MINUTES OF THE SENATE COMMITTEE ON TRANSPORTATION Sixty-eighth Session March 7, 1995 The Senate Committee on Transportation was called to order by Chairman William R. O'Donnell, at 1:35 p.m., on Tuesday, March 7, 1995, in Room 226 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Senator William R. O'Donnell, Chairman Senator Maurice Washington, Vice Chairman Senator Lawrence E. Jacobsen Senator Jon C. Porter Senator Joseph M. Neal, Jr. Senator Raymond C. Shaffer Senator O. C. Lee STAFF MEMBERS PRESENT: Don O. Williams, Chief Principle Research Analyst Diane Rea, Committee Secretary OTHERS PRESENT: Donna Wadey-Howell, Acting Chief, Registration Division, Department of Motor Vehicles and Public Safety (DMV&PS) John P. Crawford, SR/WA, Chief Right-of-Way Agent, Department of Transportation (NDOT) Brian Hutchins, Deputy Attorney General, Nevada Department of Transportation (NDOT) Senator O'Donnell stated, "First let me just say that the department pulled [withdrew] Senate Bill (S.B.) 187. That is no longer going to be heard. They have decided that they do not need the fee increased." SENATE BILL 187: Increases fees for reinstatement of driver's license after revocation, suspension or cancellation. (BDR 43-587) Senator O'Donnell asked if there was anyone present to testify on behalf of S.B. 186? SENATE BILL 186: Revises provisions governing fee for processing of fingerprints for applicants for licensure as vehicle transporters, manufacturers, distributors, dealers and rebuilders. (BDR 43-578) Donna Wadey-Howell, Acting Chief, Registration Division, Department of Motor Vehicles and Public Safety (DMV&PS) stated: S.B. 186 was division requested and would allow the division to set the fee for the fingerprints by regulation. The reason the division feels that they need to set this fee by regulation is, when the fee was established in statute, the Federal Bureau of Investigation (FBI) charged the department $23 for processing the fingerprints. They, effective January 1st, raised that fee to $24. The division anticipates that there will be fee increases on a regular basis and rather than have to come back to the Legislature each session and adjust those fees, we felt that it would be creative to try and set those fees by regulation. That is the purpose of the legislation. Senator O'Donnell stated that in the bill it is designated as $38. Mrs. Wadey-Howell replied: That is correct. The FBI charges $23 and the Nevada Repository for Criminal Records charges $15 for a total of the $38 and, as I said, January 1st it went up to $24 for the FBI charge. Senator O'Donnell asked if the $15 is really going to the highway fund, or where does it go? Mrs. Wadey-Howell replied, "It goes back to the support of the criminal repository; back into their self-funded account." Senator O'Donnell asked if there were any questions from the committee? Senator Neal asked, "This particular fee, the $38; are we talking about having one set of fingerprints checked by the FBI then also checked by the repository?" Mrs. Wadey-Howell replied: Yes, senator. It is my understanding we have sent the fingerprints to the FBI for the national check and we also send it to our repository. There are certain crimes and things that are kept at the criminal repository level that are not kept on the FBI level and vice versa. That is the reason we check both of those. Senator Neal asked if she could give an example. Mrs. Wadey-Howell replied that she could not, but would provide the committee with an example. She stated that she did not have an example of the types of incidents that would not be kept at the different locations. Senator Neal asked if the cost of the fingerprint is negotiable? Mrs. Wadey-Howell replied that those are the fees that are actually charged to the division. Senator Neal stated that many years ago, when the FBI had to use examiners to go through the classification and determine a print, that was a tedious long process. Now, they put the information into a computer and come within five people or five sets of prints that need to be checked. Mrs. Wadey-Howell stated that with the technology today it is much more expedient to process the prints. They have computer equipment, but she stated that she is not familiar with it. Senator Jacobsen asked if it is correct that there is a backlog and sometimes it takes 3 months before fingerprints are verified? Mrs. Wadey-Howell stated: Yes, senator, that is my understanding. They do have a backlog and sometimes it has taken up to 3 months. The turnaround time right now, and it varies depending on the repository or the FBI... right now we are receiving them back in about 60 days. Senator Jacobsen asked how long does that take if you want to do a background check on the department? Mrs. Wadey-Howell replied, "approximately 60 days." Senator Jacobsen asked: Do you think there is any validity to maybe allowing a person, once he comes in and applies, has his prints taken; maybe he could have a temporary license, or do you think that would be some kind of jeopardy? Mrs. Wadey-Howell replied that she thinks that could place some jeopardy for the programs. There is some concern with the consumer protection; that is the reason for checking the fingerprints to begin with. Senator Jacobsen asked how many does DMV process in a month's time? Mrs. Wadey-Howell replied she believes the figures are less than 100 statewide during any one month. Senator Jacobsen asked if they have any rejections? Mrs. Wadey-Howell stated that they have rejections. Senator O'Donnell asked, "The $100, where does that go? There is a $100 fee for submitting forms; does that go to the General Fund or does that go to the Highway Fund?" Mrs. Wadey-Howell asked if he was referring to the fee of $125 for the licensing in section 2? Senator O'Donnell stated that he was referring to section 1. Mrs. Wadey-Howell stated that it is the fee for licensing the transporter and that does go back to the Highway Fund. Senator Neal asked, "What this is for, new license, vehicle transporters, manufacturers, distributors, dealers and rebuilders. Why is it necessary to have fingerprints of these particular individuals?" Mrs. Wadey-Howell stated that this is not an area that she is familiar with. Senator O'Donnell stated that he thought this bill had been requested by the industry years ago. They wanted to make sure that the people who are transporting their cars are legitimate, non-felon type individuals. They had a couple of cases where the whole truck had disappeared. Senator Neal stated that if the individual is engaged in that type of activity, it seems like they would not come in for fingerprints anyway. Senator O'Donnell stated that the bill was new in 1987. Senator Jacobsen asked if the fingerprints show on the drivers license? Mrs. Wadey-Howell stated that they are on a separate card. Senator Jacobsen asked if the highway patrol apprehended a person, how long does it take him to get a report back that those prints are legal. Senator O'Donnell stated that the fingerprints are for someone who has a record. If the prints are sent to the repository or the FBI; they would identify the individual who has committed the crime. Senator Jacobsen asked, "If there would be any reason for me to be pulled over by the highway patrol and I pulled out both of my cards, would there be any way for him to check if it was actually my card and my prints?" Senator O'Donnell stated that the driver would not actually have prints on him. All he has is a card with his picture on it and his drivers license. The actual print is in the criminal history repository. It is only really used if there is a common belief that somebody committed a crime. They take the print and go to the repository. By the print they can find if this person is the perpetrator. Senator Jacobsen stated: If my place was robbed. They lifted some prints of the safe or the door, then do they have to send those all the way to the FBI academy to determine whose prints they are? Senator O'Donnell noted that Senator Jacobsen was getting outside of Mrs. Wadey-Howell's realm. From his background it would depend of the severity of the crime. If the crime was a double murder or such, they would send them to the criminal history repository as well as the FBI academy. That happens a lot. Senator Neal added that the only purpose this would have would be to identify the person if that person had committed a crime in the past. Senator O'Donnell stated that if no one else wished to speak on behalf of the bill he would close the hearing on S.B. 186 and open the hearing on S.B. 188; and asked if there was anyone present to testify on behalf of S.B. 188. SENATE BILL 188: Authorizes department of motor vehicles and public safety to issue sample license plates. (BDR 43-898) Donna Wadey-Howell, Acting Chief, Registration Division, Department of Motor Vehicles and Public Safety (DMV&PS) stated: This is another bill that the division has requested for the issuance of sample license plates. We have been issuing sample license plates to school children, collectors, organizations doing conferences in the state for a number of years. What this will allow us to do is, number one, have the authority to do so and to charge a fee for those sample license plates. We issued in 1994, 400 of them. Currently, we feel that our budget will support the cost of the materials to manufacture these license plates and again the revenue would be a small amount based upon the fees that we would set. Right now, we have been charging them $2 just to recoup our costs and that money goes back to the Highway Fund for the cost of the materials. Senator O'Donnell asked what the license plates have on them? Mrs. Wadey-Howell stated that she had brought a sample plate with the numbers 123ABC. Senator O'Donnell stated that he did not see anything different from an ordinary plate. Mrs. Wadey-Howell replied: Basically what we have is, we have requests for what our actual issue license plates look like. We actually produce this and we have never issued 123ABC, so you would not find this in our computer system ever actually issued to a vehicle. School children request them for school reports, license plate collectors request them to be put into their collections. Also in some instances, we will make a special plate which may be silk screened, have the same background for conferences such as the Western Governor's Conference (WGA), where we may put WGA and NV for Nevada or Colorado. Those types of things. All we have been doing at this point is making them and recouping the material costs and putting that money back into the Highway Fund. Senator O'Donnell stated, "Right now the division does not have any statutory authority to do that." Mrs. Wadey-Howell said, "That is correct. It is something that has been being done for 20 years or more." Senator Porter asked, "What you are going to be doing is changing the numerical to display the zeros instead of a song. So they will all be zero or start with zero?" Mrs. Wadey-Howell replied that any of the sample plates that are issued will be 000. Senator O'Donnell asked how they can have western governor if they are 000? Mrs. Wadey-Howell replied that it is for the actual sample plates. For those people that are just wanting a sample plate DMV&PS would issue it just that way. Any of the conferences they would silk screen. Senator O'Donnell asked if there is a special plate to put on a car for conferences for temporary purpose? Mrs. Wadey-Howell replied: No, what they do is ... they like to hand them out. Like at the Western Governors' Conference, at the Drug Free Forum Conferences; it is just like a souvenir more or less, from the State of Nevada. It is not to be put on a vehicle. It is just an identifier that they have been in attendance in a conference. The Commission on Tourism has requested these from us. Senator O'Donnell stated that if there were no other questions he would close the hearing on S.B. 188 and open the hearing on S.B. 189 and asked for testimony on behalf of S.B. 189. SENATE BILL 189: Revises provisions relating to disposal of certain property acquired by department of transportation. (BDR 35-829) John P. Crawford, SR/WA, Chief Right-of-Way Agent, Department of Transportation (NDOT) and Brian Hutchins, Deputy Attorney General, Nevada Department of Transportation (NDOT) introduced themselves. Mr. Crawford stated: The department is seeking an additional property disposal amount, in addition to the public auction sealed bid method that we currently have in statute, for the disposal of surplus property. In addition to that section 2, we feel that in some circumstances the public interest is not well served by the public auctions sealed bid process. There are two primary situations which the marketing alternative provided for the new section 180 could be effectively used. Properties that we have not been able to sell by public auction or sealed bid and special high valued properties that have a very limited appeal that are unlikely to sell at public auction that can be sold; perhaps only after multiple auctions and perhaps can only be sold after repeatedly lowering the minimum bid for those type of properties. We realize that this addition to the statute would require us to adopt rules, policies and procedure to govern the conduct of such an alternative; and I think, as provided in the wording of the bill, this would require the approval of our board of directors. Senator O'Donnell said the areas around freeways that NDOT purchases, uses half of, but has to buy the whole thing because the house sits on the whole acre; the intent is to be able to sell and sometimes during the process of selling, either you have no bids, too high of a price on the parcel so nobody bids the minimum, or you get no buyers at the price you are advertising. He asked what is it that NDOT wants to be able to do? Mr. Crawford stated that after having been unsuccessful at auctioning the property, NDOT would like to have the option available to them to trying to market that property through the qualified brokers. Senator O'Donnell asked where that is stated? Mr. Crawford stated that it does not state that clearly in the bill, but the intent is there. Mr. Hutchins stated: What we are looking at here is not the usual situation that you just described. What we are looking at are the specialized circumstances that may involve larger parcels of property that may be unusual in either shape, size, or location that the department would be better off in trying to solicit actual purchasers. Somebody who might be more interested in that kind of property. That is why you would go through these particular agents to solicit those buyers. As you see on page 2, the new language on lines 20 through 24 says [... the board may authorize the department to enter into an agreement with any person who is qualified to solicit prospective purchasers ...] and that is what Mr. Crawford was alluding to. A qualified broker to look for those prospective purchasers. Senator O'Donnell asked if NDOT's intent is to use licensed real estate brokers for this? Mr. Hutchins and Mr. Crawford both replied that is correct. Mr. Hutchins stated: It would not be the usual situation which is covered by the law in paragraph 2 as to how the department goes ahead and sells property. The way they will usually do it is at public auction or sealed bids. This is just the very unusual situation that the right-of-way division, in the first instance might believe that this would be a more appropriate way to dispose of the property. In any instance it would be the Transportation Board of Directors that would authorize this specific procedure for that particular piece of property. Senator O'Donnell asked if NDOT has to go through an auction to start this process? Mr. Hutchins stated: To start this process, no, you would not. This would allow the department to start a different process. The usual process would still be the public auction or sealed bids in paragraph 2 on page 2. This would be a new option for the department in those specialized pieces of property. Senator O'Donnell stated that he must disclose that he is a real estate broker, and it is illegal for him to transact anything with the state. Senator Porter stated: Back to 20E on page 2, specifically; I would be much more comfortable if we could say after an auction if it did not sell or you did not get a bid at fair market value that you could list it with a real- estate agent. Because I think it leaves it open to discretion, which is okay in certain cases, but it is pretty broad when it says it is likely to be sold at public auction for less than its fair market value. What is likely to be sold for less? I think it could cause some problems. Mr. Crawford asked if the committee could be a little more clear in what they are envisioning so NDOT could work on it. Senator Porter stated: I do not really know all the circumstances because you are dealing with it on a daily basis or whenever it comes up, but if we were to reword this to state that if there is an auction and fair market value in dollars is not reached; the board then could go to an authorized real estate agent to list it and sell it after you have tried the auction. Unless there are specific cases that you would like to limit this use to. . Senator O'Donnell stated: In dealing in the real estate industry, it may be beneficial to the committee [if] you will explain what your process is at the present time and then it maybe that you will want to do just the opposite. Do the "for sale" with the broker, and then go to auction. We are looking at recouping as many dollars as we can for state property, not trying to give it away to the guy who happens to read the legal notices in the paper every Sunday. I think that is where they are going, and I do not know. Mr. Hutchins stated: That is exactly the intent of this bill. It is those specialized pieces of property that may and should bring a higher price. Some of the larger parcels that we happen to end up with that we think we would do a lot better in a real estate specialized situation like that. Maybe we can think of some specifics. Mr. Crawford stated NDOT has a couple of large properties right now. As soon as construction is complete on the two highway facilities, that they were acquired in conjunction with, they are going to have dollar values, of around $6 to $7 million. It is very difficult to attract buyers to high-priced properties like that. To attract buyers NDOT is going to have to come up with a minimum acceptable bid. That almost automatically forces you to be willing to accept less than $7 million. He stated that he thought other states set minimum bids. Sometimes it is 60 percent of the appraised value, just to attract the bidders and then what we hope we can generate the atmosphere in a competitive situation and drive that price up to what you have it appraised at or beyond. He said the risk is somebody walking in and offering that minimum bid and there is only one bidder. NDOT has always reserved the right to reject all bids. Is 60 percent of something better than nothing? He continued saying this alternative would provide us perhaps a better way of getting full value of some of these specialized properties. He said he thought the best way for most properties that NDOT deals with is public auction. That way it is relatively easy to monitor or handle for the most part. Senator Neal asked: I understand what you are attempting to do here and the language is permissive in terms of getting a real estate broker selected by the board to sell this particular property for you. My question is, what rules would you have in terms of selecting the broker for this particular case? Mr. Crawford stated, "In all property dispositions, we have the property appraised before hand, so we do not go into any of these blind, without having a good feel for what the value is." Senator Neal stated: I understand, but the section that you put in said [When the property, in the opinion of the board, is likely to be sold at a public auction or by sealed bids for less than its fair market value, the board may authorize the department to enter into an agreement with any person who is qualified to solicit prospective purchasers for the direct sale of that property.] My question is, how would you go about selecting that particular individual? Mr. Hutchins stated: We would have to adopt rules, policy and procedure to clearly set that forth. What I would envision is something along the lines of; once a year advertising in the major newspapers throughout the state, including special language papers, so that we could get a wide range of qualified interested brokers on a list. Then we would have probably a screening process similar to what we do in the selection of consultants that do engineering or other type of work for the department. First we have to find out who is interested, and what are their qualifications. Then on individual properties we could direct mail out to these interested parties, with the properties that we want to dispose of, what the parameters of the sale are from the department standpoint, and see if they have an interest in responding. Then from the respondents, we would have to narrow that down to who is most qualified or would best represent the department in the closing of the property. Senator Neal stated: The agreement that you would enter into with this particular individual, it seems to be kind of wide open in terms of how these arrangements would be set up. Would this fellow come in for less than his regular commission to engage in this deal? Do you anticipate that? Senator O'Donnell stated, "no." Mr. Crawford stated, "I would have to disagree with Senator O'Donnell, on some properties I think we would want to negotiate the terms under which the firm would represent us including the fee." Senator Neal stated, "So, this particular provision then would give you the authority to set, through agreement, what the fee the person would receive for selling this property for the highway department; and also you would set up rules by which you would determine the selection of that individual." Mr. Hutchins stated: Senator, that would be very similar to what the department is doing now with selection of appraisers and the other experts that Mr. Crawford talked about. That is how they go about selecting the appraisers to begin with. A wide variety of solicitations; they get those appraisers and they find out what their qualifications are and then they oftentimes, with specific parcels of property, will ask them how much it would cost them to appraise this property. Senator Neal asked, "When you sell property, how does that transaction take place? Does the money or check come to you? It goes to the General Fund, or what?" Mr. Crawford stated, "All the receipts from the disposal of surplus property are credited to the highway fund; with an appropriate percent going to federal aid. Reimbursement of federal aid funds participated with the acquisition to begin with, then an appropriate credit has to be given to the federal aid funds to support that project." Senator Neal asked if the only means for the Legislature to check on NDOT is by audit of that fund? Mr. Crawford stated that is correct. Senator O'Donnell stated: Knowing what I know now, I have some real problems with this bill. First of all, I must again declare that I am a real estate broker, but I cannot enter into any real estate transaction either on one side or the other on dealing with disbursement of state property. That is the law, but knowing what I know about my industry, you have left out one key part. That is the ability to use the Multiple Listing Service (MLS) to advertise that property. To a number of different agencies that handle real estate. A number of qualified ... there are two sides to a transaction. There is the buyer and then there is the seller. You happen to be the seller and the seller can transact at a certain commission level, and will do that. If you want to tweak this end, you will not get any of the MLS people. Sort of an unwritten rule that if you make this percentage lower than the normal, you wont get any real estate broker in the world to look at it. Why should they? They got a buyer, they got somebody that is willing to pay money; why would they want to push your property versus somebody else's property where they could make 5 percent or 10 percent or whatever the normal commission is for that particular real estate transaction. I am not sure you have thought this one out really well. I would think it would be more appropriate for you to designate or allow people to place their name on a list of real estate brokers capable of transacting; licensed real estate brokers in the State of Nevada, and then go down the list. Every time you have a property, go to the next one, go to the next one. The information goes into a multiple listing service and the multiple listing service ... the realtor that you are going to get to do this is going to represent you, the seller. But, you may have another realtor that is representing the buyer. I am not sure you understand the real estate law here. Once you hire a real estate broker, this whole thing goes out of Nevada Revised Statutes (NRS) 408 and jumps into [NRS] 645. It's a whole different ball game in terms of rules and regulations that the real-estate broker is required to do. Mr. Hutchins stated that he does not know that would affect the language in this bill. Senator O'Donnell stated: It may not, but I think your rule, that was testified, is on the record as to Senator Neal's question is different to what I think should happen and if you are going to do what you say you are going to do, I have a real problem with the bill. I think we need to rethink this. Mr. Hutchins replied: I do not think there is a problem as far as the right-of-way division formulating its rules to this the way you suggest. I think your comments are very good and I think they will take those into account. But I think the language here does not change that one way or the other. You can still do what you would like the department to do with this language. We still obviously have to comply with any other appropriate laws, whether it be [NRS] 645 or 408. I do not think the language that is offered here is a problem in that respect. I think that is a good thing for the department to look into. Senator Neal stated: As the bill is set up, for this arrangement you have three people involved so to speak. You have the board, the rest of the department and the department hires the person going to sell the property. I would assume somewhere that arrangement then would have to come back to the board as to what the department has done. I kind of see that as a check that the board would have on the arrangements to see whether or not everything is above board. Am I wrong in assessing the bill in that fashion? Mr. Hutchins replied, "That would not necessarily require the specific process that you are talking about, senator. This would require the board to approve, for a particular piece of property, this process of going to a qualified prospective purchaser." Senator Neal said, "The board authorizes the department. The board does not enter into any agreement with the person hired." Mr. Hutchins replied: That is correct. They would authorize the department to enter into that agreement. What happens then is the right-of-way division has form agreements that they have to enter into and counsel for the department has to approve all those agreements. So, they then select the individual who is the broker and they enter into that agreement. The agreement is then signed by the director or his representative and approved by counsel and then it becomes effective at that point in time. Senator Neal asked, "Who checks the agreement? Do you?" Mr. Hutchins replied, "Yes, me or my deputies will check every ... we are required by law to approve as to form and legality every agreement that the department enters into." Senator Neal asked, "So, once the board gives its authorization to the department, they do not see what happens in the transaction after that?" Mr. Hutchins stated that typically they would not. Senator O'Donnell stated he wanted to play out a transaction and think it out openly. NDOT would sign a listing contract with the broker. The broker goes out and puts a sign on the property. Then an individual looks at the information in the MLS and says, "Here is a parcel that may be of interest to us. It is right next to the freeway. It is big enough to put our warehouse on it. Let's go take a look at it. Well, who has the listing? Let's put in an offer." Senator O'Donnell continued, they put in an offer and they find out that the seller happens to be the State of Nevada. They would have to make an offer to the other broker so the other broker gets the offer. Then he has to run to the highway department and say, "Will you accept this." The highway department says, "Yes or no or we will counter back at $1.5 million instead of $1.7 million or whatever." He said, "Then the broker takes that back to the other broker and the other broker presents that to his buyer." Senator O'Donnell added, "That is sort of the way I see this thing going. Right or wrong, that is sort of what is going to happen here if you get a real estate agent involved." Senator Neal stated, "Mr. Chairman, I understand the method, but my question goes to the check on this to prevent those sweetheart arrangements from occurring down in the department. I am just trying to find out what authority the board will have in checking these things." Mr. Hutchins replied, "The concern is valid and I do not have any ..." Senator O'Donnell asked: Wouldn't you have to be the one to approve the final contract? It is a contract of sale. If it is a contract of sale, there is going to be a deed involved. The deed has to go to the escrow company along with the check from the buyer. That contract of sale, that deed had to be approved by the attorney general, I believe. The only thing I think that's missing out of here is ... I think Senator Neal brings up a good point. What gives you the authority to accept that deal? Knowing full well that the transaction is going back and forth, but what happens if your brother-in-law gets wind of a good land deal and says [they, grab the broker and put in an offer, I think they will take it.] And he comes in with an offer and you say [go ahead and take it.] What public protection do we give the public in terms of their dollars in having that scrutinized? There are five efficiencies of the expenditure of money. The most efficient is the money you spend on you. The least efficient is the money that you get from somebody else so that you can give it to somebody else. You do not care, it is not your property. I think we need to feel some efficiencies in here. Mr. Hutchins stated: One of the checks would of course be the fair market value. That is the main purpose for this change in legislation. We think this would be a better way to get fair market value, so obviously that is one of the biggest considerations that the department would have. Does this give us fair market value? Senator O'Donnell stated that it does not prevent the sweetheart deal. Mr. Hutchins stated that there are a couple of options; it could be upon approval by the board, or it could be upon approval by the director. Senator Lee asked, "I guess I could ask someone what is in the present law. Forget this bill that stops checks on the sweetheart deals. Is there anything in the present law that does that?" Mr. Hutchins stated: The only check we have is what you see in paragraph 2 on lines 28 through 33, which is already followed by the department. That is sold at public auction or sealed bids. There are some exceptions to that in subsection 1 when the property, as you see on pages 1 and 2 ... different types of situations where the property has been acquired in a certain way by the department or obtained from a specific individual or entity. Now the department is done with it and they may have to sell it back to that entity if it is an adjacent property owner, or something like that. There are those types of situations, but generally the law covers that right now; how the department has to deal with this property. So, if it is at a public auction or sealed bids, then it goes to the highest bidder. Senator Lee stated: So then public scrutiny, Mr. Chairman, or the guaranty of the citizen is that they have to accept that lowest bid, whatever it was being whatever it was in whatever manner that bid was received by whatever energies that were spent to try to get that bid as high as it could be, there is nothing there that says any of that. I could just go ... we could have somebody do a bid and we have not done anything to try to sell that property to its true worth. There is still nothing there other than to say [public, this is the highest bid we could get]. Mr. Hutchins replied that was the reason for the legislation; to try to get some of those specialized properties where NDOT thinks they can get a higher price for it. Senator Shaffer asked, "Is there any chance that it could be subject to the board approval after the final sale? Then it is not just on your shoulder." Mr. Crawford replied: My only concern is that our board does not meet on a regular basis and it would be very time consuming. We could have 3 to 6 months between board meetings. Which for some buyers may be too long to leave them hanging out. I think when we approach our board [with] such an authorization as this, they will certainly want to be apprised of our estimate of fair market value. The parameters for variance from that fair market value could be set right then by the board, which would delineate our authority in dealing with any broker. That would be one type of check that would be, maybe not foolproof, but reasonable. We have problems with auctions. Public auction on the surface sounds great, but there is no way for us to prevent collusion at public auctions. We have had that problem in the past where bidders will show up, agree amongst themselves not to bid; hoping to cancel the auction, drive the price lower and then show up the next time. That is something that we have to be alert to all the time. By and large it is still the preferred way of selling property, and by and large we do very well. Mr. Hutchins stated: Mr. Chairman, one of the other things that I noted in this legislation is that I am not sure that the language actually authorizes the department to sell that property to a purchaser. What I read the language [to do] is to authorize the department to enter into an agreement with a person qualified to solicit the purchasers. But then it does not go further and say that the department may then actually sell it to that prospective purchaser. You could put in there [for at least its fair market value or plus or minus 7 percent of the fair market value]. Senator O'Donnell said, "I would have a problem with plus or minus 7 percent because you know where it is going to go. Minus 7." Mr. Hutchins replied that he thought the committee needed to at least authorize the department to sell the property. Senator O'Donnell stated, "Fair market value, as determined by a realtor is when you find a willing buyer and a willing seller. That happens to be the fair market value." Senator Jacobsen said that he did not realize that a state agency or a department could hold title to property. Why does Nevada not have state lands? He stated it appears to him that NDOT would be better off to transfer that land over to state lands and be out of the picture. Mr. Hutchins stated that except for highway property, the Colorado River Commission and the university are the only entities in the state that handle property. Senator Jacobsen said, "I am thinking about a piece of property that we transferred to Carson City from NDOT. We got into a big hassle about the appraisal value and we did not transfer it for any money. It just seems to me that there has got to be a simpler way." Mr. Hutchins stated, "Another check in this situation is going to be the Federal Highway Authority (FHA) on federal property. They are going to want to make sure that they have gotten their money's worth out of this, too." Senator O'Donnell said: I am acutely aware of this whole thing because a lot of the district that the state is buying up parcels; state and county are buying up parcels, are in my district. I am probably more aware than most of the responsibilities and caveats that occur in purchasing this land. I think we need to work on this bill. This bill needs work, but I think it is workable. Senator Neal asked: Since we have this measure before us, to sell the property at fair market value, could you give me your expectation, if you have it, as to the cost of some of this property that might be sold? At what price you would expect it to be sold? Can you give me some examples? Mr. Crawford replied: As I previously mentioned, we have two properties right now that I know are in the range of $6 to $7 million in value. Most of the properties that we have are actually remnant pieces, or like what Senator O'Donnell described; one-half acre tracts with houses that we remove by public auction and then sell the land or whatever. The vast majorities, I would say, of the properties are less than $100,000, but we do end up with some that are very high value. I would estimate that at this time, on current projects, that we may have a surplus property that either is or will be surplus to our needs within the next year to year and a half, up around $20 million. That money has to be recovered from those properties and filed back into the Highway Fund. Senator O'Donnell asked: I noticed, and I am sure Senator Jacobsen has noticed as well, that there are certain areas in our freeway system that could be utilized for other purposes; but because they are owned by the state and they have a state right-of-way on them, they are not used. For example, there are areas underneath the freeway in Reno between the airport and Virginia street. It is elevated, the bus company is underneath there, but there are other areas that could be utilized for storage, some kind of convenient storage for people to drop their stuff off or pick it up. What is the status of that? Are you able to enter into a contract? Have people approached you on that? Mr. Crawford stated, "Probably not, it is vacant right now; the areas that you are describing. Apparently we have not been approached. The Regional Transportation Commission (RTC) facility; where you mentioned the buses, they are a lessee of the department's." Senator O'Donnell stated that down in Las Vegas, NDOT has the computer facility for the automated traffic signals underneath the expressway. Mr. Crawford replied, "I currently have a lease that may be expanded for record storage under the I-15 viaduct in downtown Las Vegas. That is currently being negotiated and that entails several blocks of that viaduct; which could be rather beneficial both to the department of transportation and to the other government entities in Las Vegas for record storage." Senator O'Donnell asked what about private business? Can NDOT entertain any of those types of contracts? Mr. Crawford replied that most of what is called air space leases, are private. RTC and the City of Las Vegas parking are the only two public uses. Senator O'Donnell asked about ground space around the circular egress; where NDOT has an off ramp that is in a circle. What about the middle of the circle? Mr. Crawford replied: We cannot lease anything within the control of access because of the safety and liability factor, but on all other highway systems; non- controlled accesses, we have numerous leases. South Carson Street is a good example. Most of those car dealerships out there are leasing from the state. Senator O'Donnell asked: What about placing that; in allowing the department to place those properties for lease. You may want to keep the right-of-way, you may want to keep the ability for the NDOT to expand the freeway into a third lane or something, but right now you are not using it. It is outside the fence, but you still need the property for future expansion, future off ramps or fly-overs; but at the present time you are not utilizing it. What about offering not only a fee simple type transaction, but a lease hold transaction as well. I would think that the highway fund could use ... If there is an individual that is willing to sit right underneath the freeway and still transact his storage, his business or whatever is appropriate; why not allow the department to do lease hold contracts as well? Mr. Crawford replied that NDOT does enter into long-term leases on the property. Senator O'Donnell stated that the problem is NDOT may enter into it, but how many people know that strip could be leased? Mr. Crawford answered: They don't unless you put a sign up. You contract with a realtor and let the realtor pay for the sign to put up there "For Lease Contact Me". There is a commission structure that is normally set out for the real estate agent to collect some money on the lease. You could term the lease and put various contract clauses that if they needed the land for any particular purpose they could have it. Agreed? Mr. Crawford stated that he would not have a problem with that at all. Senator Jacobsen stated, "I am thinking about like John Ascuaga's with the highway running there and, of course, there is parking underneath. It is his parking, but it is free parking. Does he lease that property underneath the freeway?" Mr. Crawford stated, "Yes, he does. It is on a relatively long-term lease with appropriate cancellation clauses, if we have to get in there for reconstruction or repair." Senator Jacobsen asked if he assumes the liability for that parking? Mr. Crawford stated that he does. Senator O'Donnell stated that if there was no more testimony on the bill he would close the hearing on S.B. 189, and he would appoint a subcommittee of one to deal with this bill. He appointed himself and said that he would bring it back to the full committee. Senator O'Donnell continued, "Jim Bilbray had a resolution (Exhibit C) that he wanted to have drafted dealing with the Highway Fund and not using the Highway Fund to balance the budget." SENATOR NEAL MOVED TO REQUEST A BILL DRAFT REQUEST. SENATOR LEE SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * Senator O'Donnell stated: We had a bill draft request from Bob Crowell dealing with short term leasers and the airport, and they say they are being taxed at the airports. He would hold that for the next meeting. There is a disparity (Exhibit D). The guys that are on the airport get taxed for an airport fee. The guys that are off the airport get taxed, but they can include that into their charge and pass it on to their customer in the form of a total dollar amount; but it does not show a tax. They want it equal; one way or the other. They want it so that the guys that are on the airport get treated the same as the guys that are off. SENATOR NEAL MOVED TO REQUEST A BILL DRAFT. SENATOR SHAFFER SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * Senator O'Donnell closed the meeting at 2:47 p.m. RESPECTFULLY SUBMITTED: Diane C. Rea, Committee Secretary APPROVED BY: Senator William R. O'Donnell, Chairman DATE: Senate Committee on Transportation March 7, 1995 Page