MINUTES OF THE SENATE COMMITTEE ON GOVERNMENT AFFAIRS Sixty-eighth Session January 25, 1995 The Senate Committee on Government Affairs was called to order by Chairman Ann O'Connell, at 1:30 p.m., on Wednesday, January 25, 1995, in Room 227 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Senator Ann O'Connell, Chairman Senator Randolph J. Townsend, Vice Chairman Senator Jon C. Porter Senator William J. Raggio Senator William R. O'Donnell Senator Dina Titus Senator Raymond C. Shaffer STAFF MEMBERS PRESENT: Dana Bennett, Senior Research Analyst Tanya Morrison, Committee Secretary OTHERS PRESENT: John Balentine, Northern Nevada Consortium for Cooperative Purchasing (NNCCP) Larry Osborne, Executive Vice President, Carson City Chamber of Commerce Ande Engleman, Lobbyist, Nevada Press Association, Inc. Mary Santina, Lobbyist, Retail Association of Nevada Butch Moreto, Purchasing Director, City of Carson Dale Erquiaga, Deputy Secretary of State Marvin Leavitt, Lobbyist, City of Las Vegas Chairman O'Connell opened the hearing on Senate Bill (S.B.) 19. SENATE BILL 19: Exempts purchase by local government of items commonly for sale to public in retail stores from requirement of competitive bidding. John Balentine, Northern Nevada Consortium for Cooperative Purchasing (NNCCP), spoke to the committee in regard to some language changes in this bill. He told the committee the wording which should have been on that particular amendment to be held should have said, "Purchase of items for resale to the public in a retail environment." He explained this wording would have covered golf course pro shops, museums or convention authority gift shops where the operators have very specific brand name items which would not be available in a competitive bid situation. Chairman O'Connell stated she had the opportunity to speak with some of the representatives of the smaller counties which gave her the opportunity to hear their point of view. Larry Osborne, Executive Vice President, Carson City Chamber of Commerce, told the committee his organization is a private business organization representing about 750 local businesses. He stated they oppose S.B. 19, particularly the way it was previously explained. He pointed out when he first read the bill he did not understand the impact the bill would have. He stressed his organization read the part which reads, "purchases of items commonly for sale to the public in retail stores" and the chamber thought that would allow government agencies to have a little more leeway in making purchases locally. He emphasized his organization cannot support a bill which will put government agencies in direct competition with the private business sector. He pointed out the taxpayers want the government to understand and abide by the same rules and regulations which the private sector must follow. He reiterated the Carson City Chamber of Commerce opposes this bill, particularly with the amendment proposed today. Senator Raggio stated the provision Mr. Osborne is speaking of in the bill deals with the purchase of goods and normally competitive bidding is required. He pointed out this bill would deal with the situations where the local government has a proprietary function and is acquiring goods it sells. He emphasized the public sector business should not have an advantage over the private sector business. Senator Raggio asked if a golf course pro shop operated by Carson City selling golf balls and a downtown sporting good store selling the same thing, would the city selling that have to collect sales tax. Mr. Osborne stated in the particular situation Senator Raggio described, the city would have to collect sales tax because the pro shop at the golf course in Carson City is in fact operated by a private contractor. He gave the committee another example. He explained the State Railroad Museum has a gift shop and they do not collect sales tax on retail items. Senator Raggio stated those situations bother him because it gives the public proprietary operation an advantage over the private sector. He also understands it is impractical to go to competitive bid to buy, for instance, three dozen golf balls for the pro shop. He asked how these situations can be resolved. He explained the private sector does not have to go to bid to buy items, therefore, he feels it is unrealistic to require in the same situation the public sector operation to go to bid to buy their items. Mr. Osborne stated there is already the opportunity for government, under certain thresholds to purchase items without going to competitive bid. He explained, for instance, if the public is buying items for resale through a retail operation, by competitive bid they must go through without this bill, local retail stores have the opportunity to be involved in that bidding and selling. Senator Raggio asked if it was realistic for small item purchases to have to go to competitive bid. Mr. Osborne stated he did not feel it was realistic. He told the committee he feels the system should be left as it is at this point. He emphasized this is an issue that needs to be addressed, but he stated it is a bigger problem than what is in this bill. Ande Engleman, Lobbyist, Nevada State Press Association, Inc., told the committee she has some forms to share with the committee, but she did not have them with her. She explained there is already a process set up in local government so they do not have to go to bid, particularly for small items such as pens, pads of paper and other supplies they can get at Wal-Mart. She told the committee she would supply, to the committee, copies of the forms used in Carson City which are submitted to the supervisor for supplies. These forms are approved by the purchasing manager for the purchases and stamped by the supervisor when they are approved. Senator Porter stated this committee had heard testimony on Senate Bill (S.B.) 20 which raises county's purchasing power from $10,000 to $25,000 and he suggested perhaps S.B. 20 would solve the problems that are being addressed in S.B. 19. SENATE BILL 20: Revises provisions governing required advertising of contracts for local government purchases. Senator Townsend stated if there is a sole source problem, it should be dealt with by itself. He concluded S.B. 19 deals with more than the sole source problem. He pointed out he was concerned with this bill, but in combination with S.B. 20 the issues have become broadened so the local governments have the opportunity to avoid competitive bid. Ms. Engleman told Senator Townsend he was correct. There is a provision in S.B. 20 for sole source in certain cases. She gave the committee some verbal examples such as a contract with the local newspaper which does not have an amount on the bid, it is open-ended, but it is for half their usual rate. She explained by signing this contract the city was able to get half the usual rate because the newspaper was a sole source. Senator O'Donnell stated all individuals interested in this bill needed to focus on the real intent of this bill. He explained this bill is intended for municipal golf courses, railroad stations and other entities that are extremely subsidized by the state or local governments. He pointed out a private entity would not buy the Carson City Municipal Golf Course because it is not profitable. Therefore, if these government operated entities are unable to buy goods for resale, they will be unable to continue to operate. He emphasized the museums are good because they attract tourism which benefits everyone in the state. He told the committee he does not like to see the competition with the state and private businesses, but he stated it is only fair to let the two entities compete. Mary Santina, Lobbyist, Retail Association of Nevada, stated she has seen the competition between state owned and private entities and emphasized it did not turn out well. She told the committee practicality and precedent setting should prevail here. Senator Porter told the committee members there is a local government purchasing act which addresses the concerns of purchases by government entities which could be researched, but he stated it really is not necessary. Senator Raggio stated he agreed there is a local government purchasing which allows these purchases, but he asked if the act refers to items bought for resale to the public. Senator Porter stated the act just refers to purchases and is not specific, but he suggested they look into this purchasing act. Chairman O'Connell stated Ms. Engleman has the information the committee is looking for and therefore the committee will wait for that information before taking action on this bill. Chairman O'Connell closed the hearing on S.B. 19 and opened the hearing on Senate Bill (S.B.) 20. SENATE BILL 20: Revises provisions governing required advertising of contracts for local government purchases. Chairman O'Connell stated she spoke with two senators who told the chairman they did not feel their business community would be in favor of S.B. 20 as well. However, she stated, they are not in the meeting to make that statement for the record. Senator Porter told the committee this bill may help small business. He explained from a local level there are times when there are not three sources to get bids and they would be more apt to purchase locally because they would not have to go out under $10,000. He stated this may give local business more leeway for the purchasing government. Chairman O'Connell asked Senator Shaffer, who was in the planning department in Las Vegas, if his department had to go beyond for anything that was bid. Senator Shaffer stated there was a purchasing department that took care of the large purchases. His department was allowed to do small items just by purchase order. He explained all of the purchasing power eventually went to the purchasing department. John Balentine, NNCCP, stated this bill can help the local areas. He explained there are a lot of different bidding levels throughout the different sections of the law. He pointed out the state purchasing is limited to $7,500 in NRS 333, but in NRS 332 the counties with over 100,000 population have a formal bid limit of $25,000 and an informal bid limit is $10,000. He further explained in counties with under 100,000 population the formal bid limit is $10,000 and the informal bid limit is $5,000. He told the committee there are public works projects under NRS 338 which begin at $20,000, but they have to go to formal bid at $100,000. He emphasized this causes a fair amount of confusion in the vendor community. He told the committee this bill was to standardize for all local governments the informal bid limit at $10,000 and the formal bid limit at $25,000. He explained one of the positive points in the larger counties is a lot of the smaller businesses and minority business have been able to get a significant amount of business without having to go through the formal bid process, which can be difficult particularly for new businesses. He summarized for the committee the object of this bill was to standardize state law and local government purchasing. Butch Moreto, Purchasing Director, City of Carson, told the committee it is the smaller counties below 100,000 population who are suffering due to competitive bids of $10,000 and above. He explained this is a lot of paperwork. He stated every time a project goes out to bid the vendors and contractors are required to submit bid bond, performance ban, insurance and numerous other items. He told the committee if the bid limit goes up to $25,000 it will streamline the purchasing process for counties below 100,000 population. He explained these limits should be in line with the federal government streamlining of the procurement process. He pointed out there is a trend to simplify the procurement process and make public service more convenient to the taxpayers. He emphasized this bill is truly for the taxpayers and stated it will truly help Carson City and all counties below 100,000 population. SENATOR TITUS MOVED TO DO PASS S.B. 20. SENATOR O'DONNELL SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. ***** Chairman O'Connell closed the hearing on S.B. 20 and opened the hearing on Senate Bill (S.B.) 24. SENATE BILL 24: Revises provisions governing sale of certain bonds by City of Henderson. Chairman O'Connell reminded the committee the testimony heard earlier on S.B. 24 explained this bill is purely an industrial bond situation. She emphasized Henderson is currently the only town who has the ability to sell industrial bonds because of a grandfathering in of their city charter. SENATOR O'DONNELL MOVED TO DO PASS S.B. 24. SENATOR SHAFFER SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. ***** Chairman O'Connell closed the hearing on S.B. 24 and opened the hearing on Senate Bill (S.B.) 55. SENATE BILL (S.B.) 55: Revises provisions governing fees charged by constables. SENATOR TITUS MOVED TO INDEFINITELY POSTPONE S.B. 55. SENATOR SHAFFER SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. ***** Chairman O'Connell closed the hearing on S.B. 55 and opened the hearing on Senate Bill (S.B.) 57. SENATE BILL 57: Prohibits member of state militia or his dependents from receiving workers' compensation under certain circumstances. SENATOR RAGGIO MOVED TO DO PASS S.B. 57. SENATOR O'DONNELL SECONDED THE MOTION. Senator O'Donnell stated he spoke to some individuals from the federal government and their findings were the compensation would be better from the federal government than from the state. Senator Raggio pointed out to the committee this bill was intended to plug a loophole whereby individuals would claim benefits from two sources and he added, that was not what was intended. Senator Porter added there would be proper notification of all guard members if this bill passes. THE MOTION CARRIED UNANIMOUSLY. ****** Chairman O'Connell closed the hearing on S.B. 57 and opened the hearing on Senate Bill (S.B.) 81. SENATE BILL 81: Designates square dance as official folk dance of Nevada. SENATOR RAGGIO MOVED TO DO PASS S.B. 81. SENATOR TOWNSEND SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. ***** Chairman O'Connell closed the hearing on S.B. 81 and opened the hearing on Senate Bill (S.B.) 83. SENATE BILL 83: Eliminates fees for copying certain documents. Dale Erquiaga, Deputy Secretary of State, presented the committee with a copy of proposed amendments (Exhibit C). He explained the amendments to the committee members. Senator Raggio told Mr. Erquiaga regarding section B of the proposed amendments which deals with NRS 225, he stated this would create a new division in the office and also add at least one person. He asked if this position was included in the executive budget. Mr. Erquiaga stated the unclassified position referenced in section B of the proposed amendments is in the budget and has been for three biennium. He explained this is not an addition to the executive budget. He told the committee in 1989 the secretary of state came before the finance committee and added an unclassified position, but she did not codify that position in NRS 225. SENATOR RAGGIO MOVED TO AMEND AND DO PASS S.B. 83. SENATOR O'DONNELL SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. ***** Chairman O'Connell closed the hearing on S.B. 83 and reopened the hearing on S.B. 19. Ms. Engleman gave the committee members copies of Request for Board Action from Carson City, Nevada for them to understand the bidding process (Exhibit D). She pointed out to the committee in item 11 on the second page of the exhibit. She explains this states the local government has the right to determine this is not something that is applicable to go to bid. Senator O'Donnell asked Ms. Engleman if she would have a problem with the county or city council if they decided to allow golf clubs from a certain vendor to be purchased outside of a bidding process. Ms. Engleman told the committee as a citizen who believes in privatization and the fact it could be leased out to a private entity to run, she would have a problem with that. She stated her real problem with this bill is the bid process. Senator O'Donnell asked Ms. Engleman if she was stating it is okay if all entities are in the bid process; and he stated if the answer is "no", she is using this argument to kill the bill and not really interested in solving the problem. Ms. Engleman stated she is not an attorney and cannot answer whether or not her argument is legal. Dana Bennett, Senior Research Analyst, explained she also is not an attorney and did not wish to be interpreting law, but she stated she pointed out to the chairman on the first page of the bill on line 4, it is existing language. She commented that is the beginning of the list of the items which do not have to go out to competitive bidding if the governing body determines such to be the case. She pointed out on line 4 it states, "items which may only be contracted from a sole source." Chairman O'Connell made clear the point that sole source is already covered in the law. Senator Raggio stated that is not the issue. He understands the sole source is already in the law. He stressed he is still trying to understand what is the purpose of this bill. He explained the committee was told if a government operated proprietary function and wanted to buy some small items for resale those items had to go to competitive bidding, which is the existing situation. This bill would have changed that and allowed the government in operating in a proprietary function to buy its inventory without having to go out to competitive bidding. He added, that would in fact be the same as a private sector operation which does not have to go out to competitive bidding. He reiterated, why this committee would want to require this pro shop to go out to competitive bidding to buy small items. He emphasized these are not sole source items, they are items to be put into inventory. He stated he understands the government agencies do not have to collect a sales tax and he accepts that, but he asked why the legislature should go through this cumbersome procedure, with this bill, to buy small items. Senator Townsend stated at the bottom of the second page of the request for contract approval provided by Ms. Engleman, it states the small items can be relieved by the elected body by simply giving permission to make small purchases. Senator Raggio asked where the authority comes from for those decisions. Senator Townsend stated it is in NRS 332.115, as pointed out in item 11 on the second page of Exhibit D.. Senator Raggio pointed out in the examples of the contracts provided by Ms. Engleman, the exceptions are noted and they include items one through ten which are presently in the law. He stated item 11 which Senator Townsend is pointing out is not in NRS 332.115. He declared it is referenced as coming from some purchasing manual. He asked what is the authority for this exemption which comes out of the purchasing manual if it is not in this statute. Ms. Bennett stated it had been mentioned both S.B. 19 and S.B. 20 are related to this situation. She explained both of these bills have statutes in them that are out of the local government purchasing act. She pointed out S.B. 20 allows contracts that are less than $10,000 not to be competitively bid. She explained if the contract was for something less than the $10,000, it would not have to go to competitive bidding. She added there is language in S.B. 20 on line 16 which emphasized the possibility of competitive bidding under $10,000, but there is no requirement to go to bid under that amount. Marvin Leavitt, City of Las Vegas, explained the purchasing act, as it relates to local government, provides for conditions under which bids have to be received or solicited. He maintained the larger counties can purchase up to $10,000 at will without requiring any bids; but in the range between $10,000 and $25,000 there is an informal bidding process, and with items over $25,000 there must be formal bids. He pointed out the law provides for certain exclusions from that where there is no formal bid required regardless of the size of the contract. He summarized these exclusions such as items from a sole source, professional services and repairs to equipment. He explained if a golf course wanted to purchase an item under $10,000 for resale or otherwise, they would not have to engage in a bidding process, but if the item was between $10,000 and $25,000 the entities need informal quotes. Above $25,000 there is a formal bid required. He suggested the question would depend on how much of the purchases are in the over $25,000 range which is where this bill would be applicable. He pointed out if it was a sole source there is an exemption regardless of the size of the purchase. Chairman O'Connell clarified if a golf course wanted to buy five dozen golf balls, they could buy those without going to bid since it is under the $25,000 bid process. Senator Raggio asked why this exemption is necessary since they have a $25,000 limit, and it seems to be a large enough amount to cover any items those local entities would purchase. Chairman O'Connell called for a motion. SENATOR TOWNSEND MOVED TO INDEFINITELY POSTPONE S.B. 19. SENATOR PORTER SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR O'DONNELL VOTED NO.) ***** Chairman O'Connell closed the hearing on S.B. 19 and adjourned the meeting at 3:00 p.m. RESPECTFULLY SUBMITTED: Tanya Morrison, Committee Secretary APPROVED BY: Senator Ann O'Connell, Chairman DATE: Senate Committee on Government Affairs January 25, 1995 Page