MINUTES OF THE ASSEMBLY COMMITTEE ON GOVERNMENT AFFAIRS Sixty-eighth Session March 31, 1995 The Committee on Government Affairs was called to order at 8:00 a.m., on Friday, March 31, 1995, Chairman Bache presiding in Room 119 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 Mr. Wendell P. Williams COMMITTEE MEMBERS ABSENT: None GUEST LEGISLATORS PRESENT: Senator William O'Donnell, Assemblyman Chris Guinchigliani STAFF MEMBERS PRESENT: Denice Miller; Research Analyst OTHERS PRESENT: John Swendseid; Attorney, Gary Crews; Auditor, Legislative Counsel Bureau, David R. Olsen; City of Ely, Mary Ann Burt; City of Ely, Karla Hansen; Ely School District, Nancy Overson; Ely School District, Rick Brewer; Ely School District, Carole Vilardo, Nevada Taxpayers Association, Tom Grady; League of Cities. Chairman Bache called meeting to order. SENATE BILL NO. 304 Provides for preliminary review and audit of finances of White Pine County School District. (BDR S-1875). Marcia de Braga Assembly District 35 spoke to say that White Pine County School is in severe financial straights. She said by the audits already done, the school district is unable to meet their payroll for the month of April. She said the Senate dealt with the school district's financial problems two years ago. They began proceeding when they realized their financial condition had not improved . They took action by rapidly passing these two measures. S.B. 304 will allow for a complete audit of their finances, all their obligations and provide for establishment of some sort of plan for the next several years. She said the bills will accomplish an audit and will allow the state to find out the exact details of the financial condition. She said these are emergency measures so that an audit can be completed in a very short period of time. She said the preference of the Senate Committee who heard these bills originally, is not to loan the White Pine School District money, but to allow them to borrow more money. She said the guarantee for the money would be that school funds would go directly to retire this loan before they ever reach the school district. She said the school district has already fired their Superintendent, who apparently is their only financial advisor, or is their main financial advisor and the school district would be managed by a financial manager in lieu of the Superintendent. She said S.B. 304 is the long term financial audit, and the preparation of a long term plan. Chairman Bache recognized Carole Vilardo. Carole Vilardo of the Nevada Tax Payers Association spoke stating they support both bills, they are both needed because they have to get a handle on the situation in White Pine County. She said in the case of money owing you cannot turn around and say "We will close the school" or a multitude of other things you might be able to with any other governmental entity. She said there will be two more bills brought forth that will be special acts dealing with this. She said they have been monitoring and been involved due to many calls from White Pine County starting prior to last session. She said ever since the need for legislation last session to have this school district buy down the property tax rates in White Pine County, they have monitored everything that had been put into place and became increasingly concerned. She said they had a great deal of dialogue with the Department of Taxation because of a number of areas in the law that were not being complied with. She said Mrs. de Braga has been aware of the meetings with NACO, League of Cities, School Association people, with Dave Pursell; Department of Taxation to take a look at short term solutions, long term solutions and general law that was able to be used without any red flags going up to signal these problems earlier. She said she urged the passage of S.B. 304 and S.B. 305. She then asked for questions. She said Dave Pursell was best equipped to answer any questions because he has had people out in White Pine County doing the audits to find out the short term problem. She said in order to go out and secure the necessary money to make sure payroll and debt obligations are met for the months of April, May and June it becomes necessary to know that short term cash flow analysis to know how much will be needed and what will subsequently be negotiated. Mrs. de Braga said at the present time the total financial picture is not clear. The school district cannot make payroll and are three months behind in various other bills. She said they have a balance of approximately one hundred forty thousand dollars, and payroll is something like seven hundred thousand plus the other outstanding obligations that need to be paid. She stated she had just been notified that the Superintendent had not yet been fired. She said that would have to wait until the school board meeting on Wednesday the fifth of April. She said whether or not it will occur is uncertain. She said the Senate is looking at its next bill. First at the possibility of putting the school district in receivership. She said she understood it to involve court costs and prefers a financial manager be appointed. She said all of the possible plans are contingent upon the Superintendent no longer being in office. She said this does change matters if he does indeed stay in office. She said according to the Senate District, there are about twelve laws that have been broken by the school district plus an unwillingness to get to the bottom of the problem. She said in fairness to the school board members, who some of whom have obviously changed since the last election, they do have to rely on information given to them by the superintendent, and apparently all that information was unreliable. She said they are now understanding the serious position they are all in and that they are all responsible even though they did not know what was going on. Chairman Bache recognized Mr. Bennett. Mr. Bennett asked if the District Attorney had taken action on the twelve laws being broken. Mrs. de Braga said no action has been taken. She said the laws are in the areas of forms not being filed and statutes not complied with. She said no formal charges have been filed, only a list compiled of things that were not complied with by law. Chairman Bache recognized Carole Vilardo. Carole Vilardo said the debt management reports and the capital improvement reports were not filed. She said there were no asset management reports filed. She said there was a question of a heating system, where short term financing was originally entered into for fifteen years. She said you cannot have fifteen year short term financing. She said it was changed over to ten years. She said you can have ten year short term financing, which requires the approval of the Department of Taxation. At no time was the Department of Taxation notified. When the Department notified the school district about these things that would have to be done and these violations, they went into a Lease Purchase. She said there is nothing in law that governs leases. She said there has been enough concern that she has written a Judge in White Pine County expressing her concerns. Chairman Bache recognized Mike Pitlock and Dave Pursell. Mike Pitlock the Executive Director of the Department of Taxation and Dave Pursell of the Department of Taxation came forward. Mike Pitlock spoke regarding the action that has been taken by the department and the Tax Commission. He said at the Tax Commission's meeting on the twenty second of March, 1995, the department made a recommendation to the commission that they make a finding of financial difficulty as related to the White Pine County School District. This finding which was approved by the commission triggered a series of statutes that basically gave financial control over the school district to the Department of Taxation. He said this has allowed them to go in and control the expenditures that are on going at the school district. He said they basically have to go to the Department of Taxation for approval of any additional expenditures or entering into any additional agreements. He said they have people from the Department of Taxation on site at this time attempting to further refine the work that has already been done with the district to determine the magnitude of the current problem. He said the Department of Taxation sees two problems that need to be dealt with. One is a very immediate problem dealing with the negative cash flow. He said a source of funds is needed to remedy this situation or the payroll will not be met. He said there are little alternatives other than closing the school when you do not have any money. He said obviously that is not an option. He said the bills are a starting point for dealing with that short term situation and also the starting point for dealing with the other part of the problem, which is long term. He said in order for a school district to get itself in this much trouble, there are problems with the system itself. He said there is virtually no accounting system, and no internal controls in place at this time. The long range problem that needs to be solved is a solid accounting system has to be in place, a strong internal control and a strong individual who is knowledgeable in financial matters needs to be in place to implement that system. He said they see the bills as addressing both the short term immediate problem as well as going in there to deal with the long term problem. Dave Pursell, Chief of the Division of Assessment Standards of the Department of Taxation, gave a brief summary of the White Pine County problem. He said the voters in White Pine County approved a ballot question in November of 1992 that authorized the school district to issue up to 13.8 million dollars in general obligation bonds to construct a new high school, middle school, and complete certain other projects within the district. He said approximately 7.8 million dollars in the bonds were issued in March of 1993 and construction of the new high school began. He said at the present time that facility is ninety percent complete. He said during the same time period the district constructed a new vocational agricultural facility that is adjacent to the high school. This construction project was financed through the issuance of approximately 1.8 million dollars in short term bonds in June of 1992. He said the payment of the debt service is generated through capital project pacts, which is commonly known as "pay as you go" revenue. This was approved by the voters in November of 1988 and it can be imposed through fiscal year 1999 at the maximum rate of fifty cents. He said in January of this year it came to the Department of Taxation's attention that there was a serious cash flow problem at the White Pine County School District. He said at the end of January the school board had a meeting and on the Agenda was a discussion of the cash flow deficit. Based on what he heard in Carson City, he attended the meeting. He said the accounting firm for the school district is McMullen McFee. The CPA with that firm had put together a cash flow projection through July of 1995. He said at that meeting it was delivered to the public that there was a 2.2 million dollar projected shortfall for this fiscal year and into the first month of the next fiscal year. He said the Superintendent of the district rebutted that and said he did not believe that was the case, he felt there was going to be a four hundred thousand dollar ending fund balance. He said at that meeting the school district put themselves onto emergency spending. They told the Superintendent and the CPA to get together and reconcile the cash flow difference. He said a subsequent meeting was held in February, the shortfall had been reduced to 1.3 million dollars. He said they decided a budget analyst should look at the books. He said there was a definite possibility that payroll would not be met for March. He said they now know payroll will not be met for April without some money infused into the general fund for this fiscal year. He said he felt the reason it happened was due to decisions being made to buy the best of everything. That meant furnishings, equipment, band uniforms, band equipment, athletic equipment, etc. He said the problem was they had 7.8 million dollars in bonds to construct it and they have spent over 10 million dollars. He spoke of the leases that were entered into by the school district. He said short term financing, which is financing of less than ten years, comes to the Department of Taxation through approval by resolution of the school board and they are then reviewed and determined whether or not they can be paid back. He said when they were approached by the Superintendent, they told him to go through the steps to show them how it would be paid back and they would consider it. He said instead of the short term financing, the Superintendent went to a financial institution and got lease agreements. He said there is a statute that states if you have a lease agreement that has a non-funding clause, there is no approval process to go through at the Department of Taxation. He said that is where the master lease from Nevada State Bank came in at the amount of nine hundred and fifty thousand dollars. He said in October of 1994, five hundred thousand dollars was given to the school district to purchase equipment. Then in January they received another four hundred thirty six thousand dollars to buy various other pieces of equipment. Through their research, problems arose. Records from the school district on certain items of equipment expenditures were shown from the bond account for that equipment. When they received the itemized lease agreement the same equipment was there tied to the proceeds from the lease. This showed two different funds showing payment on the same equipment. Because of the spending spree the general fund was being depleted. By the time the proceeds from the lease agreement came, it was put into the bank account to keep everything balanced. He said the whole governmental accounting process has been compromised because dedicated funds have not been protected. He said in other words, when you have a debt fund and you have property tax revenue going in there for specific purpose, for the debt service, it was used to pay whatever they needed to pay. This included school activity funds. He said as far as they can tell everything was deposited in the main account, and they had to do it, because they had overdrafts in the checking account. He said the Chairman of the School Board had indicated in November or December of 1994, they had at times a two hundred thousand dollar overdraft in that main checking account. He said a letter was given to the bank authorizing them to offset accounts. He said his concern right now is, because most of this has not been posted to the accounting system, they have to go back and match checks with equipment to see what has been paid and what has not been paid. He said there is approximately one hundred forty thousand dollars in the bank, and payroll is at seven hundred thousand. There are other debts plus utility bills. He said debt payments are coming due in June and July to complicate the matter. He said that is why the projection has always been taken through the first month of the next fiscal year. He said they are trying to get a handle on the receipts on the revenues and the disbursements to come up with an amount that is needed to be borrowed to make ends meet for this fiscal year. He said they need to stop frivolous spending and mitigate and make the amount as small as you can to go out and loan. He said they are looking at approximately 1.5 million dollars they will need to borrow. Chairman Bache recognized Mrs. Lambert. Mrs. Lambert asked if the Federal funds were also kept in the same account. Mr. Pursell replied "yes", and that same question was asked of the Senate. He said he thought the Department of Education was going to have to look at that. He said those funds have been used in the offset. Mrs. Lambert asked if the voters were notified in the ballot question that there might be short term financing on this "pay as you go". Mr. Pursell said it was pretty broad if you look at the ballot question. He said fifty cents could be used toward capital projects. He said for fiscal year 1995 thirty nine cents is in the rate to service the debt on the 1.8 million dollars. Mr. Pursell stated there is a false sense of security in White Pine County. He said with the Magma Mining Company moving in it will double the tax base in approximately two and a half years. He said he was confident as to what was going on there, because the Department of Taxation is responsible for valuing all mining property. He said he has been in daily contact with their controller, due to the new assessed values. He said if they do not hold true, then the problem is ten times worse than it is now. He said they have indicated that over the two and one half to three years they will be building a three hundred million dollar mill and they are well into that. He said the tax base from this year to next year, July 1, 1995 will increase by almost seventy million dollars in assessed value. He said their experience with net proceeds is it takes about two years before you see any, because of the developmental costs against the gross proceeds. He said there is going to have to be a curtailment on expenditures, not only at the school district, but at all local governments in White Pine County. He said it is going to take a while before they see the benefits of the Magma project. Mrs. Lambert asked if anyone would loan them one and a half million dollars. Mr. Pursell stated that Marvin Leavitt has been a tremendous help in this. He said the local advisory committee is involved and Mr. Leavitt is the chairman of it. He did testify they had some "feelers" out to some institutions. He said until they know the amount needed it is difficult to get someone to commit to a loan. Chairman Bache recognized Mr. Bennett. Mr. Bennett asked when was the financial difficulty discovered. Mr. Pursell said he could not remember the last date. He said he thought it was February of this year. Mr. Bennett asked if this is the first time the Department of Taxation went into the White Pine School District's books. Mike Pitlock stated they went back to the 1993 legislation where there was a problem with the entities exceeding the three dollar and sixty four cent limit on the combined tax rate. He said it was alleged the reason it happened was because of the bonds issued by the school district. This caused the rate to go up. He said Senate Taxation asked representatives from the school district to discuss this, and the result of the deliberations were that the school district was told to make the other entities hold, buy down the rate for the city. He said it was about three hundred thousand dollars split at one hundred fifty thousand in each year bi-annual. He said at that meeting the Superintendent of the school district was asked if he could handle this. He replied "yes" there would be no problem, but he felt the school district should not have to do it, but if they had to they would be all right. Mr. Pitlock stated they had not specifically gone in and looked at the books because they had the person in charge telling them that everything was O.K. He said part of the problem at the Department of Taxation is any information they receive is late, if they get it at all. He said a lot of the laws that were broken included the audit that was due to the department, information on their debt, information on their leases, quarterly reports. He said this was information they would need to know something was wrong. Mr. Bennett said the bond issues approved in November of 1988 has "snowballed into a problem seven years later, and we are just now taking action. Mr. Pitlock stated he thought the problem might have been prevented if they would have stuck to the short term financing and to the 7.8 million dollars to build the school. He said the problem started with the other leases. One million dollars for the furnishings and equipment, three hundred thirty thousand dollars for the new heating system. The 1.8 million dollar short term financing and the 7.8 million general obligation bond were taken care of in the tax rate. He said it was specified in there that there was rate to cover the debt service on that. When they started spending on everything else, they went into the general fund to cover what the debt service could not. That is what caused the problem. He said they were spending money they did not have. Mr. Bennett asked when the ball was dropped on this oversight. Mr. Pitlock stated he did not believe it would be accurate to say that the ball was dropped with respect to oversight. He said had White Pine done everything it was supposed to do and was required to do by statute, if they had filed the information that was required by the Department of Taxation and if they had sought approval for the short term financing, the way the statute reads, the Department of Taxation would have been in a position to get involved in this situation in advance of this problem. Since they failed to do the above, they were left in a situation where it was too late to do anything other than what they are in the process of doing now. He said they are responding as quickly as possible with the information that has been provided to them. He said the school district is delinquent in all the reports that need to be filed. He said had that information been available to the Department of Taxation, they would have been able to take care of it. He said they do not have the resources to go out and do this, it is the local governmental entities' responsibility in the first place to deal with these issues. Mr. Bennett asked if they had the staff to make up a checklist as to whether or not reports were filed. Mr. Pitlock replied if the information had been provided the way it should have been provided, they have the resources to take care of that. He said there are two budget analysts who handle two hundred plus budgets, and they are understaffed. Mr. Bennett said this has been overlooked for seven years. Mr. Pitlock said the problem has not existed for seven years. He said he really believes the Department of Taxation has gone out of its way to provide assistance to White Pine County. Chairman Bache recognized Mr. Ernaut. Mr. Ernaut asked if the White Pine District Attorney or the Attorney General involved themselves at all. Mr. Pitlock replied not at this time. Mr. Ernaut asked if they were statutorily bound to provide the information to the Department of Taxation. Mr. Pitlock replied "yes", but they do not have all the answers yet. Mr. Ernaut asked if it was the intent of the Department of Taxation to facilitate action if necessary. Mr. Pitlock said if the Department of Taxation uncovers evidence that would support charges of that nature, they would turn it over to the appropriate authorities. Chairman Bache recognized Mrs. de Braga. Mrs. de Braga asked Mr. Pursell to speak about the large principal due on the bonds. Mr. Pursell said the first principal payment on the 7.8 million is due in fiscal year 1997. They are making only interest payments until that time. The amount of the interest payments through fiscal year 1997 is five hundred thirteen thousand dollars. In 1997 the first principal payment is fifty thousand and then it is an increasing amount on the principal. Mrs. de Braga asked if the high school was finished. Mr. Pursell said "no", it would be approximately two hundred five thousand dollars to pave the parking lot and the road into the school. He said there are approximately four hundred thousand dollars in change orders to the contractor that have not been paid. He said the estimates for the athletic complex and landscaping amount to another six hundred thousand dollars. Mrs. de Braga said there is apparently nothing in statute or local code that requires anybody in charge of the school district to have the ability or training as a financial manager. Mr. Pursell said he did not know of any specifics for the Superintendent to have accounting background. Mrs. de Braga asked Mr. Pursell to explain the makeup of the local advisory board. Mr. Pursell said it was established by statute. He said it coincides with the local government budget act. It is a group of experts that advise the Department of Taxation in how they monitor local governments. They review the forms, they decide what information should be forwarded to the Department. He said it is made up of eleven or twelve members. Three members from the city, three members from the county, three school board members, two certified public accountants and others. He said it is a mixture of different local entities of the state. Mrs. de Braga asked if they were a state wide makeup. Mr. Pursell replied "yes". Chairman Bache recognized Mr. Nolan. Mr. Nolan asked if the approval for the extravagant purchases were funneled through to one person or was this rampant spending. Mr. Pursell said it would be better to ask the school board that question. He said the letters and correspondence he has seen so far were from the purchasing agent to the school board recommending various companies to buy from. He said he did not see an itemized list only recommendations. Chairman Bache recognized Mrs. Segerblom. Mrs. Segerblom asked if they were going to be asked to bail out White Pine County. Mr. Pursell said on March 22 at the Nevada Tax Commission Meeting and at the Senate Government Affairs meeting it was told to the school district they need to go secure a loan from a private source to get the funds for this fiscal year. Chairman Bache recognized Mr. Neighbors. Mr. Neighbors asked what the counties' assessed value was. Mr. Pursell said the total assessed value including net proceeds for fiscal year 1995 is approximately one hundred eight million, one hundred thousand dollars. Mr. Neighbors said with ten cents on the rate, it would only raise one hundred eight thousand. He asked to their knowledge were there any red flags shown up on any of the independent audit reports. Mr. Pursell said yes, the 1993/94 audit that was completed by McMullen/McFee, which should have been completed in November of 1994, was given to the school board in February of 1995. He said in that report there were nine or ten non compliance items listed by the accounting firm. Chairman Bache recognized Mr. Harrington. Mr. Harrington asked if the reports which they failed to file, were they quarterly, yearly or were they reports they had to file when certain type of action was taken. Mr. Pursell said a lot are yearly, specified by law. They ask for the quarterly reports. He said the indebtedness report, which is a summary of obligations, was due last July and they still have not received it. He said it was not until they physically went out to the office did they find out it had been filed away. He said they asked the reason for this, and the reply was they did not know what to do with it. He said another was a debt management policy. He said it was due well over a half of year before they received it. He said what they did receive was not correct, it did not reflect the debt. Mr. Harrington asked on the reports that are periodically due, is it a common problem with school districts to be late. Mr. Pursell said whether it is a school district, county or city in the audits they will come across non compliance items. He said the majority of the entities will follow through in getting whatever it is not complied with. He said with White Pine County it is not the case. Chairman Bache recognized Mrs. Braunlin. Mrs. Braunlin asked if the figure of ten thousand dollars owed the Ely Hospital for hot lunches was correct. Mr. Pursell said he believed it was. He said it was one of the checks they told them to pay. He said there are over two hundred thousand dollars in checks and warrants that have been written but have not been mailed or paid. Chairman Bache asked if both of the bills give them the authority they need to do the job as far as getting the information needed. Mr. Pitlock said there are current statutes in place dealing with the finding of financial difficulty that give the department authority. He said these two bills plus the other bill that will follow will set up the process for securing the short term financing to deal with the immediate situation and the analysis that precedes, to determine what the amount is. He said then they will have to deal with the long term problem of establishing a budget for the next five years. Chairman Bache asked if the area of long term leases has a gap in regards to state law that needs to be addressed. Mr. Pitlock said it was his understanding there is a gap there. He said the statutes clearly identify that the local governmental entities have to come to the Department of Taxation to get approval for short term financing. He said it appears the school district got around that requirement by securing the financing through a lease. This was another thing that delayed the ability of the Department of Taxation to get involved. Chairman Bache recognized Mrs. Freeman. Mrs. Freeman asked who is the attorney representing the school district. Mr. Pursell said it was Mr. Steve Dobrescu. Chairman Bache recognized Mr. Nolan. Mr. Nolan stated on S.B. 304 section two the language seems to be a sunset clause. He said on S. B. 305 he did not see the same type of language and was wondering if this will still be in effect even after the crisis is over. Chairman Bache asked Mrs. Lambert to respond. Mrs. Lambert said S.B. 305 is a very short term situation to determine the cash flow problems and it will be done by April 10. Mr. Pitlock said S.B. 305 sets some very short term time frames for certain actions to take place. Once those actions have taken place, the bill no longer has any purpose. Chairman Bache recognized Mr. Neighbors. Mr. Neighbors asked if the Department of Taxation approved their budget. Mr. Pitlock said that was correct. Mr. Neighbors asked if anywhere in the budget did it mention leases as an expenditure. Mr. Pursell asked if Mr. Neighbors was referring to the 1994/95 current budget. Mr. Neighbors said "Yes", the current budget. Mr. Pursell said "no", those were entered into long after the budget was approved. Chairman Bache recognized Gary Crews. Gary Crews, Legislative Auditor addressed S.B. 305 saying it does require them to participate in the endeavor of White Pine County. He said it has a short time frame. He said they will assist the Department of Taxation in the analysis of the cash flow. Chairman Bache recognized David Olsen and Mary Ann Burt. David Olsen the City Attorney for the city of Ely stated they were present to answer any questions the committee might have for the city regarding any assistance or involvement the city can make in order to alleviate the problem. He made an observation saying part of the problem stemmed from the school district and other entities relying on some unrealistic expectations regarding mining. He said they are slipping back into a feeling of false security that the mine was going to open on schedule and all the problems would be solved. He said Magma may not double the tax base. He said mining is susceptible to market variations, and the mine may not be in existence for the next sixteen years as everyone hopes. He said very little of the tax base, even if it does double, will be within the city of Ely. He said most of the tax base will occur outside the city limits. He said they are trying to do some things to mitigate that such as annexing, further developing, etc. He said the city of Ely is not going to see a significant improvement in their financial picture regardless of how well Magma does, for a considerable amount of time. He said they are planning and budgeting with that in mind as a city government. He said his concern is the people who had good intentions on the school board were being counseled and advised by professional people and either they are not getting good advice or are being mislead somehow. He said the local bank that has been handling the school district's money, for many months had been advising the school district superintendent that the school district was operating in the red. They were overdrawn on a consistent basis, they were in the hole much of the time. He said this information was not made available to the lay people who sit on the school board. He said it was very unfortunate that the people on the school board are being strongly criticized and evaluated for criminal sanctions because they relied on advice from their local bank, the board attorney, who may have misled them. They should have been able to rely on these professionals in making these decisions. He said he questioned what the auditors were uncovering from year to year as they did their audits. He said certainly in an audit the lack of an accounting system or no controls to protect dedicated accounts should come up. He said the tragedy is the school board members are going to get blamed for this and the professionals, who advised them, will blend into the shadows and wait till this all blows over. He said the adults have fallen short in their responsibilities and the children are ultimately going to take the hit either in their education or the activities they look forward to participating in. He said the school district has contributed greatly to the youth in White Pine County. He believes the city of Ely strongly supports both bills. He said it is the closest thing they can get to putting the district in receivership without actually going through the cumbersome and expensive legal process of doing it. He said it creates a much greater oversight and a much more careful management at state level. He said the city of Ely is about the only government entity that has consistently lived through economic hardship within its budget. He said they have had to negotiate heavily with some of the other government entities in order to consistently provide the minimum level of service to their citizens without going in the "red". He said he has received information through the media they are being criticized for not doing more. He said they have currently been advised there is approximately forty thousand dollars in tax buy down checks that have been withheld for this next quarter. He said that is money they budgeted and absolutely need to operate. He said the city provides services to the citizens of Ely on about 1.3 million dollars a year. He said that is their entire budget. He said when forty thousand dollars is withheld it could be disastrous. He said he felt it is not the city of Ely's responsibility to sacrifice their services to citizens for the school district. Chairman Bache recognized Mr. Ernaut. Mr. Ernaut asked if it was correct that the Superintendent knew they were operating in the "red" and failed to tell the board members. Mr. Olsen replied he could not verify that information. His understanding was that the information provided to him was for a period of months prior to December of 1994. The school district had been overdrawn several times and it was his understanding the Superintendent of Schools was notified by the local bank, but the bank did not take the liberty of notifying the school board until December of 1994. Mr. Ernaut asked if the Superintendent had notified the board. Mr. Pursell said he would have to ask the school board members. Mr. Ernaut asked if they still had the same superintendent of schools today as they did when this happened. Mr. Olsen said he believed they are in the process of terminating his contract. Chairman Bache recognized Mary Ann Burt. Mary Ann Burt spoke saying her concern was that the residents of White Pine County see this as serious of a situation as it is. She said the Superintendent spoke at the last school board meeting and said "once Magma starts up...." She said the frame of mind in White Pine County is that Magma Mining will come in to the community and everything will be all better. She said to rely on a cyclical industry, that you have no control over the price of goods that are being sold, is a terrifying thought. She said the people need to be educated as to what is truly happening. Chairman Bache recognized Mrs. de Braga. Mrs. de Braga asked if the people of White Pine County understand the seriousness of the predicament they are in or know what will happen to them if they are forced to either raise their tax cap or borrow in order to pay for this. Mary Ann Burt replied "no". She said if they spent half the time worrying about the school district problem as they do on the landfill issue, they would be much more educated. She said they do not realize what is happening. She thinks they feel the state will not allow the school to close. Mrs. de Braga stated the high school students have a pretty good idea as to how this is going to affect them. They have called on numerous occasions asking if there was not some way the new school could be opened. Mary Ann Burt said the ignorance of the people came out when the school board met in January when the auditors gave one set of figures and the Superintendent gave another set of figures. The school board came out of the meeting looking very poorly. She said there are still people in the community who feel the Superintendent was at the mercy of the school board instead of it being the other way around. Mr. Olsen said the agenda for the next school board meeting has a request from citizens asking the Superintendent to reconsider his resignation. He said it is an interesting political environment in White Pine County. He added it is a shame the people giving advice are not being held accountable. Chairman Bache recognized Mrs. Freeman. Mrs. Freeman said she felt it hard to believe this was a result of incompetence or even a sense of euphoria with the mine opening in that area. She asked if there was any discussion of a grand jury investigation or the need for the District Attorney to become involved. Mr. Olsen said almost every year since 1988, one group of citizens or another has requested that there be a grand jury assembled to look into a variety of different issues. He said routinely what happens is the district judges discourage it because of the cost. He said initially the cost of a grand jury investigation was in the area of a threshold of forty thousand dollars. He said for something like this, it would be approximately one hundred thousand dollars. He said one of the judges has been approached with the idea and is apparently receptive in considering it. Mrs. Freeman said a grand jury investigation would be a good vehicle or body to look into this, in spite of that, she asked what would be next. Mr. Olsen stated a grand jury would be appropriate to look into this. He said he believed some aggressive activity on the part of the District Attorney's office and in cooperation with Attorney General's office would be another way of looking at it as well. Chairman Bache recognized Mr. Ernaut. Mr. Ernaut asked what sort of contingency plan has been put together in case the state refused to bail out the school district. Mr. Olsen stated they were probably the wrong people to ask. He said it is difficult to come up with a contingency plan. He said the state is Constitutionally bound to keep the schools open. He said the water and sewer department has asked the school board to come forward, in an effort to assist, to talk about delaying any payment of certain fees that must be assessed. He said the city cannot afford to waive those fees. He said they have an obligation to the rate payers to provide quality water and sewer services and they cannot do that without the money they generate through those fees. He said they would certainly consider some delays. He said they are only talking about thirty five thousand dollars. Mr. Olsen stated the school is located outside the city limits and currently the rules and regulations require that if someone wishes to participate in water and sewer services you must pay system obligation fees at two and one half times what in city users would pay. He said they already waived that requirement to the school district and are only charging them the "in city" rates to help out. Mr. Olsen spoke about illegal water tapping on the school grounds. Chairman Bache recognized Mr. Nolan. Mr. Nolan asked if the auditing firms used by the school district are the same used by other public institutions for counsel. Mary Ann Burt replied up until this year they only had two accounting firms located in White Pine County. She said with the economic conditions they now only have one. She said the city and the school district use the same auditing firm. The county uses the one that has since relocated to Las Vegas. Mr. Nolan asked if these same firms were somewhat derelict in providing appropriate counsel to the school board and are the same firms used for the city boards and hospital boards are they going to end up with a much larger problem than just the school district. Mary Ann Burt said there was some confusion between providing auditing services and providing financial consulting services. She said the auditors come in, do an audit and they make recommendations. At that point in time it becomes the school board's obligation to follow through with those recommendations. She said it is not the auditing firm's responsibility to make sure those recommendations are followed through. Mr. Nolan stated the testimony provided that there were several inequities occurring within the district in the way they had been managing their money previously. He said these were not brought to light by these accounting firms when this problem was discovered. He said he hopes this is not going to become a widespread problem. Mary Ann Burt said in talking with the auditor, one of the problems that has resulted was the auditing firm could not gather the information from the school district. If they were unable to get the information from the school district, how were they able to perform an audit if the information is not made available. She said an auditing firm, while they have access to records, are at the mercy of the governing entity to get the information needed. Mr. Olsen added he thought they should temper somewhat the wrath against the lay people who merely have been trying to serve in public office by the fact that they did have professional advice at their disposal. Mr. Bache recognized Senator O'Donnell. Senator O'Donnell stated he requested the draft of these two bills. He said what is being heard is hearsay. He said many of the questions asked should have been addressed to the school board members. He said it is a very complex and catastrophic problem. He said the language in the bills is not italicized, yet it is new language. He said it is transitory language. He said it is temporary and they have found there is a payroll that cannot be met. He said this enabling language will allow the White Pine County School District to get the necessary information to pass on to an insurance company that has said they are willing to look at financing this short term debt. He said from the state's perspective, they are not interested in financing the short term debt for White Pine County. He said in the Constitution it states all school buildings and facilities must be paid for by the community, not be state dollars. He said the state funds the teachers salaries and funds the operations of the school district, but they do not fund the facilities. He said for the state to get involved in funding or bailing out the school district in terms of facilities would set a precedent which they do not want to make. He said if this information is not received by April 10, 1995 and reported back to both your committee and the Senate Government Affairs Committee and disseminated to the insurance company for perusal in terms of whether or not they want to make the loan, the state could be looking at funding this from the state general fund in the amount of seven hundred and fifty thousand dollars per payroll. He said that is their responsibility to the school district and school children. The state has a responsibility to fund those teachers' salaries. He said these two bills are to gather the information needed to get this loan. Mrs. Lambert stated they would do their best to get this out as soon as possible. Chairman Bache recognized Mr. Harrington. Mr. Harrington asked what the population of the county was. Mr. Olsen replied about ten thousand people, that being a rough estimate. Chairman Bache recognized Karla Hansen, Rick Brewer and Nancy Oversen from the White Pine School District. Rick Brewer, Chairman of the White Pine School District responded to some of the questions by saying their attorney is rated probably one of the better attorneys in Ely. He said he is no financial expert and acts only on information given to him. He said he does not intervene in the school board business. He said this does not have anything to do with the financial condition of the school district. He said the school board did not know anything about this until December 30, 1994 when they were called by their central office bookkeeper and told they were overdrawn and the checks sitting there were payroll checks. He said the Superintendent at the time was out of town on Christmas vacation. He said they did have a warning a month before from the bank in November stating there was not enough money to cover the checks going through. He said they looked into it and were led to believe that all it was were that different transfers were not made as they were supposed to be and were delayed. They told them they were to be done on time in the future and the checks were not to be written until the money was there. They thought it was an error in judgment and blew it off. Mr. Brewer said they were called in December and he and their attorney had to go down and make transfers, which was not the right thing to do, but they had no other choice. He said as far as the district knowing this two years ago, the Superintendent did not ever bring this back to the school board. He said the only way they found out was when Mr. Pursell contacted them. He said this is when the school board got together to find out what was going on. He said the school board put their trust into somebody with a four year contract. Once they were told the audit was late, it was because their accounting department was behind. He said as far as the "pay as you go" short term financing, they made it very clear no interest is paid. If interest is to be paid out of anything it is to be paid out of the general fund. Mr. Brewer stated the public has nothing to do with the agenda item in regards to the Superintendent resignation. Mr. Brewer said the Superintendent has tendered his resignation as of June 30th. He said he cannot be fired personally, it has to be done by board action. He was asked to be gone by Wednesday night at midnight. He said this agenda item was put on so he would change his resignation to that time. He said he seemed receptive to it. He said after speaking to legal counsel, the board would agree to pay him through June 30, 1995 for his contract. Chairman Bache recognized Mr. Neighbors. Mr. Neighbors asked if the independent auditor sat down with the board and went over the recommendations. Mr. Brewer replied "Yes". Chairman Bache recognized Mr. Ernaut. Mr. Ernaut asked how this happened. Who did not do their job. Mr. Brewer stated the fact of the matter is it all falls back on the Superintendent. He said there were reports not filed, items not brought back to the board, a lot of things never heard of. He said employees were reporting things were pulled out before they reached the board. He said going through the audit, it has been going on since August of 1994. Mr. Ernaut stated he found it a bit offensive to pay the Superintendent through June 30. He said if it falls on his shoulders why pay him. Mr. Brewer said it is because of the chances and cost of a lawsuit. Mr. Ernaut asked what authorities have been informed of the violation of state statute. Mr. Brewer said other than the audit reports, they have not informed anyone else. He said they are relying on the state. He said they report everything to the Department of Taxation and take their recommendations. He said before anything is done they ask the Deparment of Taxation. Chairman Bache recognized Mr. Harrington. Mr. Harrington stated that the previous testimony indicated the people of White Pine County did not grasp the seriousness of this. He said this will cost a family of four six hundred dollars a year and this message should be taken back and told to the people of White Pine County of how severe this is going to hit them. Mr. Brewer said he feels the people of Ely do not realize the severity of this. He said the people are depending on Magma and the school board is tired of hearing that. Chairman Bache recognized Mrs. Segerblom. Mrs. Segerblom asked if the school district had an accountant or a bookkeeper. Mr. Brewer replied they had a bookkeeper. Mrs. Segerblom asked how long the Superintendent had been there. Mr. Brewer replied he has been there six or seven years. He said he hired on as an assistant and within a short period of time became the Superintendent when the other one retired. He said he is in his second year of a four year contract. Chairman Bache recognized Mrs. Freeman. Mrs. Freeman asked who is Mr. Etcheverry. Mr. Brewer stated he works for the Department of Taxation. Mrs. Freeman asked what is the liability to the Superintendent. Mr. Brewer said as far as they are offering, due to his resignation, they will pay him his monthly pay until June 30, 1995. Mrs. Freeman asked if June 30, 1995 was when his contract was up. Mr. Brewer said it will be only two years of the contract, but since he has tendered a resignation, he has expired the contract himself. Chairman Bache recognized Mrs. de Braga. Mrs. de Braga asked if they had done any emergency planning, or will this be discussed at the next board meeting. Mr. Brewer said they have entered into an emergency spending situation which the board is on top of. He said all out of state trips taken have to be brought to the board and they have to be paid for by themselves. As far as construction projects and new things coming in, they have made cancellations and returned items that have been paid for but not received. He said they are cutting costs as much as possible. Chairman Bache recognized Mrs. Lambert. Mrs. Lambert asked when did they enter into the lease with Capital Markets. Mr. Brewer replied the first one was October of 1994 for five hundred thousand and the second one in January 1995 was four hundred thirty six thousand. Mrs. Lambert asked if the budget for this fiscal year went to the Department of Taxation and the leases were not in the budget, what information did you get, because if it was not in the budget, how were you going to pay for it because it had to come out of general funds. Mr. Brewer said the Superintendent was looking at the increase of students. Mrs. Lambert replied that you do not get any more money for more students unless your over a certain percentage. She said the money from the state was to pay the teachers and to buy books, it was not to build heating systems. She said it sounded as if he was mixing apples and oranges with him. Mr. Brewer replied "yes," that is exactly what was happening. Mrs. Lambert asked if there was any training in becoming a school board member. Mr. Brewer said it was very minimal. He said most members are volunteers, and rely on correct information given to them. Chairman Bache recognized Mrs. Krenzer. Mrs. Krenzer asked what kinds of assurance can be given so that this does not happen again. Mr. Brewer stated they are restructuring the whole central office. They are taking the state's recommendation of having someone with a financial background go in and oversee the operation. They said they would like to cross train and not just have one person do it. He said the board members have decided that anything to be submitted will go directly to the school board. Mrs. Krenzer stated she could not see letting the school board off the hook just for the lack of information or bad information. She asked why they did not look into this before. Karla Hansen, member of the White Pine County School Board, stated they received, as an example, they budgeted for the bond issue of thirteen million, they only sold 7.1 million of that which was placed in the budget the first year. She said as they entered this fiscal year they picked up the five million of bonds that have not been sold and rolled it into the figures for this year. She said everything that was brought to them for expenditures they asked if they were financially secure with the bond money and they were given assurance they were. When the report was looked at there was money listed. After questioning the Superintendent and not getting a straight answer, she went directly to the bookkeeper and asked for information and that is when she found out they had rolled in the five million in bonds that had not even been sold. She said it was the Superintendent who recommended putting that into the budget. Mrs. Krenzer asked how you are going to avoid that happening in the future. Karla Hansen replied the bookkeepers are now responsible to give information to the school board. They will be hiring a business advisor in the district office. Mr. Brewer stated one of the things was that they have heard from numerous state employees that they knew about this since July, August and September of last year, but they also relied on that same person to give them information. He said there is a lack of communication. If there were state offices not getting the information needed, then why wasn't the school board directly notified. He said they never received any information on this. Karla Hansen stated that Carole Vilardo had stated she sent a letter to the County, and they were never sent a copy of that. She said they were never aware of any reports being delinquent. Mr. Brewer asked they be allowed copies of the letters sent to the Judge by Carole Vilardo. Chairman Bache recognized Nancy Oversen. Nancy Oversen, of the White Pine County School District addressed the committee and stated at the board meetings she is primarily responsible for going through the warrants that are to be passed on. She said she directly asked the Superintendent if they had the money to pay those bills. She said he guaranteed it by showing her the "so called budget" showing her there was plenty of money. She said at the end of the meeting she was notified by the bookkeeper that she was given the wrong information and that they were in the negative in the amount of four hundred and eighty thousand dollars. She said when the accountant and the Superintendent got together to find out where the difference was, the accountant came prepared with documentation to show them where exactly their projections were going to be and Mr. Cahill came in with only a pencil. She said he had literally nothing to back up what he was saying. She said they were naive not negligent as a board. She said the credit cards of White Pine County School District are not being accepted. She said they were naive in believing a man they pay seventy five thousand dollars a year. Chairman Bache recognized Mr. Neighbors. Mr. Neighbors wanted clarification to the state being responsible. Mr. Brewer said he did not feel the state is responsible, he said his statement was that he hears all the time at the state level that people knew about this prior. He said if the state knew, the board should have been notified also. Chairman Bache recognized Mr. Nolan. Mr. Nolan stated they owe the taxpayers an accountability for what they are going to be paying but also an accounting of what exactly happened. He said from the testimony provided, there is evidence of deception, fraud, conspiracy and he found it shocking that the only organization to bring this to the Attorney General was the Nevada Taxpayers Association. Chairman Bache recognized Mrs. de Braga. Mrs. de Braga said there were two other points that needed to be put in the record. She said she understands the difficulty the school board members have, because it is not a full time job. She said in 1989 there was a suit filed against the White Pine County School District for misuse of funds. She said there was a settlement made in that lawsuit which was agreed to by the White Pine County School District and the NSEA which filed the suit. She said part of that settlement was the school board members were to pay more attention to the district's purchasing and financing or otherwise comply with NRS 387. She also stated this was the same bookkeeper as they have now. She said it was not as if this problem had never existed, it has been a matter of record for quite some time. Mr. Brewer wanted to clarify that this was a new school board and never notified of this lawsuit. Mrs. de Braga said she realized that could happen, but the district does have that history and it is time they took charge and learn from their past mistakes. Chairman Bache recognized Mr. Harrington. Mr. Harrington stated the testimony expressed about what the Superintendent did is clearly criminal in the performance of his duties. He asked if it was their intention to go to the District Attorney and file those complaints or is it something you wish the state to do, and if the Superintendent does resign has he been asked not to leave the state. Mr. Brewer stated they rely on their attorney for the legalities. He said asking the state to do it would be an easy out for them. Chairman Bache recognized Mr. Ernaut. Mr. Ernaut asked about the change orders pending. Mr. Brewer said he thought it was four hundred forty thousand dollars, two hundred and five thousand for paving, and one hundred fifty thousand for landscaping. He said those were not change orders. Those were original bids that have not been let out yet as far as contracts. Mr. Ernaut asked what the original budget was for the school. Mr. Brewer said it was 7.1 million. Mr. Ernaut asked how much yet to date are they planning on spending, and who approves the change orders. Mr. Brewer said they do, but asked if he wanted to know the exact figure to finish the school. Mr. Ernaut said "right, " the original budget was 7.1 million and it is going to end up costing 10.2 million. Did you approve those figures. Karla Hansen said there are still unanswered questions about the budget. Paperwork on the bonds have several figures of where money has been taken out that does not include bond items. It includes purchases for other schools in the district. She said they are assuming the Superintendent assigned those warrants to the bond and that has not been cleared up yet. Mr. Ernaut stated he was trying to "zero," in on the one school. He said the budget was 7.1 and the school board approved over ten million dollars. Karla Hansen replied they do not have accurate figures, because there are several figures in that 10.2 million that do not belong in the bond itself. They applied to other schools in the district. Mr. Ernaut asked if that would add up to three million dollars. Karla Hansen replied "no," they will be over budget. They asked for information and they were not given accurate information. Mr. Ernaut said regardless of what the Superintendent told you what you did have, whether he was correct or not, the budget for that school was 7.1 million dollars. He said the school district bears some responsibility, regardless of this unlimited faucet that you thought was turned on, and found out that it was not. The school board overspent. He said that needs to come out as well. The state can place a lot of blame on the Superintendent for saying the money was available. He said the school district showed no restraint to within the 7.1 million dollar budget that was originally agreed. Mr. Brewer said they do take full responsibility for this. Mr. Ernaut asked whether or not they were obligated to try and keep the project within the original budget regardless of how much money was in the pool. Karla Hansen agreed they were obligated to that. She said change orders that were not in the budget had to be approved in order to get a certificate of occupancy. Mr. Ernaut asked how many of those fell in that category. Karla Hansen replied "not all of them," but money that has been spent on change orders was accepted under protest because of litigation with the architect. She said there are still a lot of unanswered questions as to how much money it will take to finish the high school. Mr. Ernaut asked who was the lead person on bid for the high school. Karla Hansen replied it was the architect Mr. Simpson. Mr. Brewer stated they are also in litigation with the contractor, and they could possibly be looking at one half of a million dollars coming back. Mr. Ernaut stated this is painfully obvious, like a comedy of errors. He said there does not seem to be very many people of any competency whatsoever. Mr. Brewer said he took that statement personally. He said there is not a project in the state of Nevada that does not run over budget. One change order can change the budget. Mr. Brewer said they had a budgeted amount for an over budget based upon what the architect told them. He said some of these change orders would have stopped the school if they did not go through with them. Mr. Ernaut said the attitude of "everything goes over budget" is not the attitude to have, because things can be bought under budget. Mr. Brewer wanted to clarify that they had no intention of going over the original budget. They had included in the original budget enough to cover the change orders. Mr. Ernaut said it was a feeble excuse, because it relieved you of the obligation to bring it in under budget. He said he will be interested in seeing the figures when they get it straightened out. Chairman Bache recognized Mr. Bennett. Mr. Bennett asked what type of a construction contract was it. Mr. Brewer replied it was a turnkey bid. He said many of the change orders were left off by the architect. Chairman Bache recognized Ms. Guinchigliani. Chris Guinchigliani, Assembly District Nine spoke saying she provided Mrs. de Braga with a letter of settlement agreement. She said in 1989 the association was made aware of leasing, bookkeeping, accounting and purchasing problems in the White Pine County. They sent their own staff in to assist. She said it got to the point where through the investigation as was noted, the Superintendent did resign as well as several board members. She said what is frustrating to her was that the Superintendent now, was the assistant Superintendent then, and apparently it was not conveyed potentially that this settlement agreement had occurred and this is very similar to the same problems that happened in 1989. She said she appreciates it when you are a school board member especially in a rural area, you are very isolated. She said there needs to be something more provided for the individuals so when they are held accountable, they have some background information provided to them. She said she will get the files from 1989 so they will be accessible to see if there was more of a pattern in relation to this that was never corrected. Chairman Bache recognized Mrs. de Braga. Mrs. de Braga spoke saying the present Superintendent was not there at that time. He came as a result of the resignation of the superintendent named in this suit. Chairman Bache recognized Tom Grady. Tom Grady of the Nevada League of Cities spoke saying the support both of the bills. He said the Department of Taxation has been on top of this, working very hard to get the information. He said many people have been working with the Department of Taxation for quite some time, and many going out of their way to do this. He said the Department of Taxation should be complimented by everyone for the work they have put into this effort. There being no further testimony, the hearing was closed on S.B. 304. SENATE BILL NO. 305 Directs immediate analysis of cash flow of White Pine County School District. (BDR S-1875) Chairman Bache recognized Mrs. de Braga. Mrs. de Braga spoke saying all the testimony given applies to both bills. One is just a short term measure and the other a long term measure. Chairman Bache recognized Mr. Pursell. Mrs. Lambert said Nevada Revised Statute 304 section 3 states the LGAC are entitled to per diem and travel. She asked who is going to fund all this. Mr. Pursell replied to date they have been absorbing this. What it basically means is they will have to cut somewhere else. They do not have the funding to handle this and their other responsibilities. Chairman Bache recognized Mr. Neighbors. Mr. Neighbors asked if they could use the error in omission policy to recover funds. Mr. Pursell said he was not familiar with the error of omission. Mr. Neighbors asked if they had the authority to turn the district around. Mr. Pursell indicated once they received enough information to make some informed conclusions, they placed the district in financial difficulty. They work very closely with many committees and when they had enough information he called Judge Pepez and told him of the appearance of some serious improprieties and said Carole Vilardo offered to write the letter to back it up. He said they have worked long and hard with a minimal amount of information to try to solve this problem. He said when they were asked about short term leasing, they responded by saying they thought they could not pay it back. Mr. Pursell said they need someone they can work with at the district. He said there is no leadership. Chairman Bache closed the hearing on S.B. 305. MOTION MADE BY MRS. de BRAGA TO DO PASS S.B.304. SECONDED BY MRS. LAMBERT. MOTION CARRIED UNANIMOUSLY. MOTION MADE BY MR. BENNETT TO DO PASS S.B. 305 SECONDED BY MR. WILLIAMS. MOTION CARRIED UNANIMOUSLY. ASSEMBLY BILL NO. 356 Revises provisions governing issuance of municipal obligations. Joan Lambert, Assembly District 29 testified on A.B. 356 saying it deals with two of the recommendations of the interim study. The first tries to clarify the role of the general obligation bond commission, the group that deals with tax overrides and general obligation bonds. She said the current language is confusing in trying to give them direction. She said section 2 goes along with A.B. 281 dealing with double barrel bonds, general obligation back revenue bonds. She said this one extends the opportunity from thirty days to sixty days for people to get a petition together to force an election. She said it improves the notice before the meeting with a resolution of intent to issue the bonds before they pass. This will give the people more information about the bond issue and then decide whether or not to take the sixty days to get the petition. Mr. John Swendseid, bond counsel, said the first part of this bill is to clarify the role of the General Obligation Bond Commission. He referred to an amendment on A.B. 356 (Exhibit C), which is identical to an amendment that was proposed to the Senate which also deals with the General Obligation Bond Commission. He said the purpose is to identify something that is not clear in present law, namely when the bond commission can look at whether they think the bonds serve a public purpose. He said present law is somewhat ambiguous. He said it looks like the bond commission is not supposed to look at that unless there is competition for the tax rate. If there is no competition for the tax rate, it is up to the city, school district, or county to decide what to do bonds for. If there is competition for the tax rate, then the bond commission should arbitrate and decide it. The purpose of this amendment is to make a real clear line as to when they look at public purpose and when they do not. He said when you are close to the tax cap, say within ten percent, the bond commission can look at whether or not the public purpose is good or not, and if you are not within ten percent of the tax cap, that is out of the bond commission's prerogative. Carole Vilardo, Nevada Taxpayers Association stated this is just part of a series of bills that started last session to try to put better accountability and safeguard measures into place where they were found missing. She said this will clarify provisions. She said they not only support the bill, they support the amendment. Chairman Bache closed the hearing on A.B. 356. ASSEMBLY BILL NO. 358 Repeals provisions authorizing general improvement district to furnish facilities for public schools. (BDR 25-952) Joan Lambert Assembly District 29 spoke saying A.B. 358 repeals a law that was never used and probably will not ever be used. She said it was the decision of the interim study committee to take it off the books. Ted Zuend, Fiscal Analyst of the Legislative Counsel Bureau stated the bill effectuates A.C.R. 47 subcommittee recommendation that the provisions allowing for the creation for multi-county districts for the provision of facilities for public schools enacted pursuant to Chapter 789 Statutes of Nevada 1989 be repealed. He said this legislation was enacted in 1989 in an attempt to create such district within Eureka and Elko counties. He said the principle intended that legislation, was to allow additional property and net proceed taxes to be assessed on mines located in Eureka County but to provide schools for the children of the workers of those mines who reside in Elko County. He said apparently a multi-county district was established under the provisions of the act, but a referendum in Eureka County put to the voters was overwhelmingly opposed. He said since there appears to be no further interest in utilizing these provisions to create such a district the subcommittee decided they were obsolete and should be repealed. Charlie Joerg, representing Eureka County spoke saying they want it off the books. Carole Vilardo, Nevada Taxpayers Association, spoke saying they are in favor of the bill. Chairman Bache closed the hearing on A.B. 358. Chairman Bache requested Denice Miller to do research on long term lease agreements and loopholes there may be in the law, so that a bill draft request can be prepared. With no further business the meeting was adjourned at 10:47 a.m. RESPECTFULLY SUBMITTED: ___________________________ Kelly Liston, Committee Secretary APPROVED BY: ________________________________________ Assemblyman Douglas A. Bache, Chairman _______________________________________ Assemblyman Joan A. Lambert, Chairman Assembly Committee on Government Affairs March 31, 1995 Page