MINUTES OF THE ASSEMBLY COMMITTEE ON GOVERNMENT AFFAIRS Sixty-eighth Session April 20, 1995 The Committee on Government Affairs was called to order at 8:00 a.m., on Thursday, April 20, 1995, Chairman Joan A. Lambert presiding in Room 330 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Mr. Douglas A. Bache, Chairman Mrs. Joan A. Lambert, Chairman Mrs. Deanna Braunlin, Vice Chairman Mr. P.M. Roy Neighbors, Vice Chairman Mr. Max Bennett Mrs. Marcia de Braga Mr. Pete Ernaut Mr. William Z. (Bill) Harrington Ms. Saundra (Sandi) Krenzer Mr. Dennis Nolan Mrs. Gene Wines Segerblom Ms. Patricia A. Tripple Mr. Wendell P. Williams COMMITTEE MEMBERS EXCUSED: Mrs. Vivian L. Freeman STAFF MEMBERS PRESENT: Denice Miller, Senior Research Analyst OTHERS PRESENT: Mr. Perry Comeaux, Director, Department of Administration, State of Nevada; Mr. John Swendseid, Swendseid & Stern; Mr. Robert Seale, Treasurer, State of Nevada; Mr. Tom Tatro, Administrator, Division of Purchasing, Department of Administration, State of Nevada; Mr. J. Marty Howard, Deputy Attorney General, State of Nevada; Ms. Laura Wallace; Mr. George Pyne; Mr. Ken West, Chief Deputy Controller, State of Nevada (see also Exhibit B attached hereto). ASSEMBLY BILL NO. 446 - Repeals certain provisions governing sale of state securities. Mr. Perry Comeaux, Director, Department of Administration, State of Nevada, testified. He advised A.B. 446 would repeal provisions of the state's securities law which specified procedures to be used in public sales of state obligations. He said A.B. 446 would allow the state to utilize a more flexible procedure in conducting those public sales. Mr. John Swendseid, Swendseid & Stern, testified on behalf of the Department of Administration. He provided written testimony (Exhibit C). He explained, originally, A.B. 446 was drafted to allow the Department of Administration to conduct public sales in the same manner as local governments conducted them and to establish rules for bidding. He said Mr. Howard Barrett of the Nevada Taxpayers Association was not comfortable with A.B. 446, as originally drafted, and asked the Department of Administration to request the committee to amend A.B. 446 to require the Department of Administration to give notice of any sale and to accept the lowest bid. He stated the proposed amendments were agreeable to the Department of Administration and were set forth on the second page of his written testimony (Exhibit C). He advised the balance of his testimony would pertain to A.B. 446 as it was proposed it be amended. Mr. Swendseid said A.B. 446 would require notices of sale be published in the "Bond Buyer," a trade journal pertaining to municipal bonds. He indicated a copy of the "Bond Buyer" was attached to his written testimony (Exhibit C). Mr. Swendseid advised the balance of A.B. 446 would repeal sections of the Nevada Revised Statutes (NRS) which specified what information, such as the date of sale, was to be included in a notice of sale. He explained the state of Florida did not include the date of sale in its notices of sale because market conditions might change. He referred to a copy of an advertisement of a bond issue by the state of Florida, contained on the last attachment to his written testimony (Exhibit C), and pointed out the advertisement said bids would be received at a time to be designated in a wire sent through Munifacts News Service, a wire service to which bond buyers subscribed. He said the Department of Administration would like the flexibility to do as Florida did. Mr. Swendseid said, additionally, A.B. 446 would repeal a section of NRS which required bids be written and sealed. He explained the purpose for repealing that section was to allow the Department of Administration to accept bids generated by computers and bids bearing facsimile signatures. Mr. Swendseid stated the last section of NRS which A.B. 446 would repeal dealt with bid deposits and bid terms. He indicated, usually, the Department of Administration would proceed as set forth in that statute but might not choose to do so on some occasions. He advised there might be times when the department would wish to deliver bonds later than 60 days following the opening of the bids for those bonds and the existing statute would prohibit the department from doing so. Mr. Swendseid advised Mr. Barrett had reviewed the proposed amendments to A.B. 446 (page 2 of Exhibit C) and was comfortable with those amendments. Assemblyman Bennett asked about the legality of bids bearing facsimile signatures and computer bids. Mr. Swendseid advised other states maintained facsimile signatures were binding. Mr. Bennett asked whether there was any requirement a bid bearing an original signature be submitted within a specified period of time after a bid bearing a facsimile signature was received. Mr. Swendseid replied, typically, the Department of Administration would not make such a requirement. He explained the market changed rapidly and said the department would wish a bidder to be bound by his bid upon the department's receipt of a bid bearing his facsimile signature. Discussions were held between Mr. Bennett and Mr. Swendseid regarding the legality of facsimile signatures. Mr. Bennett asked Mr. Swendseid to provide court decisions that a facsimile signature was legal. Mr. Swendseid indicated he would do so. Mr. Robert Seale, Treasurer, State of Nevada, testified. He stated he was comfortable with A.B. 446 and agreed with the proposed amendments thereto (page 2 of Exhibit C). Chairman Lambert closed the hearing on A.B. 446. ASSEMBLY BILL NO. 453 - Revises provisions governing procedure for appeal by person making unsuccessful bid for purchases by state. Mr. Tom Tatro, Administrator, Division of Purchasing, Department of Administration, State of Nevada, testified. He advised A.B. 453 sought to amend those provisions of the state purchasing act which governed appeals. He said, currently, statute set forth the appeal rights of an unsuccessful bidder, the amount of bond required, and when the hearing on an appeal would be held. He advised statute also designated the Director of the Department of Administration as the hearing officer and allowed only two possible decisions, either that the original bid award be upheld or the award be set aside. He explained the department sought to provide, in the event of an appeal, that the successful bidder have the right to participate in the hearing on appeal, and the department have the ability to set bond at an amount "...consistent with what's currently in statute but with estimated amounts where the estimated quantities to be purchased is all that we have." He advised the department also sought to establish hearing procedures, to have a hearing officer, other than the Director of the Department of Administration, designated and to define whether or not a claim could be made against the required bond. Mr. Tatro contended, because of the lack of clarity of current statute, the Division of Purchasing had been required to appear before the Nevada Supreme Court. He said, "...they said that anytime that we have a protest that's appealed to district court that they start all over in district court, the hearing officer record means nothing and that a trial de novo is what they have the right to." He indicated the required procedures could cause significant delays with respect to the state's ability to enter into contracts and acquire necessary goods. Mr. Tatro advised the Department of Administration had worked with the State Industrial Insurance System (SIIS) and its counsel to develop A.B. 453 because SIIS came under the provisions of the state purchasing act's protest procedures and had been involved in significant legal procedures over the past two years. Mr. J. Marty Howard, Deputy Attorney General, State of Nevada, testified on behalf of the Purchasing Division, Department of Administration, State of Nevada. He indicated current statutes governing purchasing were archaic and needed to be updated and clarified. He provided a document entitled "AB 453 Committee on Government Affairs" (Exhibit D) and a document entitled "Supplement to AB 453" (Exhibit E). Mr. Howard referred to NRS 333.370. He suggested that statute was very difficult to understand and said A.B. 453 attempted to correct that problem. He advised, currently, hearings (on bid protests) were conducted by hearing officers who were representatives of the Department of Administration and those hearings were very formal. He stated the department wished those hearings conducted in the manner provided by the administrative procedures act. He indicated, if a hearing was not held pursuant to the administrative procedures act, the parties to the hearing were required to participate in two hearings at which the same evidence was produced. He reviewed an outline of the "George's" case (contained in Exhibit E) and pointed out the problems which arose under current hearing procedures. As a further example of the confusion regarding the hearings under discussion, Mr. Howard referred the committee to a court decision concerning an invitation to bid which involved Systems Furniture (contained in Exhibit E) and asked the committee to read the first footnote to that decision. Mr. Howard reviewed the events of the case involving Systems Furniture. He suggested it was fortunate a request for a trial de novo was not made in that case because a trial de novo would have required a complaint and answer be filed, a conference be held 120 days after the complaint was filed, and thereafter "...you have 240 days to file something with the court." He indicated it was difficult to obtain a date for a court hearing. Mr. Howard said he had spoken with Mr. Brian Nix, a senior hearing officer, (regarding A.B. 453) and Mr. Nix agreed "...this is a good process; we should follow it." Mr. Howard referred to subsection 4 of Section 2 of A.B. 453 and advised the language contained in subsection 4 was not mandatory language. He explained parties to a hearing could stipulate to extend the time within which the hearing must be held and the hearing officer could consider the request of any party to extend that time. Mr. Bennett asked whether Mr. Howard had observed instances in which an unsuccessful bidder filed a frivolous lawsuit in order to obtain a cash settlement. Mr. Tatro responded to Mr. Bennett's question and said the Department of Administration had never entered into a cash settlement with anyone who filed a protest to a bid. He indicated, however, the department occasionally received protests from bidders who perceived the current law as "...a no risk proposition..." and as providing another opportunity to be successful with their bids. Assemblyman Neighbors referred to the George's case and asked what George's' complaint was. Mr. Tatro replied there was a maximum weight requirement with respect to the backhoe (for which bids were being taken) and although George's submitted the low bid, its backhoe was unsuitable. Mr. Neighbors asked whether the specifications for the backhoe were designed to apply to a particular backhoe and whether that was the basis for George's' complaint. Mr. Tatro replied that contention was the basis for George's complaint, however, the specifications were not designed to apply to a particular backhoe. Chairman Lambert referred to the language requiring substantial compliance with the provisions of NRS 233B, in line 9 on page 2 of A.B. 453, and asked whether that language would create a problem in the event of an appeal to district court. Mr. Howard indicated he did not believe that language would create a problem. Chairman Lambert closed the hearing on A.B. 453. ASSEMBLY BILL NO. 454 - Revises provisions governing investment of state money. Mr. Robert Seale, Treasurer, State of Nevada, testified. He advised the first part of A.B. 454 dealt with regulations while the second part dealt with instruments in which the treasurer would like to invest. Mr. Seale said NRS 355 set forth in detail how investments were to be made by the state treasurer and was fairly specific as to the instruments in which the treasurer could and could not invest. He stated, in addition to the provisions of that chapter, the treasurer had instituted investment policies which were approved by the state's Board of Finance. He said, "...but in between that, there are no regulations which might detail, more specifically, how we deal with those investments." He indicated policies were relatively easy to change but establishing regulations for investment would make it more difficult for the treasurer to change the manner in which he invested. He said he wished to create regulations, through A.B. 454, which would specify how the treasurer would deal with investments. He suggested creating such regulations would provide protection (for the state) with respect to the manner in which future treasurers handled their investments. Mr. Seale advised he was president of the National Association of State Treasurers and had created a task force to review the various investments in which municipalities were allowed to invest. He indicated the task force would release a document which he wished to incorporate in the regulations requested through A.B. 454. Mr. Bennett referred to the provision of A.B. 454 which said "The state treasurer shall adopt regulations..." and asked whether there should be a requirement that someone review the treasurer's regulations before those regulations were approved. Mr. Seale replied, before regulations could be put into effect, hearings must be held, the Legislative Counsel Bureau must approve the regulations and "...it requires the participation of the Attorney General's office." Chairman Lambert asked whether Mr. Seale intended to adopt regulations pursuant to the provisions of NRS 233B. Mr. Seale replied affirmatively. Mr. Seale advised the second portion of A.B. 454 would allow the state treasurer to exchange securities. He explained someone in the marketplace might need a security, which the state treasurer owned, and want to have that security for a period of time. He advised A.B. 454 would permit the treasurer to rent such a security for more money than he was receiving on the security. He said, in return for renting the security, the state treasurer would receive other securities with a value of 102 percent of the value of the security being rented for the period during which he rented the security. He stated this mechanism was widely used to generate revenue and entailed a very low risk. He advised the treasurer's use of this mechanism would generate between $250,000 and $500,000 per year. Assemblyman Harrington asked why someone in the marketplace would want a security owned by the state treasurer. Mr. Seale replied, "Their interest may be that they have sold a security, and they don't have it in their portfolio, and so they need to cover that position for a period of time. That would be the general reason to do that." Assemblyman Segerblom asked whether Mr. Seale could provide an example of someone who would wish to rent one of the state treasurer's securities. Mr. Seale replied any of the major brokers might wish to do so. Assemblyman Ernaut asked Mr. Seale whether the 102 percent of the value of the rented security would be updated each day and whether the state treasurer would retain collateral for that security. Mr. Seale replied the state treasurer would hold collateral for the rented security. He advised the 102 percent of the value of a rented security was reevaluated, daily, to ensure whoever rented the security always had collateral equal to 102 percent of its value. Assemblyman Bache commented, a few weeks previously, Mr. Seale circulated a resolution "...about getting government off our back and no new regulations..." and was now asking for regulations to be created. Mr. Seale responded Get Government Off Our Back, an organization for which he was the spokesman in Nevada, was adamantly opposed to regulations which did not make any sense, which were onerous and which created a cost without providing a benefit. He contended the regulations he was proposing, through A.B. 454, applied specifically to the state treasurer and did not impact the citizens of Nevada. Mr. Ernaut commented it was important to note the state treasurer was required by statute to come before the legislature in order to make changes in the way he invested, while the remaining constitutional officers had some leeway in the manner in which they administered their offices. He contended, as an elected officer, the state treasurer should have some ability to regulate his own office. Chairman Lambert asked whose responsibility it was to ensure the collateral for a rented security was "mark to market" every day. Mr. Seale said the ultimate responsibility lay with the state treasurer. He advised the deputy treasurer of investments and his assistant were responsible for ensuring the treasurer had appropriate collateral as well as the correct amount of collateral. He pointed out there was some discussion about collateral in state statute but said, frequently, state statute was silent about the kinds of collateral which were appropriate. He indicated statute allowed the treasurer to do some things which it might not be appropriate for him to do. He suggested it was more desirable to deal with those things through regulations than through statute. Chairman Lambert closed the hearing on A.B. 454. ASSEMBLY BILL NO. 459 - Makes various changes regarding committee established to administer program of deferred compensation for state employees. Assemblyman Douglas A. Bache, District 11, left his place in the committee and testified from the witness table. He advised, during the last legislative session, Assembly Bill 359, the progenitor of A.B. 459, was vetoed by the Governor. He said A.B. 359 was based on concern about the program of deferred compensation for state employees. He contended the committee which governed investments for such deferred compensation had no structure and said his constituents complained the committee had members who did not participate in the deferred compensation plan. He advised A.B. 359 passed both houses of the legislature but was vetoed by the Governor because one of its sections mandated there be an outside financial consultant. Mr. Bache said the current bill, A.B. 459, established criteria for the composition of the committee governing investments and provided there be three members who were employed by state agencies whose payrolls were administered by the Department of Personnel, one member who was employed by a state agency whose payroll was administered by an entity other than the Department of Personnel and one member who was retired from employment by the state or by the university and college system. He indicated the composition of the committee was intended to provide equal representation for those who contributed to the deferred compensation program. Mr. Bache advised the state controller's office had submitted a proposed amendment to A.B. 459 which would delete the words "administered by the department of personnel," on line 6 of page 1, and insert in place thereof the words "paid by the state controller" and which also would delete the words "entity other than the department of personnel," on line 8 of page 1, and insert in place thereof the words "not paid by the state controller." Chairman Lambert referred to lines 14 and 15 of Section 3 of A.B. 459 and asked why the language in those lines provided only for a special act of the legislature. Mr. Bache replied he believed the purpose was to preclude money from being deposited and withdrawn without proper approval. Ms. Laura Wallace testified. She said Mr. George Pyne was present with her. She advised she and Mr. Pyne were appearing not as officers of the Public Employees Retirement System but, personally, as participants in the deferred compensation program. She advised both she and Mr. Pyne participated in the program and viewed deferred compensation as a very important supplement to the retirement benefits they and the other members of the program would receive from PERS. Ms. Wallace contended the changes which A.B. 459 provided to the structure of the oversight committee were very important because the deferred compensation program's assets were approaching $100 million. Ms. Wallace referred to Chairman Lambert's question regarding Section 3 of A.B. 459 and said the word "special" was included because "...that's a requirement of a 457 plan." Ms. Wallace said she and Mr. Pyne urged the committee to support A.B. 459. Mr. Ken West, Chief Deputy Controller, State of Nevada, testified. He pointed out lines 7, 8 and 9 on page 1 of A.B. 459 referred to payroll as being administered by the Department of Personnel while statute established payroll was a responsibility of the state controller. He indicated the controller's office had no problem with the structure of the committee, as provided for by A.B. 459, but was concerned about the reference to payroll being administered by the Department of Personnel. Chairman Lambert closed the hearing on A.B. 459. Mrs. Segerblom said she would like the committee to request a bill be drafted to allow the Clark County Commission to loan money to Arizona for the purpose of constructing a bridge across the Colorado River at a location south of the city of Laughlin. She advised the state of Arizona was in favor of constructing such a bridge but did not have the present financial ability to do so. She said the state of Nevada would not be required to contribute any money to the project. ASSEMBLYMAN SEGERBLOM MOVED THE COMMITTEE REQUEST A BILL DRAFT TO ALLOW THE CLARK COUNTY COMMISSION TO LOAN MONEY TO THE STATE OF ARIZONA FOR THE PURPOSE OF CONSTRUCTING A BRIDGE ACROSS THE COLORADO RIVER AT A LOCATION SOUTH OF THE CITY OF LAUGHLIN. ASSEMBLYMAN WILLIAMS SECONDED THE MOTION. THE MOTION CARRIED. Mr. Bache, as co-chairman of the committee, appointed Mrs. Krenzer, Mr. Williams, Mr. Bennett, Mr. Nolan and himself as a subcommittee on Assembly Joint Resolution 26. Chairman Lambert advised Mr. Bache had been working on amendments to Assembly Bill 171 and called upon Mr. Bache to explain his proposed amendments. Mr. Bache advised the latest proposed amendment to A.B. 171 deleted "...the new language..." and replaced it with the language "A local governing body shall amend its building codes to permit the use of straw or other materials and technologies which conserve natural resources or resources that are slow to renew in the construction of a structure, in the use of solar energy for hearing of a structure, to the extent the local climate allows, as intended by subsection A, Section 105 of the Uniform Building Code, adopted by the International Conference of Building Officials, in the form most recently published before March 1, 1995, and (subsection) B, Section 103 of the Model Energy Code, adopted by the Council of American Building Officials, in the form most recently published before March 1, 1995." Mr. Harrington asked whether, with the amendment, there would be a fiscal note attached to A.B. 171. Mr. Bache advised the ability to utilize the technologies cited in A.B. 171 presently existed but the use of those technologies was sometimes prohibited because it was not customary practice to use them. Chairman Lambert asked whether providing for the use of codes in the form in which they were most recently published prior to March 1, 1995, might create problems in the future. Mr. Bache said he would inquire of the bill drafter whether that provision should instead refer to the most recently published edition of the codes. Mrs. Segerblom asked whether the opinions of county and city building department had been sought with regard to the proposed amendment. Mr. Bache responded the only building department representative who had testified before the committee at the hearing on A.B. 171 was the representative of Carson City's building department, who indicated builders should be doing some of those things provided for by A.B. 171. There being no further business to come before the committee, Chairman Lambert adjourned the meeting at 9:08 a.m. RESPECTFULLY SUBMITTED: Sara Kaufman, Committee Secretary APPROVED BY: Assemblyman Douglas A. Bache, Chairman Assemblyman Joan A. Lambert, Chairman Assembly Committee on Government Affairs April 20, 1995 Page