MINUTES OF THE ASSEMBLY COMMITTEE ON WAYS AND MEANS Sixty-eighth Session February 1, 1995 The Committee on Ways and Means was called to order at 8:04 a.m., on Wednesday, February 1, 1995, Chairman Morse Arberry, Jr., presiding in Room 352 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Mr. Morse Arberry, Jr., Chairman Mr. John W. Marvel, Chairman Mrs. Jan Evans, Vice Chairman Ms. Sandra Tiffany, Vice Chairman Mr. Dennis L. Allard Mrs. Maureen E. Brower Mrs. Vonne Chowning Mr. Jack D. Close Mr. Joseph E. Dini, Jr. Mr. Thomas A. Fettic Ms. Chris Giunchigliani Mr. Lynn Hettrick Mr. Bob Price Mr. Larry L. Spitler COMMITTEE MEMBERS ABSENT: None STAFF MEMBERS PRESENT: Mark Stevens, Fiscal Analyst Gary Ghiggeri, Deputy Fiscal Analyst Chairman Arberry requested an introduction of BDR R-1649 which amends Joint Rules of Senate and Assembly to remove provisions requiring 2-week adjournment during legislative session. * * * * * * * * * * ASSEMBLYMAN MARVEL MOVED TO INTRODUCE BDR R-1649 WHICH AMENDS JOINT RULES OF SENATE AND ASSEMBLY TO REMOVE PROVISIONS REQUIRING 2-WEEK ADJOURNMENT DURING LEGISLATIVE SESSION. ASSEMBLYMAN FETTIC SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * * * * * * REAL ESTATE ADMINISTRATION - PAGE 771 Ms. Joan Buchanan, Administrator, Real Estate Division, introduced Patrick Cameron, Accountant, Real Estate Division, and Deborah Erickson, Budget Analyst, Department of Administration. Ms. Buchanan pointed out the Real Estate Division had authority over real estate license law, appraisers, time share sales, subdivision sales and campground memberships. In 1994 responsibility was added for registering 1031 qualified intermediaries. Staff consisted of 23 personnel, 11 in Las Vegas and 12 in Carson City. Ms. Buchanan noted rent was adjusted to reduce non-state owned space in Carson City by 600 square feet and to increase the Las Vegas Bradley Building to 1700 square feet. Provisions to make payments for contract testing were included in the base budget, correcting an audit deficiency. Decision unit M-200 requested one Management Assistant and one Administrative Aid for each office to reduce the backlog and to assist with increased licensing. Mr. Marvel noted the Legislative Counsel Bureau audit report disclosed the Real Estate Division had not collected all appraiser fees, contractors had retained fees due the Real Estate Division, and there was a cash shortage reported of $21,000. He asked what steps had been taken to improve internal controls. Ms. Buchanan responded the contract for testing services had been rewritten so the Real Estate Division budget could accept funds, and payments were being made to the California testing service. Regarding the missing funds, internal controls had been established to monitor receipts on a monthly basis, balanced by the deputy administrator and sent to Ms. Buchanan each month. Additionally, the daily transaction log and deposit slips were done separately, creating a check and balance system. Mr. Marvel asked if charges had been brought against anyone as a result of the misappropriation of funds. Ms. Buchanan stated the case had been referred to the Office of the Attorney General. Ms. Deborah Erickson, Budget Analyst, pointed out the testing services were brought into the budget to avoid increasing General Fund appropriations in the middle of the year. This allowed fees to be accepted into the budget. The intent of the Legislative Counsel Bureau was to have fees go directly to the General Fund and have testing services paid from the budget. Ms. Erickson called attention to testing services on page 772 and stated the fees went directly to the General Fund and were part of the General Fund appropriation to the budget. Mr. Spitler asked if recovery of the $21,000 had been attempted through bonding of employees. Ms. Buchanan indicated the case had been referred to the Office of the Attorney General, and agreement had been reached whereby if a criminal basis for prosecution was not found, the Real Estate Division would proceed on a civil basis. Mr. Spitler inquired when the case had been referred to the Office of the Attorney General. Ms. Buchanan replied the Office of the Attorney General came to the Real Estate Division office as soon as the case was reported, which was about June, and had worked on it for a couple of years. Mr. Spitler recommended the Real Estate Division seek an expeditious recovery through bonding. Mr. Close requested a clarification of measurement indicators 7 and 8 regarding dollar amount of fines imposed and dollar amount recovered (resolved). Ms. Buchanan explained the dollar amount of fines imposed applied to real estate licensees or appraisers as a result of disciplinary action. The dollar amount recovered applied to an agreement between a licensee and a client as a result of improper handling of a transaction. Mr. Close inquired if measurement indicator 8 applied to a request from a resident to receive a refund of a deposit and measurement indicator 7 applied to fines levied against a real estate agent. Ms. Buchanan responded affirmatively and indicated measurement indicator 7 dollars would go to the General Fund and measurement indicator 8 dollars would be a pass-through figure. Mr. Close questioned how long fee collection took. Ms. Buchanan explained there were over 330 cases in Las Vegas which took from 1 month to 2 years to close, the average being 8 to 10 months. Chairman Arberry drew attention to page A-36 of the Executive Budget which recommended a one-time appropriation of $31,730 to provide for telephone and computer upgrades. He asked why an administrative assistant was needed in light of the request for 12 incoming lines and voice mail. Ms. Buchanan explained 70% of the licensees worked in Las Vegas, there was an enormous number of walk-ins to the Las Vegas office, office lines were busy 64% of the time, and the existing four lines received approximately 75 calls per hour. Three licensing clerks answered the telephone, which took away from their job productivity. Having an administrative assistant directing calls would create a more efficient office. Ms. Buchanan commented Assemblyman Price had to call the Carson City office because he could not get through to the Las Vegas office. She stated investigators were typing their own file jackets and doing their own filing. Help was needed to put compliance files together and file licensee material. There was also a volunteer who worked for the Real Estate Division. Chairman Arberry pointed out the Real Estate Division was requesting computer upgrades. He asked if it would be better to purchase new computers. Ms. Buchanan replied new computers would require more money, and the Real Estate Division was trying to be prudent in their requests. She indicated the Real Estate Division would like to have business re-engineering look at the license processing and have an integrated accounting system that tied into licensing. Compliance reports and licenses could not be printed at the Las Vegas office because there was no printer. The compliance staff was not tied into the mainframe computer, and they were required to leave the office to find out the status of a license. Ms. Buchanan stated with the added resources, it was her aim to reduce the turnaround time on cases from 8 to 20 months to 30 to 60 days. She offered to provide the committee members with an organizational chart on equipment upgrades. Ms. Erickson pointed out there was an attempt to prioritize the computer requests and Business Process Re-Engineering (BPR) requests throughout the budget. The one-time appropriation was a minimum request to keep the computers running until the BPR was completed during the next biennium. Chairman Arberry inquired whether the computers would still be outdated even with the upgrade. Ms. Erickson indicated the upgrade would not make the existing system more productive, but it would allow more software to run on the system and would provide an interim solution. Chairman Arberry requested upgrade information be provided to the committee members. Ms. Buchanan stated she also had a case management report which she would provide to the committee members. Mr. Spitler noted during FY 1993 a special bill was passed allocating $22,000 to the Real Estate Division and asked what was accomplished with the $22,000 and why wasn't a request made to cover the needs of this service-providing organization. Ms. Buchanan responded the allocation was used for a PC in Las Vegas and a program which allowed input of subdivisions, owner-developers and timeshares to the mainframe computer, which was completed in January 1995. Mr. Spitler expressed alarm that office lines were busy 64% of the time, and requesting one little project at a time would not bring the agency up to speed. Ms. Buchanan emphasized the request for additional telephone lines would take an enormous amount of stress off the current staff, and the agency was not requesting additional staff because of space limitations. Mr. Spitler felt there needed to be more comprehensive planning. Ms. Rose McKinney-James, Director of the Department of Business and Industry, remarked Mr. Spitler's point was well taken. She pointed out many agencies within the Department of Business and Industry had experienced similar frustrations. Attempts were being made statewide through comprehensive strategic planning efforts to identify agencies which had attempted to address concerns on a piecemeal basis. Since resources had been somewhat limited, agencies were asked to take a long, hard look at their needs and outline the resources matching those needs. Ms. McKinney-James indicated she was pleased with the Real Estate Division's efforts in developing their strategic plan, which was an evolving process. The budget request did take into consideration strategic planning efforts, but it would take time to make assessments for everything that was needed. Ms. Erickson indicated the BPR program would address overall needs in terms of planning for the office but all the requests could not be funded at one time. Mr. Spitler commented agencies needed to be more responsive to the public and the professionals they served, and he would support increased funding or fees to achieve demonstrable benefits. Ms. McKinney-James agreed and explained one of the hurdles was developing a format acceptable to the fiscal division of the statistics and justification for taking these steps. The vast majority of the agencies was faced with similar obstacles of providing regulatory oversight for specific professions or industries, most of which were fee based. Mr. Spitler asked why the state sent appraiser fees to the Federal government. Ms. Buchanan indicated a Federal registry called the Appraisal Subcommittee passed mandates which addressed uniform standards of practice, etc. The registry received funds as a result of pass-through fees from the Real Estate Division. Ms. Tiffany inquired if the one-shot appropriation for an integrated system was a priority within the Real Estate Division. Ms. McKinney-James acknowledged the one-shot appropriation was a priority because of the existing backlog and the fact the Real Estate Division was required to work with a substantial industry component. She remarked the Business Process Re-Engineering program would give a better opportunity to prioritize the heaviest workload throughout the Department of Business and Industry. Absent the BPR, individual requests were prioritized within each agency on a departmental basis. Ms. McKinney-James stated if each agency in the department were compared, she could not say the Real Estate Division would come up number one as a priority, but based on what they shared with the Department of Business and Industry in their budget request and in comparison with other requests from agencies, she would consider their requests a priority. Ms. Tiffany pointed out Clark County real estate would continue to grow and automation could perhaps solve some problems, but with the Business Process Re-Engineering, Ms. Tiffany indicated her reluctance to spend $3.6 million on four different departments. The committee could pick one or two pilot projects, perhaps one being the Department of Business and Industry and the other being the Department of Motor Vehicles. Ms. McKinney-James agreed and pointed out the professionals who pay a fee or were assessed in some way would be particularly interested in being provided the services they paid for. Ms. Tiffany suggested Ms. McKinney-James might consider what her response would be if the committee came back and asked which agency within the Department of Business and Industry would receive the highest priority. Ms. Giunchigliani requested the committee be provided a written description of the space requirements needed and also future moving plans be included in the description. Ms. Buchanan indicated the whole Bradley Building would house the Department of Business and Industry. Mr. Hettrick expressed his support for funding the Real Estate Division. He pointed out when he sponsored the 1031 bill, several agencies could have potentially accepted responsibility for administering the bill and the law that came from it, but no one wanted it. Joan Buchanan accepted this responsibility without asking for additional funds, and Mr. Hettrick felt the Real Estate Division should receive priority funds for the work they were performing. Ms. Buchanan pointed out the state of Nevada was the first state to have 1031 registrations, and other states were watching Nevada and were pleased with the outcome. Millions of dollars were coming to the state of Nevada as a result of tax deferred exchanges. Mr. Price echoed Mr. Hettrick's comments and wished to recognize the efforts made by the Real Estate Division. Mrs. Evans noted decision unit 912 recommended a transfer of one Information Specialist to the Department of Information Services and asked how the job would be filled in the future. Ms. Buchanan responded 50% of the work performed by the Information Specialist was data processing, and the Department of Information Services would be handling that position on behalf of the Real Estate Division. The purchasing duties and other duties handled through that position would then be reassigned to other staff. Ms. McKinney-James pointed out the reason for the transfer was the result of a request to reassign computer specialists housed throughout state agencies. What remained unclear was the ability to perform the required work, because in many instances the Information Specialist did more than just fill that specific position. The commitment to support the centralization of Information Specialists was made because the greater efficiency, control and uniformity might well balance the loss of the specified tasks which would then be absorbed by other staff members. Mrs. Evans commented other budgets were struggling with the same issues, and clearly the Real Estate Division was overloaded and shorthanded, which could create a greater deficiency. Ms. McKinney-James indicated many Information Specialists did not have an opportunity for advancement, but centralization would provide an opportunity for greater training and advancement. REAL ESTATE EDUCATION AND RESEARCH - PAGE 777 Ms. Joan Buchanan, Administrator, Real Estate Division, pointed out funds flowed from the Real Estate Recovery Account into the Real Estate Education and Research Account. Staff consisted of two classified positions, and a request was being made for one additional administrative assistant. The budget was created to cover the cost associated with prelicensing education and continuing education for real estate and timeshare licensees. A task force was created to see if modifications were needed in licensing requirements or an apprenticeship might be helpful in post-licensing education. Ms. Buchanan stated the Real Estate Education and Research funds were used to provide courses needed for licensing. It was anticipated the agency relationship would sift from being a regulation to being incorporated into the NRS 645 licensing law. Courses were developed to create a better understanding on agency relationships for real estate licensees and the public. Ms. Buchanan noted a library had been established as a resource for licensees and the public. Plans were also being made to develop a video course on trust fund accounting for broker offices as a result of shortages in trust accounts from property managers. Regulations were being drafted which would require monthly reconciliations on property management accounts. Mr. Close expressed concern for budget requests almost tripling the base budget in light of the number of continuing education courses in the measurement indicators decreasing significantly. He asked why there was a request for increased funding in education when there was a decrease in education activities. Ms. Buchanan stated, in addition to her other duties, she handled the education position for a period of eight months, until the position was filled. During that time she did not encourage the addition of new courses, which created an approximate three- month delay. In addition, provisions for continuing education courses had been tightened as a result of out-of-state teachers perhaps not knowing Nevada laws and regulations, which proved confusing to many licensees. Mr. Close stated if the measurement indicators were the basis for future actions, then the measurement indicators needed to be revised to truly indicate where money was actually being spent. He asked if the projections for FY 1995 were realistic. Ms. Buchanan responded she believed the projections were realistic. Mr. Hettrick drew attention to the work program for FY 1994-95 which showed a reserve increase of $526,145 in the $728,254 work program budget. It appeared that would be a good part of the increase, since it showed zero in the FY 1993-94 actual. He expressed concern particularly over M-200 and E-275 during both years of the biennium and asked if those items would be ongoing expenses. Ms. Erickson pointed out the reserve in the base budget corresponded in the first year and the actual year because the balance was forwarded, which would reflect in the balance forward for FY 1994-95. That meant the 1993-94 reserve would have been $700,000 and showed up as zero in the first year, which did continue to use the reserve. The money came from the 1327 account, as indicated by Ms. Buchanan at the beginning of her testimony, and was generated by licenses and fees. Mr. Hettrick said the summary of the budget went from $526,145 work program reserve down to $394,724 at the end of the biennium. He asked if the ongoing programs were funded by reserves, what would happen in the long term. Ms. Erickson responded as the agency built its budget, the request was to start using some of the reserve to educate the licensees, which was part of the purpose of paying the fees. The intent was to bring the reserve down by using the fees for the purpose which they had been paid. Mr. Hettrick asked if the continuing education courses would be funded by the fees and the reserve would decrease. Ms. Buchanan indicated the legislative auditors recommended the reserve fund balance be decreased, as the reserve fund was not being used for the intended purpose. She stated the recommendation led to the creation of new programs and more research. The agency did not want to rely on outside contractors to put on courses. Programs were being added to enhance the professional status of licensees and provide consumer information. Ms. Buchanan remarked the enhancements were one-shot appropriations and would not be repeated. REAL ESTATE INVESTIGATIVE FUND - PAGE 781 Ms. Joan Buchanan, Administrator, Real Estate Division, noted the Real Estate Investigative fund was also called the inspection fund because it was a holding account for developer deposits on travel to conduct inspections for subdivisions, timeshare projects and campgrounds. REAL ESTATE RECOVERY ACCOUNT - PAGE 783 Ms. Joan Buchanan, Administrator, Real Estate Division, commented the Real Estate Recovery Account related back to Real Estate Education and Research. Expenses totaled $38,679 in FY 1994 on claims against licensees for fraud or misrepresentation. It was anticipated future claims would increase, resulting in projected FY 1995 dollar value of claims paid out of $60,000. This account was funded by a yearly fee of $40 from each licensee, and the balance was transferred to Real Estate Education and Research at the end of each fiscal year. HOUSING DIVISION - PAGE 833 Mr. Charles Horsey, Administrator of the Housing Division, introduced Lon DeWeese, Chief Financial Officer, and Charles Eldridge, Deputy Administrator, who had immediate supervisory responsibility for the Federal Home Program as well as the account for Low Income Housing. Mr. Horsey reported the Housing Division was the state's version of a financial institution without savings accounts. Not having savings accounts, the source of lendable proceeds came from the sale of millions of dollars of tax-exempt bonds. The proceeds from bond sales were used to provide below market rate mortgages to low and moderate income first-time home buyers. The Housing Division received no General Fund support, and all bond issues were structured in such a fashion as to return to the Housing Division a positive rate of return. Mr. Horsey called the committee members' attention to two events from 1994 which directly impacted the Housing Division's budget: 1) For the first time the Nevada Housing Division received an AAA bond rating without the need of an outside credit enhancement. The significance of the AAA bond rating was the higher the ratings the Housing Division was able to attain, the lower the mortgage rate offered to first-time home buyers. 2) In 1994 the Housing Division made approximately $135 million in mortgages to first-time home buyers for approximately 1,350 mortgage loans in 1994. Mr. Marvel asked if the audit report indicated how many Housing Division loans were made in 1993. Mr. Horsey stated the Legislative Counsel Bureau (LCB) auditors were very helpful and the Housing Division incorporated many of the suggestions in the audit report. The audit focused on the period of time during the lowest demand in Housing Division history and on ways to increase loan demand. Mr. Marvel pointed out the audit report found neighboring states clearly outperformed Nevada in issuing affordable housing mortgages. Mr. Horsey disagreed, but stated numerically that was true. He explained the performance indicators on page A-33 showed an abnormally large amount of payoffs. There was not just concern for the audit period where there was extremely low demand, but there was also concern about the subsequent period of high demand. It was important to keep the work flow steady and the mortgage money open to the state's first-time home buyers. The abnormally high levels of growth in Nevada, especially in southern Nevada, created a classic supply-and-demand scenario. There were so many people going into southern Nevada, the prices of homes the Housing Division was allowed to finance were driven up beyond the financible price range. In 1992 and 1993 there were very few models of new homes being produced in the financible price range. There was more profit to a developer in the upscale market. Starting in 1993 and 1994 and continuing into 1995 the typical subdivision went through a period of time where there might be one model in a new subdivision which the Housing Division could finance. Presently, entire subdivisions produce units in the affordable range which the Housing Division was able to finance. Mr. Marvel requested Mr. Horsey provide the committee members with information comparing Nevada with some sister states in 1994. Mr. Horsey agreed to provide the information. Mr. Marvel asked how would impact fees affect the Housing Division's lending program. Mr. Horsey remarked one of the biggest obstacles to affordable housing was impact fees, including building permits, sewer hookup fees, park fees, etc. Impact fees had a much greater impact on a $90,000 home than on an upscale home. Mr. Dini inquired how the LCB audit recommendations were implemented by the Housing Division. Mr. Horsey commented the LCB auditors confirmed in many instances what the Housing Division had suspected. For example, the Housing Division was aware a down payment was difficult to obtain for low-income buyers. A new program being asked for in the budget was loan servicing on a case-by-case basis. It was anticipated the new program would be profitable by the end of the second year, and at least 25% of the profits would be designated to a down payment program statewide. In 1994 a pilot program called Good Neighbors was unveiled, which was a joint venture between the Housing Division and one of the state's financial institutions, and this program had a down payment component built in. The program was extremely successful and reinforced the need for competitiveness. The LCB audit found other states did have a down payment assistance program, and the Nevada Housing Division planned to offer that type of program. The LCB audit suggested reducing the application fees, and the Housing Division had already instituted the reduction. Mr. Horsey indicated a policy had been instituted where points were not charged to acquire a Housing Division mortgage, which would mean a slightly higher mortgage rate. Mr. Close asked, in reference to the measurement indicators, why the Housing Division did not have a mission statement. Mr. Horsey indicated one was included in the expanded narrative. Mr. Close requested a mission statement be provided to the committee. Mr. Horsey agreed to provide the information. Mr. Close stated the measurement indicators gave a dollar figure for applications funded but did not provide information on the number of applications received by the Housing Division and the number of low-income family fundings. Mr. Horsey pointed out Senator Raggio strongly suggested it might be helpful to provide that type of information, and he agreed to provide the information. Mr. Close asked if the limitations imposed by Congress allowed the Housing Division to be involved in manufactured housing. Mr. Horsey indicated the Housing Division was allowed to finance real property, like condominiums and permanently affixed manufactured homes, as opposed to personal property. Mr. Close commented it was anticipated the cost of homes would continue to rise, and mobile homes in the past had been looked upon as residences for seniors; however, young families were moving into mobile homes more frequently. He asked if financing could be extended to young families who wished to purchase manufactured housing. Mr. Horsey responded the rating agencies historically had not had the same comfort level as the state of Nevada in financing rolling stock. Mr. Close suggested this might be an area that could be looked into. Mr. Horsey commented the state of Nevada's laws and regulations do not present very many problems, but the Federal requirements were terribly burdensome. Since the source of lendable proceeds comes from the sale of tax- exempt bonds, the Housing Division must adhere to the requirements of the Federal Tax Code. Chairman Arberry mentioned the Housing Division would receive a letter requesting the committee be provided within two weeks updated information on the agency's mission statement and performance indicators. He indicated the only way to measure a budget was based on performance indicators and the mission statements; and as a result of the audit report and observing the budget, it appeared the Housing Division just did not care, but the Assembly Ways and Means committee did care. Chairman Arberry requested Mr. Horsey continue with the Housing Division budget. Mr. Horsey explained the number of anticipated mortgages as well as the number of applications received from other programs account for the majority of activity in the Housing Division budget. It was anticipated in both years of the biennium $125 million in bonds would need to be issued, $75 million in bonds for single- family housing and $50 million in bonds for multi-family housing. Mr. Horsey indicated measurement indicator No. 3 should read new multi bonds instead of new mutual bonds, which would finance apartment-type projects. The other significant development of the last couple of years which reflected itself in 1994 was for the very first time since 1985 there was substantial interest from private sector developers to utilize tax-exempt bond financing for apartment projects. There were restrictions imposed on developers of rental units, and from 1985 to the beginning of 1994 there was remarkable lack of interest. Developers did not build units because of rent restrictions when they could build projects that immediately rented at market value. It was anticipated the number of loans paid off would drop approximately in half because people would not pay off 7% mortgages when they could pay off 10% and 11% mortgages. Mrs. Chowning stated she was happy to see improvements and requested the committee be provided in writing the strings attached to the bond money loaned. Mrs. Chowning pointed out her constituents were affected by the restrictions and costs imposed by the state. They were able to go to private lenders and pay no loan origination fee, no points and no application fee at 7.5% interest. Mr. Horsey noted the Housing Division averaged about one full percent of interest below the market to be competitive, although they had been higher at times. The Housing Division was created to augment or supplement the lending activities of the private sector, not be the only lending source in the state. Mr. Horsey pointed out the constituent of Mrs. Chowning who had been reported to Larry Struve was affected by the Federal recapture requirement. Mrs. Chowning stressed these were the reasons the committee needed to know about the restrictions placed on the bond money. Chairman Arberry asked Mr. Horsey to comment on the fact housing loans dropped to 99 from 1,250 in FY 1992 when the Housing Division's 22 employees processed 104 new loans per month, compared to 8.25 new loans per month in FY 1993. Mr. Horsey responded it took as much work to process a loan payoff as it did to originate a new loan. The Nevada Housing Division was a $750 million financial institution with 23 employees. The Idaho Housing Agency, which was approximately 20% larger, was a $900 million financial institution with 87 employees. The Nevada loan department comprised seven employees. The Nevada Housing Division was conducting audits and processing payoffs at a record level of approximately $1 million per day starting March 20, 1994. Chairman Arberry reiterated if the performance indicators were accurate, the questions would not have to be asked. Mr. Marvel asked if the Housing Division was involved in refinancing. Mr. Horsey stated the Housing Division was not permitted by law to do refinancing. They only originate loans for first-time home buyers. When interest rates started to decline, the number of payoffs was greater by many times than any time in past history. Mr. Marvel asked if the loans provided through the Housing Division were fixed rate. Mr. Horsey responded the loans were a 30-year, fixed-rate mortgage with no discount points. Mr. Marvel inquired if the Housing Division was involved in ARM's. Mr. Horsey replied the Housing Division could be involved, but they found variable rate mortgages were more for sophisticated purchasers than first-time home buyers. Chairman Arberry pointed out the LCB audit found in FY 1992-93 six western states averaged 2,721 mortgages while Nevada issued only 376 mortgages. Mr. Horsey commented a large number of homes in Nevada were priced outside the price limits the Housing Division was allowed to finance. Chairman Arberry asked what the price limit was. Mr. Horsey answered it would depend whether it was a new home or existing home and the location of the property. Another problem encountered was the income limits were established by FHA, and existing homes in southern Nevada had artificially low data. Mr. Close asked Mr. Horsey to explain the development of a loan servicing organization within the Housing Division and why competition with private enterprise was desired. Mr. Horsey responded Mr. Marvel had made it abundantly clear competing with the private sector was not something the Housing Division should be going after, but there were reasons for developing a loan servicing organization. The Nevada Housing Division had ten lenders who wanted to originate loans but did not want to service the loans; however, they were required by the Housing Division to service the loans. There were three instances Mr. Horsey could think of where the servicers went bankrupt. American Federal had been extremely helpful to the Housing Division, and portfolios had been transfered to them on several occasions, but there were several instances where very poor servicing had been received from individual lenders. Mr. Horsey said, under certain circumstances where a lender wanted to participate in the lending program but did not want to service the loan, he felt the lender should be allowed to do so; and if a servicer was not performing, the portfolio should be taken away from the lender. He reiterated the Housing Division did not receive General Fund support. The states which the Nevada Housing Division did not compare favorably with in the LCB audit had down payment assistance programs. It had been identified loan servicing was the most likely candidate for the Housing Division to be profitable, and a portion of the profit could then be used for a down payment program. Mr. Close asked why a requirement could not be made that participating Housing Division lenders must do loan servicing as part of the package. Mr. Horsey replied that was being done now. Mr. Close pointed out some lenders chose not to participate in loan servicing. Mr. Horsey stated some lenders preferred not to participate, but the Housing Division was now mandating participation. Mr. Marvel asked why lenders preferred not to participate in loan servicing. Mr. Horsey replied lenders did not feel loan servicing was profitable. Mr. Marvel pointed out loan servicing was where the Housing Division felt the money was. Mr. Horsey said the Housing Division understood that, but lenders were not physically set up to perform loan servicing. Lenders originated loans and sold loans. Loan servicing required an ongoing presence. Chairman Arberry called attention to the LCB audit which stated the Housing Division had a policy of not refunding a $250 application fee. Mr. Horsey said that was a requirement, but before the LCB audit the non-refundable fee had been greatly reduced. Chairman Arberry asked if there was still a non-refundable application fee of any amount. Mr. Horsey responded the Housing Division was charging a $100 non-refundable application fee which was credited to the buyer at the close of escrow. Ms. Giunchigliani stated if the intent was to get low-income, single-family housing, it was not prudent to put any more restrictions on a government program and then just give a credit in the escrow. Mr. Horsey indicated there were periods in history when the demand for funds was so great, people who really had no intention of buying a house reserved the funds just because the interest rates were so low. That kept the family who really wanted to buy a home from being able to. Ms. Giunchigliani remarked she did not see where the fee tied into whether or not someone came in to purchase a home. Mr. Horsey said people who had a piece of property they wished to purchase would put up the fee, whereas people who just wanted to reserve the interest rate because it is so attractive would not put up the fee. Ms. Giunchigliani said she did not necessarily buy Mr. Horsey's argument, and she would look further at these issues in subcommittee. Mrs. Evans requested Mr. Horsey include in his performance indicators the number of people who did not complete the loan and did not receive a refund on the application fee. Mr. Horsey agreed to supply the information to the committee. Chairman Arberry asked what steps were being taken to improve participation in the loan program. Mr. Horsey responded a number of things were being done, some at the suggestion of the audit committee and some through the Housing Division. The Housing Division had the greatest number of lenders participating than at any other time. Work was being done with the Real Estate Division to develop a continuing education class to let Realtors know about the Housing Division's programs. The AAA bond rating the Housing Division obtained would enable lower mortgage rates in the future. The Housing Division was developing a newsletter and was also taking space in the continuing education newsletter. Chairman Arberry requested Mr. Horsey highlight important items in the Housing Division Budget. Mr. Horsey referred to M-200 on page 835 and noted it was a very expensive proposition to go to market with a $30 million to $50 million bond issue. There were a number of fees that must be paid which would eventually be recouped. Bond issues were structured in such a fashion that not only would they eventually return the expenses, but a profit would also be realized. Decision unit M-200 represented the cost of issuing bonds. There were attorneys' fees, fees to Moody's and Standard and Poors, fees for the printing of the official statement and fees to the trustees. The numbers on page 835 represented the $125 million in bonds expected to be issued versus approximately a $50 million figure which was the basis used in the prior biennium. Mr. Horsey called attention to decision unit M-300. He stated mandates when dealing with Federal programs were far more onerous and burdensome than any he could dream up. One of the things that needed to be done was to have a field inspection officer make sure people residing in apartment projects were qualified people as intended by congress. In addition, the Housing Division was the administrative agency for the Federal Tax Credit Program, and the Housing Division wanted to make sure the private sector was renting their units to the same qualified people. Mr. Horsey pointed out decision unit E-125 on page 836 was the loan servicing section, including staff, which would allow for a down payment assistance program statewide. Ms. Tiffany inquired if E-125 was requesting funding for an additional loan officer. Mr. Horsey responded the request was for an equivalent category of a loan officer in the same classification within the state system to take over processing insurance premiums, payment on taxes, and correspondence on delinquent loans. Ms. Tiffany asked if the loan officer would be the person dedicated to build the new down payment program. Mr. Horsey indicated the loan servicing department, not the individual, would be returning enough money in fees to pay for itself, and then a portion of the net revenue above the fees would be used for the purpose of funding the down payment assistance program. Ms. Tiffany asked if the loan officer would be responsible for the new down payment program. Mr. Horsey responded no, the person would be responsible for servicing the loans. The down payment assistance program would be instituted in the next biennium. Ms. Tiffany remarked she did not understand why the Housing Division was hiring another person. Mr. Horsey replied loan servicing was not the same as loan origination, and the Housing Division staff was buried and could not handle more new loans. Ms. Tiffany inquired how many loans were being processed by the present staff. She asked if it was 8.25 loans per month. Mr. Horsey said they were comparing apples and oranges. In 1994 approximately 1,400 loans were made. Ms. Tiffany stated she was confused as to what the new person would do, where he would be located, and she could not see a justification for funding such a position. Chairman Arberry requested Mr. Horsey continue with the budget on page 841. LOW INCOME HOUSING TRUST FUND - PAGE 841 Mr. Charles Horsey, Administrator of the Housing Division, mentioned the Housing Division had responsibility for administering the Low Income Housing Trust Fund. By way of background, Mr. Horsey pointed out in 1989 the legislature saw fit to create the Low Income Housing Trust Fund. The primary purpose for the fund was to give the State of Nevada a source of funds to meet the matching fund requirement of the Federal Home Program. However, the 1989 Nevada Legislature did not find a funding source until 1991 when the legislature increased the real estate property transfer tax by 10 cents per $500. The matching fund requirement was given a year's abeyance. When the property tax abatement was passed by the legislature which addressed tax exemption for affordable housing, the interpretation was made that also met the matching fund requirements of the Federal Home Program. The result was the Low Income Housing Trust Fund was able to increase to the point funding was available for real projects. Ms. Giunchigliani requested measurement indicator information on the number of Low Income Housing Trust applications processed and what was done with the dollars during the interim. Mr. Horsey indicated the funds were earning interest. Ms. Giunchigliani asked how the out-of-state and in-state travel was utilized. Mr. Horsey replied the types of projects funded from the Low Income Housing Trust account would be for training. Ms. Giunchigliani asked if the funding would go to private sector to build low income housing for start-up costs. Mr. Horsey asked Charles Eldridge to respond to Ms. Giunchigliani's question. Mr. Eldridge, Deputy Administrator for the Housing Division, stated the Low Income Housing Trust Fund was established to provide a match for the Federal Home Program. When the rules for operating the trust fund were set up, the rules needed to coincide with the Federal Home Program so the projects could be qualified as a match. As of December 1994 the trust fund had issued approximately $80,000 to southern Nevada for welfare set-aside and $756,000 for projects. The projects were affordable housing for 60% and below of median income, and they matched the funds utilized from the Federal Home Program. Ms. Giunchigliani requested a synopsis be provided to the committee of exactly how someone would apply for the construction part of the low-income housing and the number of units required so the committee would have an understanding of what was looked at in order to accept a project. She also requested information be provided on whether the project would belong to the private sector at some point in time and what happened to the trust fund dollars once the project was constructed. Mr. Eldridge said he would provide the information. He pointed out the display chart showed activities which could be provided for out of the trust fund: the first-time home buyer portion, tenant rental assistance, and new construction. Ms. Giunchigliani asked if trust fund money could be used for Section 8 housing. Mr. Eldridge indicated the rental assistance category was used for Section 8 housing. Mr. Marvel requested the Low Income Housing Trust Fund standards be provided to the committee. Mr. Spitler asked information be provided to the committee regarding the reserve portion of the budget on page 843. He expressed interest in how the reserve was accumulated and if it was portrayed accurately in the budget or a revision would be made. Mr. Spitler pointed out in the second year of the biennium there was in excess of a $6 million reserve. Lon A. DeWeese, Chief Financial Officer for the Housing Division, replied the issue of the reserve was interesting because it had been accumulating for the previous couple of years. He stated the advisory committee which advised the Housing Division on the use of the trust fund would determine exactly how the funds would be spent. When the determination was finalized, the reserve would be allocated to project types and localities. Mr. Spitler asked when the determination would be made. Mr. DeWeese responded it would be done on a yearly basis. Mr. Eldridge pointed out the determination was being worked on. Presently, $3.5 million of the Low Income Housing Trust Fund had been released to be used in three geographic areas of Clark County, Washoe County and rural areas. Mr. Spitler asked if it was anticipated at the end of the second year of the biennium there would be an additional $3 million reserve. Mr. Eldridge remarked it was the LCB's estimation the trust fund itself would accumulate $1.2 million yearly. The last advisory board committee established a floor of $250,000. It was anticipated the funds would be expended by the end of the second year of the biennium. Mr. Spitler requested the committee be provided with revisions of the budget as they progressed. FIRE MARSHAL - PAGE 1819 Mr. James P. Hawke, III, Chief of the Special Services Division, commented seven budgets would be presented: Three from the offices of the Special Services Division, which were the State Fire Marshal's office; the State Emergency Response Commission, which was attached to the Special Services Division for administrative support; and the Office of Emergency Management. He commented the agencies presenting budgets represented real success stories as a result of reorganization. Before the reorganization the Fire Marshal's office was part of the Department of Commerce, Emergency Management was part of the Department of the Military, and the State Emergency Response Commission (SERC) was administratively attached to Motor Vehicles and Public Safety. Bringing the programs together had facilitated a close working relationship among the agencies. Attention was focused on providing service to the first responders and the citizens and visitors to Nevada. Mr. Hawke indicated networking of computers and the telephone system had greatly improved. He noted forms and fees were consolidated so that businesses utilizing hazardous material would fill out a single form and pay one fee, where previously there were forms for SERC, Emergency Management and the Fire Marshal. Arson investigators were cross-trained with Nevada Division of Investigation staff, which provided enhanced training for investigators as well as more career opportunities within the department. He invited the committee members to inspect the Special Services Division facilities at any time. Mr. Hawke commented staff would review audit issues for the Fire Marshal's office, Emergency Management and performance indicators. An overview of the budget would be given and questions would be welcomed. Mr. Hawke introduced Ray Blehm. Mr. Ray E. Blehm, Jr., State Fire Marshal, distributed copies of Analysis of Deputy Activity (Exhibit C) to the committee members. He drew attention to budget 3816 on page 1819, which was the basic operations budget. As a result of a Legislative Counsel Bureau (LCB) audit, it was reported the Fire Marshal had not implemented the Nevada Uniform Fire Incident Reporting System (NUFIR) as required by statute. The previous fire marshals had not implemented the system due to a lack of funding. Because of heavy activity, staff was not available to dedicate efforts to NUFIR implementation. The Fire Marshal's office was in the process of complying with the recommendations of the LCB audit. A Federal grant in excess of $15,000 was received to purchase the computer as required by Federal specifications to run the computer program. Chairman Arberry asked if the Federal grant had been approved. Mr. Blehm responded the grant had been approved and funds were pending as final equipment specifications were being made. Chairman Arberry inquired whether software was included in the Federal funding. Mr. Blehm stated there was some software included. The actual Federal program to run the state reporting system required no state funds. The Federal government provided the program through the U. S. Fire Administration as part of the data collection effort. There was a cost for software to those agencies wanting to run the system themselves. If the program was run under the current Federal guidelines, the cost would be approximately $200 for off- the-shelf software. There were many approved after-market vendors of software at varying prices. Chairman Arberry queried when the NUFIR program would be implemented. Mr. Blehm replied the Fire Marshal's office was working with some departments to partially implement the NUFIR program. He explained the National Fire Incident Reporting System had been around for some time, but Nevada had not participated in it. During the previous ten years the Fire Marshal had done a lot of pass-through funding to local agencies and had gotten the reporting system running. As a result, some local agencies had been using the Federal software. If the equipment were in place and the local agencies reported electronically, a partial report could be assembled in calendar year 1995. Mr. Marvel commented one of the complaints about the Fire Marshal's office was the length of time it took to receive a permit under the plan review process. He asked if the procedure was being expedited. Mr. Blehm pointed out A.B. 194 (1993 Session) allowed the Fire Marshal's office to write agreements with local government entities, and agreements were in place with Douglas County and Storey County, with verbal notification central Lyon County intended to enter into an agreement. Mr. Blehm stated when agreement was reached with Douglas County, that assisted the Fire Marshal's office because more plan reviews were coming in than they were able to process. A plans reviewer position had been held open to satisfy the vacancy savings requirements in the budget. For the prior 14 months a data base system, which was developed in-house, was being used with old, obsolete software and computers, but the system did allow reduction of the backlog. The Fire Marshal's office was cooperating with any agency which could meet the required standards of using people of equal training and background who perform the same kinds of jobs as the Fire Marshal. Mr. Marvel repeated his question about whether the permit process has been expedited. Mr. Blehm responded yes, the Fire Marshal's office was back at full staffing on the plan review process. More resources were being allocated, a fire protection engineer had assumed more responsibilities, and other staff time had been dedicated to the smaller plans. Mr. Marvel asked what the turn-around time was for plan review. Mr. Blehm explained the statistics from his analysis sheet indicated there was about a four-month backlog. Mr. Marvel pointed out the permit process had imposed a hardship on rapidly growing counties like Elko and Humboldt where contractors were working under a time line. As a result, some contractors were unable to get a permit and were working outside the law. Mr. Blehm stated as long as the local fire department agreed, there was a fast-tracking system in place for obtaining the permits. Oftentimes there would be no reason for delays if the contractors were willing to go along with the conditions of fast tracking, which meant some level of preparation must have been done. The only caution was, after the fact, there may be some corrections which would have to be made. Mr. Marvel inquired if the fast tracking would enhance revenue. Mr. Blehm replied fast tracking was not an enhancement to revenue. However, fee structures were modified during the interim in order to make A.B. 194 (1993 Session) work. The plans review revenue was offset with increased revenue, so the workload was assigned to local agencies to enable the staffing levels to be at a point where plans were completed on a timely basis. Within 6 to 12 months the turnaround time should improve to a more acceptable range and within a year's time staff feels the turnaround time should be at a 2-month range. Ms. Giunchigliani noted the Governor recommended $398,184 for licenses and fees for FY 1995-96. She asked if the CIP program in the amount of $305,767 for fire plan check was included in the licenses and fees. Mr. Blehm responded there were several fees, including a plan review fee, a fee for licensing the fire protection industry which installs sprinkler, alarm, and hood systems, and a fee for licensing blasters for commercial projects. The split was about 2/3 plan review and 1/3 other fees. Ms. Giunchigliani asked where the CIP program would show up. Mr. Blehm stated the CIP program was not in the Fire Marshal budget. Ms. Giunchigliani inquired why the Fire Marshal was requesting $712,849 from the General Fund. Mr. Blehm indicated the request included man power considerations. Ms. Giunchigliani inquired if the fee charged for the fire plan check program was for inspection of buildings and new construction. Mr. Blehm commented the Fire Marshal's office performed the only plan review process for much of the State of Nevada. The plan review process was based upon the Uniform Building Code, the Uniform Fire Code and National Fire Protection Association standards. The plans would be reviewed for exiting, separation, and built-in protection systems. Ms. Giunchigliani asked if the fee charged would go into the CIP program rather than the Fire Marshal budget. Mr. Blehm said the fees charged were funding for the regular Fire Marshal budget. Ms. Giunchigliani asked from what source the revenue of $305,767 was received. Mr. Blehm indicated he had not seen that figure. He explained the Public Works Board had design people who created beautiful buildings, but they did not perform a code plan review. The Fire Marshal performed the code plan review for the Public Works Board, and the fee charged for the review had increased. Ms. Giunchigliani questioned whether the General Fund obligation could be reduced because of increased fees. Mr. Blehm indicated that would be a possibility. Ms. Giunchigliani asked how many employees were being requested. Mr. Blehm responded two employees were being requested, one in the Maintenance section and one in the Enhancement section. Ms. Giunchigliani inquired whether one of the requested employees would be working on the backlog. Mr. Blehm explained 71% of the Deputy State Fire Marshal's workload was travel related, and the new Deputy State Fire Marshal would be located in Las Vegas. Mr. Close pointed out he did not see measurement indicators in the Fire Marshal's mission statement regarding fire safety standards for equipment and appliances, licenses for fire protection industries and certificates for service personnel. He suggested measurement indicators be provided as to the number of service personnel certified and the number of inspections performed. Mr. Close asked how the measurement indicators were formulated. Mr. Blehm indicated the Analysis of Deputy Activity (Exhibit C) was devised to give a better idea of productivity of the Fire Marshal's office. The event section of the chart addressed inspections and investigations, the time distribution addressed where a Deputy State Fire Marshal spend his time, and the two sections presented quite a different picture. A fire investigation typically took an average of three days to perform. Mr. Blehm pointed out a difference between the program indicators listed in the standard narrative and those listed in the Fire Marshal budget. The reason for the difference was staff only listed those fires which they determined after the fact to be suspicious or a fire death, which resulted in a large part of total fires being left out of the equation. What had been intended was every fire investigated be considered suspicious until the cause was known. The actual fires investigated in FY 1993-94 were 129, while the program indicators showed 82. Mr. Close requested the committee be provided with addendums to the testimony prior to the committee meetings. Mr. Blehm agreed to the request. Chairman Arberry asked Mr. Blehm to highlight important issues in the Fire Marshal's budget. Mr. Blehm noted a new Deputy State Fire Marshal was being requested in M-200 to satisfy some regional needs in northeastern Nevada and to cut down on overtime. The position in the enhancement category would help the fire reporting system work. Mr. Blehm noted the data included in Exhibit C was compiled on his home computer. The new position would enable better reporting of statistics on which fire reporting decisions could be made. He noted a request was not included in the budget for vehicles, but the Fire Marshal's office relied on very old vehicles, hand-me-down Highway Patrol cars, and State Motor Pool cars. When some personnel spend 70% of their time doing travel-related activity, a more sensible approach would be to have dedicated transportation. Ms. Tiffany asked if the National Fire Reporting System was a GIS system. Mr. Blehm replied it was not. Ms. Tiffany inquired who provided the software. Mr. Blehm stated the software came from the National Fire Information Council, which was funded by the U. S. Fire Administration and was a standard program for fire reporting. Ms. Tiffany asked if the program was an existing program for use on a PC network. Mr. Blehm responded affirmatively. Mrs. Brower asked if the equipment in E-720 was replacement equipment or was additional equipment. Mr. Blehm responded all investigative personnel were required to have self-contained breathing apparatus, full fire clothing, and filter masks to protect against diseases like myelofibrosis, which results from exposure to asbestos, and blood-borne pathogens like hepatitis. Chairman Arberry stated it was his understanding the Highway Patrol had given the Fire Marshal's office access to three vehicles, and four staff had been allowed to take the vehicles home for storage, but it did not appear insurance or expenses for operation of the vehicles was included in the budget. Mr. Blehm said the vehicles temporarily obtained were Highway Patrol full-sized cruisers. The mileage ranged from a low of approximately 81,000 miles to a high of 100,000. He pointed out the insurance was paid from the travel fund. Chairman Arberry requested information and justification on home storage be provided in writing to the committee. Mr. Hettrick inquired whether the licenses and fees revenue for actual FY 1993-94 in the amount of $398,184 included the fee increases for the entire year. Mr. Blehm responded it did not. Mr. Hettrick pointed out the measurement indicators projected 445 inspections for 1995, 1996, and 1997 compared to 382 inspections for 1994. He stated it would appear that income would be significantly higher if 445 inspections were performed with a full year of increased fees. Mr. Blehm responded before the implementation of A.B. 194 (1993 Session) fee income fluctuated about $90,000. Because plans review was very interest sensitive, big projects would come on when interest rates were low and then dial back with higher interest rates. The inspection activity was for the Deputy State Fire Marshal on state facilities, license facilities, and places of accommodation for the traveling public. Mr. Hettrick restated his question that if the budget had a full year of increased fees and an additional number of inspections, it would appear income would also increase. Mr. Blehm said it was difficult to give an accurate projection. Fee increases did not apply to state projects and state buildings which had been budgeted, which accounted for approximately 40% of the review activity. The increased fee portion did not take effect until the new fiscal year. Mr. Blehm offered to provide to the committee a spreadsheet so an analysis could be made of the figures. Mr. Dini commented it was his understanding some jurisdictions were going to pull out of the plans review process, so the projected figure of 445 inspections might not be obtained. He asked if the projected inspections were not reached, would that mean fees would have to be raised. Mr. Blehm replied it was hoped the work flow could be equalized and the plans review turnaround time could be decreased to the 45-day range. By transferring responsibility to local agencies and increasing fees, it was hoped the situation would be stabilized. Mr. Marvel asked the Budget Division to address Mr. Hettrick's analysis of why revenues were not increasing. Joel Pinkerton of the Budget Division responded the actual revenues which were collected in FY 1994 were used as the base when the budget was built. Mr. Marvel inquired whether the budget would have to be amended. Mr. Pinkerton stated he hoped not. Mr. Marvel remarked he felt Mr. Hettrick made a valid point with regard to the revenue recommended in the budget and that this issue needed to be addressed by the Fire Marshal before the budget was closed. HAZARDOUS MATERIAL TRAINING CENTER - PAGE 1825 Mr. Ray E. Blehm, State Fire Marshal, stated the Hazardous Material Training Center was a status quo budget. He pointed out there was a significant revenue issue regarding the Beatty Hazardous Material Dump site which provided a significant portion of the funding for the budget. The dump site was projected to be filled in 1997. He directed the committee's attention to page 1825, agency transfers, which represented the Beatty waste site fees used to fund hazardous materials training. Mr. Blehm remarked the revenue issue would need to be addressed either through increased General Fund or other sources. Chairman Arberry asked if the closure of the Beatty dump site had been taken into account in the revenue projections. Mr. Blehm responded revenue projections were not done because the money came from environmental protection funds. Chairman Arberry asked the Budget Division to respond to the question. Mr. Pinkerton stated the revenue estimates were developed by the Environmental Protection Agency in the Governor's recommendations. He stated it was his understanding the Beatty site would be active until 1997 or until such time it was filled. Chairman Arberry asked if any of those factors had been taken into account in the revenue projections. Mr. Pinkerton responded yes. Mr. Dini remarked after 1997 there would need to be a new funding source or the Beatty site would need to be extended. Mr. Marvel commented one of the significant issues from the Legislative Counsel Bureau audit report was the division did not collect approximately $220,000 in hazardous material permit renewals and asked if the division had corrected the problem. Mr. Blehm stated the problem had been corrected. The division had responded to all the suggestions made by the Legislative Counsel Bureau, in fact, most before the actual audit report was published. He commented because of the hiring freeze, insufficient staff was available to address the problem. It was his belief the division would exceed the projected figures on permits, and that would relieve some of the pressure on other fee sources. Mr. Marvel asked if it were possible to recover any portion of the lost $220,000 from permit renewals. Mr. Blehm responded the way the statute was structured, he did not believe arrears could be recovered. Steps had been taken through the administrative rule process to improve the situation, but it was not possible to go back more than one year. Mr. Marvel questioned whether there was a statute of limitations on recovery. Mr. Blehm stated the limits were imposed by the way the language was designed in the original statutory provisions and the original administrative rule provisions. A mechanism was not given for recovery. Agencies were being asked to pay the current fee and the previous year's fee, but there was no statute of limitations in force. Mr. Price asked the committee's indulgence so that he might put on the record testimony regarding emergency exits. He asked if it was proper fire code when using stairs during a fire to be able to enter the building at any given level without restrictions in order to effect an escape in another direction. Mr. Blehm stated there were different design criteria for different exiting systems. He introduced Eugene L. Williams to address the question. Mr. Eugene L. Williams, Assistant State Fire Marshal, commented codes provide for exiting a building. It was anticipated once entering an exit pathway, a person would stay in the pathway until exiting at a public area outside the building. The codes have left building security to the individual building owner. Many hotel and casinos required exit stairs to have one-way doors until the bottom was reached as a security measure. A hotel had been charged with allowing individuals to come through an exit stairwell, enter an area past security, and assault hotel guests. This type case had become a standard for security in the hotel industry. In cases which presented a safety issue, attempts were made to resolve the issue with an in-house security system where security officers would go to floors above and below the fire floor or all the doors which were locked on the stairwell automatically unlocked. Mr. Blehm pointed out security was an interesting issue because of death caused by barred windows during a fire. Fire bar standards required bars be easily opened from the inside. There had been instances at manufacturing plants in Las Vegas where the automatic system locked everyone in the building when there was a power failure. Those were the day-to-day issues on which code research and background were being done to find a solution for security versus public safety. Mr. Hettrick noted the same issue existed as previously discussed in the measurement indicators with number 7 showing an increase in the number of permits issued, but licenses and fees resources showed a flat income straight across. There seemed to be a 20% increase in permits issued, yet fees were held flat. He said he would like to see a projection for the difference. EMERGENCY RESPONSE COMMISSION - PAGE 1831 James Hawke, Director, Division of Emergency Management, introduced Charles W. Owen, Executive Director of the State Emergency Response Commission. Mr. Hawke explained the State Emergency Response Commission was not limited to just the State of Nevada but included private enterprise and was the largest commission in state government. Mr. Charles W. Owen, Executive Director of the State Emergency Response Commission (SERC), introduced Elizabeth Ashby, SERC Program Assistant. Mr. Owen provided copies of the Nevada Emergency Response Commission Annual Report (Exhibit D) to the committee members. SERC was the executive agency of Public Law 99-499, which was the Emergency Planning and Community Right to Know Act. It mandates state involvement in management of hazardous materials. The state also mandated a coordinated effort be made in managing regulatory activities as well. The program was fee funded. The SERC was composed of 17 members drawn from local governments and first responders as well as state agencies and industries. These members provided program oversight and funding. The partnership was successful and was responsible for extending the partnership to local levels in the Local Emergency Planning Committees (LEPCs). LEPCs were responsible for developing hazardous material emergency response plans and projects to support the plans. SERC took money received from industries using, manufacturing, or storing hazardous materials and redistributed the money to fund local level projects. As a matter of fact, SERC redistributed nearly $400,000 in funds from users to local entities. Mr. Owen offered to answer questions on this status quo budget. Chairman Arberry pointed out number 1 of the measurement indicators stated SERC would submit requests for 100% of all grants made available to SERC. He asked if that applied to two grants, all grants, or were only two grants available. Mr. Owen responded the LEPCs developed project grant applications and submitted them to the SERC staff. An offer to seek funding from two Federal grant programs, the Department of Transportation and the Environmental Protection Agency, was also provided. These grants, which totaled 100% as referred to in the measurement indicators, were submitted to the SERC funding committee on an annual basis for their consideration and approval. Chairman Arberry asked Mr. Owen to highlight some areas in the SERC budget. He noted there were increased revenues in fees dealing with HazMat transportation and asked Mr. Owen to address that issue. Mr. Owen explained the fees received were primarily associated with facilities which were fixed within the state. The fees were based upon the amount and types of hazardous materials those facilities either used, manufactured, or stored. SERC also received a portion of fees from carrier licensing, i.e., carriers approved for transporting hazardous materials either intra- or interstate. Those fees were the ones that were variable. Ms. Giunchigliani asked whether the SERC consultant was an independent contractor. Mr. Owen responded affirmatively. Ms. Giunchigliani questioned whether there was a violation of any standards for independent contractors. Mr. Owen declared there was no violation of standards. Ms. Giunchigliani inquired what the independent contractors were doing exactly. Mr. Owen responded SERC had looked at several ways of enhancing the local emergency planning committees' ability to prepare plans for hazardous materials incidents. The possibility of hiring a state employee was examined, and it was found not to be cost effective. Ms. Giunchigliani requested the independent contractors' duties be supplied to the committee, because it appeared their duties might be duplicated. Mr. Owen indicated the duties were not duplicated. The local planners were involved in coordinating the activities of the local emergency planning committees and putting those activities onto paper to make them a viable document as well as a viable process that involved the people within the community in developing their emergency response capabilities. Mr. Owen stated it was his responsibility to manage the grants applications and to help those entities requesting grants to focus on the issues in their emergency plans. Ms. Giunchigliani asked if the independent contractors were assigned to the LEPCs. Mr. Owen responded affirmatively. Chairman Arberry pointed out the Executive Budget recommended $4,629 in out- of-state travel and $1,266 in non-state employee out-of-state travel for a commission member to attend a national conference. He asked how non-state employees could be paid by state dollars to travel out of state for a conference. Mr. Owen responded the $4,629 figure applied to out-of-state travel for staff. In the process of maintaining a viable grant application posture for the state, it was important workshops be attended which were put on by the Department of Transportation or the Environmental Protection Agency. The non-state employees were those commission members who were drawn from local governments or industry who also needed to attend SERC meetings or LEPC meetings or to support intrastate coordination. Chairman Arberry inquired how frequently the board and local government meetings took place. Mr. Owen replied the SERC met every quarter, and the national-level workshops occurred once or twice yearly. Chairman Arberry asked how frequently the out-of-state travel would be. Mr. Owen replied probably twice a year. Chairman Arberry requested an estimate of the number of people who would be traveling. Mr. Owen estimated two to three people. Mr. Close pointed out the actual expense in FY 1993-94 for emergency disposal was zero, yet the base budget recommended $30,000 and M-200 recommended $20,000, totaling $50,000 in projected costs for emergency disposal in each year of the upcoming biennium. He mentioned there was nothing in the budget which indicated the number of emergency disposal incidents and asked Mr. Owen if he could provide information to help the committee understand the emergency disposal category. Mr. Owen indicated the emergency disposal category was a contingency fund used only in the event a spill or release could not be attributed to a responsible party. It had been fortunate there were no orphan spills to fund initial cleanup. The fund would continue as a disposal fund, even though it may not be drawn upon. Mr. Close inquired with no experience from the past, how were the two figures arrived at to come up with a total of $50,000. Mr. Owen stated the $50,000 figure was coordinated with the Environmental Protection Agency, and they felt the figure was quite low per event when their contingency funds were considerably higher. Chairman Arberry asked Mr. Owen to touch on the SERC computer purchase. Mr. Owen explained the computer was a replacement for the existing computer in the office. Chairman Arberry pointed out the agency purchased a computer in FY 1994 and asked if an upgrade had been considered. Mr. Owen responded it was his understanding the computer could not be upgraded to meet today's standards of performance. Chairman Arberry requested Mr. Hawke address the question. Mr. Hawke stated the computer was an early model which did not have room in the box structure to replace the mother board and the hard drive. Chairman Arberry requested a list of out-of-state travel and the staff attending meetings be provided to the committee. Mr. Mark Stevens, Fiscal Analyst, mentioned during the recess period a number of committee members needed to fly to Las Vegas on Thursday, February 9, 1995. The Human Resources/K-12 subcommittee would be meeting on Friday, February 10, 1995, for public hearings at the state office building. The morning session would address Human Resources issues and the afternoon session would address K-12 issues. The Public Safety subcommittee would tour the Jean Conservation Camp and Indian Springs facilities in Las Vegas on Friday morning. Chairman Arberry commented many of the committee members were new to Assembly Ways and Means, and the committee hit the ground running. He and Mr. Marvel wished to commend the new members on their grasp of the issues and the intelligent questions they had posed over the previous two weeks. Chairman Arberry requested an introduction of BDR 34-863 which revises provisions governing repayment of financial support received by students from Western Interstate Commission for Higher Education. * * * * * * * * * * ASSEMBLYMAN MARVEL MOVED TO INTRODUCE BDR 34-863 WHICH REVISES PROVISIONS GOVERNING REPAYMENT OF FINANCIAL SUPPORT RECEIVED BY STUDENTS FROM WESTERN INTERSTATE COMMISSION FOR HIGHER EDUCATION. ASSEMBLYMAN DINI SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * * * * * * Chairman Arberry requested an introduction of BDR 31-920, an administration bill, which makes various changes related to state financial administration. * * * * * * * * * * ASSEMBLYMAN DINI MOVED TO INTRODUCE BDR 31-920 WHICH MAKES VARIOUS CHANGES RELATED TO STATE FINANCIAL ADMINISTRATION. ASSEMBLYMAN HETTRICK SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * * * * * * There being no further business, Chairman Arberry adjourned the hearing at 10:58 a.m. (Agency budgets listed on pages 1837, 1843 and 1845 were not addressed.) RESPECTFULLY SUBMITTED: Jonnie Sue Hansen, Committee Secretary Assembly Committee on Ways and Means February 1, 1995 Page