MINUTES OF THE ASSEMBLY COMMITTEE ON GOVERNMENT AFFAIRS Sixty-eighth Session February 8, 1995 The Committee on Government Affairs was called to order at 1:00 p.m., on Wednesday, February 8, 1995, Chairman Bache presiding in Room 4412 of the Grant Sawyer State Office Building, Las Vegas, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Mr. Douglas A. Bache, Chairman Mrs. Joan A. Lambert, Chairman Mrs. Deanna Braunlin, Vice Chairman Mr. P.M. Roy Neighbors, Vice Chairman Mr. Max Bennett Mrs. Marcia de Braga Mr. Pete Ernaut Mr. William Z. (Bill) Harrington Mr. Dennis Nolan Mrs. Gene Wines Segerblom Mrs. Patricia A. Tripple Mr. Wendell P. Williams COMMITTEE MEMBERS ABSENT: Mrs. Vivian L. Freeman, excused Ms. Saundra (Sandi) Krenzer, excused GUEST LEGISLATORS PRESENT: None STAFF MEMBERS PRESENT: Denice Miller, Senior Research Analyst Paul Mouritsen, Senior Research Analyst OTHERS PRESENT: Myrna Williams, Clark County Commission; Guy Hobbs, Director of Finance; Carole Vilardo, Nevada Taxpayers Association; Marvin Leavitt, City of Las Vegas; Tom Grady, Nevada League of Cities; Gary Crews, Legislative Audit; Irene Porter, Southern Nevada Home Builders Association. All others present are listed on the Attendance Roster, Exhibit B. Chairman Bache changed the order of the bills slightly. A.B. 49 would be heard first. ASSEMBLY BILL 49 - Revises provisions relating to alteration of boundaries of certain districts for support of public parks. (BDR 20-410) Myrna Williams, Clark County Commissioner, indicated A.B. 49 was the result of an interim study. In this particular bill, the committee wanted to make sure that in a park district where assessments were placed on property owners, if the boundary lines were changed or expanded, that the new people included in that assessment district would have an opportunity to vote on whether or not they wished to be in that park district and make sure they would not be unfairly assessed without knowing. Paul Mouritsen, Legislative Counsel Research staff, recalled Senate Bill 307, passed in 1993. That measure allowed Clark County to establish park districts under similar provisions in A.B. 49. He noted in line 10, the provision indicates the boundaries of districts could be altered by county commissioners by ordinance. We now see the addition would require a public vote on such matters. Mr. Guy Hobbs, Clark County Comptroller and Director of Finance, elaborated on the voting mechanism in the new area to be added. Perhaps as an additional alternative besides a vote of the people might be to add a mechanism whereby the property owners could petition to become a part of the district. If a unanimous petition by property owners in a specific area indicated the desire to become a part of the district, that might be an affordable and reasonable additional method of adding to the boundaries of a park district. This would not necessarily be in lieu of a vote, but if the petition is unanimous, a vote could be avoided. That might most commonly occur adjacent to a park district where a contractor is preparing to cultivate that area and wishes to have that area included because of some parks development they are desiring to pursue. Assemblyman Neighbors inquired whether on setting boundaries, is a survey required or would they be set by street boundaries or what. Mr. Hobbs responded in the ordinance that created the district, the legal description of the boundaries were included as a part of the ordinance, so any amendment to that would include amended legal descriptions. Carole Vilardo, Nevada Taxpayers Association, echoed support for A.B. 49. She reiterated the desire to amend the bill with the option of petition by 100% of the people along with the unanimous vote. Without this language, changing boundaries could subject new residents, who had never voted on the issue, to property tax levied before they moved in. There must also be a provision to change the tax rates according to the size of the new boundaries so they match. This would ensure the public was aware of property tax liabilities and would enable them to express their pleasure or displeasure by the way they vote. Assemblyman Lambert asked if the district were shrunk, would the people be excluded if they were no longer in the district. Ms. Vilardo replied that as long as there were no bonds out requiring that additional money remain levied, the amount of money collected would be reduced. Mr. Hobbs stated in the park district in question, there is no property tax levy or outstanding indebtedness. Therefore, there would be no unfair apportionment of property taxes for people no longer in the district. Assemblyman Segerblom wondered if a district coincided with precincts. Mr. Hobbs indicated the boundaries could coincide with existing precincts. Several acres could be added to a park district and might not coincide with the precinct. Ms. Vilardo mentioned there are several districts at the present time whose boundaries are not co-terminus with precinct boundaries. This is an ever-changing situation caused by unincorporated cities and the annexation of towns into counties. Mr. Bache closed the hearing on A.B. 49. ASSEMBLY BILL 48 - Provides for establishment of funds for extraordinary repair, maintenance or improvement of certain buildings of local government. (BDR 31- 402) Myrna Williams, Clark County Commission, was the first to speak in favor of A.B. 48. She emphasized what we have nationwide is a crumbling infrastructure, a growing population and no way to address the problems of replacement or rehabilitation of that infrastructure. In Nevada, the growth has outpaced every state in the union. What little infrastructure there is, is falling apart. The main purpose of this bill is to establish a fund to take care of extraordinary maintenance of major buildings. For every capital improvement that is bonded for, one half of one percent of the bonding would be set aside, accrue interest and used strictly for extraordinary repair and maintenance of local government buildings. This has been successful in several states and has pulled many of them out of difficult situations. Mr. Paul Mouritsen, Research Analyst for the Legislative Counsel Bureau, said this bill comes as two separate recommendations from the subcommittee . Section two of the bill provides for money to be set aside from bond proceeds. Section three allows local governments to establish another fund in which they could deposit money in the case of fluctuating revenues to be used later for extraordinary repair and maintenance. Mr. Mouritsen elaborated on the details of each section. Going back to section two, this would require every local government to allocate one half of one percent of the total of the bonds sold for capital improvement projects. This money would then be invested and would accrue interest and be used for items not regularly purchased. Section six indicates such expenditures would not occur more than every five years. Section three has very similar provisions for the other fund. Money can be set aside in the event of fluctuating revenues for extraordinary improvements. There are also auditing provisions in the bill in sections five and six which require legislative auditors to review certain audits of local governments where these funds have been set aside and report to the Legislature. When the local governments have their annual audit the auditor would be required to examine these funds and attest they are being properly used. Mrs. Williams reiterated Mr. Leavitt and Mr. Hobbs were available to answer specific questions on handling the money for these funds. Assemblyman Bennett questioned Mr. Mouritsen about section three, number two regarding interest and the federal government's hand on this account. Mr. Mouritsen cited the provision from the Internal Revenue providing that if the interest on this bond fund exceeds the rate of interest that is being paid on the bonds themselves, that money would have to be returned to the federal government (Exhibit C). Mr. Bennett then noticed on page two, section three, number 45, the legislative auditor "may" review the working papers of the auditor, not "must" or "shall" and it was previously stated that it was a requirement to do so. Mr. Mouritsen explained the requirement is that the annual audit report of the local government will have a finding in there and whether the legislative auditor then reviews the working papers is at his discretion. Mrs. Lambert referred to section three, number two and asked if the money in this fund came from bonds or from some other source and why the arbitrage restriction here. Mr. Mouritsen acknowledged her point and maintained that in the arbitrage section there is a provision that says when bond funds are used in lieu of other funds, then those other funds that are freed-up cannot be invested at a higher rate. Mr. Marvin Leavitt, representing the City of Las Vegas, said its possible to have some bond funds other than the one half of one percent or money that is seen as dedicated to the project from other sources and is seen as switched back and forth between bond funds, so it was felt to be a safeguard to have the language in there so there would not be problems with the Internal Revenue code relating to arbitrage. Mr. Leavitt expressed perhaps some feel the audit requirements are being overdone, and as this fund does not involve a lot of money, maybe more money is being spent than saved. He pointed out the external auditor is required to give an opinion on problems and compliance issues. Mrs. Williams agreed it was a legitimate problem. The concern of the committee is to make sure that money that was generated from the sale of bonds for a specific project was only used for that project. The audit trail exists to ensure this. This is looked at in the course of normal audit procedures and does not cost any additional money. Carole Vilardo, Nevada Taxpayers Association, spoke in favor of A.B. 48. She mentioned a report on the financing of infrastructure. This bill facilitates long-range planning. If provisions are not made to do something about decaying infrastructure now, it will never be done. Population growth makes some needs obsolete, including obligatory federal regulations such as asbestos removal. The three bills being looked at are deserving of support to initiate a plan for maintaining and restoring the state's buildings and facilities. One distinction relative to the bonding money is that element with bonding in the first part of the bill is mandatory. The second part of the bill was made permissive to give the local government the option to be part of the planning program and determine if they have any perimeters as to how they would fund this if they did set it up. Irene Porter, Executive Director, Southern Nevada Home Builders Association, stated the industry has seen many times over the years incidents where the public comes back to the builder to ask for repair assistance or needs money for other facilities for maintenance. This bill is the first step in prudent planning for having maintenance money available for buildings that are constructed. The type of care and maintenance sustained on a personal level has to be projected into the public sector for the upkeep of all facilities. As local governments often have to struggle to find money for maintenance because they have so many other concerns, this bill would begin to set aside money specifically for this use and no other, eliminating some of the perpetual budget-stretching. Mr. Hobbs suggested flood control projects be added to the list of projects exempt from the extraordinary repair fund. Tom Grady, Nevada League of Cities, indicated this bill had its pros and cons. He said the League felt the audit process should be done strictly by an outside agency and reviewed by the Department of Taxation. Any discrepancies should be done with an outside auditor and Taxation and the legislative auditor should not be involved. Bob Hadfield, Executive Director, Nevada Association of Counties, indicated the Association's support of A.B. 48. Gary Crews, Legislative Auditor, pointed out that 250 local governments would provide for at least as many funds and audit reports requiring oversight. A fiscal note has been submitted requesting one additional personnel position to take care of the extra work. Mr. Bache closed the hearing on A.B. 48. ASSEMBLY BILL 120 - Creates trust fund for extraordinary maintenance, repair or improvement of capital projects of state. (BDR 31-386) Mr. Bache testified on behalf of District 11. This bill parallels A.B. 48 in that it sets up an extraordinary maintenance fund of one half of one percent but in this case it is for state buildings rather than local governments. He felt if it was a good idea for local government, it would be smart planning for the state's future as well. Mr. Bennett inquired as to the difference in this bill from A.B. 48 in the audit requirements. Mr. Bache indicated the legislative auditor would have control over the auditing responsibilities. Gary Crews had a concern with subsection six on page two that requires the legislative auditor to account for the funds every five years and also provides for the director of the Legislative Counsel Bureau to contract with an accounting firm to audit those accounts administered by the Legislative Counsel Bureau. Currently, an annual audit is conducted each year. The state is audited as a whole by a public accounting firm. Consequently, if another audit procedure were to be done on top of the already existing one, it might be a duplication of effort. Mr. Crews would like to see subsection six, lines 23-30 eliminated. Ms. Vilardo supported the concepts in A.B. 120. This bill refers to capital projects, that is something being constructed given the amount of money the state could possibly set aside for the length of time necessary. Perhaps some consideration should be given with some tighter perimeter on what a facility is. The wording may need to be adjusted to "facilities" and" projects". If taken with a bond issue, it may not be needed five or ten tears from now, but may be required for other uses. Mrs. Lambert remarked on the flexibility for local government. Ms. Vilardo indicated there are two provisions in the local bill and only one in the state bill. The state is able to amass much greater sums of money for capital improvements whereas local governments cannot. There is some apparent adjustment needed in both bills. Mrs. Williams had a problem with expanding the use of extraordinary maintenance funds for existing facilities at the local level. This would be pushing on the integrity of the whole purpose of the bill. People who vote for a bond issue are voting for something very specific. It is imperative at the local level that the money remain cloistered for the purpose for which the bonds were sold. Mrs. Lambert inquired if there should be a provision for the trust fund to be retired in the event of the sale of a public facility to the private sector. Mrs. Williams did not recall that issue coming up, but certainly some arrangement should be made for that purpose. Mr. Bache closed the hearing on A.B. 120. The meeting was adjourned at 2:10 p.m. RESPECTFULLY SUBMITTED: Denise Sins, Committee Secretary APPROVED BY: Assemblyman Douglas A. Bache, Chairman Assemblyman Joan A. Lambert, Chairman Assembly Committee on Government Affairs February 8, 1995 Page