MINUTES OF THE SENATE COMMITTEE ON GOVERNMENT AFFAIRS Sixty-eighth Session March 1, 1995 The Senate Committee on Government Affairs was called to order by Chairman Ann O'Connell, at 2:00 p.m., on Wednesday, March 1, 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 Teri J. Spraggins, Committee Secretary OTHERS PRESENT: Joe Guild, Nevada Mobile Home Park Owners Association Andie Engleman, Lobbyist, Nevada Press Association John Ballentine, Purchasing and Contracts Administrator, Washoe County, Purchasing Study Commission Jesse Paulik, TAB Contractors, Inc., Las Vegas Association of General Contractors Pam Miller, Association of General Contractors Tom Grady, Lobbyist, Nevada League of Cities Don Williams, Chief Principal Research Analyst, Legislative Counsel Bureau David McNeil, Energy Program Specialist, Nevada State Energy Office Dean Borges, Acting Manager, Nevada Public Works Board, Carson City Mike Meizel, Administrator, Buildings and Grounds, Carson City Kathryn McClain, Legislative Analyst, Clark County Howard Barrett, Lobbyist, Nevada Taxpayers Association Al Kramer, Treasurer, Carson City Pam Wilcox, Administrator, Division of State Lands Joe Guild, Nevada Mobile Home Owners Park Association, requested the committee to consider introducing a bill draft request based on a bill which was introduced last session, but was withdrawn (Exhibit C). Mr. Guild told the committee this bill would prohibit local government from enacting ordinances which regulate rents for residential properties. He stated there is no change from the way the bill was drafted for last session. He stated hearings on the bill might indicate amendments. He stated the issue of rent control has come before the Legislature every session since 1981. He said he feels it is time to create a debate on the policy. He requested the committee introduce a bill draft request based on S.B. 217 of the Sixty-seventh Session. SENATE BILL (S.B.) 217 OF THE SIXTY-SEVENTH SESSION: Prohibits local governments from adopting ordinances limiting rental rates for private residential property. (BDR 20- 814) SENATOR SHAFFER MOVED TO INTRODUCE A BILL DRAFT REQUEST BASED UPON SENATE BILL 217 OF THE SIXTY- SEVENTH SESSION. SENATOR PORTER SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR TITUS VOTED NO. SENATOR TOWNSEND WAS ABSENT FOR THE VOTE.) ***** SENATE BILL (SB) 151: Eliminates limitations on solicitations of bids for certain public works projects. (BDR 28-524) Andie Engleman, Nevada Press Association, testified S.B. 151 removes the limit on advertising for bids in public works project. She stated it would make newspapers in Nevada a great deal of money. She stated the press association unanimously opposes S.B. 151. She said the press association feels the bill is unfair to taxpayers. Senator O'Connell asked John Ballentine, Purchasing and Contracts Administrator, Washoe County, Purchasing Study Commission, if he was aware of A.B. 121 and if it was his bill also. Mr. Ballentine stated he is aware of A.B. 121 and it is not his bill. He said S.B. 151 essentially removes paragraph 2 from section 1 of the Nevada Revised Statutes 338.143. He explained the reason for the request is the statute states "not more than three of the contractors on the list for the contracts of that value." He asserted this is a restraint of trade. He stated the bid is a matter of public record and how could he deny access to public records to anyone. He stated it put him and his staff in a bind. He stated they would like it to read, "not less than three bids." Senator O'Connell asked Mr. Ballentine if he had discussed this with various contractors. Mr. Ballentine stated he had and there are two contractors present in the audience to speak to the issue. Senator Porter asked Mr. Ballentine why not change the one sentence, instead of deleting the entire paragraph. Mr. Ballentine replied that would be acceptable, it just seems easier to remove the whole paragraph. He said whatever the committee's pleasure would be fine. Senator Porter asked Mr. Balantine if the amendment is to read "Not less than three." instead of "Not more than three." Mr. Ballentine replied in the affirmative. He said if the bill reads "a minimum of three" and there are only two qualified contractors in a given area, it creates a new problem. He reiterated stating no more than three is restricting trade. Jesse Paulik, TAB Contractors, Inc., Las Vegas Association of General Contractors (AGC), testified in opposition to removal of the paragraph. He stated he understands Mr. Ballentine's concern. He said the sentence should be amended, not the entire paragraph removed. He suggested "shall solicit bids from the contractors on the list" and remove any number which might restrict trade in any way. He stated correcting the language is preferable to removing the entire paragraph. Pam Miller, Association of General Contractors, stated the reason for the language in the law is to allow small emerging contractors or minority contractors the opportunity to bid on public works projects which are under $100,000. She stated three is not a magical number, but during the last session there was opposition to having to solicit 10 bids on a smaller (perhaps $25,000) project because of the staff time to review the bids. She noted there may not be three contractors in the smaller counties; there may only be one contractor. She said the association would rather a contractor did the work, than have the project done "in-house." Senator Porter asked how the bill helps small contractors. Ms. Miller stated in the last legislative session, all projects were bid out at $100,000. She related a smaller contractor may not have a limit that is anywhere near $100,000. She said this law gives them the availability to do some of the smaller public works (like remodeling) projects. She explained it gives them the opportunity to get into the marketplace. Senator Porter asked if only notifying three contractors helped the smaller contractors? Ms. Miller stated reviewing three bids on a $25,000 project is not an administrative burden, reviewing 10 bids is a burden. She offered to provide Senator Porter with the legislative history of the law. Senator Shaffer responded to Ms. Miller by asking how hard it is to note the three lowest bids out of 10 bids, or out of 20? Ms. Miller stated three is not a magical number, it is just the number settled on during the last legislative session. She said she would like to discuss it with some of the public agencies who were involved in the legislative process last session. She said if the committee is going to discuss a different number than three, they need ask what is burdensome to the agencies. Senator Shaffer asked if the agencies are unaware of the legislation coming before the committee today? Ms. Miller stated this bill eliminates that entire section. Senator O'Connell informed the committee the bill from last session was S.B. 474 of the Sixty-seventh Session and stated she can get the minutes for the committee. She explained the bill was amended and there were a lot of witnesses. SENATE BILL 474 OF THE SIXTY SEVENTH SESSION: Requires industrial insurance for employee leasing companies. Senator Shaffer stated he feels the law is more restrictive not allowing more than three. He said it is simple to pick three chosen people and say "This is who we want to bid," and no one else can bid. He continued by saying if it is open and anyone can bid, it is easy to eliminate the contractors who would not be considered because of the higher bids. He said he understands what Mr. Ballentine wants to do. Jesse Paulik restated his position of amending the sentence, not removing the paragraph. He said it is not exactly an advertised bid where there would always be 10 bidders, because all of them are not looking at advertisements for bids. Senator Raggio asked Mr. Paulik and Ms. Miller if agencies customarily have different lists of contractor names by bid limit? Ms. Miller replied that each public entity does it differently. She says the AGC works with agencies to maintain lists of qualified contractors up to a $100,000 limit. Senator O'Connell stated the contractors know what their limits are and what is available for them to bid upon. Tom Grady, Nevada League of Cities, stated the intent of the law is not to limit anyone. He said the purpose is when there is a small job or repair job, the agency could pick three contractors from an established list of contractors, ask them for a written bid, and upon review of the written bids, the agency award its contract. He asserted the law is to simplify the process for the contractor and the entity. He said it is to help the smaller contractors get some of the smaller jobs. Senator O'Connell closed the hearing on S.B. 151 and opened the hearing on S.B. 180. SENATE BILL (S.B.) 180: Revises duties of state public works board concerning conservation of energy in state buildings. (SCR 35) Senator Dina Titus testified this bill encourages construction companies to be proactive in energy conservation. She provided the committee with a copy of a statement from Don Williams (Exhibit D) which provides history on the bill and a copy of the study by the interim committee (Exhibit E. Original exhibit is on file in the Research Library.) She stated S.B. 180 came from the interim committee which studied energy needs and resources in Nevada. She added the committee attempted to define an energy policy for the State of Nevada. She stated the committee heard expert and public testimony, reviewed various model energy plans from other states and studied information provided by regulators, utility industries, vendors, scholars, politicians, and concerned citizens. She said at the end of the study the committee adopted 47 recommendations, including 15 bill draft requests, one of which is S.B. 180. She noted S.B. 180 was adopted unanimously by the interim study committee and asked members of the Senate Committee on Government Affairs to give it positive consideration. Senator Titus remarked S.B. 180 specifically amends chapter 314 of the Nevada Revised Statutes by adding new sections, 2 and 3, which require the State Public Works Board to become proactive in the matter of energy conservation in state buildings. She explained to the committee that the Nevada Public Works Board has attempted in the past years to become more energy conscious, but after hearing extensive testimony, the interim committee decided the issue was too important to be left to the whim of a particular administration. This bill would mandate that public works be energy conscious. In support of S.B. 180, Senator Titus reminded the committee of the opening of the new state building in Las Vegas. She stated there was a check presented to Governor Miller from a Nevada power company as a result of a customer rebate program. This program provides incentives for the installation of energy efficient equipment in the construction of commercial buildings. She explained the result of putting energy efficient equipment in the building was a check for $10,652. She stated it is anticipated this summer that the building will continue to qualify for rebates and the additional money will total $19,400. She noted this is a total of $32,052 overall for one building from this program. Senator Titus testified the building was designed without rebates in mind, and because the public works board was conscious of energy conservation, the state qualified for the rebates. Senator Porter asked if this bill addresses rehabilitation? Senator Titus responded the interim committee discussed this. She said it mainly refers to new construction, but energy conscious retrofitting is a goal. Senator Porter asked if language should be added that if retrofitting is done that it should meet energy conscious standards? Senator Titus commented she would certainly support Senator Porter's suggestion. Senator O'Connell noted there was no fund set up for maintenance or operations costs for state buildings. She asked if rebate revenue would be set aside in a fund to support operations expenses. She asked where the rebate revenue goes? Senator Titus stated another bill draft provides that agencies who are able to save money via energy savings will have that money returned to that agency as an incentive for them to conserve energy rather than have it disappear into the General Fund. Don Williams, Chief Principal Research Analyst, Legislative Counsel Bureau testified the committee recommended the agencies receive the savings they generate. He stated agencies can receive savings from energy conservation either in rebates or in retrofitting. He supported savings going back to the agencies to help support further retrofitting for energy conservation. He said some agencies make an effort to install energy conservation equipment or practice energy conservation which lowers their utility bills, but this is not shown as an actual savings in their budget. They have to return that savings to the General Fund. He emphasized there is support for the agencies to have this revenue as an incentive to increase further energy savings. He told the committee there is a bill draft request which will address this issue. Senator O'Connell asked Mr. Williams to explain what a further energy savings could be. Mr. Williams replied a lot of it addresses current existing buildings. He said the energy retrofitting of buildings is more expensive than to design an energy efficient building. He explained there are buildings which need extensive work. Senator O'Connell asked Mr. Williams if the energy saving revenue would go back to the agency or to a building retrofitting fund. Mr. Williams stated the agencies who conserve energy should get the money back for them to do further energy savings. Senator Titus referred the committee to page 44 of Exhibit E. Mr. Williams gave the committee the example of the Legislative Building during the last session. He said there was an appropriation of $26,000 to do some lighting retrofitting and energy management. He explained there is a proposal for this session for another $66,000 to do further energy efficiency improvements. He said for buildings not built in the past 5 years there are a lot of things that can be done for those buildings. He said the energy retrofitting is done one part at a time. He explained the money they save from installing new devices should be given back to an account in the agency so they can do further energy improvements. Senator O'Connell said she was thinking of new buildings, not ones already in existence. Senator Porter asked if the old Fremont School, which will become a state building, falls into the category of rehabilitation or new building? Senator Titus stated it falls into the category of rehabilitation. Senator Porter remarked if it is a rehabilitation, it should meet some of the new energy standards. Senator Titus replied that Senator Porter's premise is correct. Senator Porter asked if the state performs an ongoing energy audit of its buildings? Senator Titus replied she did not think there is such a plan. Senator Townsend stated S.B. 180 is a response to the state's lack of approach to energy saving measures. He added the Supreme Court Building does not pass those standards. He said the interim committee was in shock at this revelation. Senator Titus emphasized S.B. 180 as a way for the state to say that it believes energy conservation is important and that it is acting as a role model. She told Senator Porter on page 40 of the report (Exhibit E) there is a mandate to perform an energy audit. Senator Raggio stated no one can argue with a concept which is based on cost savings. Mr. Williams pointed out it is difficult to guarantee a savings. Utility companies may be able to guarantee energy consumption will be reduced. The price per unit may vary, so it may be difficult to guarantee an actual dollar savings, but the amount of fuel or power consumed can be addressed. He stated he is not sure in a new structure that utility companies can establish a savings to which they can apply a guarantee. He explained there is an extensive history regarding retrofitting. Retrofitting has an energy saving range and the utilities companies can give an estimate that will hit that range every time. Retrofitting has a substantially greater history. He explained most public and private agencies have measurable results guaranteed when they begin retrofitting. He said now that they have been retrofitted, they can document the savings. David McNeil, Energy Program Specialist, Nevada State Energy Office, read a written statement to the committee (Exhibit F). He stated he believes S.B. 180 provides the necessary direction and assistance to the public works board that will improve the board's ability to meet its life-cycle-cost-based design obligations and ensure the most effective investment of state revenues for construction of state buildings. He suggested energy rebates be considered at the time of design, rather than as a post-construction afterthought. Mr. McNeil explained the Washoe County School District had a poor experience with a company which promised retrofitting would decrease their energy costs. He said it was basically because the contract was structured in such a way that the energy service company benefitted by the relationship, rather than the school district. He said there are good and reputable retrofitting firms and there are "snake oil" varieties. Dean Borges, Acting Manager, Nevada Public Works Board, Carson City, testified in favor of S.B. 180. He stated a demonstration project would have a positive impact on the public perception of what the state of Nevada is doing in its new construction. A report each odd numbered year as indicated in the bill keeps the Nevada Public Works Board on point to report to the Legislature. He supports independent consultants. He emphasized applicable rebate which could be received and put into the funds is supported. He prepared the fiscal note for this bill when it was a bill draft, and it estimated the size of a building like the Supreme Court Building. He estimated $90,000 in energy savings per year for a new building. He said this is substantial. Mike Meizel, Administrator, Buildings and Grounds Division, commented personnel from the Buildings and Grounds Division worked on the interim committee regarding this issue and supports all energy savings. He stated his division has enjoyed rebates from retrofitting over the past 5 or 6 years. Senator Raggio inquired about the necessity of a demonstration project each year instead of expecting energy efficiency for all new buildings. Mr. Borges replied the new state building in Las Vegas was built with these energy efficiencies in mind as are retrofittings of other state buildings. He said early administrations were not focused on energy savings and everyone is now coming around. He stated this has been his focus for 17 years. He said retrofitting rebates were used in the State Library and Archives and the Department of Education. He added the energy bills for the Kincaid Building were in the $100,000 range, presently they are less than $80,000 per year. Senator Raggio asked if there is someone in Mr. Borges staff who could act as the consultant proposed in the bill? Mr. Borges replied he has that capability in the staff, but the bill states an independent consultant which the Nevada Public Works Board would deal with. Senator Raggio questioned the feasibility of adding a position in the state which would cost about $56,000 in salary and benefits for someone to decide what efficient lighting equipment should be used. He stated the concept is fine, but he is concerned about mandating another position. Mr. Borges remarked there is staff available to accomplish that goal. He does not interpret that portion of the bill to mean additional staff. Senator Raggio commented the fiscal note shows a $56,000 fee for a consultant mandated under the bill in section 3. Mr. Borges stated $56,000 is rather high. He thinks it is supposed to read $5,600. He read the fiscal note and told Senator Raggio he would investigate the entry and would respond to it. Pam Miller, Associated General Contractors, expressed concerns with S.B. 180. She asserted contractors are using state of the art right now. She stated she is not opposed to energy savings, but expressed concern about specifications for these types of projects ( energy conservation which incorporates technological advances). She said AGC does not want to be stuck with prototypes. She added some of the energy consultants used in the northern Nevada area are neither engineers, architects, electricians, etc. AGC wants to make sure independent consultants have the level of expertise to judge if it is state of the art in energy conservation in those areas. Senator Townsend stated the latest and greatest technology has to be written in a bid. He asked if the AGC would consider the language for that part of the bill regarding proven technology. Senator O'Connell closed the hearing on S.B. 180 and opened the hearing on S.B. 182. SENATE BILL (S.B.) 182: Authorizes informal interim leasing of property acquired for public work. Kathryn McClain, Legislative Analyst, Clark County, provided a written statement to the committee (Exhibit G). She stated this is the intent of S.B. 182. Senator Raggio stated to Ms. McClain that 5 years seems like a long time for this kind of proposal. He asked her how that was determined. Ms. McClain responded this is to establish short-term leasing. Senator Raggio stated ordinarily a project takes place within a time frame where the property is acquired, and work commences on the project. He stated he could envision delay, but has a level of discomfort with a 5-year period. Ms. McClain stated she would find out why the 5-year time frame was put in the bill and respond to him. Senator Shaffer noted the bill shows no effect on local government. He asked if revenue would be generated during the 5 years? Ms. McClain explained the income would be used on the project itself, it would not be added income. Howard Barrett, Lobbyist, Nevada Taxpayers Association, spoke against S.B. 182. He stated the language should state the money from leasing goes to the project for which the property was acquired. He said the intent of the procedure is too informal. He asserted the short-term leasing policy should be adopted at a open county commissioners' meeting. He stated there should be a provision that the owner has the first option to rent or lease the property they have sold. Senator O'Donnell asked why the revenue should go to the project? He stated it is entrepreneurial for the government to return an investment by leasing it in the interim. He asked if it is really important to return the money to the project. Mr. Barrett stated the money could go anywhere, but it needs to be in the language of the law as to where the money is to go and not be left to the discretion of whoever is writing the policy. He said there should be language regarding the disposition of the income from the property. He explained it would be logical that in effect the rent is a reduction in the cost of acquiring the property which is part of the project. The rent income could go to offset the cost of acquiring the property in the first place. Senator Raggio asked Mr. Barrett to provide clarification on his second point. Mr. Barrett read that section of the bill to the committee and expressed that the language is vague and informal. He stated there should be a policy statement or procedure that is formalized and adopted. Senator O'Donnell stated the acquisition of property is determined by the magnitude of the project. He expressed it is prudent for the committee to look at what would make the project work. He said the option for the county to buy up the house and lease it back makes it easier for owners to get on with their lives. He added this leasing option would ensure a greater ease in building beltways. Al Kramer, Treasurer, Carson City, explained to the committee the procedures for the Carson City bypass has owners in lease- back properties. He stated the bypass may not be completed for 10 years. Carson City tries to pick up land in the area in tax sales, not to resell, but to lease if possible, until the project goes through. He explained if a property in the area is federally insured and comes under foreclosure, the property is not put on the market and bids are not solicited. Instead, the property would be transferred to the public entity which is trying to build in that area. He told the committee this may occur far in advance of the project, maybe more than 5 years. He stated he does not feel there should be a time limit, but reasonable and prudent planning. He asserted projects affect property taxes collected in the area in the following years. He feels the money generated from rental receipts is only a start in recouping the lost tax revenues. He encourages leaving how the money is spent to the discretion of the county. Pam Wilcox, Administrator, Division of State Lands, agreed local governments need this type of authority. She is concerned the structure of the bill would set up conflict between chapters 321 and 322 of Nevada Revised Statutes and the new language. She explained Division of State Lands can lease land acquired by the state for any purpose, but the lease must be at fair market value, have approval by the Board of Examiners, and approval of the Interim Finance Committee. She said leasing is beneficial to the state and to the people who will be affected by the public projects. She emphasized she does not want to see a conflict created where the counties do not know which procedure to follow. Senator O'Donnell stated the mortgage side of leasing should be put toward the project. He explained the property tax portion is a loss to the county and suggested during the lease-back period of time that the property tax portion be returned to the city. Mr. Barrett said that Senator O'Donnell is suggesting an "in lieu [of] tax payment" by the juridiction which is holding the property until it is developed. He stated that is another subject and should not apply to this bill. Senator O'Donnell explained it should apply to the bill because the committee is trying to determine where the money goes. He said that is what the committee is dealing with. Citing a lease-back revenue of $1000, Senator O'Donnell asked Mr. Barrett if he would have a problem with $100 going to maintenance of the area until the project is started, $100 going to property taxes, and the remaining $800 going to finance the project. Mr. Barrett said he has no problem with it, as long as it is written into the law where the money goes. He stated it would be unfortunate to make the law overly complex. He stressed it would be simpler and cleaner to state the income from the property in effect is a minus cost of acquiring the property in the first place. He said it should be applied back against the cost of the project. He said they would have no objections to other distributions, as long as it is stated in the law. Senator O'Connell asked Ms. Wilcox if she could suggest language for the bill. Ms. Wilcox replied she planned to go back and read the statutes before giving suggestions to the committee. The meeting adjourned at 3:45 p.m. RESPECTFULLY SUBMITTED: Teri J. Spraggins, Committee Secretary APPROVED BY: Senator Ann O'Connell, Chairman DATE: Senate Committee on Government Affairs March 1, 1995 Page