MINUTES OF THE meeting
of the
ASSEMBLY Committee on Judiciary
Seventy-Second Session
April 29, 2003
The Committee on Judiciarywas called to order at 8:14 a.m., on Tuesday, April 29, 2003. Chairman Bernie Anderson presided in Room 3138 of the Legislative Building, Carson City, Nevada, and, via simultaneous videoconference, in Room 4401 of the Grant Sawyer State Office Building, Las Vegas, Nevada. Exhibit A is the Agenda. Exhibit B is the Guest List. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.
Note: These minutes are compiled in the modified verbatim style. Bracketed material indicates language used to clarify and further describe testimony. Actions of the Committee are presented in the traditional legislative style.
COMMITTEE MEMBERS PRESENT:
Mr. Bernie Anderson, Chairman
Mr. John Oceguera, Vice Chairman
Mrs. Sharron Angle
Mr. David Brown
Ms. Barbara Buckley
Mr. John C. Carpenter
Mr. Jerry D. Claborn
Mr. Marcus Conklin
Mr. Jason Geddes
Mr. Don Gustavson
Mr. William Horne
Mr. Garn Mabey
Mr. Harry Mortenson
Ms. Genie Ohrenschall
Mr. Rod Sherer
GUEST LEGISLATORS PRESENT:
Senator Ann O’Connell, District 5, Clark County
STAFF MEMBERS PRESENT:
Allison Combs, Committee Policy Analyst
Risa B. Lang, Committee Counsel
Deborah Rengler, Committee Secretary
OTHERS PRESENT:
Jim Wadhams, Attorney at law, Wadhams & Akridge, representing Southern Nevada Home Builders
Brian Herr, representing the Realtors Association
John P. Sande, Attorney at law, Jones Vargas, representing Nevada Bankers’ Association
Bryan Gresh, Government and Media Affairs, The Gresh Group, representing Nevada State Psychological Association
Louis Mortillaro, Ph.D., President, Nevada State Psychological Association
Jeffrey Whitehead, Attorney, Nevada State Psychological Association
Alicia Smalley, representing the Nevada Chapter of the National Association of Social Workers
Helen A. Foley, Public Relations and Government Affairs, FaissFoleyMerica, representing Marriage and Family Therapists, Clark County Health District
Cynthia Pyzel, Chief Deputy Attorney General for Human Resources, Office of the Attorney General
Anthony Bandiero, representing the Nevada Petroleum Marketers and the Convenience Store Association
Chairman Anderson:
[Roll called.] There is a quorum present; anyone arriving late should be marked as present. We will start with S.B. 70.
Senate Bill 70 (1st Reprint): Makes various changes concerning property exempt from execution. (BDR 10-15)
Senator Ann O’Connell, District 5, Clark County:
Senate Bill 70 (1st Reprint) requests two changes in the current law. First, it changes the dollar amount a person can protect their home with a homestead from $125,000, as you see in the bill, up to $200,000. Those changes can be found on page 1, page 2, page 3, page 4, page 7, and page 9. The second change is the date; it changes from the year 1995, which was the last time the Legislature increased the amount of the homestead, to the current year of 2003. You will find that change on page 2, Section 1, subsection 6.
I have provided the Committee with two newspaper articles (Exhibit C), both from the Las Vegas Review-Journal. In the January 28, 2003, article, you will notice that the median new home is listed at $186,827. Then if you look at the April 26, 2003, article, you will see that the price has gone up $708. The projection is that it will continue to increase over the next 12 to 18 months. Therefore, you see the amount of $200,000. That was a number decided on by the Senate Committee on Judiciary. The number was suggested by Irene Porter of the Southern Nevada Home Builders; Irene isn’t with us this morning, but her attorney and mine, Mr. Wadhams, is here if you should have any questions about the number. It is a really simple bill; it doesn’t do anything other than those two changes that I have mentioned.
Chairman Anderson:
Isn’t it amazing that our figures have gone up so quickly in just a few years? Any questions for Senator O’Connell on a relatively simple piece of legislation? We are just moving up a number as a reflection of the reality of life. I don’t see any questions from the Committee.
Jim Wadhams, Attorney at law, Wadhams & Akridge, representing Southern Nevada Home Builders:
[Introduced himself.] We support this legislation [S.B. 70].
Brian Herr, representing the Realtors Association:
We are here in support of S.B. 70 as well.
Chairman Anderson:
Anybody else wanting to get on record in support of S.B. 70? Anybody in opposition to S.B. 70? [Close the hearing on S.B. 70 and open the hearing on S.B. 55.] Let’s turn our attention to the first bill on the agenda, S.B. 55.
Senate Bill 55: Revises provisions governing power of settlor and beneficiary of trust to alter certain statutory duties, liabilites, privileges and powers of trustee. (BDR 13-874)
John P. Sande, Attorney at law, Jones Vargas, representing Nevada Bankers’ Association:
[Introduced himself.] This is a pretty straightforward bill we requested that addresses trusts and trustees. If you look at Nevada Revised Statutes (NRS) 163.010 through NRS 163.200, there are various duties, responsibilities, and powers of trustees that Nevada recognizes. What we are proposing today is to amend NRS 163.060 and NRS 163.170, which are provisions that say not withstanding the other parts of the chapter, a settlor or a creator of a trust under NRS 163.160, or the beneficiaries of a trust under NRS 163.170, can add to or restrict liabilities, privileges, and powers of a trustee. In the case of a settlor, the trust documents must specifically say that they can do so, and in the case of beneficiaries, the trust documents can allow the trustee to have more or fewer powers than those provided in these sections. What we are proposing is simply, you will see it on page 2, lines 1 and 20, to delete NRS 163.050, which has to do with powers of sale by a trustee. That basically is all we would be doing by this amendment.
Nevada Revised Statutes 163.050 says that a trustee cannot sell property from the trustee to the trust or buy property from the trust. However, NRS 163.060 and NRS 163.170 say even if the instrument says otherwise, you could not do this and you would have to go to court to obtain authority to buy or sell from a trust. The Bankers Association, obviously, is one party that would like to see this amendment to allow the settlor, the creator of the trust, or the beneficiaries, if they wanted to, give the power of sale back and forth. It doesn’t relieve the trustee from any fiduciary responsibility to act fairly and not abuse the trustee’s power, but it makes a lot of sense.
I will give you a couple of quick examples. In the case of a corporate trustee, like a bank, if it made sense, the trustee could buy insurance from an affiliate of the trustee, an affiliate of the bank; that might save money for the trust. Obviously, it would have to be in the best interest of the trust or the trustee would be liable. When I first started practicing, we didn’t use trusts hardly at all except under a will. Now, it is almost malpractice if you don’t recommend to a client that they consider setting up a trust to avoid probate. Typically, these trusts provided upon the death, for a husband and wife, if one of them…you set up two trusts in an attempt to avoid estate tax. That is becoming less of an issue these days, since they are bumping up the amount you can pass tax-free, but there still are some potential estate tax issues. In a typical family, assuming the husband dies first, he would set up two trusts and the surviving spouse would be the trustee. That’s typically the way it would occur.
Without this amendment, suppose you had the family cabin and the surviving spouse got that on the death of the husband. You have the other trust that’s created for the benefit of the wife during her life, but on her death it goes to the children. You might want to have a situation which happens very often, where somebody says, “I would like to buy the family cabin. I would like to have the trust buy that so that it will end up in the estate and go to the children. We’ll keep it in the family.” Without this amendment, you wouldn’t be able to do that type of thing, even if the trust document provided that you could without going to court, which is a fairly costly adventure many times and most people don’t want to do that. So what S.B. 55 does, again, is allows the trust document or the beneficiaries to say, “We would like the trustee to have the power to buy from the trust or to sell to the trust.” This does not in any way relieve the trustee from the liability from breach of trust.
Chairman Anderson:
So, I set up my trust; whereas before I may have set up my will, now I set up a living trust instead. I recognize it is a living trust because I am still alive. I set up the living trust, I am going along merrily, and within that trust, I cannot take, since I am in this particular case the settlor, away from their normal powers even if I would like to. Their responsibilities will include, if I have left the bank as the institutional guardian of all my assets, my stamp collection, my railroad tracks, and all the rest of things that I’ve got out there, them guarding those assets for me. Then if I decide that I want to sell that off, I get to do that, only if I pass this [S.B. 55]?
John Sande:
Typically, it would be an irrevocable trust. You would set up a life insurance trust for your kids, you pass away, and someone else is a trustee.
Chairman Anderson:
Is there a certain level of mischief that the bank or the trustee would do in setting up insurance, other real estate agencies, and other kinds of corporations it might have under its corporate entity that they are going to do business with themselves and thus be a greater profit for my trust?
John Sande:
There is always a possibility of fraud or breach of trust in any situation. If you are going to be a bad trustee, you will be a bad trustee and ignore this section anyway and get caught. All S.B. 55 says is that if the trust, if the settlor, the creator of the trust, wants the trustee to have power of sale and they put it in the document, that should be recognized by the state of Nevada as legitimate and not prohibited. Currently, you would have to go to court to get it changed. My understanding is that this is a rarity under the law and other states do not have this provision except for one or two in the United States. So S.B. 55 brings Nevada into the modern era.
As I pointed out, I think the reason this is important is because 20 years ago you did not create that many trusts. Now almost everybody who does estate planning, rather than doing a will, sets up a trust. You have to have, in my opinion, flexibility. It does apply to corporate trustees, but even more importantly, it applies to the family situation where you have assets that you want to get into the trust that’s been created on the death of one of the settlers. You want to be able to buy that back and forth for the benefit of the remainder beneficiaries.
Assemblywoman Buckley:
I must be reading this wrong. Just looking at NRS 163.050, which is what we are proposing to eliminate, this seems to be the conflict of interest statute, not having anything to do with the trustee’s power to buy and sell to benefit the estate. But rather it says you can’t buy and sell and keep the profits or give it to your partner or your employer or your relatives. If there is going to be a conflict of interest, you have to get court approval. What am I missing here?
John Sande:
NRS 163.050 says,
No trustee may directly or indirectly buy or sell any property for the trust from or to itself or an affiliate, or from or to a director, officer or employee of the trustee or of an affiliate, or from or to a relative, employer, partner or other business associate of a trustee, except with the prior approval of the court having jurisdiction of the trust estate.
So very simply this means that you cannot buy or sell property. If you are a trustee, this would say you cannot buy or sell property from the trust without court authority, and it adds all that affiliate language so that if you were a corporate trustee or partnership or something like that, it would include everybody else in the world. What I am saying is, in this modern era of trusts becoming so common, you would want to have that if the settlor specifically put that power into the trust or if the beneficiaries specifically consent to it.
I happen to practice a lot in this area. It makes no sense to have that prohibition and require somebody in a family situation or even a corporate situation to have to go to court. It’s contrary to what other states are doing. It’s not a conflict of interest. There’s a potential there, obviously, any time you own property and you are selling it to a trust that you are a fiduciary for. But if the creator of the trust specifically says, “I want you to have that power,” I can give you a lot of examples where you want to have that.
Assemblywoman Buckley:
I can see where it makes sense if… I don’t know whether you differentiate between personal trusts and someone who is not responsible for the creation of the trusts. For example, my husband and I have a trust. If we want to sell our house, we should be able to sell our house, and when we get a new house, it would go into the trust. But where you have a bank as a trustee, why would we want the bank to be able to sell the property to its affiliate without having the court involved? Let’s say it’s an independent trustee who is not a relative. My husband and I die and I have a trustee who is in charge of my estate and in charge of my kids. Do I want him selling my house to a relative where there might be a conflict of interest for the price that does not inure to the benefit of my children?
John Sande:
What I am saying here is that, whether you sell to an affiliate or somebody else, there is always a potential, whenever you are a trustee, for abuse if you are buying or selling property to a trust. Let’s take an example where you have a corporate fiduciary; you have a big life insurance trust created for the benefit of your children. On your death there are life insurance proceeds in the trust. You would have two trusts: a life insurance trust and then another trust with a corporate fiduciary managing the business of the decedent. The remainder men say, “I like you, so we’ll get this on the death of the surviving spouse. We want you to go and buy the business out of the trust.” Without this language, even though that’s clearly something you would want to do, you couldn’t do that without having to go into court and getting court authority. I am saying that this is so common on an everyday basis I have people that in most cases just ignore this section. But where you want to have family situations, corporate trust situations, or you want to have that ability… If you are defrauding somebody, you are going to defraud him or her in any event. I don’t think this language… The existing law only hurts honest trustees that can’t go and deal with the fiduciaries. I don’t think it is any stretch as far as passing this legislation and giving more authority to fiduciaries.
Assemblywoman Angle:
It is my understanding that this is permissive. So when you set up the trust, if they want this in there, they can have it. Otherwise, they can “not allow” this kind of power to go to the trustee. Is that correct?
John Sande:
That is an important point. You would have to specifically put into the trust document that the trustee has the ability to sell property to the trust or buy property from the trust. That’s not the normal language you have in existing trusts. The other section is where you did not have it in the trust, but you go after the death and talk to the beneficiaries and say, “We want to buy the family homestead so that it doesn’t go someplace else.” That would be the other section. It is only if you specifically put it in the document.
Assemblywoman Angle:
You can put this specifically in the document at any time; it doesn’t have to go in when you set the trust. I am the trustee for my father’s trust. He is the settlor, so he puts the property in and out of the trust all the time. But at some point he may get to the place where he can’t do that and he may want me to do that for him. Can we at any time alter that trust with this provision?
John Sande:
Is your father’s spouse alive? [Ms. Angle replied in the negative.] Upon his death, it would become irrevocable. If he did not change it and put that language in before his death, you would have to go to court to be able to buy or sell property from the trust.
Assemblywoman Buckley:
So if there was the power of the sale in the trust, someone in that situation could sell the property?
John Sande:
Only if the power of sale specifically said that the trust had the power to sell to the trust or buy from the trust. A normal power of sale would not be enough to overcome the prohibition on sales back and forth between the trust and trustee.
Assemblywoman Buckley:
Would there be any way to change this statute to allow someone in that situation to put it on the market and not have to get court approval if the trust gives them the power? Won’t this statute just govern if someone wanted to sell it to a relative and not do a “commercially reasonables” sale process?
John Sande:
If you have the power of a sale, then you could sell it to anybody. I don’t think that this is not talking… A trustee can sell without this section here, can sell to a relative…not a relative of the trustee, but could sell to a relative of the decedent; that’s not prohibitive. Normally you have a power of sale in the trust document that allows the trustee to sell to anybody as long as they don’t breach their trust.
What this is talking about specifically is power of sale between a trust and a trustee or a relative of a trustee. If you put specifically in the trust document, “I want to have the trustee have the power of sale to the trust or to a relative of the trustee,” if you put that in there, our change would allow you to do that and to make those sales without going to court. A lot of families, when creating these trusts, get into a situation where they have do something like that, they have to make some sales back and forth for one reason or another to get cash to the surviving spouse or whatever it is to get other types of assets in. Without S.B. 55, technically they would have to go court; I think a lot of them ignore it.
Assemblyman Mortenson:
You keep making examples where they are beneficial for the trust, but I keep thinking of examples that would not be beneficial for the trust, when the trustee is able to buy things out of the trust without going to court. It just seems like if there are a bunch of small children in that trust and the bank, as the trustee, can buy things out of the trust, that may not be very beneficial for the trust.
John Sande:
If you look, it is common law as well, on line 6, page 2, it says:
A provision of the trust instrument is not effective to relieve a trustee of liability:(a) For breach of trust committed intentionally, with gross negligence, in bad faith, or with reckless indifference to the interest of a beneficiary; or(b) For any profit that he derives from a breach of trust.
What I am saying is that there is always a possibility of abuse. Most of the time, when you have a problem with trusts and trustees, [it is because] the trustee doesn’t follow the trust document, just ignores the law, and goes out and does whatever he wants to. If you are going to have a bad trustee, this provision is going to be irrelevant to them. It is very important to allow trustees to have as much power as you can to deal as though they were the individual that died, or else you are going to end up spending a lot more money and not really taking care of the beneficiaries. This is a good proposal for the good trustee. The bad trustee, I don’t think it is corporate trustees, other people who are going to ignore the best interests, sell things to relatives and stuff like that, this is not going to affect them because they are going to ignore the law.
Assemblyman Mortenson:
If you have some young children in the trust, who determines whether or not the trustee has done the best thing for the trust?
John Sande:
I am assuming you have an inter vivos trust because, obviously, if you have a will you get to spend a lot of attorney fees. I will be in there to get a guardian for the children appointed by the court. But in a typical circumstance you have a husband and wife…
Assemblyman Mortenson:
Suppose they were both gone.
John Sande:
…then you would have a relative or a corporation. If you have a corporation, and you have any issue… I can tell you this, if you have a corporate fiduciary, a bank, they always have a lawyer representing the bank or the trust company. Whatever it is, if there is any issue, any at all, we will go into court anyway because we like to get that stamp of approval. But if it is something simple, then you don’t want to spend the time. It is very costly to go into court. It costs you a lot of money just to file the petition and get it approved. What we are trying to do is streamline it in the normal circumstance. To me, it makes a lot of sense. Most states in the nation, I’ll get you the information on that, but I think all of them, or almost all of them, allow this to occur.
Chairman Anderson:
So if I have a piece of property with somebody else who is a family member and I have the rest of my property in a trust, which includes my share of that piece of property, then I want to sell my share of that property to another family member. I would have to go to court in order to do that, technically, if I were to be truthful with the law, because my wife and I had a trust rather than a will or other kind of common property, if we were going to follow the letter of the law?
John Sande:
If you owned property, “tenants in common,” with your sister and you want to sell that to her, there would be no problem with that. But once you become a trustee of a trust under the existing law, you cannot do that regardless of what the trust document says unless you go to court. I would emphasize, the settlor or the creator of the trust must put it in there, it must say, “I want to have my trustee have that power.” Yet, existing law is saying, “We don’t care if you put that in the document specifically, because we are not going to allow you to do that because we don’t trust your judgment.” That is what S.B. 55 does say. If the settlor who created the trust or the beneficiaries say, “We want to have this,” I think, from a public policy standpoint, it makes a lot of sense to avoid the expense of going to court.
Assemblyman Horne:
In the current language or current practice, isn’t the oversight of the court to look… You can have the authority by the settlor giving the trustee the authority to sell property; however, the court can overlook whether or not those sales are appropriate or fall within the intent of the settlor, because the settlor at some times may not be competent enough to recognize when a trustee is going outside the intended scope of that authority. The way we have it currently, if I am the settlor and I say, “Yes, Mr. Sande, I want you to have the authority to sell property because I want to keep this trust liquid, active, or whatever,” and then you go start making sales that may not be prudent. Currently, you have to go to court and the judge looks at that, and the judge takes into account that “Yes, Mr. Horne wanted you to have this authority; however, I think you have gone outside the scope of what he wanted this authority for.” You would be removing that here.
John Sande:
I would not be removing the ability of anybody to question it and go into court. The Nevada [Revised] Statutes specifically says that every trust, including an inter vivos trust that’s normally not subject to probate, is subject to the jurisdiction of the court, so if there was any question, any beneficiary could go into court and say, “We don’t think this is correct,” and the court would make the determination. If you don’t pass this law, what you are saying as a public policy reason is, “We don’t trust the settlor and the trustee to act appropriately and we are going to require any time anybody wants to sell property from the trust to the trustee or the other way around, that they specifically have to go into court to file a petition and have the court accept jurisdiction, have a hearing, and make a determination.
What I am saying is that in most cases that is putting a burden upon, especially a lot of these families that would be technically…especially if they have real property, they go to a title company, and the title company wouldn’t do it. Again, I point out that in the normal trust documents that I have seen, I don’t normally see this type of language, but there might be circumstances where a sophisticated settlor would put that power into the trust because they want to have, maybe it is a child of theirs or someone that is going to be the trustee, and they want them to have the ability to sell back and forth. If you don’t do this, they have to go into court.
Assemblyman Mortenson:
What would it cost to go into court, typically, in a situation where somebody in the trust wanted to sell a piece of property?
John Sande:
Obviously, it depends upon the trust and if it’s contested. If there were no contest, I would say it would cost at least $1,000 by the time everything got done.
Chairman Anderson:
Anybody else like to testify in support of S.B. 55? Anybody else like to testify against S.B. 55? Let me close the hearing on S.B. 55. Let’s turn our attention to S.B. 65.
Senate Bill 65 (1st Reprint): Allows formation of certain professional corporations. (BDR 7-335)
Bryan Gresh, Government and Media Affairs, The Gresh Group, representing Nevada State Psychological Association (NSPA):
[Introduced himself.] I thank you for allowing us to bring this bill before your Committee to testify in support of S.B. 65. By way of a brief setup, permit me to say that S.B. 65 will provide patients with a diversity of treatment options available under one roof, the so-called “No Wrong Door Approach” to available mental health services. Originally, Dr. Louis Mortillaro, President of the NSPA, was going to travel to Carson City to testify in person on this bill this morning. Unfortunately for our purposes, he is currently an expert witness in two cases taking place in Las Vegas, today and tomorrow, and he cannot, for obvious reasons, venture too far from the courthouse. However, he does join us via teleconferencing. With your permission, Dr. Mortillaro and our attorney, Jeffrey Whitehead, are both in Las Vegas and will briefly walk the Committee through some of the salient points.
Louis Mortillaro, Ph.D., President, Nevada State Psychological Association:
[Introduced himself.] Mr. Gresh has distributed my comments (Exhibit D) to yourself and the Committee. I am not going to repeat them here; I am just going to make a few points. Senate Bill 65 (1st Reprint), as written, amends NRS 89.050. It will change the professional corporation law to include psychologists, marriage and family therapists, licensed clinical social workers, and psychiatric nurses. If the bill is passed, it allows for the formation of a professional corporation composed of all of these licensed mental health professionals that will be able to offer evaluation, consultation, and psychotherapeutic treatment for clients.
We believe that this bill will offer a great range of psychological and mental health services in one convenient, centralized location. As we know, we are in a highly regulated, managed care environment, so a corporation with other mental health professionals makes good business sense relative to the sharing of practice costs, ownership of real and personal property appropriate to the business, and the ability to invest corporate funds. Professional corporations can develop an economy of scale to minimize costs in this highly regulated and managed behavioral health service industry. Individuals in such a multi-disciplinary professional corporation will allow the partners to provide not only the quality but also the quantity of mental health services.
Without the passage of S.B. 65, these advantages cannot be achieved under the current law as it is written. This law does not adversely affect consumers or other licensed professionals. This law, if passed, will expand multi-disciplinary practice opportunities for psychological, marriage and family therapists, social workers, and psychiatric nurses. Mr. Chairman, I appreciate the opportunity to speak before the Committee this morning. I don’t wish to take up any more of your time; our attorney, Mr. Whitehead, is here to provide the technical explanations if needed.
Chairman Anderson:
Mr. Whitehead, any questions or observations you want to bring to the attention of the Committee?
Jeffrey Whitehead, Attorney, Nevada State Psychological Association:
Answering any questions that may arise, I don’t see anything; I believe the presentation by Dr. Mortillaro was straightforward and to the point.
Alicia Smalley, representing the Nevada Chapter of the National Association of Social Workers:
[Introduced herself.] We concur with this bill. I just wanted to let you know that social workers are the largest providers of mental health services in the country. This would be a way for us to work together with other professionals.
Helen A. Foley, Public Relations and Government Affairs, FaissFoleyMerica, representing Marriage and Family Therapists, Clark County Health District:
[Introduced herself.] We too support the legislation [S.B. 65].
Chairman Anderson:
Ms. Jeannette Belz of the Nevada Psychiatric Association also is supportive of S.B. 65. Anyone else need to get their name on the record? Anybody wishing to speak in opposition or neutral on the bill that wishes to be heard? Let me close the hearing on S.B. 65 and bring it back to Committee. Let’s then turn to our fourth and final piece of legislation this morning, S.B. 315.
Senate Bill 315 (1st Reprint): Provides that cigarette vending machines may be placed in public area only if persons who are under 21 years of age are prohibited from loitering in that area pursuant to certain statutes. (BDR 15-435)
Cynthia Pyzel, Chief Deputy Attorney General for Human Resources, Office of the Attorney General:
[Introduced herself and submitted Exhibits E and F.] [I am] here on behalf of John Albrecht. We are here in support of S.B. 315; this bill is a small and very necessary step to further protect Nevada’s children from tobacco. The bill proposes to ban cigarette vending machines except in “adults only” areas. “Adults only” areas are described as gaming and bar areas where minors under 21 [years of age] are prohibited from loitering and under other state laws.
The Office of the Attorney General is assigned the responsibility to conduct compliance checks to enforce the state law prohibiting the sale of tobacco to minors under [the age of] 18. Those checks include cigarette vending machines. The businesses where vending machines are located have been very cooperative after a sale to a minor has been made from a cigarette vending machine and our office finds out about it. Our office asks them to move the machine to an “adults only” area, and generally the businesses move the machine. After it is moved to an “adults only” area, the Attorney General does not conduct compliance checks on the machine. In addition, when businesses require, a representative will visit the property to assure that the vending machine is placed well within the “adults only” area to assure that youths do not have access to that machine.
At this time, the Attorney General can identify approximately 20 cigarette vending machines that are located outside of “adults only” areas. However, cigarette vending machines are used by underage youths as a source of tobacco products. The youth buy rate for cigarette vending machines is 55 percent compared to 12 percent for all tobacco outlets. According to the 2001 Youth Risk Behavior Study (YRBS), 7.5 percent of high school students who purchased their own cigarettes purchased them from a cigarette vending machine. The 2001 Youth Tobacco Survey (YTS) shows a higher result; it says 19 percent of high school youths who bought cigarettes bought them at a vending machine. According to the YRBS, 42 percent of middle school students who bought their own cigarettes purchased them from a cigarette vending machine. The YTS shows a higher result; it says 53 percent of middle school students who purchased their own cigarettes purchased them at a cigarette vending machine.
In conclusion, despite voluntary efforts by the Attorney General and businesses, vending machines remain a significant source of cigarettes to both middle school and high school students. This bill [S.B. 315] would ban cigarette vending machines from being placed outside of gaming and bar areas, which would further reduce youth access to tobacco.
Chairman Anderson:
I have heard stories about where vending machines are all the time. I am always curious because in my experience they are never in the places that people tell me they are. As to the 10 to 20 places, are they typically at theaters that are in common with casinos?
Cynthia Pyzel:
I am not certain of that; I am here on behalf of John Albrecht and I would be happy to have him furnish you with that information relative to the exact location of those types of machines. As I said, typically when our office goes in to do the checks and the compliance searches, the business operators are very cooperative, but there have been some people who have not been cooperative; this is an opportunity to narrow that area of non-compliance.
Chairman Anderson:
Have you seen the list?
Cynthia Pyzel:
No, sir, but I would be happy to get that information to you. I know Mr. Albrecht has a huge amount of information on this. He is away in San Diego today, teaching a class on tobacco enforcement, and he apologizes for not being here.
Chairman Anderson:
Because you can’t have them in all these different places—public elevators, waiting rooms, schools, hospitals, school buses, or all those other places. I would like to see the list.
Assemblyman Carpenter:
I have a hard time understanding the letter (Exhibit E) that says, “resorts with gaming areas could sell tobacco at vending machines on their gaming areas and at their gift and other retail shops.” I don’t know what we are trying to do with this bill. Looks to me that we are getting to the point where we don’t need vending machines any more.
Assemblywoman Ohrenschall:
I wish to make my standard disclosure that because I am connected with a corporation that deals, among other things, with tobacco, I will not be voting or participating in the discussion of this bill.
Assemblyman Horne:
Do you know why, it seems the language was changed from prohibitive to permissive, from cigarette vending machine “must not” to “may.” I was wondering why that change? It seems to me it would be better if it was “must not be placed in a public area if minors under 21 years of age are prohibited from loitering there.” See what I am saying?
Cynthia Pyzel:
Yes, I do. I am not familiar with the history on this bill. It would seem to me that it appears to be a legislative attempt to make it clear that “adults only” areas are the ones you are intending to allow vending in, and then all others, not certain delineated areas, but in all other areas, they would be prohibited. I would be happy to get that information back to you as well.
Anthony Bandiero, representing the Nevada Petroleum Marketers and the Convenience Store Association:
[Introduced himself.] We do want to go on the record in support of this bill [S.B. 315]. We think this bill is in the right direction of helping prevent underage smoking. We would go as far as support Mr. Carpenter’s observation that we probably shouldn’t have any vending machines because of their easy access by underage smokers. That’s all we have to add; thank you.
Chairman Anderson:
That would probably be somewhat beneficial to the retail association.
Anthony Bandiero:
I thought about that and I thought that some people would actually think that this is a benefit for us, but actually we are very supportive of [discouraging] any underage smokers. If it helped their business, it would be a side issue.
Helen Foley:
We support the legislation. The reason why, although there are only a few locations that have the vending machines, in those locations people can buy without being supervised. If you are in a bar or a casino and children are not allowed to be in those locations, it more difficult for them to acquire the cigarettes. We support it [S.B. 315].
Chairman Anderson:
You usually follow these pieces of legislation pretty carefully; Mr. Horne asked the question relative to the amendment. Could you explain to the Committee, were you knowledgeable about how that went from being in the negative to permissive language?
Helen Foley:
I heard the testimony and heard what they wanted to do, but the way the amendment has come out is not exactly what I remember. Not that it’s incorrect, but I believe they were looking at whether or not it would be a crime for someone to purchase the cigarettes from the vending machine rather than just removing the vending machines from the areas where they would be unsupervised. It doesn’t look as clear in the revised bill that it’s exactly what it did. So my answer is that I don’t have a good answer for you.
Risa Lang, Committee Counsel:
It looks like it may have been a suggestion, but I think it is just a semantical thing that’s a drafting choice. We could certainly change it back. I think they mean pretty much the same thing to say that it “may be placed only if” or to say it “must not be placed unless.” It could go either way. But if it seems clearer to express the intent of the Legislature, we could certainly change that.
Chairman Anderson:
The way that it is drafted, do you think it meets the needs of your organization?
Helen Foley:
I think that it does. The concern that the Health District had was for children to be around smoking and clearly places where children are not allowed, where they have to be over 21 [years of age], is an appropriate location for machines not to be.
Chairman Anderson:
Anybody else wish to testify on S.B. 315? Anybody in opposition to S.B. 315? Let me close the hearing on S.B. 315 and bring it all back. It seems to me that all four of these bills we could move on today; what’s the pleasure of the Committee? Mr. Carpenter, do you wish us to hold up on S.B. 315; you had some questions you wanted answered?
Assemblyman Carpenter:
I don’t know if the one sheet we have here covers vending machines in their entirety because if it does, then the letter (Exhibit E) really confuses me. If they can be in a gift shop, there will be all kinds of kids down there. I don’t see where they can be supervised. There are all kinds of kids going through bars to get to showrooms.
Assemblyman Conklin:
I am really confused about this one. I have two problems. It seems like machines are where a lot of our kids get these and we are talking about making it more available through machines; that’s what it appears to me to the bill. Then it goes to the heart of the next question, maybe we don’t need to have machines. We don’t have machines for beer. Why? Because it is illegal for people under 21 [years of age]. So are cigarettes; maybe we don’t need machines either. I am not sure I really like this bill.
Chairman Anderson:
Are you suggesting, you would support Mr. Carpenter’s view that there should be no vending machines, period?
Assemblyman Conklin:
For cigarettes, I’d seriously consider that, yes.
Assemblyman Mortenson:
I have a little bit of heartburn on S.B. 55. We were told it cost so much money to go through court and then we learned that it’s about $1,000. When you are selling something, a house or a piece of property, that’s a small fraction of the cost. To give a trustee the ability to buy and sell freely out of the trust just scares me a little bit.
Chairman Anderson:
So then S.B. 65 is the only one we have where no one has raised questions. We are waiting on some questions on S.B. 55, S.B. 315, and S.B. 70. The Chair will entertain a Do Pass motion on S.B. 65.
VICE CHAIRMAN OCEGUERA MOVED TO DO PASS S.B. 65.
ASSEMBLYWOMAN BUCKLEY SECONDED THE MOTION.
MOTION CARRIED UNANIMOUSLY.
That would appear to go to Ms. Ohrenschall to present on the Assembly Floor.
Is there anything else in front of us? We are in the clear? We are adjourned [at 9:16 a.m.]
RESPECTFULLY SUBMITTED:
Deborah Rengler
Committee Secretary
APPROVED BY:
Assemblyman Bernie Anderson, Chairman
DATE: