and by passing the bill it may be creating a monopoly for those two large companies. Ms. Tiffany said it had concerned her as well and she had asked how Ray Vega had gotten started. She stated it was very expensive to start a liquor wholesaler distribution and network. Ray Vega had a distribution network, a warehouse and facilities. He also had the financial support to begin. He began by going to some of the suppliers who were not being carried and offered to market their liquor for "X" price -- and that was how he received his first contract. There were many small wineries, particularly in Southern California, that could be distributed with no problem since nobody else had them. She said the barriers to entry were high to begin and only a few individuals could step into it without a great investment. However, it was available and Ray Vega was a perfect example of it. Mr. Schneider asked if Ray Vega was in favor of the bill? Ms. Tiffany said she had not talked with Mr. Vega, but she guessed he would probably not be in favor of the bill. Mr. Humke mentioned section 12, page 5, creating a new subsection 4, there could be a situation where there was no written contract. Did it deal with the length of a granted franchise? Ms. Tiffany answered if there was no contract there was no time frame. The way the liquor/wine would be pulled from them would be through the good cause clause. Beer would be more tightly defined. Mr. Humke indicated the time could be limited -- one month or one quarter. Ms. Tiffany did not think anybody would sign a contract like that with the investment it would take to market and distribute a line. Mr. Humke said it sounded as if they were unwritten contracts. She said some liquor and wine suppliers did not have contracts. She had asked "Monika" for a sample contract and it was very loosely defined for good cause as well as territory. It was not a bad contract and some people would probably sign it. She asked it be defined in the amendment as a contract for a certain territory. Ms. Buckley pointed out paragraph 2 in regard to "good cause": "It must be determined solely from the behavior of the wholesaler and does not relate to activities of the supplier even if based on bonafide economic or business reasons." She indicated there was testimony at the original hearing that a supplier may want to change wholesalers if they felt the product was not being marketed enough, if sales were not up, or if he decided to take a different direction. She asked why that was put in the amendments? Ms. Tiffany, referring to where it said "activities of the supplier", indicated the supplier wanted to pull the line for economic reasons, which meant they needed to consolidate, or they wanted to get it from somebody who would give it to them for three percent less. It was the supplier's economic reasons, not the wholesaler's economic reasons. She believed that was the way it was intended to read. Ms. Buckley agreed but asked why it was a bad thing? Why did it not promote competition? Ms. Tiffany, referring to her conversations with people in the industry, indicated there was no good cause to pull the line other than they made some arrangements with other wholesalers at less price or under-the-table manipulation. It was not a wholesome business! There were other arrangements being made that hurt the people who made the investment. It also created a domino effect in the economy -- if one grabbed from one wholesaler, they would turn around and grab from somebody else, and they would grab from somebody else, and so forth. Mr. Hettrick, on section 6 (2), expressed concern it had to be solely on the behavior of the wholesaler and could not be based upon a bonafide economic or business reason of the supplier. He cited an example: The supplier was losing money and asked the wholesaler for a lower price to distribute the liquor. The law said no, they could not do it for an economic or business reason, it could only be done from the perspective of the wholesaler. The supplier had no recourse. Ms. Tiffany agreed with the way he was reading it, but real world examples from individuals to whom she had spoken, including other states that had enacted the franchise bill, was the industry traditionally did not move markets because they were losing money. They moved markets because deals had been made which left people without a contract in severe economic difficulty. Mr. Hettrick said his example was one of losing money and understood her point that in a regulated market it was probably not an occurrence. He did not have a problem with the major intent of it but was concerned the language could cause a problem. He asked why not demand they have a contract and let the two parties work it out? In that event the state would not be regulating it and all that would be needed was a business contract. Ms. Tiffany said they defined "good cause" so it would not get into the courts and be defined there. She compared the suppliers and the wholesalers to David and Goliath -- Goliath, from his position of power, would not necessarily comply with David's wishes. The suppliers were from out of state. The intent of "good cause" was an attempt to protect Nevada wholesalers who had much invested. Mr. Arberry stated with the two parties being as separated as they were, if the bill passed would it go to court? Ms. Tiffany specifically had requested to Kim Morgan to draft the bill language in such a way that would not happen. Mr. Humke left the hearing to help the Judiciary Committee set up in another room. The Commerce Committee had infringed upon their hearing time. Mr. Fettic thought Ms. Tiffany had said originally the bill was beer only. Ms. Tiffany indicated beer did not need "good cause". Beer wholesalers, except for the smaller labels, had contracts which gave them a buy-out and defined their territory. She clarified originally she felt it should be beer only, but after looking into it further she changed her mind. Mr. Humke returned to the room. Ms. Giunchigliani thought it was originally a brew pub bill but then wine and liquor had been added to it. The "good cause" language was added because wholesalers did not have contracts, however, the industry never asked to be part of it. She was astonished they would consider good cause language because in so doing they were directing through government the requirement of a contract and what must be contained in it. They had gone full circle from what she thought was the original intent of the bill. The "good cause" language had been included because Ms. Tiffany had discovered, in some instances, there were no contracts between the wine/liquor groups and they somehow had to be protected. The industry not being heard from was her major concern. Mr. Arberry, in section 6, 1, (a) and (b), asked what "bad faith" meant? Ms. Tiffany indicated Kim Morgan had put that language in the bill and it was described in section 9 (a) through (I). Chairman Spitler summarized the four major points that had been brought up by the Committee: (1) Ms. Giunchigliani had wished to delete wine and spirits. (2) Some suggestions regarding taxation issues had been brought forward. (3) There had been a beneficial discussion about the amendments being proposed by Ms. Tiffany and Mr. Ernaut. (4) Chairman Spitler indicated his pleasure at Mr. Ernaut's intention to do a "sunrise" amendment on it. Chairman Spitler indicated there were probably two major motions ready to be presented. He asked the Committee to make the motions as succinctly as possible. With that the Chair entertained a motion. ASSEMBLYMAN TIFFANY MADE A MOTION TO AMEND AND DO PASS A.B. 594 TO INCLUDE MR. ERNAUT'S AMENDMENTS WHICH TOOK OUT "GOOD CAUSE", AS WELL AS LINE 17; AND THE AMENDMENTS PROPOSED BY HER AND PREPARED BY BILL DRAFT. ASSEMBLYMAN BROWER SECONDED THE MOTION. ********************* ASSEMBLYWOMAN GIUNCHIGLIANI MADE A MOTION TO AMEND MS. TIFFANY'S MOTION, TO STRIKE SECTIONS 5, 6, 7, 8, 9, 10, 11 AND 12, WHICH REMOVED ALL REFERENCES TO WINE AND LIQUOR AND TOOK OUT "GOOD CAUSE". ASSEMBLYMAN SCHNEIDER SECONDED THE MOTION. THE MOTION TO AMEND THE AMENDMENT FAILED. BY A SHOW OF HANDS THERE WERE SEVEN NO VOTES. Chairman Spitler asked for questions on Ms. Tiffany's motion. ASSEMBLYMAN BUCKLEY MADE A MOTION TO AMEND MS. TIFFANY'S MOTION TO DELETE SECTION 6, (b), 2. ASSEMBLYWOMAN GIUNCHIGLIANI SECONDED THE MOTION. THE MOTION CARRIED. ********************* ASSEMBLYWOMAN GIUNCHIGLIANI MADE A MOTION TO AMEND MS. TIFFANY'S MOTION TO STRIKE THE LANGUAGE IN SECTION 12, SUBSECTION 4, AND INSERT "A BUSINESS CONTRACT SHALL BE ESTABLISHED". THE MOTION FAILED FOR LACK OF A SECOND. ********************* ASSEMBLYMAN TIFFANY MADE A MOTION TO AMEND AND DO PASS A.B. 594 TO INCLUDE MR. ERNAUT'S AMENDMENTS WHICH TOOK OUT "GOOD CAUSE", AS WELL AS LINE 17; AND THE AMENDMENTS PROPOSED BY HER AND PREPARED BY BILL DRAFT. ASSEMBLYMAN BROWER SECONDED THE MOTION. THE MOTION CARRIED. ASSEMBLYWOMAN GIUNCHIGLIANI VOTED NO. ASSEMBLY BILL 528 - Makes various changes relating to mobile home parks. Assemblyman Jack Close, District 15, explained the amendment (Exhibit P). Mr. Hettrick indicated page 2 (a) "A majority of the tenants of the park are present at a meeting of the tenants conducted by the landlord", and said the intent was fine but the effect may not work. If one went to the tenants of the park and announced a meeting asking for a majority to vote upon a capital improvement. If the tenants refused to show up in a majority the landlord could not function, he was "stuck"! Therefore, Mr. Hettrick suggested: On the line above 2 (a) where it said ". . $20,000 made to a mobile home park unless: -- strick the colon and (a) which then would read ". . A majority of the tenants of the park who are present at (insert a for the) a meeting (add "of the tenants") approve the capital improvement. Mr. Hettrick's comment to Mr. Close was if the tenants of the park were informed a majority of those present would be able to vote on whether or not a capital improvement would occur, there would be attendance. The majority of the owners and tenants would be there and they would vote. That was the only fair way to do it, in Mr. Hettrick's opinion, otherwise the tenants could boycott the owner. Mr. Close agreed with the amendment. Mr. Fettic disclosed he lived in a mobile home park and expressed concern with the area that a mobile home park owner could not recover his capital improvement costs unless a majority of the tenants in the park approved. He could see no improvements in parks and none forthcoming. He indicated there were legitimate things to be done in a park, street paving and other things to keep things up, and he did not think that should be open to a vote. Ms. Buckley said Mr. Fettic raised a good point. She pointed out, however, that it did not prohibit the landlord from making any necessary repairs, such as roads or roofs. This was talking about additional capital improvements, over $25,000 only and only restricted to a rental increase. If the landlord had a modest project there was nothing preventing him from doing that capital increase. Comparing the maximum a landlord could pass through, if one looked at the CPI plus repairs, and if a landlord took his maximum every year, it would result in a much higher amount than what could be passed through than his mobile home park had seen in rent increases. She felt the reason for that was the intent of the bill was only to get at some of those parks who were given $80 rent increases at a time. That was what was being attempted, not to pass through modest increases in which the landlord was entitled. Ms. Buckley also agreed with Mr. Hettrick's comments about taking out the provision. Mr. Fettic understood Mr. Close and Ms. Buckley were in a different area than he. His experience was in a park in which he had lived for 23 years. He did not see the same problems. However, from his perspective, if an improvement was made to the park it was to the benefit of those who lived there. The landlord should be able to recover that cost. ASSEMBLYWOMAN GIUNCHIGLIANI MADE A MOTION TO AMEND AND DO PASS A.B. 528. ASSEMBLYMAN HETTRICK SECONDED THE MOTION. THE MOTION CARRIED. ASSEMBLYMEN TIFFANY, BROWER AND FETTIC VOTED NO. Chairman Spitler requested Mr. Close to handle the amendment and the floor statement on A.B. 528. There being no more business, the hearing adjourned at 6:50 p.m. RESPECTFULLY SUBMITTED: Barbara Moss, Committee Secretary Assembly Committee on Commerce June 7, 1995 Page