MINUTES OF THE ASSEMBLY COMMITTEE ON GOVERNMENT AFFAIRS Sixty-eighth Session March 2, 1995 The Committee on Government Affairs was called to order at 8:00 a.m., on Thursday, March 2, 1995, Chairman Douglas A. Bache 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 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 Mr. Wendell P. Williams COMMITTEE MEMBERS ABSENT: Mrs. Deanna Braunlin, Vice Chairman, excused GUEST LEGISLATORS PRESENT: Assemblyman Barbara Buckley, District 8 STAFF MEMBERS PRESENT: Denice Miller, Senior Research Analyst OTHERS PRESENT: Mr. Norm Starrett, Public Purchasing Study Commission; Mr. Henry Etchemendy, Nevada Association of School Boards; Ms. Stephanie Licht, Elko County Board of Commissioners, Nevada State Board of Sheep Commissioners and Nevada Woolgrowers Association; Ms. Nancy Howard, Nevada League of Cities, testified; Ms. Ande Engleman, Nevada Press Association; Mr. Douglas R. Bell, Manager, Community Resources Management, Department of Finance, Clark County; Mr. Wayne E. Carlson, Nevada Public Agency Insurance Pool; Mr. Jim Smith, Deputy Attorney General, representing the Commissioner of Insurance (see also Exhibit B attached hereto). SENATE BILL NO. 20 - Revises provisions governing required advertising of contracts for local government purchases. Mr. Norm Starrett, Public Purchasing Study Commission (hereinafter referred to as the Commission), testified. He advised the Commission was created, under NRS 332, to advise the legislature on matters relating to purchasing and was the sponsor of S.B. 20. He stated S.B. 20 was a companion bill to Assembly Bill No. 37, which was withdrawn in favor of S.B. 20. He indicated the purpose of S.B. 20 was to standardize the threshold for advertised bids at $25,000 for all state and local government agencies. He said $25,000 was the bid threshold for anything which involved a federal grant. He explained the present threshold for advertised bids was $7,500 for the state purchasing department, $10,000 for small counties, $25,000 for counties with populations in excess of 100,000 and $25,000 for the state's public works board. He advised small agencies, in large counties, had a bid threshold of $25,000 while moderately large counties, with high purchasing volumes, such as Douglas County and Carson City, had a bid threshold of $10,000. He indicated S.B. 20 attempted to create equity among governmental entities with respect to their dollar thresholds for advertised bids. Mr. Henry Etchemendy, Nevada Association of School Boards (hereinafter referred to as the Association), testified. He provided a document entitled "Assembly Government Affairs SB 20" (Exhibit C). He advised two counties, Clark County and Washoe County, had populations in excess of 100,000. He explained he obtained his figures from "...a two year old red book..." and, therefore, some of the assessed valuations set forth (on Exhibit C) would not be identical to current assessed valuations but their relativity to one another would be the same. He pointed out the assessed valuations of each of the school districts listed (on Exhibit C) were greater than the assessed valuations of any of the smaller governmental entities listed thereon. He suggested there was inequity in the fact smaller governmental entities, in counties with populations in excess of 100,000, had a threshold of $25,000 for advertised bids while larger governmental entities, in counties with populations of less than 100,000, had a threshold of $10,000. He urged the committee to pass S.B. 20, which he said was intended to eliminate inequity in advertised bid thresholds. Assemblyman Lambert asked if Mr. Etchemendy knew when one of the smaller governmental agencies last purchased something for which it took bids. Mr. Etchemendy replied he did not. He indicated "...the GIDs..." and the smaller governmental entities in Washoe County probably did not do a great deal of purchasing while Boulder City and Mesquite probably did do a lot of purchasing. Assemblyman Krenzer asked if Mr. Etchemendy knew "...the amount that's being advertised currently between the $7,500 or the $5,000 and $25,000." Mr. Etchemendy replied, under current law, if a government agency wished to purchase something which cost at least $10,000, it would have to advertise. He stated he did not know how frequently smaller governmental agencies were required to advertise. Assemblyman de Braga commented S.B. 20 was nearly identical to A.B. 37, except S.B. 20 contained an additional provision requiring records concerning requests for bids and bids received be retained for not less than 72 months after a purchasing contract was completed. She asked Mr. Etchemendy if the addition of that provision was the only difference between S.B. 20 and A.B. 37. Mr. Etchemendy confirmed the additional provision was the only difference but indicated he did not understand the reason for the added provision. He advised, pursuant to the existing statute governing records retention, records of the type referred to in S.B. 20 must be retained for a period of six years. Chairman Bache said he saw no connection between a governmental entity's assessed valuation and whether or not that entity did any purchasing. Mr. Etchemendy responded, when the Committee on Government Affairs held a hearing on A.B. 37, a question was asked regarding the relative size of governmental entities' budgets and he had no information with which to prepare a response to the question. He explained there was a relationship between the size of a governmental entity and the amount of its budget and, therefore, he utilized information concerning assessed valuations to prepare Exhibit C in an attempt to respond to the question he was asked at the hearing on A.B. 37. Assemblyman Bennett asked Mr. Etchemendy to supply statistics concerning the numbers of purchases governmental agencies made which cost from $10,000 to $25,000 and the cost differential between advertising and not advertising for such purchases. Mr. Etchemendy replied the Association would supply as much of the information Mr. Bennett requested as it was able. Mr. Bennett commented, in his experience as a government contractor, he found administration costs of making small purchases often exceeded the costs of the items purchased and said he wished to ascertain if such situations were the kind being discussed with respect to S.B. 20. Ms. Stephanie Licht, Elko County Board of Commissioners, Nevada State Board of Sheep Commissioners and Nevada Woolgrowers Association, testified. She stated the Elko County Board of Commissioners, at its regular meeting on February 15, 1995, voted unanimously to place its support of S.B. 20 on the record. Ms. Nancy Howard, Nevada League of Cities, testified. She stated she concurred with the testimony given by the previous witnesses and declared the Nevada League of Cities supported S.B. 20. Ms. Ande Engleman, Nevada Press Association, testified. She advised the Nevada Press Association opposed S.B. 20 and had opposed A.B. 37. She contended the assessed valuation of a governmental entity had nothing to do with the dollar amount of that entity's purchases. She suggested, in general, the size of its population determined the size of a governmental entity's purchases. Ms. Engleman said, with respect to another bill which dealt with state purchases, a former head of the state's purchasing department advised her the percentage of state purchases affected by the bill was 80 percent. She suggested a much larger percentage of counties' purchases would be affected. She advised, based on their quarterly claims for bills paid, most rural counties' expenditures for purchases were far less than $25,000. She contended not only did bidding keep prices down but bidding and advertising for bids allowed small contractors an opportunity to do business with those local governments to which they paid their taxes. She suggested this constituted good economics. Ms. Engleman said, as a taxpayer, she, too, would be interested to know if there was a real cost differential involved between publishing or not publishing a bid. Ms. Engleman explained, with respect to publishing legal notices, counties were encouraged to arrive at contracts with local newspapers which would allow those counties to advertise at a lower cost than the cost imposed for running a single advertisement. She contended such contracts saved counties a great deal of money. Mr. Bennett asked if Ms. Engleman was aware of what, in addition to advertising, a governmental entity was required to do when making a purchase for a sum which exceeded that entity's purchasing threshold. Mr. Bennett commented he was aware of an instance in which, because of the paperwork involved, it took 18 months for a government agency to approve the only qualified bid it received. Ms. Engleman responded some of the paperwork resulted from the fact, when dealing with governments, audit trails must be maintained and the ability to review transactions to determine their legitimacy must exist. Mr. Bennett asked if Ms. Engleman believed S.B. 20 precluded county agencies from "...sending out bids from an approved list of vendors." Ms. Engleman responded approved vendor lists were required for public works projects but were not required for the kinds of purchases discussed by S.B. 20. Assemblyman Neighbors commented, as a former county manager, he had been involved in many informal bids. He explained, when a county wished to purchase something which cost in excess of $10,000 and was unable to obtain the purchase from the state purchasing agency, the county's manager would obtain several informal bids which he would present at a meeting of the county's commissioners and from which the best bid could be selected. He suggested obtaining bids was an administrative tool with which to expedite government and did not create a problem for local governmental entities. Ms. Engleman said, in previous hearings held by the Assembly Committee on Government Affairs, she had pointed out abuses of purchasing provisions which had taken place in various rural counties. She contended S.B. 20 was not a good government bill as such a bill related to accountability to the public. Assemblyman Nolan commented Senator McGinness had opposed A.B. 37 and asked if Ms. Engleman knew how Senator McGinness voted on S.B. 20. Ms. Engleman advised the Senate Committee on Government Affairs held three hearings on S.B. 20 and said, at the last hearing, S.B. 20 was passed out of the committee at a time when Senator McGinness was absent from the committee room. She stated Senator McGinness was somewhat upset when he found out S.B. 20 had passed. Mr. Nolan commented he understood, of those contracts entered into during the last calendar year, 24 would have been affected by A.B. 37 and asked Mr. Starrett if his understanding was correct. Mr. Starrett replied, in the fiscal year 1994- 1995, the Commission issued 25 advertised bids of which four were under $25,000. Mr. Starrett gave further testimony. He explained the increase in the threshold for advertised bids, provided by S.B. 20, would have to be approved by local governmental entities. He pointed out the Public Works Act was uniformly adhered to by all 17 counties in Nevada and the threshold for advertised bids for public works was $100,000. Mr. Starrett stated (under the provisions of S.B. 20) governmental entities would still be required to solicit three bids for purchases costing between $10,000 and $25,000. Mr. Starrett contended government was being asked to accomplish more while using less money, to be more efficient and to function in the manner private business functioned. He said all governmental entities were asking for (under S.B. 20) was a tool to help them make purchases more efficiently. He explained it took three weeks longer to award an advertised bid than it took to award an unadvertised bid. He advised, in addition to advertising bids, governmental entities also sent bids to those, on their bid lists, who were capable of performing the contract in question. Mr. Nolan asked how many of the bids for purchases of less than $25,000, which the Commission issued in fiscal year 1994-1995, were awarded to local contractors. Mr. Starrett replied he did not recall but said none of those bids were awarded to out-of-state contractors. Chairman Bache asked if all counties would not take action to raise the threshold of their advertised bids if S.B. 20 was passed by the legislature. Mr. Starrett replied some small government agencies in Clark County and in Washoe County had not raised their bid thresholds to $25,000 and suggested raising the bid threshold was not an automatic action but one which was within the discretion of a county's board of commissioners. Mr. Bennett referred to lines 10 through 13, on page 1, of S.B. 20 and asked if those lines provided for a minimum of two bids. Mr. Starrett replied those lines provided for a minimum of two or more bids. Mr. Bennett asked how often Mr. Starrett had been involved in a situation in which an unsuccessful bidder initiated litigation with respect to the bid. Mr. Starrett responded he had worked in purchasing for more than 19 years and had never been involved in litigation. He said Douglas County had issued 125 bids and had never been involved in litigation as a result of one of those bids. Ms. Ande Engleman gave further testimony. She reiterated public works projects differed from the kinds of purchasing discussed by S.B. 20, which concerned purchases made in the course of daily business. She advised, at a hearing on Assembly Bill 121, held by the Assembly Committee on Commerce, Mr. Starrett testified in favor of eliminating bid lists with respect to public works projects. Chairman Bache closed the hearing on S.B. 20. ASSEMBLY BILL NO. 143 - Authorizes board of county commissioners to convey certain property belonging to county to nonprofit organizations for development of affordable housing for low-income families. Mr. Douglas R. Bell, Manager, Community Resources Management, Department of Finance, Clark County, testified. He stated the purpose of A.B. 143 was to provide a board of county commissioners with the ability to donate surplus county property to nonprofit agencies for their use in creating affordable housing. He said, currently, under NRS 244.1505, a board of county commissioners was able to make cash grants to nonprofit organizations if such grants provided a substantial benefit to the inhabitants of the county. He indicated what was being requested, through A.B. 143, was the ability for such a board of county commissioners to donate land, as well as money, for use in creating affordable housing. Mr. Bell provided a letter he received from Habitat for Humanity (Exhibit D). He explained Habitat for Humanity was a nonprofit agency known nationwide for its interest in creating affordable housing. He said, in its letter (Exhibit D), Habitat for Humanity requested county land be donated for its use in creating "infill" housing. Mr. Bell explained, unless A.B. 143 was passed by the legislature, Clark County would be unable to donate land to Habitat for Humanity. Assemblyman Harrington pointed out some land referred to in A.B. 143 was land acquired through eminent domain proceedings and suggested this would allow a county to obtain land from a landowner, through eminent domain proceedings, and then donate such land for use in creating low cost housing. Mr. Bell responded property acquired through eminent domain proceedings must be used for the purpose for which it was acquired. He indicated the land being discussed was land a county might have acquired with surplus revenues or which had been donated to the county. Assemblyman Tripple referred to line 3, on page 2 of A.B. 143, which provided building of affordable housing must be commenced within 5 years from the time a county donated land for that purpose. She suggested, if an organization was interested in constructing affordable housing, the organization would wish to do so in a shorter period of time than five years. She asked if Mr. Bell could provide a rationale for the five year period. Mr. Bell answered the period of five years was selected merely to provide a time limit. He said, after a nonprofit organization received a grant for affordable housing, it could take as long as two years for the organization to obtain HUD's approval of necessary mortgage documents. He contended it could take an extensive period of time to complete an affordable housing project. Mrs. Tripple asked if Mr. Bell was comfortable with the five year time period. Mr. Bell said he believed five years was the maximum time which should be allowed to complete a project. Mr. Bennett asked how many requests, similar to the request made by Habitat for Humanity, Clark County received each year to donate lands. Mr. Bell responded, to the present time, Clark County had not received such requests because it did not have enabling power to grant such requests. He suggested, if A.B. 143 was passed, the county would probably receive two or three such requests each year. Mr. Bennett asked how many properties the Public Administrator of Clark County currently held in trust and what the assessed value of such properties was. Mr. Bell replied he did not know. He explained property held in trust was not property which was owned by a county and which the county could donate or sell. He indicated such properties would not fall under the provisions of A.B. 143. Mr. Bennett pointed out line 14, on page 2 of A.B. 143, referred to land held in trust for the public. He asked, "So, the Public Administrator would not be administering those properties is what you're saying." Mr. Bell responded, to his knowledge, the Public Administrator would not. Mrs. Krenzer asked if she was correct that a county could sell land and donate the proceeds of sale to a nonprofit organization. Mr. Bell replied that was about the only way a county could assist a nonprofit organization. He suggested, however, if a county sold land to someone other than a nonprofit organization, that land would no longer be available for the nonprofit organization's use in developing affordable housing projects. He contended having the ability to donate land would provide a county with one means by which it could assist a nonprofit organization in the overall financing of an affordable housing project. Mr. Neighbors asked Mr. Bell to define a nonprofit organization. Mr. Neighbors also asked, if more than one nonprofit organization should request the same piece of land, how a county would handle the situation. Mr. Bell replied, "First of all, it would be a nonprofit 501C3, registered with the Secretary of State, and had its federal requirements." In response to the second part of Mr. Neighbors' question, Mr. Bell advised it would be up to the county's board of commissioners to determine which was the more suitable nonprofit organization to which to donate the land. He explained there might be some competition between nonprofit organizations with respect to large parcels of land but smaller parcels of land were generally targeted by nonprofit organizations which worked in the neighborhoods in which those smaller parcels were located. Mr. Nolan commented he had been involved in developing a shelter for homeless women and children. He advised some of the land which was considered for the shelter was land acquired through eminent domain proceedings, which had no commercial value but which would have been valuable for the shelter project. He contended A.B. 143 would serve a valuable purpose. Chairman Bache expressed concern about A.B. 143 as it applied to land acquired by eminent domain proceedings. He said he foresaw possible abuses. Mr. Harrington expressed concern over accountability for donated public lands. He asked how land transfers allowed under A.B. 143 would appear in a county's records should a taxpayer wish to ascertain information about such land transfers. Mr. Bell replied any proposed donation of land would have to be placed on a publicly posted agenda for a meeting of the board of county commissioners and there would be a legal record of any request made of the county commissioners to donate land. Assemblyman Ernaut asked if there were any specific requirements that notice of Clark County's intention to donate a parcel of land be given to those in the surrounding neighborhood. Mr. Bell answered, presently, there were no such requirements. Mr. Ernaut suggested the question of notice to neighbors should be addressed. Assemblyman Segerblom asked if Mr. Bell, alone, would make the decision to donate land. Mr. Bell replied, "Never." Mrs. Segerblom said, "We're just giving the county commissioners the right to accept responsibility for what they're responsible for." Mr. Bell indicated Mrs. Segerblom's statement was correct. Mrs. Segerblom asked if the action taken by county commissioners to donate land would be taken publicly. Mr. Bell replied affirmatively. Assemblyman Freeman commented, with respect to a project in her district, she believed the neighbors of that project would have supported the project wholeheartedly had they been given notice of the project. She suggested, if a project was to be created in an area where people had lived for a long time, those people should be given notice of the intended project. Mr. Bennett asked if Clark County possessed any properties which were liabilities, the disposing of which would benefit the county and demonstrate the county's fiduciary responsibility to its taxpayers. Mr. Bell replied, when government owned property which was not being used for any particular purpose, such property was a liability unless government could expect to gain from long term appreciation. He contended government's goal should be to utilize its property either to generate income or to accomplish some social purpose by disposing of such property. Mr. Bennett asked if Mr. Bell believed the situation A.B. 143 would create would be fiscally responsible. Mr. Bell replied affirmatively. He suggested a county's donation of land for creation of affordable housing would provide a social benefit. Mrs. Krenzer referred to lines 28 through 38, on page 2 of A.B. 143. She said she agreed with both Mr. Ernaut and Mrs. Freeman about the need for notice but felt that need was addressed by the language to which she referred. Assemblyman Barbara Buckley, District 8, testified. She advised she supported A.B. 143. She said, as a lawyer for Nevada Legal Services, during each year, she encountered thousands of people whose only problem was they were unable to pay their rent. She stated the majority of those people were casino workers, often single parents with children, who earned close to minimum wage, and senior citizens who lived on fixed incomes. She explained, as a result of these encounters, she became involved in the attempt to create more affordable housing in Clark County and met Mr. Bell. She described Mr. Bell as one of the most responsible and hardworking individuals who supported affordable housing in Clark County. Ms. Buckley explained the manner in which Clark County determined which affordable housing projects it wanted. She said the county had a citizens' committee which reviewed all requests concerned with affordable housing. She said the committee consisted of volunteers from the community and from nonprofit organizations. She advised each nonprofit organization which made a request was required to submit an application, proof of its 501C3 status, a budget and a statement regarding the kinds of individuals who would occupy its housing. She stated the committee then took a bus trip and looked at properties proposed to be used for affordable housing to ensure those properties were compatible with the neighborhoods surrounding them. She contended most properties selected to be used for affordable housing were in worse condition than any of the other properties on the block on which they were located. She explained how nonprofit organizations, which had applied to use those properties, renovated those properties and how, after they were renovated, the properties were adopted by community groups which would paint the apartment units or sponsor carpeting for the units. She advised, in the year following acquisition of such a property, the citizens' committee inspected the property to ensure it was being maintained and said, in nearly every instance, the property was the most attractive on its block. Ms. Buckley declared affordable housing was a necessity for minimum wage earners and senior citizens. She stated, frequently, donation of land was the key to the success of an affordable housing project because rents obtained from such projects were never enough to pay a mortgage on land. Ms. Buckley urged the committee to support A.B. 143, which she believed was "...another step in our effort to better serve our communities." Mrs. Lambert asked if Ms. Buckley would object if A.B. 143 was amended to require a nonprofit organization to which land was to be donated must be "... a 501(C)(3)" or was amended to require the notice procedure set forth in lines 26 though 38, on page 2, of A.B. 143 be followed with respect to donations of land. Ms. Buckley responded she would have no objection to the first amendment proposed by Mrs. Lambert. She said she had mixed feelings regarding the second amendment proposed by Mrs. Lambert. She suggested community involvement and notification was an admirable goal but it was necessary to educate communities and to demonstrate to neighbors of affordable housing projects the quality of those projects. She contended unwarranted fears, arising from lack of education, sometimes blocked development of good projects. Mrs. Lambert pointed out the notice requirement to which she referred dealt with notice of a planning commission hearing. She suggested such a notice requirement would allow time to educate the community and would allow the planning commission time in which to ascertain the appropriateness of a proposed project with respect to the overall land use plan for the community. Mrs. Freeman referred to NRS 268, which pertained to cities, and pointed out the notice requirement in that chapter was addressed in much the same manner as in NRS 244. She asked how Mrs. Buckley felt about changing the notice requirement in NRS 268. Ms. Buckley replied she would have to read NRS 268 before she could respond. She discussed her involvement in a small affordable housing project in Las Vegas and advised the neighborhood in which the project was planned defeated the project. She contended the project was a good project of high quality but said neighbors were concerned welfare recipients were going to be allowed to live in the project. Ms. Buckley advised, in order to reside in the proposed project, an individual had to be employed. She said the planning commission recommended the project but the city council yielded to objections of angry neighbors of the project. Mrs. Freeman related problems concerning a proposed affordable housing project in her district and indicated she understood Ms. Buckley's concern but suggested there was a need to amend the notice requirement with respect to cities as well as counties. Mr. Harrington said, with the eminent domain provision contained in it, he perceived A.B. 143 as a direct assault on the fifth amendment to the Constitution of the United States, which dealt with taking private property for public use. He said all those purposes for which land could be acquired by eminent domain proceedings, as set forth in lines 10 through 13, on page 1 of A.B. 143, pertained to public facilities as opposed to private businesses or residences. He said, under the provisions of A.B. 143, he foresaw a county being able to use eminent domain proceedings to obtain a private residence from one family, against that family's will, and to use the residence to provide subsidized housing for some other family by donating the property to a nonprofit organization. Mr. Harrington asked if Ms. Buckley would support A.B. 143 if it was amended to remove all clauses related to eminent domain proceedings. Ms. Buckley responded, if the committee chose to amend Section 3 of A.B. 143 to cause it to pertain to property which a county owned, she would not object. She contended, as a practical matter, a county would never use its eminent domain powers to acquire private property for use as affordable housing. She advised, in the eminent domain proceedings she had witnessed in Clark County, those proceedings were used to acquire land for use by casinos. Mr. Harrington contended one could not know for what purpose counties might use eminent domain proceedings, in the future, if those proceedings were made available to them. Mr. Ernaut asked Ms. Buckley if it would be cost prohibitive to require an affordable housing project to pay at least a portion of its property taxes. Ms. Buckley replied it would. She explained one reason counties considered nonprofit organizations as a means to produce affordable housing was because many public housing projects had failed. She indicated most properties which would be targeted under the provisions of A.B. 143 would be small pieces of infill land which did not generate much revenue. She advised most projects developed by the nonprofit organizations with which she worked were created for working people and senior citizens and she contended those projects might generate more revenue for counties than those counties would receive without those projects. Mr. Ernaut suggested, if the proposals contained in A.B. 143 were to be allowed, they should be made applicable to cities as well as counties. Mrs. Segerblom said Habitat for Humanity had built several projects in Las Vegas and asked Ms. Buckley if she investigated those projects to ascertain they conformed to the community. Ms. Buckley said she had not personally done so because the land for those projects was not acquired with county resources. Mrs. de Braga referred to lines 9 through 12, on page 1, and to the last page of A.B. 143, and said, as she read those provisions, they did not give a county power of eminent domain for the purpose of creating low income housing. She advised those provisions only allowed a county to use land which it had previously acquired by eminent domain proceedings, for one of the specific purposes set forth, and which could no longer be used for such purpose and could not be reconveyed to the individual from whom it was acquired. Ms. Buckley stated Mrs. de Braga was correct. Mr. Nolan stated he agreed with A.B. 143, in concept, but said Mr. Harrington had raised an interesting point. He advised, in his Clark County district, several homes were acquired through eminent domain proceedings for purposes of expanding the airport and creating freeway accesses. He said, after the owners of those homes were evacuated, the county began renting those homes to other families. He contended it was necessary to ensure such conduct could not occur under the provisions of A.B. 143. Ms. Buckley said it was her recollection the homes of which Mr. Nolan spoke were being torn down but the county wanted to maximize its revenues while that process was taking place. She said, however, the situation she described did not lessen the appearance of unfairness. Ms. Stephanie Licht, Elko County Board of Commissioners, testified. She said, at its last regular meeting, on February 15, 1995, the Elko County Board of Commissioners voted unanimously to go on record as opposing A.B. 143. She said she was unaware of the reasons underlying the board's decision but suggested what worked well for a large county did not always work well for a smaller county. Mrs. Freeman asked if Ms. Licht knew of any other small counties which were opposed to A.B. 143. Ms. Licht replied she did not. Mrs. Krenzer said she interpreted A.B. 143 as being enabling legislation, which did not require counties to act upon its provisions. She said she would like to know the Elko County Board of Commissioners' reasons for opposing A.B. 143. Ms. Licht said she would ask the board to provide the committee with its reasons. Chairman Bache closed the hearing on A.B. 143. ASSEMBLY BILL NO. 144 - Broadens permissible investment of money pooled by public agencies or nonprofit medical facilities for insurance. Mr. Wayne E. Carlson, Nevada Public Agency Insurance Pool, testified. He explained A.B. 144 would allow insurance pools, such as the Nevada Public Agency Insurance Pool (hereinafter referred to as the Pool), to make investments other than those specifically provided for local governments. He advised the Pool had characteristics similar to those of an insurance company "...although we are self-funding a portion of that risk." Mr. Carlson indicated, based on discussions held with the Attorney General's staff, it appeared necessary to make some changes to A.B. 144 in order to clarify its provisions and to avoid potential problems for pools which might perceive the investment opportunity provided by A.B. 144 differently than the Pool perceived it. He said the Pool's board was comprised of elected and appointed officials of local governments. He advised the board was very conservative in its investment strategies and the Pool's investment policy was limited. He said sometimes investment opportunities were available which, when the treasury market was not performing well, were less risky than those investments government was allowed to make. He indicated, in the first half of 1994, treasury bonds were not performing well, and the Pool's investment adviser reviewed some triple A bonds which would have offset problems created by the treasury market had the Pool been able to invest in those bonds. Mr. Carlson said the Pool's time frame for paying claims often spanned seven years. He stated the Pool paid approximately 60 percent of all liability claims within three to five years and paid the balance of those claims within five to seven years. He explained, because of this time frame, the Pool invested in intermediate government bonds. Mr. Carlson advised A.B. 144, as drafted, provided those insurance pools to which it pertained could do those things which a domestic insurance company could do under NRS 682. He indicated the Attorney General would prefer to see the provisions of A.B. 144 narrowed to specific types of investments. He indicated, if the Pool generated a list of specific investments to be made under A.B. 144, the list would include: revenue bonds of public utilities, as covered by NRS 682A.050, subsection 4; corporate obligations, as covered by NRS 682A.050, subsection 5; public obligations, as covered by NRS 682A.060; and those items set forth in 682.070, which were identical to investments presently allowed under the statute which governed investments by local governments. Mr. Carlson said, with respect to corporate obligations as investments, Deputy Attorney General Jim Smith suggested it be required such corporate obligations have a rating of "1" by the National Association of Insurance Commissioners' Securities Valuation Office, which would reflect they were low risk corporate obligations. He indicated he concurred with the Deputy Attorney General's suggestion. He advised there were other investments, under 686A.080, which the Pool wished included in A.B. 144, in order to clarify precisely what investments could be made, and suggested A.B. 144 be amended to list specific obligations in which investments could be made. Mrs. Freeman said she hoped everyone would learn from what occurred in Orange County, California, with respect to investments, and hoped any concerns related to that occurrence would be addressed in A.B. 144. Mr. Carlson responded there were some insurance pools in California which invested in Orange County and incurred losses. He said, as Executive Director, he had some flexibility with respect to the investments he could make, however, the Pool's board had hired an investment manager to make investments also and the investment manager could only invest in accordance with statute. He explained Orange County's problems were caused by "leveraging" and said if the committee wished to include provisions in A.B. 144 to avoid the possibility of leveraging, he would be happy to include such provisions. Mr. Harrington asked what safeguards the Pool had to ensure it did not have a "rogue investor." Mr. Carlson replied the Pool's executive committee acted as the investment committee and the Pool's board had adopted an investment policy which was followed by the Pool's investment . He said the investment advisor could make investment decisions only in accordance with statutory provisions for local governments and the policy adopted by the board. Mr. Harrington asked what oversight Mr. Carlson had to ensure the Pool's investment advisor adhered to its investment policy. Mr. Carlson replied he received a monthly report, which he distributed to the executive committee, and he was aware of any major shift in investments which the investment advisor might recommend prior to the investment advisor making any such investments. He said, within three days of any transaction made by the investment advisor, he received a report required by the Securities and Exchange Commission. He advised the investment advisor made an annual, oral report to the board with regard to what he had done and what he recommended for the future. Mr. Bennett referred to the proposed deletion of the language "and includes any municipal corporation" from the definition of a public agency, as provided in Section 1, subsection 1, paragraph c of A.B. 144, and asked why that language was included in the statute in the first place and why A.B. 144 required deletion of that language. Mr. Carlson replied he would have to defer to the Legislative Counsel Bureau to respond to Mr. Bennett's question. Chairman Bache directed the Senior Research Analyst, Denice Miller, to obtain an answer to Mr. Bennett's question. Mr. Jim Smith, Deputy Attorney General, representing the Commissioner of Insurance, testified. He advised, when an insurance crisis occurred, in 1985, 1986 and 1987, and municipalities were unable to buy insurance, the legislature created interlocal agreements which allowed public agencies to combine their risks and either buy insurance as a group or create their own insurance pool. He explained the Insurance Commissioner's only duty, with respect to such insurance pools, was to review the pools when they were created. He said the legislature took the position the elected leaders of the pools were responsible for those pools. Mr. Smith said the investment pools made their investments in the same manner counties were required to do, which was set forth in statute. He advised A.B. 144 would allow corporate bonds of the highest grade to be available investment vehicles for interlocal agencies. He contended it made good sense to allow investment in corporate bonds but suggested the legislature specify, precisely, what investments could and could not be made. He indicated specifying the investments which could be made would not only provide investment advisors with that knowledge but would allow auditors to ascertain investments were properly made. Mrs. Lambert asked if public utility bonds were secure investments. Mr. Carlson responded the Pool had not considered such bonds as either a primary or secondary choice for its investments. He said the Pool was primarily interested in investing in corporate bonds. He indicated public utility bonds had a history of being secure investments but said, if the public utility industry was no longer stable, the Pool would measure the risk of investing in such bonds. He suggested, if the National Association of Insurance Commissioners rated public utility bonds, a requirement such bonds have a rating of "1" might address concerns about permitting investments in such bonds. Chairman Bache asked why A.B. 144 was needed. Mr. Carlson replied investment segments performed differently under different market conditions and suggested the ability to invest in more than one segment would create the possibility of offsetting losses incurred from investments in one segment with gains from investments in another segment. He advised the statute governing local government investments focused, primarily, on credit risk but did not address market conditions risk. He explained, if an investor was fully invested in an obligation which was permitted under present law but which was "...on the down slide, substantially...", there was no credit risk in the investment but there was a lot of market risk for which there was no offset. He said A.B. 144 "...broadens our ability to diversify our asset base to stabilize both the credit risk and the market risk." Mrs. Freeman asked if Mr. Smith had any recommendations or comments concerning the need for protections in state law with regard to investments by governing bodies. Mr. Smith replied, thus far, there had been no problems with investments by public agencies and he believed the existing provisions which governed such investments were adequate. He said, presently, there were limited government insurance pools. He advised there was a pool for county liability and property, a pool for medical malpractice and a pool for the housing authority. He indicated Nevada's large counties were totally self insured and were not members of insurance pools. Mr. Harrington asked Mr. Carlson what the Pool's average annual yield was over the past five years and what he thought the yield would have been had the Pool had the ability to make the investments it was requesting it be allowed to make. Mr. Carlson replied he did not have information regarding the past five years' yield immediately available. He said the Pool asked its investment advisor what the difference in yield would have been, had the Pool had the ability to make those investments it was requesting it be allowed to make, and was told, if the Pool had invested a portion of its assets in a manner similar to that of an insurance company for which the Pool's investment advisor had managed funds, there would have been a difference in yield of one percent. He stated most insurance companies invested 75 percent or more of their monies in bonds, both government bonds and corporate bonds, and invested the remainder of their monies in a variety of investments. Mr. Harrington asked if the anticipated difference in yield under the provisions of A.B. 144 was one percent or less. Mr. Carlson replied affirmatively. Chairman Bache closed the hearing on A.B. 144. SENATE BILL NO. 20 - Revises provisions governing required advertising of contracts for local government purchases. Chairman Bache called for a motion on S.B. 20. ASSEMBLYMAN LAMBERT MOVED TO INDEFINITELY POSTPONE S.B. 20. ASSEMBLYMAN WILLIAMS SECONDED THE MOTION. Discussions were held by the committee. Mrs. Lambert said she did not think there was a need for the changes proposed by S.B. 20. She suggested large counties had more staff than smaller counties had and smaller counties must work harder to obtain bids. She contended it was better public policy to retain the present requirements for bid advertising than to change them. Mr. Ernaut observed there had been a movement over the past few years toward more open government and suggested S.B. 20 would reverse the movement. He contended S.B. 20 "...closes the door on the open bidding process and open purchasing process..." He advised he would vote against S.B. 20. Mr. Nolan said none of Nevada's large counties, which, potentially, had more bids under $25,000 than smaller counties and might wish to see the threshold for advertised bids raised, had representatives present to testify at the hearing on S.B. 20. He suggested those large counties were operating well with the present threshold. He pointed out the representative of the county which requested S.B. 20 testified only five of the county's contracts would have been affected by the provisions of S.B. 20; he suggested five contracts could be easily managed under current statutory provisions. Chairman Bache called for a vote on Mrs. Lambert's motion to indefinitely postpone S.B. 20. THE MOTION CARRIED; ASSEMBLYMAN NEIGHBORS VOTED "NO." Chairman Bache asked the committee if it wished to approve the minutes of the committee's meetings held from January 19, 1995, through and including February 10, 1995. ASSEMBLYMAN WILLIAMS MOVED TO APPROVE THE MINUTES OF THE MEETINGS OF THE COMMITTEE ON GOVERNMENT AFFAIRS FOR THE DATES JANUARY 19, 1995, THROUGH AND INCLUDING FEBRUARY 10, 1995. ASSEMBLYMAN KRENZER SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY BY ALL MEMBERS PRESENT. Mr. Neighbors referred to S.B. 20 and commented, while it seemed convenient to refer to counties with populations over 100,000 and counties with populations under 100,000, the constitution of the state of Nevada said all counties shall be treated the same. There being no further business to come before the committee, Chairman Bache adjourned the meeting. RESPECTFULLY SUBMITTED: Sara Kaufman, Committee Secretary APPROVED BY: Assemblyman Douglas A. Bache, Chairman Assemblyman Joan A. Lambert, Chairman Assembly Committee on Government Affairs March 2, 1995 Page