MINUTES OF THE ASSEMBLY COMMITTEE ON GOVERNMENT AFFAIRS Sixty-eighth Session February 20, 1995 The Committee on Government Affairs was called to order at 9:38 a.m., on Monday, February 20, 1995, Chairman Lambert presiding in Room 330 of the Legislative Building, Carson City, 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 Mrs. Vivian L. Freeman Mr. William Z. (Bill) Harrington Ms. Saundra (Sandi) Krenzer Mr. Dennis Nolan Mrs. Gene Wines Segerblom Mrs. Patricia A. Tripple COMMITTEE MEMBERS ABSENT: Mr. Wendell P. Williams GUEST LEGISLATORS PRESENT: None STAFF MEMBERS PRESENT: Denice Miller, Senior Research Analyst Paul Mouritsen, Senior Research Analyst OTHERS PRESENT: Mary Nebgen, Washoe County School District; Henry Etchemendy, Nevada Association of School Boards; Greg Betts, Nevada Rural School Districts; Al Bellister, Nevada State Education Association; Barbara Clark, Sierra PTA Council; Mary Henderson, Washoe County; Madelyn Shipman, Assistant D.A., Washoe Co.; Barbara McKenzi, City of Reno. Chairman Lambert indicated the sponsor of Assembly Bill 140 asked that the bill be withdrawn. ASSEMBLY BILL 140 - Requires local government to refund impact fees for certain housing for low-income households. (BDR 22-434) ASSEMBLYMAN BACHE MOVED TO INDEFINITELY POSTPONE A.B. 140 ASSEMBLYMAN BENNETT SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. Assemblyman Krenzer commented there are other avenues for low-income housing and keeping those programs funded is still a priority. ASSEMBLY BILL 47 - Revises provisions relating to impact fees. (BDR 22-403) Mr. Paul Mouritsen, Research Analyst for the Legislative Counsel Bureau, introduced the bill. He mentioned A.B. 47 was a product of the interim study committee. In 1989 the Legislature authorized local governments to impose impact fees on new development to pay for certain types of capital improvements. Since that time, Reno has been the only city to assess impact fees for the purpose of financing roads and streets. He produced Reno's Impact Fee Ordinance (Exhibit C) for the committee's perusal. Impact fees are a relatively new form of financing infrastructure development. Traditionally, when developers went for zoning approval, they would make certain concessions to the local government to construct different types of capital facilities on-site or off-site and to make varied improvements. Approval for their projects was contingent upon that. This method was known as exactions. There were several problems with the exactions process. Some considered it rather arbitrary because the assessments were not consistent among developers. Small facilities would often escape the exactions process because they did not need zoning changes. The imposition of impact fees is really an attempt to provide a more equitable means of financing infrastructure development. The bill has three issues to consider. First of all, the bill would expand the types of facilities for which impact fees could be assessed. This would include fire and police protection structures. The second is the elimination of subsection two in section seven, deleting the exemption of schools from the collection of impact fees. Third, the remaining sections concern the procedure for imposing these fees which is extremely cumbersome and thus will be streamlined via this bill. Assemblyman Segerblom asked Mr. Mouritsen to review section seven, part two regarding the exemption of schools from impact fees. He quoted the supposed costs of impact fees if they did exist at the present time. The City of Reno currently pays these fees with funds from the general purpose government. The subcommittee felt because schools were imposing a cost to the community, the expenditures should be reflected in the costs of school bonds rather than in the revenues of the local government. Assemblyman Harrington questioned what the total cost would be for the Reno area school district this year. Mr. Mouritsen replied it would depend on the schools they were building. If new elementary schools were being constructed, $563.00 per employee would be assessed. For a high school, it would be $1,100 per employee. Mary Henderson, Government Affairs Director with Washoe County, along with Madelyn Shipman, Assistant District Attorney, testified in favor of A.B. 47. They were both members of the infrastructure committee from whence this bill came. Assemblyman Freeman wanted an explanation of support from Ms. Henderson. Ms. Henderson indicated the major reason Washoe County supported the bill was the intention to levy a regional impact fee. This bill would give the county more flexibility in terms of administering the fees and it broadens the definition of impact fees to include police and fire stations which a growing community needs. Assemblyman Nolan queried subsection two on schools and wondered if a double jeopardy situation existed. If a government agency is charged the impact fees, then taxpayers owe and if schools are charged impact fees, taxpayers would be paying again. Madelyn Shipman answered a principle is involved and everyone should be paying their fair share. An impact fee is a substitute for exactions or conditions placed on any kind of development approval. If a school is not paying the impact fees, they will be paying in another manner for different types of improvements. When an impact fee program is in place, exactions are not allowed to be imposed upon the developer, whether it is for a school district, fire station or any other type of facility. All of these facilities are a result of growth, not just schools. Mrs. Segerblom reiterated that Washoe County would indeed pick up the schools' part. Ms. Shipman clarified that if Washoe County School District builds within the city of Reno, the local government would have to pay the impact fees for that school. This is a substitute for exactions being placed on that school. Necessary infrastructure must be paid for one way or the other. Mrs. Segerblom wondered if Washoe County approved of this practice. Mrs. Shipman mentioned the Board of Commissioners had approved Ms. Shipman and Ms. Henderson attending the meeting on behalf of Washoe County to speak in favor of the bill and to specifically address the exemption. Mr. Harrington could not make sense of imposing impact fees on schools and giving impact fees to police and fire facility projects. Ms. Shipman explained the capital improvement program for the county or city that decided to build a police or fire facility would have to incorporate impact fees into their capital improvement program and budget. Mrs. Lambert wanted to clarify that the state was exempt from the payment of impact fees and that exactions were charged for capital projects. Ms. Shipman elucidated that technically, under the law that was not supposed to occur. However, the state is an entirely different situation as far as development generation because they are not subject to local building permit processes and do not receive certificates of occupancy from the local government. As a result, everything is done sort of mid-stream and prior to the commencement of construction or taking occupancy. There is not always an impact or exaction that would be on the capital improvement program qualified for impact fees or credit for impact fees. When somebody builds a piece of infrastructure on a capital improvement program that is covered by the impact fee laws, they can obtain credit for building that facility. They are paid back from the special revenue fund for the monies expended in constructing that particular improvement. Mr. Bennett was confused and posed a hypothetical situation. If an unincorporated small town, part of a larger county school district needed a new school, would the impact fee be imposed upon the entire county or just the residents of the small town? Ms. Shipman stated the impact fees would be imposed upon a certain defined service area. The small town would not have to pay. The only authorized agencies to develop an impact code are counties and cities. The developer and other contractors building within that area would put money into a fund along with the county's contribution for the school's impact fees. Mr. Bennett asked what if no one was developing anything in that small town. Ms. Shipman said chances are, in the districting that occurs, the small town would be part of a larger area. The monies from that section get put back into that area and are utilized for appropriate infrastructure needs. Assemblyman Ernaut did not understand how the county differentiated between the schools causing growth and being a result of growth. Ms. Shipman indicated the county did not differentiate. In the 1989 legislative session, the schools came in and argued there would not be a need for schools if the local governments were not approving growth within their particular jurisdictions. That was the basis for the committee to put the school exemption in the bill at that time. Due to the proportionality problems that accompany impact fees, it was necessary to make sure that although schools were exempt, those monies still needed to be put into the fund otherwise building would not be able to take place. Mr. Ernaut mentioned in the proportionality argument, the impact fees imposed on the community would be assessed to determine the needs of that area so that all necessary facilities could be constructed. He felt this should happen in advance of the project implementation. Ms. Shipman said that would not be allowed under federal law. Impact fees have been defined by the courts dictating development cannot be charged any more than they are actually costing in terms of the needs projected. More money cannot be charged for projected infrastructure needs. If police and fire facilities are put into the bill, there will be separate charges for each structure that is erected. She stated that to include schools would bring about an $18,000 charge for each individual house in the district. Mr. Nolan wondered if there was enough oversight in city and county budget planning to provide for new facilities by earmarking money in advance for proposed projects, including impact fees in their calculations. Ms. Shipman explained the law itself requires that in the development of the actual fee, all credits, other agency expenditures, tax source revenues, property taxes, gas taxes, and dedicated monies are put into the formula and subtracted out so that the final figure does not become a duplication or double taxation. Mr. Harrington mentioned there are some transaction costs associated with obtaining money from the school district versus the city itself. Ms. Henderson recognized the dilemma being faced is that general fund monies from local governments are being put into restrictive areas. Those monies come from a variety of sources which pulls the local governments' ability away to delegate those funds to other areas of concern. Imposing impact fees on schools would clean up that aspect of it and costs would be associated with the projects being paid for. Barbara McKenzi, representing the City of Reno, expressed unanimous support of A.B. 47 by Reno city officials. Stephanie Tyler, representing the City of Sparks and the Regional Transportation Commission (RTC), mentioned from their standpoint they look at this as leveling the playing field. For example, when RTC or the City of Sparks builds a new structure, they must also pay impact fees. This bill equalizes legislation for all local governmental entities. Mary Nebgen, Superintendent of Washoe County School District, testified against A.B. 47. She noted that in 1989, school districts made effective arguments for their exemption from the impact fee. Those arguments should still be effective today. She declared charging impact fees to school districts makes no sense. Schools are not developers and do not cause growth. They are not the source of the need for additional fire, police, sewer and road services. Instead, schools are responsive to growth that has been approved by local governments. Schools do not necessitate development, it is the other way around. If school districts were required to pay impact fees, it would require the taxpayers to pay money for the benefit of developers. She suggested an amendment as a compromise, retaining the first sentence of line four, section seven, subsection two and eliminating the rest of the verbiage through line eight. Mr. Bennett questioned the effects potential school impact fees would have on per student spending throughout the state. Ms. Nebgen gave the overall effects of the impact in Washoe County School District. Her figures were different from those previously quoted. The cost per employee would be $640.00 at the elementary level and $1,264.00 per employee at the high school level. Mr. Henry Etchemendy, Nevada Association of School Boards, expressed concern over this bill on behalf of school boards throughout the state. Three school board members were in attendance and recognized by the Chairman. Mr. Etchemendy emphasized that schools, too, are affected by growth and should be listed in this bill as one of the definitions of capital improvements. He mentioned schools, along with police and fire services should be listed as capital improvements and be eligible to receive impact fees, not pay them. He prepared an amendment for the committee to indicate the Board's point of compromise (Exhibit D). If schools do pay impact fees and they are part of the infrastructure, developers' costs are being subsidized with public money. He urged consideration of the amendment prior to passage of the bill. Mr. Greg Betts, representing Nevada Rural Schools, remarked this bill has been called irrational and illogical by most school districts. It is already very difficult to pass bond issues and this has resulted in year-round schools, team teaching and class size reduction programs. To go to the people and tell them they now have to pay impact fees will not have much success. Mr. Al Bellister, representing the Nevada State Education Association, went on the record in opposition to A.B. 47. The association was in agreement with previous testimony. In essence, school districts are creatures of growth which are created to provide service to the community without the capacity to generate their own revenues with the exception of a bond. This bill would require school districts to assess a tax on a tax, that is the bond. This would make it even more difficult to pass bond issues. Barbara Clark, Sierra PTA Council, also spoke against the bill. She read from a prepared statement and shared the council's viewpoint with the committee (Exhibit E). Mrs. Freeman had a problem with impact fees for schools. She asked Madelyn Shipman what her feelings were on the amendment suggested by Mr. Etchemendy that schools be added to the list of capital improvements. Ms. Shipman responded there could be possible problems with the constitutional aspect of uniformity in school funding . Her committee felt it was appropriate to look for other funding sources for schools because of the magnitude of the problems. She needed more time to consider the amendment. Mr. Nolan questioned the difference in fees required to put a new school in an already developed area versus an undeveloped locale. Ms. Shipman related when a school is being built in an area where there is no existing development, the school district tries to plan the construction of the school to coincide with other infrastructure such as roads, sewers, etc. When a school is built in an already developed area, they would still have to pay the impact fees. Mr. Bennett asked if section 16 of each surveyed township was set aside for schools. Mrs. Lambert told him to ask the Research Division as Ms. Shipman could not be expected to answer that question. Mr. Etchemendy had one more point to make. He wanted to clarify the amount of impact fees per household that would be assessed if this bill passed. In Douglas County, it was determined to be approximately $3,400.00, not $18,000.00 as was previously mentioned. Mrs. Lambert stated that the higher figure was undoubtedly from another county. Mrs. Lambert closed the hearing on A.B. 47. Mr. Bache introduced three bills. BDR S-895 - Repeals prospective expiration of provisions requiring public utilities to pay assessments for certain expenses incurred by Public Service Commission of Nevada. MR. BACHE MOVED TO INTRODUCE BDR S-895. MRS. KRENZER SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. MRS. LAMBERT ABSTAINED DUE TO CONFLICT OF INTEREST. BDR 58-897 - Repeals authority of Public Service Commission of Nevada to require aircraft carriers to file adequate indemnity bonds or insurance. MR. BACHE MOVED TO INTRODUCE BDR 58-897. MRS. SEGERBLOM SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. BDR 58-892 - Makes various changes and provisions governing recovery of certain civil penalties by Public Service Commission of Nevada. MR. BACHE MOVED TO INTRODUCE BDR 58-892. MR. BENNETT SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. MRS. LAMBERT ABSTAINED. Mrs. Lambert brought up Assembly Bill 38 and mentioned the proponents of the bill did not want to proceed with the bill. ASSEMBLY BILL 38 - Revises jurisdiction of state fire marshal. (BDR 42-591) MR. NEIGHBORS MOVED TO INDEFINITELY POSTPONE A.B. 38. MR. BENNETT SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. ASSEMBLY BILL 80 - Revises provisions governing certain grants of financial assistance made by commission for cultural affairs. (BDR 18-430) Mrs. Lambert indicated to Mrs. Segerblom that her bill, A. B. 80, was supposed to go to the Ways and Means Committee. Mrs. Segerblom said it was concurrently referred to both committees, but was more suited for evaluation by the Ways and Means Committee. Apparently there had been a mistake in the original referral. MR. BACHE MOVED THAT THE BILL BE REPORTED WITHOUT RECOMMENDATION. MRS. FREEMAN SECONDED THE MOTION. THE MOTION CARRIED. MR. HARRINGTON VOTED NO. The meeting was adjourned at 10:38 a.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 20, 1995 Page