MINUTES OF THE meeting
of the
ASSEMBLY Committee on Ways and Means
Seventy-Second Session
March 3, 2003
The Committee on Ways and Meanswas called to order at 8:10 a.m., on Monday, March 3, 2003. Chairman Morse Arberry Jr. presided in Room 3137 of the Legislative Building, Carson City, 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.
COMMITTEE MEMBERS PRESENT:
Mr. Morse Arberry Jr., Chairman
Ms. Chris Giunchigliani, Vice Chairwoman
Mr. Walter Andonov
Mr. Bob Beers
Mrs. Vonne Chowning
Mrs. Dawn Gibbons
Mr. David Goldwater
Mr. Josh Griffin
Mr. Lynn Hettrick
Ms. Sheila Leslie
Mr. John Marvel
Ms. Kathy McClain
Mr. David Parks
Mr. Richard Perkins
GUEST LEGISLATORS PRESENT:
Mr. Tom Collins
STAFF MEMBERS PRESENT:
Mark Stevens, Assembly Fiscal Analyst
Steve Abba, Principal Deputy Fiscal Analyst
Susan Cherpeski, Committee Secretary
Connie Davis, Committee Secretary
Chairman Morse Arberry Jr. called the meeting to order at 8:10 a.m. and indicated the Committee would hear the first item on the agenda.
Assembly Bill 74: Provides for revolving fund to finance remediation of brownfield sites. (BDR 40-518)
Allen Biaggi, Administrator, Nevada Division of Environmental Protection (NDEP), read a prepared statement (Exhibit C) to the Committee in support of A.B. 74. Mr. Biaggi said that Assembly Bill 74 would allow the establishment of a revolving loan program relating to brownfields. He gave an overview of what a brownfields site was, what the Division of Environmental Protection had been doing to encourage the redevelopment of property, and what A.B. 74 would do.
Mr. Biaggi explained that a brownfields site was real property that was contaminated or was suspected of being contaminated. Those sites were typically industrial or commercial properties that were abandoned or vacant due to hazardous substances present in soil or ground water. Mr. Biaggi said that serious ramifications could occur when contamination was suspected on a piece of property. The environmental cleanup of those brownfields sites was extremely expensive—hundreds of millions of dollars for large sites. Because of that cost and associated liabilities, many brownfields sites in the country and in Nevada were not cleaned up and were underutilized. Mr. Biaggi said that was because landowners, prospective buyers, and developers were reluctant to proceed with redevelopment even though the properties might be ideally suited and otherwise prime parcels of land. That could create decay in urban centers and increased the likelihood of sprawl where uncontaminated lands were pursued for development because the specter of contamination was not present.
Mr. Biaggi said that in 1999, Senator Dina Titus sponsored S.B. 363, which had established a brownfields voluntary cleanup program in Nevada. That bill allowed owners and operators of properties to voluntarily enroll in the program and conduct necessary assessment and cleanup activities without the fear of enforcement or penalties while removing much of the stigma associated with contaminated properties. The program also had provided a certificate of completion after remediation. That certificate gave prospective lenders and purchasers the security and assurances they needed to move forward with acquisition and redevelopment. A.B. 74 would take this program one step further by providing low interest loans to assist in the evaluation and cleanup of contaminated properties. That would provide further incentive to have affected properties evaluated and cleaned up.
Mr. Biaggi explained that capitalization of the program was funded by a $2 million grant from the U.S. Environmental Protection Agency to the state of Nevada. Those funds could be used to provide no- or low-interest grants to eligible recipients. Payments from those grants could be leveraged to make additional loans. Previous pilot brownfields grants had yielded very successful results in redevelopment efforts in Las Vegas as well as assessment projects in Reno, Battle Mountain, and Tonopah.
Mr. Biaggi said that revolving loan programs were not new to his agency. There had been a highly successful loan program relating to water pollution control that had operated for several years. The brownfields loan program would operationally be very similar to that program, which had assisted communities across Nevada in designing and constructing wastewater collection and treatment systems. Mr. Biaggi mentioned that the Nevada Division of Environmental Protection had been encouraging communities to consider applying for brownfields loans in the event that the program would be approved. Mineral County had been very proactive in that effort and was ready to initiate a project to evaluate a 240-acre former landfill.
Mr. Biaggi concluded by stating that he believed the establishment of a brownfields loan program, through A.B. 74, would be a win-win situation for Nevada and its communities by encouraging the assessment and cleanup of contaminated properties and by stimulating that interest through the availability of low- or no-interest loans. The program would ensure properties were utilized to their fullest potential, serve to reduce urban sprawl, and most importantly, protect public health and environmental quality. Mr. Biaggi indicated he would be happy to answer any questions from the Committee.
In response to Assemblyman Marvel’s question regarding the grant funding, Mr. Biaggi replied that it was a one-time grant of $2 million to capitalize the program. He explained that the loans would be made on top of that, and as the payments came in, more loans could be made, and it would be a revolving process so that additional capitalization would not need to occur.
Mr. Marvel asked if it would require additional personnel for the Division. Mr. Biaggi responded that he believed there was a fiscal note that detailed 1 or 1.5 full-time equivalent positions, and that was paid through the $2 million grant, so there would be no cost to the state. Mr. Marvel commented that there would be enough money made on interest to pay for the additional personnel, and Mr. Biaggi agreed.
Assemblywoman Chowning remarked that Mr. Biaggi had said the capitalization would come from the $2 million grant, and she asked what the federal requirements for that grant were with regard to a ceiling on interest rates or a time limit. Mr. Biaggi explained that the interest rates were tied to an index. He gave the example of the wastewater state revolving loan fund (SRF), which had been indexed to a federal grant program and the current interest rates were very low, between 2 and 3 percent. He said it had not been decided whether or not to cap the loans, but there was a concern that someone would want the full $2 million. The Division would prefer to spread out the money. Mr. Biaggi said those types of programmatic activities would be developed once A.B. 74 was approved.
Mrs. Chowning asked if there would be a time limit. Mr. Biaggi explained that the amount of time established for repayment of the loans would depend on the criteria that would be established upon approval of A.B. 74. Mr. Biaggi indicated that in the established SRF program, the maximum time allowed was 20 years, although many of the loans were for shorter periods of time. Mrs. Chowning asked if the grant money had to be distributed in a certain amount of time. Mr. Biaggi said that once the state received the grant, the state could prolong disbursement of the awards over a relatively long period of time as there was no specific time frame for distributing the loans.
Mr. Marvel asked if the loan program would parallel the Fuel Tax Fund that was used for cleaning up storage tanks. Mr. Biaggi said it was a similar program, although A.B. 74 proposed a loan program, whereas the Fuel Tax Fund was a reimbursement program and acted more as an insurance program. The brownfields loan program would be a grant program with revolving loans similar to the NDEP’s wastewater program and the Safe Drinking Water Act revolving loan program that was operated by the Health Division. Mr. Marvel remarked that the Fuel Tax Fund and the brownfields loan program could work together, and Mr. Biaggi agreed.
Chairman Arberry mentioned that there was a federal brownfields program, and he questioned whether the state would even need a program as a private individual or a public entity could apply to the federal government for those funds. Mr. Biaggi explained that the Environmental Protection Agency (EPA) had established a policy that the funds would be given to the states for implementation and operation of the program, which meant that a private person or a public entity could not go to the EPA to secure the grant funds, they would have to go to the state. The intent was to have the states administer the programs.
Chairman Arberry asked if there were criteria relating to a person in the private sector applying and reapplying for funds. Mr. Biaggi responded that the loans were primarily for municipal entities and quasi-municipal entities, although there might be opportunities in the future for the private sector to apply, but currently it would be for public entities. The goal was to distribute the money to as many communities as possible, so the criteria in terms of operating the program would relate to the amount of money, the need, environmental concerns, and other issues. Mr. Biaggi emphasized that the goal was to “spread the wealth.”
Chairman Arberry inquired as to how the money would be generated. Mr. Biaggi explained that there was a $2 million grant from the federal government through the EPA. The EPA Superfund program, which had been in place since the 1980s to clean up the most contaminated sites in the country, was being transitioned into the brownfields programs; thus, much of the money at the federal level that had been allocated toward the Superfund was being shifted to the brownfields program; consequently, the state of Nevada had received a grant.
Assemblywoman Gibbons pointed out that Section 12, page 2, of A.B. 74, specified that the funds should be used to finance the cleanup of a brownfields site or to provide other assistance to brownfields projects, but there were references to the Brownfields Restoration Act in the text of the bill as well, and she inquired if there was a difference between the act and the program. Mr. Biaggi replied that the Brownfields Restoration Act was the federal law that initiated the brownfields program and the grant was made under the Brownfields Restoration Act, so there was not an inconsistency in the bill. Mrs. Gibbons suggested that the wording might be changed to reflect that those two things were the same as it might be easily misinterpreted. Mr. Biaggi thanked her for pointing that out and said that would be examined.
Keku Kamalani, a UNLV intern working for Senator Dina Titus, read a prepared statement (Exhibit D) in favor of A.B. 74. Mr. Kamalani said that brownfields were defined as abandoned, idled, or underused properties where redevelopment or expansion was complicated by real or perceived environmental contamination. Brownfields sites typically occurred on or near properties that were formerly used for industrial purposes, such as chemical production, manufacturing, or any activity that might have resulted in soil or water contamination. Until an environmental assessment had been conducted, the property owner, developer, or purchaser might be unaware that the property presented an environmental risk. The uncertainty associated with a property’s environmental liability could slow or stop the development process. Mr. Kamalani stated that brownfields redevelopment was a form of recycling land; it was a means of reestablishing previously underused or underdeveloped property as a viable resource.
Mr. Kamalani explained that at the federal level there had been many attempts to address the problems associated with brownfields sites. Both the United States Senate and the House of Representatives had introduced legislation that provided funds to finance brownfields site activities, such as assessment and cleanup, and tax incentives to ease the cash flow or cost of capital for brownfields projects. In 1997 the Clinton administration had signed into law the Brownfields Tax Incentive which used the tax code to encourage non‑responsible parties—innocent owners and prospective purchasers—to undertake cleanup projects by offering incentives, such as making cleanup expenses fully deductible in the year incurred. The law also authorized $1.5 billion in incentives for cleanups undertaken by December 31, 2000. There had been additional legislation introduced which offered further protection for brownfields participants such as prospective purchasers and adjoining property owners, while other bills provided a more direct link between the EPA and state voluntary cleanup programs.
Mr. Kamalani said that had been the case in Nevada. In 1999, S.B. 363, sponsored by Senator Titus, had been passed and created a brownfields program whereby prospective purchasers of contaminated property could voluntarily enter an agreement with the Nevada Division of Environmental Protection (NDEP) to clean up environmental hazards on land, and in turn receive protection from liability for damages caused by the hazardous substance prior to the cleanup. Mr. Kamalani said that A.B. 74 would supplement the program by creating a revolving fund through which federal dollars could be distributed. Mr. Kamalani wished to commend Allen Biaggi and the Nevada Division of Environmental Protection (NDEP) for acquiring the grant.
Mr. Kamalani concluded by stating that brownfields development was important because many benefits were associated with the program. When contaminated sites were cleaned a healthier environment was the end result. Besides the environment, other benefits attributed to brownfields development included the creation of new jobs and improved property values. Revitalized, economically successful sites would attract additional industry and commercial enterprise to the state of Nevada and further the diversification of the business sector. That diversification of the business sector would promote diversification of the job market and labor pool. Economic diversification might reduce the cyclical slumps that could occur in mono-economies, such as those based solely on tourism. Mr. Kamalani felt that was especially important after the terrorist attacks of September 11, 2001, which had placed Nevada’s tourist economy at risk. Mr. Kamalani thanked the Committee and urged them to support A.B. 74.
Assemblyman Tom Collins, District No. 1, voiced his support of A.B. 74.
Chairman Arberry asked if there was any additional testimony. There was not. Chairman Arberry asked if there was a time limit on A.B. 74. Mr. Biaggi replied that there were federal deadlines, but the only urgency was in getting the program started and the loans distributed.
Mr. Marvel asked if the NDEP was going to need additional positions to administer the program. Mr. Biaggi explained there would be a transfer of 1 to 1.5 existing positions from other programs into the brownfields loan program. Mr. Marvel confirmed that there were no new positions requested.
Chairman Arberry declared the hearing on A.B. 74 closed.
Assembly Bill 122: Revises provisions governing calculation of basic support for school districts with declining enrollment. (BDR 34-963)
Mark Stevens, Assembly Fiscal Analyst, Legislative Counsel Bureau (LCB), spoke regarding A.B. 122. He provided background information on the introduction of the bill and indicated that the Fiscal Analysis Division of LCB had asked Douglas Thunder, Deputy Superintendent, Department of Education, to attend the meeting to answer questions.
Mr. Stevens explained that the hold harmless provision within the Distributive School Account (DSA) had been changed in the 2001 Legislative Session. It had been changed from a one-year hold harmless to a two-year hold harmless, which meant that if a school district’s enrollment declined in a school year, the district could use the previous year’s enrollment and receive funds from the Department of Education based on that higher enrollment. The provision had been changed to allow the school districts to use either of the previous two years’ enrollment totals. The two-year hold harmless program during the current biennium had cost approximately $15.7 million. Mr. Stevens indicated that he had provided the Committee with a report detailing the costs (Exhibit E). The report covered fiscal years 2002, 2003, 2004, and 2005. Mr. Stevens pointed out that FY2004 and FY2005 were estimates. In FY2002, the total cost of the program for the first year had been approximately $8.7 million, and in FY2003 that cost had been approximately $7 million, for a total of approximately $15.7 million.
Mr. Stevens referred the Committee to the handout (Exhibit E) and explained that there were two columns on the spreadsheet, one was the cost of the one-year hold harmless, the other was the cost of the two-year hold harmless. He pointed out that, according to the report, the amount saved, if the one-year hold harmless had been in effect in the current biennium, would have been approximately $8.6 million. Mr. Stevens explained that staff had reported that information to the chairmen of the Committee on Ways and Means and the Senate Finance Committee, and the chairmen had asked staff to request a bill draft request to bring that forward during the 2003 Legislative Session in order to initiate a policy debate on whether it was best to continue with the two-year hold harmless or to revert back to the one-year hold harmless, which had been the standard prior to the 2001 Legislative Session.
Mr. Stevens referred the Committee to the FY2004 and FY2005 portion of the report (Exhibit E), and explained that the Fiscal Analysis Division had estimated those cost totals for the next biennium. The Fiscal Analysis Division had taken the revised Governor’s recommendations for the basic support guarantee, which meant that the $50 per student for textbooks and instructional supplies would be taken out of the guarantee, as well as taking the additional amount that would be required for the Governor’s recommendation to fund the entire retirement contribution for K-12 employees, and converted that into a basic support by district. Mr. Stevens explained that the numbers were not completely accurate, but they had been estimated by taking the percentage in FY2003 and applying that relationship to FY2004. Mr. Stevens said the numbers would have been slightly different if they had been formulated using the Nevada Plan, but the Fiscal Analysis Division had done a quick estimation of the costs for the Committee. Mr. Stevens continued his explanation and said the Fiscal Analysis Division had taken the estimated enrollment reported by each school district and estimated which districts would be in a hold harmless situation. The report (Exhibit E) showed the cost of both the one-year and the two-year hold harmless. The cost estimated by the Fiscal Analysis Division would be approximately $4.8 million in the first year and $3.2 million in the second. With a two-year hold harmless instead of a one-year hold harmless, there would be a savings of approximately $3.2 million in the first year of the biennium and approximately $1.7 million in the second year of the biennium.
Mr. Stevens said that the Department of Education had also prepared a report that had been given to the Committee (Exhibit F). He explained the numbers in that report would be slightly lower because the numbers had been calculated using a different basis. The Department of Education had used the average basic support guarantees from FY2003 while the Fiscal Analysis Division had estimated FY2004 support guarantees, using the same relationship and increasing them for the increased amount that had been recommended by the Governor. Mr. Stevens said he would be happy to answer any questions and indicated the Deputy Superintendent from the Department of Education was present to answer questions as well.
Assemblywoman Giunchigliani indicated that the handout provided by Mr. Stevens also included charter schools, and she commented that, regardless of the hold harmless decision for regular school districts, she felt that giving money to charter schools whose children reentered the public school system as the charter school enrollment decreased was a policy issue that needed to be examined.
Mr. Stevens explained that currently state statutes deemed charter schools eligible for hold harmless monies, so if enrollment declined, the charter schools were still eligible for funds based on the previous year in a one-year hold harmless or based on the previous two years in a two-year hold harmless.
Ms. Giunchigliani opined that charter schools were a separate policy issue that needed to be segregated because she felt it was nonsensical to pay charter schools for the children attending those schools to reenter public schools. She felt the other policy issue that needed to be dealt with was the issue of declining populations in the rural school districts. Ms. Giunchigliani asked if those rural school districts would be able to project costs with the one-year hold harmless. She indicated that one of the concerns raised by the superintendents of the school districts was being able to provide notice to employees when there was a staff reduction with the one-year hold harmless.
Mr. Stevens indicated that prior to the 2001 Legislative Session the one-year hold harmless had been in effect. The 2001 Legislative Session had changed that to a two-year hold harmless. Mr. Stevens said the school district administrators would be better able to answer the questions regarding staff-reduction. Mr. Stevens explained that the theory of the one-year hold harmless was that school districts needed to plan for the number of students. The number of teachers given contracts was based on the number of students and if the number of students declined, the district was still obligated to the teachers. He said superintendents of the school districts or administrators from the Department of Education would be better able to explain those situations.
Ms. Giunchigliani asked that the Department of Education address why the change had been made from the one-year to the two-year hold harmless. Douglas Thunder, Deputy Superintendent, Department of Education, responded to Ms. Giunchigliani’s question and said the one-year hold harmless had gone into effect in 1980; in 1985 it became a two-year hold harmless, but it had reverted to a one-year hold harmless in 1987, and had been changed in 2001 to a two-year hold harmless. Ms. Giunchigliani asked who had requested the change in the previous session. Mr. Thunder said he was not sure, but it had not been initiated by the Department of Education. Mr. Stevens interjected that it had been a recommendation from the Legislative Committee on Education.
Assemblyman Marvel questioned the length of teacher contracts. Mr. Thunder responded that contracts were renewed on an annual basis, but there was a requirement that teachers be notified by May 1 of intent to rehire for the next school year.
Ms. Giunchigliani asked if a second count in the middle of the year would help the rural school districts. She commented that the count had traditionally gone down at the elementary schools but had gone up at the middle and high schools, and she wondered if the count procedure should be examined. Mr. Thunder said that had not been examined for several years, but the previous studies had indicated that the numbers on the designated count day, which was the last day of the first school month, were the highest totals for the year. Ms. Giunchigliani said that school districts often required their principals to have the count weeks before, so those numbers were not necessarily accurate in reflecting the number of students on count day. Ms. Giunchigliani remarked that she was not sure if that would change the numbers, but the count day process might be something to examine in the future.
Mr. Thunder wanted to point out that in the budgets there was not a line item for the hold harmless provision; it depended on basic funding in the Distributive School Account. In the event that the sales tax was lower or enrollment was higher in a given year, it would become an implemental increase and would result in a supplemental appropriation. Mr. Thunder stated that the Department of Education was not taking a stand on A.B. 122. He indicated that the Department of Education and the Fiscal Analysis Division agreed that the cash savings to the state would be approximately $3 million in FY2004 and $1.6 million in FY2005. He pointed out there would be an effect on the local school districts.
Ms. Giunchigliani remarked that if hold harmless continued, regardless of whether it was a one-year or a two-year hold harmless, there should be a line item in the budget, and Mr. Thunder agreed.
Chairman Arberry asked if there were any further questions or comments and Charlotte Petersen, Superintendent, Humboldt County School District, identified herself for the record and spoke in opposition to A.B. 122. She indicated that the Committee had received two handouts (Exhibit G and Exhibit H). She mentioned that she had testified before the Committee previously regarding the Distributive School Account, and she had provided additional information at the Committee’s request. She referred the Committee to the handout detailing the effects the change in hold harmless would have on various school districts (Exhibit G). Ms. Petersen explained that the report (Exhibit G) contained all the affected school districts with the exception of two.
Ms. Petersen said she had prepared the report for the Humboldt County Board of Trustees so that the Board would understand the Humboldt County School District’s financial situation. Ms. Petersen indicated the Board had wanted to discuss revenue, so she had taken the ending fund balance as of June 30, 2002, and compared that to the numbers calculated in the report to demonstrate what would happen in FY2003. The report showed that in FY2003 the DSA funding per pupil amount increased from $4,749 to $4,864, and then that amount had been held constant in order to calculate FY2004 and FY2005 because it was not known if changes might be made in the DSA funding. Ms. Petersen explained that the number from count day had been used to calculate FY2002 and FY2003, and an estimate for FY2004 had been made using a count that had been done in January and assuming that number would be the same in September for all the districts. Ms. Petersen emphasized that the numbers were estimates and there would be some inaccuracy; however, the numbers reflected the impact A.B. 122 could have on the school districts.
Ms. Petersen said she had been a superintendent in the state of Nevada for three years, and there were only four superintendents in the state that had been in Nevada longer than she had. She pointed that out to emphasize that the majority of school superintendents had been functioning under the assumption of a two-year hold harmless because they were unaware of the history that Mr. Stevens had provided earlier. Ms. Petersen explained that when she had been hired, she recognized the need to make extreme adjustments in the Humboldt County School District, so two one-room schoolhouses had been closed and 14 percent of the staff had been laid off. The administrative staff had gone from 19 to 14 people and the District had “tightened its belt” to get through that two-year period with the idea that the appropriate cuts would be made and additional cuts would be unnecessary as there would be reductions due to attrition for the next biennium. Ms. Petersen informed the Committee that in 1998 there were 4,286 students in the Humboldt County School District, and in 2002 that number had decreased to 3,451—one-fifth of the population. Ms. Petersen stated that Humboldt County had been greatly affected by the mine closures and the loss of other revenue, but she said the report was restricted solely to the Distributive School Account (DSA) funding. With the current two-year hold harmless, Humboldt County School District would lose approximately $1,643,908 in FY2004 and approximately $2,178,948 in FY2005 compared to the amount received in FY2002. If A.B. 122 were passed and there was a one-year hold harmless, Humboldt County School District would lose an additional $535,000 in addition to the $1,643,908 that had been projected with the two-year hold harmless in FY2004, assuming the DSA funding per pupil amount would stay the same. That meant, combining the estimated amounts for FY2003 through FY2005, Humboldt County School District would lose an estimated $4,588,325. With a one-year hold harmless, that amount would increase to $5,383,102 over that same time period.
Ms. Petersen emphasized that even with the two-year hold harmless, Humboldt County School District, and the other districts outlined in Exhibit G, would have a substantial decrease in funding. The one-year hold harmless would exacerbate that situation because it was unexpected and the districts had not planned for that. Ms. Petersen pointed out that Humboldt County had already cut programs, schools, staff, and administrators.
Assemblyman Marvel asked why the losses for Humboldt County were more than Elko County, which was a larger county. Ms. Petersen replied that the percentage of decrease was bigger in Humboldt County than in any other rural county. Ms. Petersen pointed out that the funding decreases in Esmeralda County seemed small, but relative to the overall funding, the cuts were very big. The size of the county had to be factored in. Ms. Petersen opined that Humboldt County was the county most affected by declining enrollment.
Mr. Marvel asked what the student to teacher ratio was in Humboldt County. Ms. Petersen indicated Humboldt County followed the mandates for class-size reduction, which meant the ratio was 15:1 in first and second grade; 18.5:1 in third grade; 22:1 in fourth grade; 26:1 in fifth grade; and 25:1 in high school. Mr. Marvel inquired as to whether the number of teachers would be affected if Humboldt County tried the Elko pilot program. Ms. Petersen explained that the number of teachers would not be affected as the ratio in the lower grades would increase and the ratio in the higher grades would go down.
Mr. Marvel questioned the enrollment numbers for the past four years, and Ms. Petersen said there had been a decrease of 835 students, the school district had gone from a high of 4,286 in 1998 to 3,451 in 2002. That was one-fifth of the school population. Mr. Marvel commented that the classes visiting the Legislature from Humboldt County did appear smaller.
Ms. Petersen pointed out that Eureka County had not been included in the report because Eureka had not been receiving funds from the Distributive School Account (DSA), and Storey County had not been included because Storey County would be gaining funds rather than losing funds. The report only covered those school districts that would be adversely affected by a change in the hold harmless provision.
Assemblywoman Giunchigliani asked when Ms. Petersen began budget preparation for the next school year. Ms. Petersen responded that she was currently working on the budget. Ms. Giunchigliani indicated that, because budget preparation was usually done in February and March, Ms. Petersen should know, based on the current enrollment numbers, what to plan for FY2004 in terms of enrollment and number of employees. Ms. Petersen explained that enrollment was difficult to determine because there was a decrease over the summer, as people tended to wait until school was not in session to relocate.
Ms. Giunchigliani pointed out that budget preparation had already started, but adjustments could be made. She said that the point of the one-year hold harmless was to allow for that preparation and adjustment. Ms. Giunchigliani said that Ms. Petersen knew what the current numbers were, and the budget for the next year should be that flat budget, and then depending on what happened in terms of enrollment, the budget would be adjusted accordingly. Ms. Giunchigliani commented that the one-year and two-year hold harmless provisions were not that different. The two-year hold harmless simply meant the state was subsidizing the school district for two years rather than one.
Ms. Petersen explained that there had been some areas that could be cut, and she had cut those areas as best she could, but the situation with staff reductions and unions made that difficult. Ms. Giunchigliani asked if there were seniority clauses in the teachers’ contracts, which guided dismissal of teachers. Ms. Petersen responded affirmatively and said that part of the problem with the budget cuts had been trying to maintain class-size ratios and programs, such as English as a Second Language (ESL), while making those cuts, and some cuts to those programs had been necessary.
Ms. Giunchigliani remarked that the class-size reduction mandates should not be a problem if overall enrollment was declining. Ms. Petersen conceded that was true, but she pointed out that it also meant less money for support staff, such as ESL teachers. Ms. Giunchigliani said it would be the same amount as the previous year, and Ms. Petersen responded that the two-year hold harmless had given them more time to make the cuts as it was very difficult to make such extreme cuts quickly and still maintain those support services.
Ms. Giunchigliani acknowledged those difficulties and said that the rural counties were different from the urban areas. She commented that it might be time to examine a dislocated worker program, which would make businesses that leave pay a cost for abandoning an area in order to assist those people that are affected. She said there were other factors that needed to be examined because the population decreases in the rural counties would be continuing.
Ms. Petersen agreed and pointed out when she was hired, she had walked into a situation where she had needed to make $200,000 in cuts after the school year had already started. The DSA funding was not the only area of concern; Humboldt County was losing other revenue as well.
Ms. Giunchigliani stated that there was a debate about taxes and structural problems because the state had never established a strong tax base, which might need to be dealt with constitutionally. She opined that the state had an obligation to fund education, and the state should do the best job possible, but that was very difficult without a stable, set tax base.
Ms. Petersen asked that the Committee consider, especially in dealing with the smaller rural counties, that there was a certain amount of money that the counties had to have in order to provide certain services. The Nevada Plan considered some of those factors, but it did not account for the exponential expansion.
Ms. Giunchigliani agreed and pointed out the Nevada Plan did have wealth equalization factors. She remarked that it might be time to consider consolidating some of the rural school districts.
Ms. Petersen interjected that the Humboldt County School District was very fortunate because cuts had already been made. She indicated that she had been a superintendent in Oregon, which was facing an even more difficult situation with 199 school districts.
Curtis Jordan, Superintendent, Esmeralda County School District, spoke in opposition to A.B. 122. He said the change from a two-year to a one-year hold harmless would cost the Esmeralda County School District approximately $99,597 for FY2004, which was approximately 9 percent of the total budget. That would neutralize any additional funding that the legislative process might provide with the DSA funding for the Esmeralda School District. Mr. Jordan indicated that the estimates provided by Mr. Thunder showed that if DSA funding remained the same as it was now, there would be a reduction in funding of approximately $109,156 for the two-year hold harmless, and $208,753 for the one-year hold harmless. The combined amount of loss of DSA funding for FY2002 through FY2005 would be $401,363 with a two-year hold harmless and $504,173 with a one-year hold harmless.
Mr. Jordan indicated there was another bill, A.B. 45, that would also reduce funding by removing funding for students that dropped out or left the district after count day, and that would cost Esmeralda County School District approximately $40,000, which for Esmeralda County was a fairly large amount. Mr. Jordan said A.B. 45 would not provide allowances for more payments if additional students moved into the district after count day. His district was facing a possible reduction of $230,808 for FY2004, which was approximately 20 percent of the budget. If additional funding was allocated by the Legislature that funding would be offset by the funds lost due to A.B. 122 and A.B. 45. Mr. Jordan indicated that all the teachers employed by the Esmeralda County School District were teaching multiple grades. The loss of funds would mean a further reduction in staff and instructional programs and activities. Mr. Jordan pointed out the reductions would make it difficult to achieve the district, state, and No Child Left Behind goals and requirements. Mr. Jordan commented that his district was concerned about the requirements of the No Child Left Behind Act, and he felt the current staffing and budget levels would allow the District to meet those requirements, but any decrease would make it more difficult.
Ms. Giunchigliani questioned the number of teachers and students in the Esmeralda County School District. Mr. Jordan indicated there were 6 teachers and 75 students. Ms. Giunchigliani remarked that she had visited schools in Esmeralda County at a time when there were 14 teachers in that district.
Dr. Allen R. Brown, Superintendent of Schools, Elko County School District, referred to page 3 of Exhibit G, which contained the estimates for the Elko County School District. Dr. Brown noted that A.B. 122 would result in a loss of approximately $1.7 million. Elko County, in addition to the loss in DSA funding, would lose approximately $1.9 million in other revenue due to the economic situation. Elko County would lose a total of $3.6 million, which would be the equivalent of approximately 100 teachers’ salaries or 17 percent of the workforce. Dr. Brown said that seniority clauses and union contracts would have to be dealt with, but programs, such as music, art, and athletics, would also have to be cut. He emphasized that the cut in funding would mean programs and jobs would disappear.
Assemblyman Marvel asked if the increase in the price of gold had a significant impact on the number of pupils. Dr. Brown responded that it had not and enrollment in Elko County continued to decrease. Elko County had lost approximately 800 students in the past five years; the demographers had predicted the population would stabilize in 2005, but Elko County had lost 150 students in 2002.
Mr. Marvel inquired as to which area in Elko County had lost the most students. Dr. Brown replied that west Wendover and Jackpot were the only areas that had experienced a minimal increase, the other areas were decreasing.
Al Bellister, Nevada State Education Association, spoke in opposition to A.B. 122. He opined that the two-year hold harmless implemented in 2001 was good policy, and the real issue was the state’s need for a broader and more stable tax base to support good policies. In addition, the rural counties were having to make staffing and program cuts at a time when the state and federal government were requiring more testing and accountability. Mr. Bellister indicated that there were programs in the Humboldt County School District that had been taught by licensed instructors but were no longer taught by licensed instructors, despite a federal requirement to have highly-qualified teachers in every classroom in the core subject areas as outlined by the No Child Left Behind Act. He urged the Committee to oppose A.B. 122.
Donald Lindeman, Assistant Superintendent, Churchill County School District, testified against A.B. 122. Mr. Lindeman explained that he prepared the budget for the Churchill County School District, and he had prepared that budget with the two-year hold harmless numbers, which would be a $250,000 reduction in basic support. The change to a one-year hold harmless would be an additional reduction of $300,000. Hold harmless provisions had been designed to give districts with declining enrollment one year to adjust their budgets. Mr. Lindeman suggested that, if the change from two-year to one-year hold harmless were made, there should be a year of transition to ease the process. He stated that when the hold harmless had been changed to two years in the previous session, the assumption had been that it was a long-term change, and budgets had been prepared with that assumption. The Churchill County School District notified staff by April 15 each year of any intended reductions in force. It would be difficult for the District as the amount to cut could be $250,000 or $550,000 depending on the fate of A.B. 122. Mr. Lindeman explained that the first year of the biennium was difficult to budget because the basic support amount and the enrollment numbers were unknown. The passage of A.B. 122 would put Churchill County School District, and other rural districts, in a very difficult situation, and Mr. Lindeman asked that the Committee vote against A.B. 122.
Mr. Marvel asked Mr. Bellister if the Nevada State Education Association had projected how many teachers would lose jobs. Mr. Bellister replied that he did not have those calculations, but he would be willing to work with the school districts to provide estimates.
Mr. Marvel asked if it would be possible to relocate teachers to areas with a teacher shortage. Mr. Bellister indicated that Clark County had been relatively aggressive in recruiting teachers from rural areas. Mr. Marvel wondered how many teachers had relocated and commented that he had been receiving telephone calls regarding dismissals of teachers and relocation seemed to be a possible solution.
Charlotte Petersen, Superintendent, Humboldt County School District, interjected that Humboldt County School District had held a job fair for the teachers where representatives from districts that were hiring came and interviewed teachers. Ms. Petersen indicated that one of the problems was that many of the teachers had a spouse whose job required staying in Humboldt County rather than moving to Clark County or Washoe County. Mr. Marvel said he was looking for options. Ms. Petersen said that many of the families went from two incomes to one. Those teachers who were able to relocate had moved to a different school district.
Assemblywoman Giunchigliani suggested that the possibility of relocation should be explored regardless of the amount of time in the hold harmless provision because it was likely enrollment would continue to decline. She pointed out that some people were more comfortable in a rural environment and that should be considered as well in the relocation process. Ms. Giunchigliani commented that in the past, Clark County had refused to hire teachers from the rural counties, but that was no longer the case. She reiterated that, regardless of the length of the hold harmless provision, consolidation of school districts and relocation agreements for teachers should be examined.
Chairman Arberry asked if anyone else wished to address the Committee in support of, or in opposition to, A.B. 122. There being no response, the Chairman thanked those who had spoken and declared the hearing on A.B. 122 closed.
Assembly Bill 123: Makes appropriation to Lander County for design and construction of Battle Mountain Industrial Park and for support of Battle Mountain Flood Control Project. (BDR S-397)
Bradley Kelley, Commissioner, Lander County, spoke in favor of A.B. 123. He indicated the Committee had received a handout (Exhibit I) detailing the two issues he wished to address: an industrial park project and a flood control project.
Mr. Kelley explained that the Lander County economy depended heavily upon natural resource-based industries. He pointed out that approximately 93 percent of the land area in Lander County was controlled by the federal government. That reliance upon public land using natural resource industries had resulted in a narrow economic base and limited economic diversification in Lander County, and Lander County had suffered through periods of economic growth and decline making consistent provision of public facilities and services difficult. Mr. Kelley indicated that total employment in Lander County had declined from 2,570 persons in 1991 to 1,926 persons in 2001, and currently that number was even lower. Mining employment in Lander County had fallen 48 percent from 1,284 workers in 1991 to 663 workers in 2001, and the total annual mining payroll in Lander County had declined 28 percent from $52,619,024 in 1991 to $37,686,010 in 2001. Mr. Kelley indicated that the loss of jobs and the related unemployment had resulted in an annual deficit of over $400,000 in the Battle Mountain sewer enterprise fund.
Mr. Kelley said that since 1996, taxable sales in Lander County had fallen from $128,237,907 to $62,926,997 in 2002. Despite those constraints, Lander County was crossed by strategic infrastructure including a mainline rail, a U.S. interstate highway, natural gas lines, and fiber optic and electrical transmission lines. The County had embarked upon an initiative to develop improved industrial sites as a means to attract new industry to the Battle Mountain area. A feasibility study had been completed which had identified a preferred location for industrial development near the community, and a Community Development Block Grant had been obtained to enable completion of that analysis. Mr. Kelley stated that Lander County’s request for financial assistance from the Legislature would help with preparation of the conceptual design and cost estimates for the Battle Mountain Industrial Park, while construction funding for improvements would be sought from the U.S. Economic Development Administration.
Mr. Kelley then addressed the Battle Mountain flood control project. He explained that Battle Mountain was subject to flooding from the Reese River. The flood control program had been in effect and was a significant factor in the attraction of new business as well as in the safety, health, and welfare of the citizens of Lander County.
Mr. Kelley provided background information on the flood control project and stated that after extensive flooding in the 1960s, Lander County, following recommendations of the Federal Emergency Management Agency (FEMA) funded construction of a flood control levee. FEMA had since determined that the existing flood control levee did not protect Battle Mountain against flood hazards.
Mr. Kelley pointed out that, despite the existing flood control levee, owners of property in Battle Mountain had been required to obtain flood hazard insurance to ensure protection from loss. The average insurance policy had cost $600 per year for residential properties and was higher for commercial properties. With an estimated 1,300 residential and commercial improved properties in Battle Mountain, annual costs for flood hazard insurance could be as high as $780,000.
Recognizing the risk to property owners and the threat that urban flooding posed to water quality downstream, Nevada’s congressional delegation had secured funding to study enhancements to the existing flood control system in the Battle Mountain area. The U.S. Army Corps of Engineers had determined that extending and raising the elevation of the existing levee would afford the community the needed protection from flooding. FEMA had notified the Corps of Engineers and Lander County that, if constructed as designed, the proposed levee improvements would result in the community of Battle Mountain being removed from the flood hazard area and would eliminate the requirement for flood hazard insurance.
Lander County anticipated that a significant percentage of the savings to property owners, from not having to purchase flood hazard insurance, would be spent in the County resulting in increased sales and use tax revenues, a portion of which would be returned to the state of Nevada.
Mr. Kelley stated that Lander County had been required to bear 35 percent of the cost of the project. In 1998, the Corps estimated the project cost at $1.8 million. By 1999, the cost of the project had been revised by the Corps to $1.9 million. Currently, the project had been estimated to cost $2,400,000. Initiation of construction of the project had been delayed in part due to Lander County’s inability to afford the balance of its share of the project costs, which would be $840,000. Mr. Kelley remarked that the downturn in mining during the past few years had not helped that situation, but Lander County had the capability to accrue in a capital projects fund all but $200,000 of its share of the costs for the Battle Mountain flood control project. Mr. Kelley indicated that U.S. Senator Harry Reid had been able to earmark funding within the Corps’ budget to ensure that federal funds remained available to complete the project. Lander County was requesting the Legislature’s assistance in providing the last $200,000 required to construct the Battle Mountain flood control project.
Mr. Kelley concluded his presentation by stating that from 1993 to 2002, net proceeds of mine taxes and sales and use tax collections from Lander County had contributed more than $23,000,000 in funding to the state of Nevada. During the 2001 Legislative Session, Lander County’s requests for assistance from the 2001 Legislature in the form of A.B. 114, which would have provided $100,000 for the Battle Mountain Industrial Park, and A.B. 185, which would have provided $200,000 for the Battle Mountain Industrial Park, had not passed.
Mr. Kelley said the $300,000 requested through A.B. 123 would provide important public safety and environmental benefits, aid in creating additional taxable activity in Lander County, and should result in an excellent return on the Legislature’s investment.
Mr. Marvel questioned whether A.B. 123 had changed from the proposal in the 2001 Legislative Session. Mike L. Baughman, Ph.D., President of Intertech Services Corporation, responded to Mr. Marvel’s question and said that the bill was the same, and he pointed out that the $200,000 in A.B. 185 of the Seventy-first Session that Mr. Kelly referred to had been for the flood control project, not the industrial park. Two bills had been submitted in 2001; those bills had been combined and A.B. 123 was the result.
Mr. Marvel inquired whether $200,000 would be sufficient as there had been an increase in the estimates from the Corps of Engineers. Dr. Baughman replied that based on recent conversations with the Corps of Engineers that would be enough as Lander County had been able to accrue more money in the capital projects fund. He indicated that Lander County had already spent money in terms of surveying and right-of-way acquisition, but he believed the amount requested would be sufficient.
Mr. Marvel asked if the net proceeds of the mines had increased in the past year. He commented that the pipeline had been a significant contributor to Lander County and had contributed approximately $12 million. Mr. Kelley said the information regarding the pipeline was correct. He indicated that the assessed valuation of the mines and the net proceeds had decreased. Mr. Kelley commented that those decreases, in addition to the associated loss of employment and the relocation or dislocation of workers after an in-depth mandate, had encumbered an otherwise solvent enterprise fund with $400,000 per annum.
Vice Chairwoman Giunchigliani asked how many businesses would be located in the industrial park. Mr. Kelley explained that the planning had not proceeded to that extent; it was in the schematic phase currently as only $50,000 had been allocated. Further allocations would be dedicated to research and planning in the hope that the completion of the design standard and analysis would put Lander County in a position to receive further funding and grant money from the federal government.
Vice Chairwoman Giunchigliani inquired if the town of Austin would also need assistance and noted there had been competition between Austin and Battle Mountain in the past. Mr. Kelley stated that the current Lander County Commission was responsive to Austin’s needs and there was a good relationship between the two communities. The Lander County Commission had acquired Federal Aviation Administration (FAA) money for the airport in Austin and was examining a main street program as an economic redevelopment plan. Mr. Kelley remarked that Austin had a great deal of potential and a very active Chamber of Commerce. He emphasized that the past tension between the two communities would not be a problem.
Vice Chairwoman Giunchigliani asked if the Lander County Commission had taken a position on the Governor’s proposed tax package. Mr. Kelly replied that it had only been discussed briefly, but it appeared the response was positive. Vice Chairwoman Giunchigliani commented that perhaps if the Lander County Commission took a position, that could be conveyed to the Governor and an appropriation request might be considered more favorably. Mr. Kelley thanked Vice Chairwoman Giunchigliani for that advice.
Dr. Baughman interjected that one of the problems with the tax package was the lack of discussion regarding the expansion of the tax base. He noted that it was a difficult task and very controversial, but the expansion and diversification of the tax base was important. Dr. Baughman said he had not heard that discussion and the situation over the past few years had essentially maintained the status quo. He opined that the state would have to invest money in projects like those for Battle Mountain in order to expand the tax base.
Vice Chairwoman Giunchigliani commented that Dr. Baughman’s suggestions as to how to broaden the tax base might be useful to the Committee on Taxation as well. Vice Chairwoman Giunchigliani asked if there was any further comment, and there was none. She declared the hearing on A.B. 123 closed and relinquished the chair to Chairman Arberry.
Assembly Bill 195: Makes appropriation for planning and construction of ports of entry on certain highways. (BDR S-83)
Assemblyman Tom Collins, District No. 1, testified in support of A.B. 195. He indicated he had given the Committee two handouts (Exhibit J and Exhibit K) regarding ports of entry in Nevada. Mr. Collins stated he had been in favor of ports of entry for many years, but with the discussion regarding tax increases and tax base expansion, he had taken more of an interest. He indicated that several state agencies would be involved in this venture: the Department of Transportation, Department of Motor Vehicles, Department of Public Safety, Division of Environmental Protection, State Department of Agriculture, and Department of Taxation.
Mr. Collins indicated there were several reasons for ports of entry including tour bus safety; prevention of fuel tax evasion; prevention of the transport of dangerous or exotic animals or diseased animals, specifically those carrying brucellosis and Newcastle disease; prevention of the transport of noxious and illegal plants; fee collection for products delivered to Nevada, such as landscape and building materials; fees for rental car registrations; and the monitoring of nuclear waste transport.
Mr. Collins surmised that there might be federal money available as the ports of entry could coincide with homeland security concerns. He likened the absence of ports of entry to a movie theater without a ticket office, where people could just walk in and out without having to pay. Mr. Collins felt ports of entry were a revenue source that was not being used by the state.
Mr. Collins mentioned Newcastle disease, which had been a problem in southern Nevada. The U.S. Department of Agriculture (USDA) had sent 250 employees and the state Department of Agriculture had sent 5 employees to deal with chickens infected with Newcastle disease, which had possibly been brought into the state when an individual had transported an infected chicken from southern California for cockfighting. Mr. Collins pointed out that ports of entry would prevent the transport of animals for the purpose of cockfighting, and money would not be expended on disease control.
Mr. Collins cited statistics from a newspaper article in The Southern Utah News dated March 13, 2002. He explained that the statistics had been gathered from a port of entry near Kanab, Utah, that had been open 24 hours a day, seven days a week, from February 1 to February 28, 2002. He said 5,025 trucks were weighed, 2,392 drivers were checked for credentials and/or sold permits, and 598 driver-only inspections were performed. A driver-only inspection meant a check of the paperwork and permits carried by the driver. Mr. Collins indicated that the port of entry authorities had found 712 violations and had issued 49 citations. Twelve drivers had been found to be driving while on suspension, and six drivers were found to be driving under the influence. Seventy-six drivers had been put out of service and hundreds of hazardous material loads had been checked, documented, and tracked during that one‑month period. Mr. Collins emphasized that the numbers would be similar in Nevada, and those same issues should be addressed by opening ports of entry.
Mr. Collins then referred to an article in the Las Vegas Review-Journal from April 2, 2002 (Exhibit L), and said that fire ants had been discovered in a palm tree sold by a Las Vegas nursery. Mr. Collins indicated that the potential cost of eradicating that pest could be millions of dollars.
Mr. Collins directed the Committee’s attention to Exhibit K, and read portions of the letter from Paul Iverson, Director, Department of Agriculture. Mr. Iverson’s letter stated that the Department of Agriculture supported the establishment of border inspection stations on major and secondary highways leading into Nevada. The letter indicated that it might require four large facilities on the interstates and seven smaller facilities on other highways. Mr. Collins added that those facilities would be permanent and in constant operation.
According to Mr. Iverson’s letter, the Florida Department of Agriculture and Consumer Services had determined that the increased collection of sales taxes resulting from border stations actually exceeded the operating costs of the stations. Mr. Collins indicated that Florida was collecting use taxes and fees for permits for large vehicles and for animals, in addition to fees for fuel tax evasion, so the total would be more than just a few million dollars.
Mr. Collins pointed out that the importation of fire ants could be very costly. Arizona spent $100,000 in 1987 and $1 million in 1999, and California spent $6 million in 1999 and $5 million per year for the next four years in eradication efforts (Exhibit K). Mr. Collins remarked that the fire ants had been found in Assembly District No. 1, which he represented, as well as five other locations in the state of Nevada.
Chairman Arberry asked how the costs outlined in A.B. 195 had been determined. Mr. Collins indicated the appropriation in the bill was “seed money” and was far below the actual cost. Chairman Arberry asked what the ongoing costs would be, and Mr. Collins replied that the costs potentially could be much higher than outlined in A.B. 195, but the return on the operation could be from 50 to 60 percent. Mr. Collins indicated he had read a study on commercial vehicles that had shown a 74 percent return with a possibility of an 88 percent return. He said the study also showed $1.03 collected for every dollar spent and the actual amount was dependent on the way the port of entry would be used. Mr. Collins added that there were facilities in Nevada at different stages; there were traditional ports of entry stations that were unmanned and there were satellite tracking devices to monitor trucks.
Ms. Giunchigliani indicated she had examined the ports of entry question ten years earlier, and she inquired if there was a possibility of joint ports with surrounding states in order to share those costs. Mr. Collins said the ports of entry study he reviewed had been done ten years earlier and included what the cost benefits would be to Nevada. He indicated he had a map of Nevada and surrounding states with ports of entry, and he said it might be possible to negotiate with other states to share ports of entry. In Evanston, Wyoming, there was a port of entry that Wyoming operated on one side of the road and Utah operated on the other side of the road, and there were other locations where there was a similar situation. Mr. Collins pointed out there was a port of entry in southern Utah where it might be possible for Nevada to rent space and share data and information with Utah and then forward that information to the appropriate state agency. Mr. Collins commented that he had been unable to obtain information from the Department of Taxation with regard to the ports of entry.
Ms. Giunchigliani asked if the map to which Mr. Collins had referred showed ports that were manned or existing facilities that had been abandoned. Mr. Collins explained that the map showed the other states’ ports of entry, and he indicated he had another map that showed where Nevada had portable facilities set up to check vehicles. The portable facilities were short-term, and Mr. Collins opined that agencies were being funded to maintain those facilities to make roadways and communities safe, but were not able to do that due to vacancies in departments, so the state was not getting the “most bang for the buck.” He indicated the only enforcement unit was in the Department of Agriculture.
Ms. Giunchigliani inquired as to the transportation of hazardous materials. Mr. Collins replied that it was much like the problem of the aforementioned movie theater without a ticket office. Many of the large freight and trucking companies were honest and chose to report the materials and acquire the necessary permits, but there could be problems because the ports of entry were unmanned. Ms. Giunchigliani asked if other states funded their ports of entry with Highway Fund monies and used revenues from the ports of entry to fund operating expenses. Mr. Collins said several states funded the ports primarily with the Highway Fund, but depending on the focus of the port it might be funded by the Department of Agriculture or another state agency in a coordinated effort. Ms. Giunchigliani said that 1991 was the last year in which a ports of entry study had been done, and Mr. Collins confirmed that was the case. Ms. Giunchigliani asked if the Committee could be given a copy of that study, and Mr. Collins said he would provide that to the Committee.
Assemblywoman McClain opined that A.B. 195 was a good idea. There was a port of entry facility outside Las Vegas that was unmanned, and she felt that created an unfavorable public perception. She asked if Mr. Collins had a study that indicated how much money that one port of entry could generate. Mr. Collins said that would be difficult to determine because he had not received estimates from the Department of Taxation, but he opined there would be a positive gain with the combination of fixed ports and mobile ports.
In response to Ms. McClain’s question regarding a specific facility outside Las Vegas, Mr. Collins replied that was a fixed port that was unmanned because the state would not hire the necessary personnel. Ms. McClain commented that the pavement had been recently resurfaced, and it seemed that that port of entry might be a good starting point to determine if it was a worthwhile endeavor. Mr. Collins agreed and emphasized that there were existing facilities in the state. He said that Nevada was one of the leaders in the satellite technology used to track vehicles and retrieve data on routes and permits and weights of cargo.
Mr. Collins commented that 22,000 homes had been built in southern Nevada the previous year, and that meant 22,000 water heaters, refrigerators, and other appliances, as well as the necessary roofing materials and building materials, had been brought into Nevada and taxes were not being collected. He indicated that he had heard from nursery owners and truss company owners that they could not compete with materials brought from other states because of the taxes. Mr. Collins stated that it was a simple matter of manning a “ticket office” and collecting revenues that were escaping Nevada.
Assemblywoman Chowning indicated she had several questions. She asked how the cost figures of $2 million and $3 million in A.B. 195 had been determined, what the cost breakdown was for planning and construction, how would truckers be prevented from using alternate routes that did not have ports of entry, and what about the money that was being lost or had already been lost because there was a shortage of troopers and the ports were unmanned. She commented that not only were permanent ports needed, but so were mobile ports because truckers could avoid permanent ports more easily. She indicated that federal funding was received for mobile ports.
Mr. Collins replied that he had some of the answers, but he indicated that there were other people who might be better able to respond to those questions. Mr. Collins said the figures of $2 million and $3 million were determined as “seed money” as the exact amount for upgrading the existing facilities and opening them was unknown. The money would pay for staffing, primarily in the Department of Public Safety, as the Department of Agriculture already had an existing enforcement unit. In addition, the money would be used to negotiate with the state of Utah regarding ports of entry in Wendover and St. George, Utah, and the state of California regarding a port of entry that the California Department of Transportation (Caltrans) was building at Mountain Pass. Those would require interstate agreements.
Mr. Collins then addressed the question regarding alternate routes and said that the trucks were not supposed to use those roads. The truckers were supposed to call a toll-free number and report their cargo. If they did not call that number, they should be stopped at the ports of entry. If the truckers did call that number, they would be directed as to which routes to take in order to avoid the situation that had been discussed in the Committee on Transportation where low-level hazardous waste had traveled through the Spaghetti Bowl in Las Vegas unbeknownst to anyone. Mr. Collins said that the Department of Public Safety could coordinate efforts as well if the routes and cargo of the trucks were known.
Mr. Marvel asked why the mobile units being used currently were not successful and why the original ports of entry had closed. Mr. Collins said he had been told that the ports were not being manned by the departments in charge of them.
Bob Wideman, Deputy Chief, Highway Patrol, Northern Command, introduced himself to the Committee and indicated he was there on behalf of Chief Hosmer of the Highway Patrol. He commented that he would answer questions when Mr. Collins was finished.
Chairman Arberry indicated he wanted to focus on the costs and benefits of A.B. 195, rather than the “birds and the bees and the ants.” Mr. Collins agreed and said the issue was collecting revenue from sources, such as building and landscape materials, to ensure safe roads and communities, but money would have to be spent to do that. He commented that if the taxpayers were going to be asked to pay $1 billion in taxes the possibility of collecting several million dollars through an alternate method, such as ports of entry, should be examined.
Mr. Wideman stated that the Department of Public Safety neither opposed nor supported A.B. 195, but he was present to answer any questions the Committee might have.
Assemblyman Beers commented that he remembered that as part of the fuel tax distribution, truckers entered transit routes into a national database and that information was used to allocate Nevada’s share of federal highway tax dollars. It seemed that the database would allow the state to quantify the amount of lost revenue by using that information and comparing what it should generate, in terms of right-of-way fees, to the actual revenue.
Mr. Collins responded that what Mr. Beers suggested had been attempted. He indicated that there were difficulties as interstate trucks had a lower per mile cost than intrastate trucks, and the reporting system was set up in such a way that it was difficult to determine if a national company with 5,000 trucks only had 50 of those trucks in Nevada, and entering information in the database was voluntary. Mr. Collins said the satellite tracking was not full-time collection, and collecting fees was dependent on interstate agreements. He indicated he had gleaned that information from the National Cooperative Highway Research Program (NCHRP) Report 416, which studied alternate approaches to the taxation of heavy vehicles. Mr. Collins pointed out that private trucking companies underreporting or reporting exaggerated costs could distort the numbers. There were other issues as well, such as whether weight distance was equitable or whether causing delays as trucks were stopped at borders increased unnecessary costs to the trucking companies. That could be prevented if there was technology to collect fees and keep the trucking companies honest without stopping trucks to check permits. Mr. Collins indicated that fine collection had decreased by several hundred thousand dollars over the past few years as the number of vehicles weighed had decreased substantially. Mr. Collins opined that there was no reason to have any taxes or fees if they were not going to be collected consistently.
Charles Chinnock, Executive Director, Department of Taxation, addressed the Committee and said his department would be willing to work with the Department of Transportation and the other agencies in the efforts required to plan and implement ports of entry. Mr. Chinnock explained that the impact on the Department of Taxation would depend on the manner of implementation. There was tangible personal property that either was transported through the state or brought into the state, and that personal property brought into the state for resale or for use could be escaping taxation. Mr. Chinnock pointed out that the manner of tax collection was an issue that should be considered as to how intrusive it could be or if it would be a matter of checking a database to verify that companies that were receiving goods were registered. If the companies were not registered then there would have to be a procedure for collecting the taxes and registering them.
Mr. Marvel requested clarification of the “personal property” mentioned by Mr. Chinnock that was escaping taxation, and Mr. Chinnock explained that building material being imported from a different state was taxable, and businesses self-reported that property. Mr. Marvel asked if it would be necessary to know the destination of the materials. Mr. Chinnock replied that it would be necessary, and Mr. Marvel remarked that would create a large amount of administrative work. Mr. Collins interjected that he had documentation of a response from the Legislative Counsel Bureau Research Division that indicated that the Department of Taxation had no way of determining if the companies were in compliance. Chairman Arberry thanked Mr. Collins and Mr. Chinnock for their testimonies.
Russ Law, Chief Operations Analysis Engineer, Nevada Department of Transportation (NDOT), spoke in opposition to A.B. 195. He indicated that Michael Lawson, Chief of the Traffic Information Division at NDOT, was present as was Ken Chambers, who had been working on updating the 1993 Benefit Cost Study that Ms. Giunchigliani had referred to earlier. Mr. Law said he agreed with the intent of A.B. 195 as he had spent much of his career trying to increase truck safety and protect infrastructure, and he understood the importance of the health and environmental aspects of the bill. However, A.B. 195 conflicted with NDOT’s current plan to increase roving mobile enforcement and use electronic screening as a modern substitute for traditional ports of entry. Mr. Law suggested that a value engineering study be conducted and the border enforcement agencies meet and brainstorm alternatives to ports of entry and develop a better plan that would be a better investment of public money. Mr. Law indicated he had a PowerPoint presentation for the Committee that would take approximately 10 minutes and would answer many of the earlier questions posed by members of the Committee. It would also include information on the Caltrans plans for a port of entry at Mountain Pass as that plan would be very similar to what Nevada would have to do if there were a northbound I-15 port of entry. Mr. Law explained that the presentation would also contain information regarding the update of the benefit cost study, electronic monitoring and plans to increase electronic monitoring, the value engineering job plan, and the benefits of that. Mr. Law indicated the presentation had been given to the Committee in the form of a handout as well (Exhibit M).
Mr. Law began the presentation and referred the Committee to the final page of Exhibit M. He explained that a mistake had been made and the cost information on the Mountain Pass port of entry was incorrect. The total project cost of $40,590,754 was correct, but the amount attributable to the agriculture inspection station should be $12.2 million and the amount attributable to building a port of entry for the trucking part of the facility was $28.4 million. Mr. Law indicated there were difficulties with the PowerPoint presentation, and he directed the Committee’s attention to the handout (Exhibit M). He explained that the diagrams showed the project location for the Caltrans port of entry, which would be located approximately 12 miles southwest of the Nevada border on I‑15. Mr. Law stated it was a perfect project to use to determine the cost of a similar project in Nevada. The second picture in the handout was a view of the proposed site. The Caltrans plans were 95 percent complete; construction would start in late 2004 and the facility would open in March 2006.
Mr. Law showed an aerial view of the site plan and explained that the facility would consist of a four-bay inspection area, a parking area for trucks that were taken out of service, and an office building where permits and fees could be processed. Mr. Law showed several more slides with various views of the planned facility.
Mr. Law informed the Committee that in 1993 NDOT had conducted a study on ports of entry and had examined the possibilities of building a port of entry at Jean, Nevada, northbound on I-15, or maintaining a joint port with Caltrans. The Jean site had been selected because a 1991 benefit/cost study showed it had the most promising economics, and Caltrans had been interested in a joint port. Mr. Law stated that the study had been done well and was comprehensive, and NDOT was currently updating that study because of legislative interest in ports of entry. The fee structure had not changed since the study was done in 1993, while trooper salaries and construction costs had increased significantly, and preliminary results showed that a Nevada port of entry would generate $2.1 million per year and cost $5.8 million per year to operate, a benefit/cost ratio of 0.37, or $.37 earned for every dollar spent. A joint California/Nevada port would be somewhat better. It would generate $3.2 million per year and cost $5.9 million to operate, which was a benefit/cost ratio of 0.54.
Mr. Law explained that a joint port meant there would be an operating agreement between Nevada and California in which there would be an officer from the Nevada staff at the southbound port of entry in California. There could also be an agreement that California would enforce Nevada’s laws and Nevada would enforce California’s. Mr. Law indicated that Caltrans was amenable to either situation.
Mr. Law continued with his presentation and showed the Committee a map of potential bypass routes; those routes were one of the reasons ports of entry were not as profitable as they could be. Mr. Law commented that when a port of entry was built, it tended to encourage dishonest people to travel via another route, and those routes were not prepared to handle heavy truck traffic. He showed a map of bypass routes near Reno and said studies showed the truck volumes on those other routes increased when the I-80 port of entry was open. The next map showed ports of entry in Utah, California, and Idaho. A 1993 commodity study by NDOT had indicated that 80 percent of trucks traveling Nevada’s interstate roads had an origin or destination outside of Nevada and had been inspected in an adjacent state. If there were ports of entry at all interstate borders, the trucks inspected that had not been inspected in a neighboring state would represent only 7 percent of the total Nevada truck travel.
Mr. Law described a new approach to traditional ports of entry. The new approach emphasized roving enforcement rather than fixed-site enforcement and employed the use of an intelligent transportation system for commercial vehicle operations. To do that, NDOT was developing a program called the Commercial Vehicle Information Systems & Networks (CVISN). The program design had been submitted to the Federal Motor Carrier Safety Administration, and Mr. Law expected it to be approved soon.
Assemblywoman Chowning asked how many federal dollars Nevada received with the CVISN program. Mr. Law indicated $350,000 had been received from the federal government for the plan and design work. That amount had been matched by NDOT, and the study had cost approximately $650,000.
Assemblyman Hettrick asked if the CVISN program would allow NDOT to determine the point of origin of trucks in order to determine whether or not the trucks should be inspected. Mr. Law replied that the program would not determine point of origin, but NDOT would know what routes the trucks were using as they would be tracked by satellite transponders. California had several transponder sites, and Mr. Law noted that the information could be used to narrow down the points of origin, but the cargo carried by the trucks would still be unknown.
Mr. Hettrick inquired whether the satellite information would allow NDOT to determine that a series of trucks were traveling from southern California and then the roving mobile inspection stations could decide whether or not to inspect the trucks. Mr. Law said that would be something the satellite information would allow. He remarked that trucks that had been inspected in another state would not be inspected again. While satellite transponders were not mandatory, the trucks without them could be inspected.
Mr. Law offered further explanation of the CVISN Level I program. There were three components of the program: the electronic credentials administration, the electronic safety information exchange, which would allow NDOT access to nationwide safety data, and electronic vehicle screening. In the future, Mr. Law envisioned a system that encompassed driver condition monitoring, vehicle condition checks, collision avoidance systems, and guidance systems. He pointed out those things were available now and some progressive trucking companies used those tools, but currently none of those tools were required by federal or state laws.
Mr. Law opined that a value engineering study would be the best course to take. He explained that a value engineering study would follow certain steps: selection, investigation, speculation, and evaluation. Chairman Arberry inquired as to the cost of the study, and Mr. Law replied that an appropriation would not be needed as value engineering studies were part of his regular duties at NDOT. However, if a cost was placed on employee time and paperwork it would be a minimum of $20,000 and a maximum of $60,000. Chairman Arberry clarified that a separate bill would not be needed to conduct the study. Mr. Law agreed and opined that a study should be done regardless of the Committee’s decision on A.B. 195.
Assemblyman Marvel asked what the results had been for the mobile inspection facilities. Michael Lawson, Chief, Traffic Information Division, said that NDOT worked with the Department of Public Safety to operate those temporary ports. There were significant revenues generated when tickets were being issued and vehicles were being inspected. A suggestion had been made that NDOT, the Department of Public Safety, the Department of Agriculture, and the Department of Taxation work together to identify opportunities for improving the operations. Mr. Lawson commented that he had found that state troopers within the Department of Public Safety had a high interest in performing those duties, but there was a shortage in officer positions in commercial enforcement. He said the problem was the inability to fund existing positions and the training that would be needed for the project. Mr. Lawson felt that many of the issues could be addressed without allocations from the General Fund or the Highway Fund. He reiterated that the mobile inspection stations were effective.
Mr. Marvel asked if those mobile inspection stations would generate revenue. Mr. Lawson responded that revenue could be collected through mobile roving enforcement and better usage of facilities, but NDOT disagreed with the collection method outlined in A.B. 195. Mr. Marvel said that the revenue could be captured without permanent facilities, and it was merely a matter of funding. Mr. Lawson replied that it was a matter of better coordination with existing resources and better dialogue between the agencies. Mr. Marvel asked if there had been any dialogue between the departments, and Mr. Lawson indicated there had not, and the value engineering group would facilitate that. Mr. Marvel noted that might be an avenue to pursue.
Chuck Chinnock, Executive Director, Department of Taxation, said he would be willing to work with NDOT to identify the resources that would be required. He indicated that currently the Department of Taxation was not working with the roving ports of entry, so additional manpower and resources would be needed to oversee that system.
Don Henderson, Acting Director, Department of Agriculture, said the Department was neutral on A.B. 195, but he pointed out that it had not been included in The Executive Budget, and the Department’s budget would not allow the flexibility to contribute to the efforts outlined in A.B. 195. The Department of Agriculture had been working closely with the Nevada Highway Patrol (NHP) and the agriculture enforcement unit on the roving inspection stations. The agriculture enforcement unit had been very beneficial from an agricultural perspective; there had been approximately 2,700 inspections in the past year. The Department of Agriculture had focused on NHP temporary inspection stations, random patrol of state highways, random inspection and patrol of commercial retailers and construction sites.
Mr. Henderson continued and said the states surrounding Nevada had inspection stations. Because of that and Nevada’s limited capabilities in that area, Nevada had become a “dumping ground.” The Department of Agriculture was attempting to address that problem with very limited resources; however, the inspections by the agriculture enforcement unit had increased by 400 percent since the 2001 Legislative Session. He said his department would continue to look for opportunities to work with other agencies to address problems.
Chairman Arberry asked how much the project would cost the Department of Agriculture. Mr. Henderson explained that there were four full-time agriculture enforcement officers in different locations in the state and there were additional part-time positions from the Plant Industry Division and the Livestock Inspection Division available to address those issues in conjunction with the other agencies. Chairman Arberry repeated his question regarding the cost, and Mr. Henderson said the Department could devote two full-time equivalent positions to the project.
Chairman Arberry questioned if A.B. 195 was needed in order for the Department of Agriculture to participate in the study. Mr. Henderson replied that the bill was not necessary, and the Department had the manpower to devote to the study.
Assemblyman Marvel asked if there should be a study before action was taken. Mr. Henderson indicated that the Department of Agriculture was neutral on the question of A.B. 195, but the Department of Agriculture had followed a route similar to the route chosen by NDOT. The agriculture enforcement unit was a roving unit that worked with other agencies. He pointed out that the agriculture enforcement inspection stations were the most effective way to monitor and control materials coming in and out of the state.
Daryl Capurro, Managing Director, Nevada Motor Transport Association, Inc., spoke in opposition to A.B. 195. He explained that Nevada was federally mandated to belong to the International Fuel Tax Agreement and the International Registration Plan, which allowed a state to collect revenue from trucking companies based in that state, which was then distributed to all states through which the vehicles would be traveling based on the previous year’s filed information on mileage. Mr. Capurro claimed that there was very little evasion of the fuel tax or of registration fees, but there was a problem with dyed fuel taxes that had not been collected, which could be a potential loss of $8 to $10 million. In his opinion, ports of entry would not solve that problem. Mr. Capurro stated that spending $40 million for one port facility was a large expenditure, and there were still many other routes to travel through Nevada. He opined that traditional ports of entry were “dinosaurs” and the money should be put into the CVISN program and the mobile inspection teams. He indicated that many states had eliminated their ports or decreased the number of ports because the ports of entry were expensive and there was not a good return on the investment.
Mr. Arberry thanked Mr. Capurro and asked if there were additional questions or comments. Mr. Collins interjected that he wanted to thank the Committee for devoting time to A.B. 195, and he claimed that the state would have to spend money in order to collect money. Mr. Collins surmised that Caltrans would not build a $40 million facility if there were not advantages to having the port of entry, and he felt the state of Nevada should examine that situation as well.
Chairman Arberry asked if there were additional comments, there being none, he declared the hearing on A.B. 195 closed. Mark Stevens, Assembly Fiscal Analyst, reminded the Committee of the Subcommittee meetings the next morning. The meeting was adjourned at 10:25 a.m.
Susan Cherpeski
Committee Secretary
APPROVED BY:
Assemblyman Morse Arberry Jr., Chairman
DATE: