MINUTES OF THE

SENATE Committee on Government Affairs

 

Seventy-second Session

May 7, 2003

 

 

The Senate Committee on Government Affairs was called to order by Vice Chairman Sandra Tiffany, at 12:10 p.m., on Wednesday, May 7, 2003, in Room 2149 of the Legislative Building, Carson City, Nevada. The meeting was videoconferenced to the Grant Sawyer State Office Building, Room 4412, 555 East Washington Avenue, Las Vegas, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

 

COMMITTEE MEMBERS PRESENT:

 

Senator Ann O'Connell, Chairman

Senator Sandra Tiffany, Vice Chairman

Senator Randolph J. Townsend

Senator Warren B. Hardy

Senator Terry Care

 

COMMITTEE MEMBERS ABSENT:

 

Senator William J. Raggio (Excused)

Senator Dina Titus (Excused)

 

GUEST LEGISLATORS PRESENT:

 

Assemblyman Bernard (Bernie) Anderson, Assembly District No. 31

Assemblyman Jason D. Geddes, Assembly District No. 24

Assemblyman Bob Beers, Assembly District No. 4

 

STAFF MEMBERS PRESENT:

 

Michael Stewart, Committee Policy Analyst

Scott Wasserman, Committee Counsel

Tara DeWeese, Committee Secretary

 

OTHERS PRESENT:

 

Stacy M. Jennings, Executive Director, Commission on Ethics

Janine Hansen, Lobbyist, Independent American Party of Nevada

Kent F. Lauer, Lobbyist, Nevada Press Association

Allen Lichtenstein, General Counsel, American Civil Liberties Union of Nevada

Vivian Freeman

William Puchert

John Garvin

Patricia (Patty) Cafferata, Attorney

Mike Hoffman

Sean McGowan, Lobbyist, City Attorney, City of North Las Vegas

Andrew A. List, Lobbyist, Nevada Association of Counties

Nicole J. Lamboley, Lobbyist, City of Reno

John O. Swendseid, State Bond Counsel, Swendseid and Stern

John H. Milton III, Board of Commissioners, Humboldt County

Carl Linvill, Administrator, Nevada State Office of Energy

Greg Smith, Purchasing Officer, Purchasing Division, Department of Administration

Larry Kinney

Ken Baker

Jay Johnson

Joseph L. Johnson, Lobbyist, Sunrise Sustainable Resource Corporation, and Toiyabe Chapter/Sierra Club

Kaitlin A. Backlund, Lobbyist, Nevada Conservation League

Craig Hartman

Greg MacRenaris

Renee Parker, Chief Deputy Secretary of State, Office of the Secretary of State

 

Vice Chairman Tiffany:

We will begin with the hearing of Assembly Bill (A.B.) 127.

 

ASSEMBLY BILL 127: Repeals certain provisions relating to Commission on Ethics. (BDR 23-47)

 

Stacy M. Jennings, Executive Director, Commission on Ethics:

Assembly Bill 127 does two things. First it repeals the campaign practices statute contained in chapter 294A of Nevada Revised Statutes (NRS), NRS 294A.345, and NRS 294A.346 and makes some instructional provisions changes for the commission from chapter 281 of NRS. The second thing A.B. 127 does is repeal provisions of the ethics in government law you saw in Senate Bill 147.

SENATE BILL 147 (1st Reprint): Makes various changes relating to Commission on Ethics. (BDR 23-500)

 

The one-page handout (Exhibit C) I gave you contains those provisions in the last bullet point. They are identical to those repealed in S.B. 147 because they had been declared invalid by a court of law. We talked about the campaign practices statute a couple of times when I was before the committee this year. It is an expedited process wherein someone can file a complaint in the course of the campaign alleging someone made false statements against them and those false remarks were published. The allegation is it was done with malice, or done with the intent to impede the success of a campaign and did. The statute was enacted in 1997, and there have been 21 complaints filed with our agency since then. Only three persons have been fined for violating the statute, with all three violations in 1998; $500 in civil penalties were collected under this statute and deposited in the General Fund in the last 5 years. The statute of campaign practices is currently the subject of litigation. The Nevada Press Association, the American Civil Liberties Union, and several legislators have sued the commission over the constitutionality of the campaign practices statute. That lawsuit is currently tolled in the process, based on if the Legislature chooses to repeal the statute or not. The commission does not have a position on it. We struggle with the enforcement of the law and I wanted to briefly read you part of an opinion in a discussion the commission had in regard to this statute last fall in the Assembly District 37 race. Earlene Forsythe filed a request for opinion regarding this statute with the commission. In Opinion Nos. 2002-15 and 2002‑16 commission said:

 

Publishing campaign materials with statements such as those (which would be the false statements) may be a cowardly way to conduct a political campaign. However, if the statements in the publications are not maliciously false and the opinions expressed in the publications are based upon facts that are true, the content is considered mere political hyperbole and is protected by the political free speech provisions of the First Amendment of the United States Constitution as interpreted by the United States Supreme Court.

 

The commission considered the political fliers created for the purpose of impeding the success of Mrs. Forsythe’s campaign extremely distasteful; however, the content was nothing more than political satire or statements of opinion. The First Amendment protects political speech. Even though the record hearing clearly and convincingly established the persons behind the malicious publications did intend to impede the success of Mrs. Forsythe’s campaign, there was no evidence in the record their activities did, in fact, impede the success of the campaign.

 

Those are the issues the commission has with the statute. It is very hard to meet the final criteria of proving the publication impeded the success of a campaign.

 

Senator Tiffany:

Are you repealing the measures because they are difficult?

 

Ms. Jennings:

Yes, that is why the proponents of the bill are proposing to repeal the statute.

 

Senator Tiffany:

Is one of the criteria the commission uses whether or not the statements made changed the outcome of the race?

 

Ms. Jennings:

Correct. It is very hard to have clear and convincing evidence to prove a single publication or a series of phone calls is responsible for impeding the success of a campaign. The commission, since reorganized in 1999, has not been able to find any person filing a complaint can meet the burden of proof to show clearly and convincingly someone’s race was affected.

 

Senator Tiffany:

Are there any other laws in statute now to deter someone from lying, laws not necessarily related to campaign practices?

 

Ms. Jennings:

It has always been the position of the commission that people have recourse, through defamation statutes and civil causes of action, they can always use in lieu of this process.

 

Senator Tiffany:

I have seen it happen where they go through the criminal courts. Do you think there is any other way to have a burden of proof of a different standard easier to prove so we would not have to eliminate all of the statute?

Ms. Jennings:

We did some research. There is a system set up in Texas where they provide public hearings and an expedited public hearing for allegation of muddy campaigning. That kind of a process could be implemented in Nevada under the Ethics Commission, but there is no civil penalty attached, which is where the constitutional violation occurs. If the committee wanted to set up a process to provide an expedited public hearing and an airing of the finding through the media, that could help exonerate a candidate wrongly accused.

 

Senator Care:

I strongly support the bill as it is. I have said this before, we have always had an Ethics Commission, and it is the public. That commission can exercise its duty to investigate and vote if it chooses. I do not think you can, to any degree, regulate political speech. You can regulate conduct of an officeholder and there can be statutory prohibitions against certain kinds of conduct, but free speech is robust, dirty, and that is just the way it is. If the system is strong enough, it can withstand free speech. I support the bill and the deletions.

 

Janine Hansen, Lobbyist, Independent American Party of Nevada:

I am wholeheartedly in favor of this bill. I hope you will not try to fix it in any way. This law has been unconstitutional from the beginning and it is unfortunate it has taken such a long time and so many lawsuits to get it overturned. The Nevada State Constitution, article 1, section 9, reads:

 

Liberty of speech and the press. Every citizen may freely speak, write and publish his sentiments on all subjects being responsible for the abuse of that right; and no law shall be passed to restrain or abridge the liberty of speech ….

 

The Nevada Constitution also talks about the question of libel, and they could pursue that if it is libelous. In American Communications Association v. Douds. 339 U.S. 382(1950), U.S. Supreme Court Justice Robert Jackson said, “It is not the function of our Government to keep the citizen from falling into error, and it is the function of the citizen to keep the Government from falling into error.” One of the problems we have here is the government is trying to regulate speech in order to keep citizens from falling into error. This is exactly the opposite of the whole nature of the First Amendment. Professor Bradley A. Smith in The Wall Street Journal (Exhibit D) said:

 

Government is inherently untrustworthy when it comes to regulating political speech, and this tendency to use government power to silence political criticism and stifle competition is a major reason why we have the First Amendment.... In fact, constitutional or not, campaign finance reform has turned out to be bad policy. For most of our history, campaigns were essentially unregulated yet democracy survived and flourished. However, since passage of the Federal Elections Campaign Act and similar state laws, the influence of special interests has grown, voter turnout has fallen, and incumbents have become tougher to dislodge.

 

The U.S. Supreme Court, in Thomas v. Collins, 323 U.S. 516 (1945), said:

 

The very purpose of the First Amendment is to foreclose public authority from assuming a guardianship of the public mind. …. In this field every person must be his own watchman for truth, because the forefathers did not trust any government to separate the true from the false for us.

 

According to the U.S. Supreme Court in N.A.A.C.P. v. Button, 317 U.S. 415 (1963), the First Amendment is a value-free provision whose protection is not dependent on the truth, popularity or social utility of the ideas and beliefs which are offered.

 

We encourage you to uphold the First Amendment and Article 1 of the Nevada State Constitution and repeal this as a first step in protecting free speech in the State of Nevada. We wholeheartedly support this bill, which repeals the speech police portions of our state law.

 

Kent F. Lauer, Lobbyist, Nevada Press Association:

We are in total support of this bill. A law which grants an appointed body the power to police campaign speech clearly violates the First Amendment and must be repealed. I think one of the most offensive aspects of this law is it can be used to go after any person who communicates about a candidate. That person could be someone who places a political sign in his or her yard, writes a letter to the editor, or speaks up at a political rally. In fact, the editor of the newspaper in West Wendover was accused of violating this law because of an editorial he wrote. He was forced to come to the Ethics Commission and defend his First Amendment rights. I would like to point out this law does not apply to only candidates and their handlers, it applies to anyone who communicates about a candidate. I would like to pass out an Ethics Commission opinion (Exhibit E) regarding the newspaper editor from West Wendover.

 

Allen Lichtenstein, General Counsel, American Civil Liberties Union of Nevada:

I am one of the attorneys on this particular case. We have put our case on hold, hoping this bill will pass and make it unnecessary for us to go forward. Just to point out, half of this bill deals with repealing something we have already had to go to court on and the court found unconstitutional. We have no doubt, if we have to go back and litigate this, we will end up with the same result. One of the things worth mentioning is the problem with this law: it gives the expedited process to someone who is accused of a violation. It is a very short amount of time to mount a defense. Putting together a defense on a defamation case is a very complex matter because it has to do with state of mind, sources of information, and it is nearly impossible to do in this kind of expedited process with only a couple of days to prepare. One has a significant due process problem, which by itself is enough to kill this in court on constitutionality grounds. There are other recourses in defamation law designed to adjudicate these kinds of matters with due process, with the opportunity for someone to mount the defense to show that sort of thing. While the intent was admirable to try to prevent certain kinds of speech that might be false and harmful, I think the old adage, “the best antidote for bad speech is more speech” is proper here. The chilling effect on someone, particularly the newspaper editor Mr. Lauer mentioned who might have to keep defending himself for editorials, should not be discounted. Some people have the resources to keep doing this, but alternative voices might very well be chilled because of this. In any case, I am hopeful this bill will pass and we can go to the federal court and say the case is moot; we do not have to proceed and save everyone a lot of time and money.

 

Senator Tiffany:

We will close the hearing on A.B. 127 and open the hearing on A.B. 292.

 

ASSEMBLY BILL 292: Prohibits political subdivisions from challenging initiative petitions, referendums or recalls under certain circumstances. (BDR 24‑329)

 

Vivian Freeman:

I am sure you are all aware of the train trench being built through the middle of Reno. It has caused a great deal of controversy. Those of you who have been here the last few sessions know this, but four sessions ago we repeatedly heard about the infrastructure committee who had the bill asking for the quarter-cent sales tax for the “second straw” from Lake Mead. At that time, there was a great deal of controversy here in Carson City. There seemed to be access to funds for Washoe County, for the people in Reno, to fund certain projects. I watched while a great to-do was created here in Carson City regarding an eighth of that cent for the train project in the City of Reno.

 

It involves a lot of local politics the committee may not be familiar with, but what happened from a legislative viewpoint began 2 years ago. There was a request from an anonymous legislator for a decision by our Legislative Counsel Bureau (LCB) regarding what had happened in Reno because there was a legal challenge over an initiative petition that passed. Several of my friends were personally sued by the City of Reno because they had participated in this initiative petition and all of us were outraged. These people were engaging in a constitutionally protected activity in their community. They believed their government had become their enemy. I served in the government for 16 years. We are not the enemy, but when we do things like this it is the illusion we create. When we have to get an attorney to defend ourselves against our own government, most of us do not have the money for a high-priced attorney and we do not know how to deal with this terrible situation. That is what happened to some very prominent people of both parties in the City of Reno regarding this issue.

 

The only Nevada Supreme Court justice who dissented from Court’s opinion of what happened in Reno, was Cliff Young who stated it was unconstitutional because it was administrative rather than legislative. His most telling remark was, “One thing however is certain, the old adage of being railroaded may be aptly applied to the situation confronting the residents of Washoe County today.”

 

That is the way many of the people in Reno saw this. I served in this legislative body for 16 years, and I was never so disappointed in the opinion of our own legal counsel and of our own Supreme Court. They actually went against the vote of the people and our U.S. Constitution to support whatever was going on in Reno. I am sure, given the war in Iraq and all the rest, the one thing people really trust and depend on in our nation is our Constitution. The question was asked of the City of Reno attorney at the meeting in the Assembly, from where does the Constitution derive its power? The answer is from the people and this was a vote of the people, yet they found themselves being sued by their own city government.

 

This bill passed out of committee with no amendments, it is very simple, and just lays it on the line. The City of Reno did come forward with an amendment last time, which they may have this time, that said if it is declared unconstitutional, then you could not proceed. It is really an insult to the people of the City of Reno. I would ask you to pass A.B. 292. This is very important to the people of Washoe County.

 

William Puchert:

I respectfully request passing this legislation unamended to prohibit local governments from legally disenfranchising their own citizens. I was among 200 circulators of the infamous train trench petition last year. We were a group of concerned citizens and small business owners who wanted to put the project to a public vote. I believe what compelled most of us to circulate the petition were concerns of the impact to businesses, the questionable financing behind the project, and the dubious history behind it. As you may be aware, during the 1997 Legislative Session, the Legislature gave counties the right to impose a quarter-cent sales tax towards public works projects. The following year, Clark County voters were allowed to vote on that tax increase. However, in Washoe County, a lame duck county commission passed the tax, without the consent of the voters, that partially funds the train trench project. In the years to follow, there were numerous requests to put the project to a public vote which only fell on deaf ears.

 

A group of us, including many senior citizens, veterans, and disabled people, got together and circulated the petition. We braved the elements, stood out in the cold, and worked very hard. We did this in a bipartisan effort. After a lot of hard work, we collected 6000 more signatures than required. You can imagine our disappointment when our own city council, using taxpayer dollars, sued to take our petition off the ballot. By the way, the LCB opinion Ms. Freeman spoke of came from the same council meeting when we were asking to have that petition go to a vote.

 

I would like to show you the number of people disenfranchised by the lawsuit. Over 15,000 people signed the petition and they were never able to vote on the issue. Local governments have no business engaging in strategic litigation against public participation by their own citizens. In fact, to quote Martha Gould, who was one of the incorporators of the petition, “For a government to sue a citizen for doing something allowed by law is a perfect example of why citizens have so little faith in some of their elected officials.” She urges you to support A.B. 292. Our government is supposed to be for the people, and by the people.

 

At a time when we are thinking about what makes our nation so great, let us remember the First Amendment grants the right of citizens to petition their government for a redress of grievances. I would like to reiterate what Ms. Freeman has said, especially to those who will bring opposition to this bill and say it is unconstitutional. I would also like to respectfully remind you from where the Constitution derives its power, and it is from the people.

 

I understand, like it or not, we have to live with the train trench, and it is not the issue here. The reason I am here today is to urge you to level the playing field for citizens who play by the rules and want to participate in the process. To use a sports analogy, I am not happy with the referee’s call and I want to make sure the rules are clarified so the citizens have a fighting chance the next time they pursue a ballot initiative.

 

In closing, I want to thank Assemblyman Bernie Anderson for introducing this bill and to say I am very proud to be among a diverse group of people who support this bill. We may come from different sides of the political spectrum, but we all want to restore the rights of the citizen. Please support this bill.

 

Senator Care:

Ms. Freeman, I was under the impression until the teachers’ initiative was shot down last session, the issue of constitutionality was not ripe unless the ballot question was, in fact, passed by the voters. Up until that time, it is speculation as to whether you are even going to have this thing go into effect. But obviously I am wrong because the Nevada Supreme Court last year did what it did and the State court upheld the Reno court. I would like to get some kind of a brief e-mail discussing that issue. I am particularly concerned about it because the City of Reno’s proposed amendment says, “the petition is unconstitutional or otherwise illegal.” That could be read to mean you could challenge the constitutionality of a petition or a ballot question prior to even gathering the signatures. I see a several-step process here. You circulate it, gather the signatures, then maybe you might question the constitutionality of it. But as I read this amendment, this could even stifle an attempt to gather signatures in the first instance, and it is the same thing with the people who represented the City of Reno. I would like to know when these issues become ripe, because this concerns me.

 

Ms. Freeman:

I was really disappointed in the Nevada Supreme Court decision, but as Martha Gould asked, “When people start losing trust in their own government, then what do we have?” I hated to think the people did not trust me because I was part of it. This whole scenario has been disappointing, disheartening, discouraging, to me and I wonder why I have been in politics all these years for it to come to this. I suggest those who not have a copy of the Nevada Supreme Court decision, get it and review it. As an attorney, you probably understand it better than I do, but if this bill does not do what we are intending it to do, I am asking you to help me make it concise enough. One of our county commissioners in Reno is an attorney and he said that he would be happy to work on the language, as well, to make it even more concise and more definite.

 

Assemblyman Bernard (Bernie) Anderson, Assembly District No. 31:

This is a bill requested on behalf of Ms. Freeman, initially. This bill is a response to recent cases whereby local governments extended public money to challenge the merits of the initiative petition process. Indeed, we know this happened in Reno regarding the train trench petition. The City of Reno argued the initiative petition should not be placed on the ballot. In addition, similar action involving local government took place here in Carson City regarding an initiative petition to preserve Fuji Park on the Carson City Fairgrounds. The use of taxpayer money to challenge the initiative petitioner, or any other petition because local governments disagreed with the petition’s contents, is not a fair use of public funds. This bill would prohibit this action.

 

Nevada Revised Statute 293.725, created last session by A.B. No. 443 of the 71st Session and sponsored by former Assemblywoman Vivian Freeman, specifies state and local governments shall not incur an expense or make expenditure to support or oppose a ballot question. Assembly Bill 292 would expand on that concept, prohibiting local government or any agency thereof from commencing legal action to challenge the initiative referendum or recall a petition before the petition is presented to the voters as a ballot question. There are provisions in Title 24 of NRS addressing the forms of petition and the signature requirements. This bill makes an exception for challenges brought by local government regarding signature requirements, petition formats, or other procedural issues relative to the incorrect preparation of the petition. The intent of A.B. 292 is to prevent local government from using public money to influence the will of the public by commencing a challenge to a petitioner on anything other than format or signature matters.

 

I would like to urge the committee’s support for this important measure. To me it has always seemed whether you like a particular petition or not is not the question, it is whether you believe there is a proper role for the public to play. When we stand in the public’s way of reaching that, I think we violate the very principle upon which our country was founded. I do believe once a petition has made the grade, we have a responsibility to make sure government itself allows the petition process to reach its vote of the people. Therefore, I support this concept.

 

Senator Tiffany:

It happens down south too, this is not just a northern issue. We have an attorney from North Las Vegas who will tell his side of the story.

 

Mr. Lichtenstein:

As was just mentioned, the problem also occurs in the south. We got involved with a petition in North Las Vegas, which would change some of the rules concerning the North Las Vegas City Council meetings, making sure all members of the public have a right to speak on every issue. We support this particular bill. The time element is a tactic used by a municipality at the last minute to challenge a petition on constitutional grounds; it is something that would kill the process. Constitutional litigation takes time; it is not something done in a couple of days. To remove that tactical possibility for a government which does not like the subject matter and simply says we will litigate, they will have to find lawyers and they may not have the money. Petitions have to go through the voters. There is a procedure there.

 

The ripeness issue Senator Care spoke about is an important one. Until something is enacted, there is nothing really to fight about in terms of constitutional issues because it is not a law. It would be the equivalent of somebody challenging a bill in the Legislature prior to the bill being enacted. It might be a good politically tactical decision, but it would wreak havoc with the process. We support A.B. 292, as it still allows for the procedural formalities to be the subject matter of litigation if you do not have enough signatures or if there is fraud, but the substantive matters would have to await the vote of the public. As a money-saving matter, if something gets voted down, there would be absolutely no reason to have to challenge it. The only suffering a local government would do is it would prevent that government from making a preemptive strike on a group of citizens, often underfunded, who are trying to exercise their constitutional rights.

 

John Garvin:

I am in favor of A.B. 292 on behalf of a citizens committee called the Sustainable Growth Initiative Committee in Douglas County. This is a group whose efforts put a slow growth initiative on the Douglas County ballot, which did pass. The intent of the bill is to facilitate the initiative procedure, which the constitution calls for, by prohibiting preelection challenges except under those narrow exceptions you have set forth. However, had it been in place prior to the last election, our committee would not have been spared the time and expense of defending the sustainable growth initiative because it was challenged by a private party, a builder who asserted in this preelection lawsuit the initiative substance was administrative rather than legislative in character. The bill would have prevented Douglas County, which was a defendant along with our committee in the lawsuit, from openly siding with the developer to stop the measure from going on the ballot. After our local district court ruled against the initiative, ordering it off the ballot preelection, and based on prior case law, our group had to immediately petition the Nevada Supreme Court. Pending the election and despite the continuing opposition of Douglas County, the Supreme Court ordered it back on the ballot. After the election, the court ruled our initiative was legislative and not administrative in character and therefore a proper subject for the ballot.

 

As an aside, you should be aware that the United States Supreme Court in a March 25, 2003, opinion, entitled City of Cuyahoga Falls, Ohio v. Buckeye Community Hope Foundation, reaffirmed the legislative-administrative dichotomy cannot be used to keep voters out of the loop as to referendum matters. The same ruling obviously applies to initiatives, so I think it is consistent with what you are trying to do here on a preelection basis.

 

It is fundamental to our democratic process, and good politics, to allow people to express themselves at the ballot box on initiative matters, even if the measure is later ruled unconstitutional or otherwise unlawful in substance. After all, legislators on both state and federal levels have passed such bills on occasion. Voters acting as legislators in the initiative process should be accorded equal status. Certainly, it has been argued having a voter-passed measure later ruled unconstitutional can be very frustrating to the electorate. However, that is a relatively small occurrence and a small cost to pay compared to the virtue of having been able to express themselves for the benefit of the elected officials, who can then proceed to act accordingly at their peril. When voters become more educated in this process, they are more apt to consult legal counsel, as our group did, prior to expending a great amount of energy and money in qualifying their measure for the ballot. We urge you to pass A.B. 292.

 

Ms. Hansen:

We, too, support this particular bill. The Nevada State Constitution, Article 1, section 10, guarantees the right of the people to freely assemble together, consult for the common good, to instruct their representatives, and to petition. This is an important right we have and one of the main reasons for the initiative process is to circumvent the reluctance of the unwilling government, which will not be responsive to the will of the people. It is a dangerous precedent to challenge a petition before it is on the ballot and passed by the voters.

 

Many initiatives are specifically designed to change or amend the Constitution. They might be unconstitutional because they are trying to initiate a constitutional change. We are treading on dangerous ground here and appreciate the fact you have been willing to listen to us. As you notice, we have Democrats, Republicans, and Independents, up here today, all supporting this because we all believe the people’s right to the initiative process is very important. We have all participated in this process in many different ways.

 

Patricia (Patty) Cafferata, Attorney:

I am here because I represent citizen groups in initiative petition processes. I cannot speak for the ones that occurred in Las Vegas this year, but I did represent the people on the train trench and I also represented the people on eliminating the building permits in Douglas County. In the past, I have represented groups in White Pine County and in Douglas County. I am here in support of A.B. 292. It is a constitutional right found in Article 19 of the Nevada State Constitution, which was added to the Constitution back in 1911.

 

At the time, people were frustrated with government, as they could not get the responses they wanted. They wanted the people to be able to propose their own bills or repeal bills that had been passed. We are seeing more of them because people are frustrated with government, and the train trench, which the people in Reno have been fighting since the 1930s. They could not get the response they wanted from the government, so they went to the initiative petition process. The same thing happened in Douglas County with the building permit limitations. They had gone to their commissioners time after time, got nowhere, and  resorted to the initiative petition.

 

The other big initiative petition circulated was the Fuji Park petition in Carson City. I was not a lawyer on that, but I do know a little about it.

 

Assembly Bill 292 limits political subdivisions from challenging initiating petitions. The casinos and Citizens for Private Enterprise (CPE) sued us and this bill will not prevent any of that. All this bill would do is prevent the local governments from suing citizen groups. The train trench was a convoluted, procedural mishmash. My clients sued the City of Reno to stop it from selling the bonds; CPE and the casinos then sued us, and the two cases were merged together. The city countersued us and that is how it came down. In Fuji Park, I believe what happened is the citizens won in district court and then the city took the citizens to the Nevada Supreme Court. As Mr. Garvin said, in the Douglas County petition, the county was named as a defendant, which would be a usual occurrence. It might as well have been the plaintiffs, because everything they did was against us. Those are government resources being used against the citizens. You all know how hard it is to collect signatures on an initiative petition; this is not easy work, it is backbreaking work to get done. There are no resources, no money, you are passing the hat to do whatever you need to do, it takes a lot of signatures to qualify something, and then to get sued by your local government and knocked off the ballot is very disheartening. We keep talking about Martha Gould from Washoe County. After she was sued, she said to me it never occurred to her she would be sued for circulating an initiative petition. Where do citizens get the money to defend themselves? It is very hard; these are merely activist groups. I personally do a lot of pro bono work in this area because I realize people do not always have the money to pay for my services. In the train trench case, I donated $28,000 of my legal fees to them. The Douglas County case was a similar amount.

 

Senator Tiffany:

The premise of this whole bill is to not use taxpayer money to sue on a petition, but when Mr. Lichtenstein was testifying, he said he was in support of the bill because it is not a law yet. How can you take this to a court when it is not a law you are challenging? I would like to hear your comments, because if that is a true premise, then nobody should be able to challenge this before it goes to the ballot and passes.

 

Ms. Cafferata:

The ripeness issue: Is it a law and can you challenge it? What happens when the Legislature passes a law? Nobody challenges it until after it is enacted, then you can take it to court and say, okay, it is unconstitutional. That is not what happens with the initiative petitions, or it has not historically been what has happened in the Nevada Supreme Court.

 

You have to sort out the constitutional challenges and then the administrative and legislative challenges. There are two different ways to defeat proposals. On the constitutional ones, the Nevada Supreme Court has been pretty consistent. If they look at it prior to a vote, they will knock it out if they say it is unconstitutional; those are the cases like the one where there was an initiative to amend the terms on Congress. We wanted to put term limits on Congress and it was on the ballot, and the Supreme Court said the only one who can set the qualifications for Congress is the Congress. You cannot do that, so that one was knocked off.

 

The ones that are clearly unconstitutional are clearly flawed and those have been set aside.

 

The teachers’ initiative was unconstitutional because it was a violation of the Nevada Constitution. There was a request to appropriate certain kinds of money. Our Constitution says if you are going to appropriate money by initiative petition, you must provide the tax to fund it. That petition did not provide the tax. An administrative act deals with the day‑to‑day operations of the government. If you have a municipality running a utility, an initiative petition would start the process to study the fees or identify to lay the pipes or do something similar. That would be considered administrative and obviously the people cannot interfere with the day-to-day operations of the government.

 

Senator Tiffany:

The question was, if this is not a law, how can you challenge it by the private or the public sector?

 

Ms. Cafferata:

I made that argument in court and I still got sued.

Senator Tiffany:

What you are saying is the court does not really pay any attention to that argument.

 

Ms. Cafferata:

Sometimes it does, depending on what the issue is. Sometimes they will say, well, it is not a law yet. There are some firefighter initiative petitions in Clark County and the courts said, well, it is not a law, so there is nothing to do here, because most of them are voted down. If you qualify them, many are voted down by the people anyway. There is nothing to decide, it is not right. On the other hand, they do interfere because of these constitutional issues or the legislative-administrative issues. If it is legislative, it is policy.

 

Senator Tiffany:

I am asking because, if we amended this bill to say there is no court challenge until after it is a law, I wonder if it would be stricken down and challenged.

 

Ms. Cafferata:

The reason this bill came out was because the Legislature passed section 1 last time which says local government will not interfere. What happened in the Fuji Park case is the same argument made to the Supreme Court, this bill was here and therefore the governments could not do it, and the Supreme Court said, “Oh no, the Legislature could not have meant that.” That is why this bill is here.

 

Scott Wasserman, Committee Counsel:

I would like to get to the question of why the courts struck it down, as they did before, and the exact case was the congressional term limits. The Nevada Supreme Court said:

 

There is no public utility in burdening the already strapped public with the expense that would be incurred by placing meaningless questions on the ballot, conducting an election, and tallying votes, even where balloting would allow voters to express their views.

 

They struck it down in light of public expense. If you broaden the terms of the bill to prohibit all challenges, the terms of the bill only limit public expenditures. To go beyond that would clearly put you in an unconstitutional issue.

 

Ms. Cafferata:

To debate the other side though, there is Las Vegas Chamber of Commerce v. Del Pappa, 106 Nev. 910, 802 P.2d 1280 (1990), wherein the court said whether it is constitutional or not, there is some merit to having the people express their opinions and having the public will known to elected officials. There is always a counter rule to cases, but A.B. 292 does not address any of those things. All it does is prevent the local governments from interfering.

 

I urged the Assembly to consider adding an amendment to allow citizens to recover their legal fees and costs for doing this if they are successful. It would not have worked in the train trench case because they were not successful, but it would have helped in the Douglas County case; they would have been able to recover their fees. There is a private attorney general right to enforce the open meeting law and I would suggest you do something like that as enforcing the citizens’ constitutional rights.

 

Senator Tiffany:

Is there an amendment you would like?

 

Ms. Cafferata:

That would be it.

 

Senator Tiffany:

You do not have a formal amendment?

 

Ms. Cafferata:

No.

 

Senator Care:

Let me make a distinction. Suppose we had a statute saying no political subdivision can incur taxpayer monies to challenge an initiative petition on constitutional grounds, as opposed to no political subdivision can challenge an initiative on constitutional grounds. Is there a difference there? It would seem to me any party who thinks their constitutional rights are being aggrieved can go to the court in spite of a statute to the contrary. If the distinction is whether public monies are involved, obviously public monies are going to have to be involved. I do not know if we can go that far. Do you have any thoughts?

Ms. Cafferata:

You cannot prevent the local governments from defending themselves if they are sued. What happened in Douglas County was the district attorney took a very activist role in supporting the other side. In Washoe County, the district attorney took an absolute neutral role, answered the court’s questions, never did any research, and never filed any briefs. They spent no time on it. The district attorney in Douglas County spent enormous amounts of time. Are you asking if you added that here, whether or not they could challenge for constitutional reasons?

 

Senator Care:

I am wondering what would happen if you did it that way, or if we did not adopt the proposed amendment and left it silent where there is no permissive language in the statute saying a municipality could raise that challenge. It seems to me if it is on constitutional grounds, they could do it anyway. It would be up to the court then to take it or decline it.

 

Ms. Cafferata:

Assembly Bill 292 does not address that the way it is written now. The only reasons you can challenge are insufficient signatures or an incorrect form used. Those are legal requirements; those are the protections. The legislation does not address that in any way, all it says is they cannot proceed against the citizens. You know you cannot fight city hall, they have all the money and resources and it is just the average citizen voters who are trying to accomplish some purpose and this is just another burden on them. I urge you to pass A.B. 292.

 

Mike Hoffman:

I am in support of A.B. 292. I am the president of a group of citizens who circulated a petition in 2001 to collect signatures to try to preserve a park in Carson City. We filed this petition because we felt our local officials were not hearing us. We turned to the Nevada State Constitution and were able to collect over 17 percent of the required signatures. We filed the petition with the clerk/recorder office and the petition was found valid. The Nevada Revised Statutes state if a petition is valid, the city government in this case must either adopt the language or pass it on to a vote of the people in the next election. In our case, the city supervisors chose to ignore the petition and instructed the clerk/recorder not to put the language on the next ballot. Our group did not have the funds to hire an attorney to take the city to court, but luckily a local attorney named Julian Smith stepped up and waived his fees. We challenged the city in district court, and the city of Carson City took us to the Nevada Supreme Court, Glover v. Concerned Citizens for Fuji Park, 118 Nev.__, 50 P.3d 546 (2002). Without Mr. Smith waiving fees of over $17,000, the people’s signatures would have been meaningless and their voices lost to the very people they put into office. My personal feeling is for the citizens to come up with and create an initiative petition, they should not have to build a war chest to support themselves in a challenge by their own government. Assembly Bill 292 would help support and strengthen one of the best means voters have to be involved, be heard, and bring change to their government as supported by the Nevada State Constitution and the First Amendment.

 

Sean McGowan, Lobbyist, City Attorney, City of North Las Vegas:

I am here to give you a brief summary of what occurred vis-à-vis the initiative petition of North Las Vegas, so you can evaluate that as part of this equation. Our city council believes preelection access to the courts is necessary and appropriate in some cases. In our situation, it was a 4-to-1 decision. A minority woman wanted to make sure you knew at least one member did not want to go to court over this, but the case proceeded because the petition dealt with matters they felt were clearly administrative in nature. For local governments, that is the constitutional standard. Is it an administrative or a legislative matter? Let me tell you four of the items with which our petition dealt.

 

The first one was whether or not the voters should decide the city council meetings start at 7 p.m. or 6 p.m., which is the current practice. Secondly, shall the voters decide whether there will be two public forum sessions rather than the current one. The petition wanted one at the beginning as well as a second session at the end. Thirdly, shall the voters decide whether speakers at the meeting be allowed 10 minutes on every item or be limited to the current 5 minutes. Fourth, the petition would have the voters decide whether speakers at the podium could direct comments and questions to individual members of the city council and require the individual member give complete and truthful answers to the questions.

 

Our council felt these matters were administrative in the conduct of their meetings. They were not policy, they were not substance of the business of city government; they were merely the administrative details about how we conduct our meetings. When we went to district court in Clark County, the judge who heard the matter asked one question I think is indicative of the judicial role. He asked, “Mr. City Attorney, could you not have brought this to me sooner?” In effect, he was saying he could have saved them the time and trouble of standing out there in the hot sun collecting signatures, because these matters are not appropriate for the initiative process. They are not policy and substance, they are not legislative items. And that is the constitutional standard.

 

We believe the judiciary is the appropriate place to weigh the balance on whether the topic is above the line or below the line or close to the line. If it is close to the line, it will be a difficult decision for the courts, but that is what they are there for. They will weigh the balance on whether the benefit to be gained from the legislation is a value to be protected versus the cost and the expense of sending a matter to the ballot that should not be on the ballot. Does that not raise the potential for greater frustration in the electorate and further alienate the electorate when an earlier reading on the constitutional basis for the matter would be helpful to all parties?

 

We think earlier access to the judiciary, rather than later, is a better result, so we would urge you to not adopt this provision. I think the comparison to the State Legislature is not germane because it is a different process. Your rules and the practice over many years is different, and the courts have determined they should be involved for this legislative process, when it is a close question on whether it is appropriate to go on the ballot.

 

Andrew A. List, Lobbyist, Nevada Association of Counties (NACO):

The association of counties is officially neutral on this bill, but we did want to weigh in with some concerns, several of which have already been mentioned. First, if anything can go on the ballot, I think you will end up having rather large ballots with a substantial number of initiative petition questions. This is troublesome to the counties because of the cost to print these ballots and prepare the questions.

 

Secondly, the initiative petition process is something we believe in and value, but to pass this bill would impinge on the integrity of the process itself. You would end up with a lot of different petitions that are not legal, do not have the proper administrative-legislative balancing, and also might be unconstitutional.

 

We need to protect the people who are also asking for these initiative petitions and have some sort of early review so their time, money, and effort can be protected before the question actually gets on the ballot. Along those lines, I have discussed a possible conceptual amendment to have the Attorney General’s Office review any potential ballot question prior to going to the ballot. This office would be a neutral party; it would not be the local government, which would be affected by the petition itself. The Attorney General’s Office could review the question for constitutionality and their recommendation would be advisory only. If the question was found not to be in the right format, subject matter or constitutional, it could still go to the ballot, but the people who asked it be placed on the ballot would know ahead of time it might not be legal. At the same time, the local government would reserve the right to take that group to court or take the question to court after the people voted it on. Some sort of prior access to the court or to a legal advisor would be prudent in the matter.

 

Nicole J. Lamboley, Lobbyist, City of Reno:

For the record, our counsel does oppose the bill as currently written. As some of the supporters of the bill indicated, we did suggest an amendment (Exhibit F). In discussion, our city council asked if there was a way we could support this legislation, and there was if we could add a provision stating the petition is unconstitutional or otherwise illegal. To address Senator Care’s question, it is not before the signatures would be gathered, before it goes to the voters as a ballot question, so it would not impede the collection of signatures before it was actually put to the vote.

 

I also provided you with an article (Exhibit G) quoting Second Judicial District Judge James W. Hardesty’s ruling:

 

The court is precluded from permitting a ballot whose only purpose is to allow people to express their views when the proposed law would have absolutely no legal force or effect.

 

He stated the language of the petition did not declare a new law, but rather impedes existing policies established by the city. He declared the initiative unconstitutional because it sought to overturn administrative actions and contractual obligations already in place. For that purpose, the City of Reno held the same views and took the initiative petition to court. If we could provide an amendment that would allow local governments the opportunity if there was an unconstitutionality issue, then they would be allowed.

Senator Tiffany:

In your amendment, who would be the judge and the jury on whether or not it is unconstitutional or illegal?

 

Ms. Lamboley:

Every local government has its legal counsel.

 

Senator Tiffany:

It is the fox in the hen house?

 

Ms. Lamboley:

Right, it would also force or require the legal counsel representing that entity does due diligence; you would not just frivolously engage in a challenge of an initiative petition. There have been seven case citations for preelection intervention on illegal petitions in the State of Nevada. At the request of the bill’s sponsor, we did provide those citations to him in the Assembly.

 

Senator Tiffany:

When Mr. McGowan was talking about whether the topic was above or below the line, the administrative part was pretty clear-cut, but what about when close to the line, when the judge and the jury would then be the public government’s attorney making the decision? It could put you between a rock and a hard spot. That is where I see the difficulty with the amendment; I do not know if it clears up anything.

 

Mr. McGowan:

It would set a good faith standard. The local government and the counsel for the government would have to have a basis to believe the particular subject matter was unconstitutional or otherwise illegal before the legal action commenced.

 

Senator Tiffany:

But what do you do when you get to that level, the gray zone that would make it difficult?

 

Mr. McGowan:

That is why the courts are there and we think they are doing a pretty good job. The decision last December, where they clarified and overruled a 30-year-old Reno case saying all zoning was administrative involved what was originally not a good law or well-reasoned. They fixed it and said zoning is a substantive right that perhaps is a coequal power of the direct process. We have a strong faith in the judiciary to evaluate those matters.

 

Senator Hardy:

On this amendment, what other possible grounds would a court have to reject it? The petition is unconstitutional or otherwise illegal; it seems to be the issue at hand.

 

Mr. McGowan:

The City of Las Vegas had an example of where an initiative petition would have potentially put them in breach of contract on certain redevelopment bond financing matters.

 

Senator Hardy:

It could not be done for policy reasons and would be illegal?

 

Mr. McGowan:

Yes, Senator, I believe that is true.

 

Senator Hardy:

I just do not want to set up a situation where the court feels like they could do it for policy reasons. That is the standard where they have to judge it anyway.

 

John O. Swendseid, State Bond Counsel, Swendseid and Stern:

I am here to testify against the bill as presently drafted on behalf of the cities for which we issue bonds, but particularly the City of Las Vegas matter previously mentioned. The reason for the opposition to the bill is it would allow a petition to go forward against the financial matter that perhaps is unconstitutional; while the petition is pending and until the election, this would chill the financial markets to such a degree that bonds could not be issued. We have had some direct experience with this in Las Vegas. An initiative petition was presented to the city council which would have repealed the ordinance creating the Las Vegas Redevelopment Agency. That agency has a lot of bonds outstanding, and at the time the petition was filed, the city was in the process of considering a refinancing bond. That is a bond you issue to pay off an old bond and lower the interest rate.

 

Whenever you do a bond, you have to tell the investors what is going on in your city and what the risks are, and we thought we would have to disclose the existence of the initiative petition. We were told no one would want to buy a bond if there was an initiative petition presented against it unless the petition was held to be unconstitutional. In this particular case, the city attorney, with concurrence of the attorney general, advised the city the petition would be unconstitutional. Of course, had it repealed the redevelopment agency, it would have adversely affected all its outstanding bonds. The challengers did not go to court, so the petition did not go forward after that decision.

 

If this bill was in existence, the city would not have had the ability to make that decision, the question would have gone on the ballot, and a couple of bad things would have happened. First, the city would not have been able to do refinancing bonds because the market just would not want to buy bonds with this cloud over them. If you are about to make a decision to invest $25,000 or $100,000 in a bond, and one bond you are being offered has an initiative petition that might repeal the tax that goes to repay the bond, whereas another bond you can buy has no such initiative petition, you are going to buy the bond with no petition. Assembly Bill 292 would have stopped the city from going ahead with the proposed refinancing bond because no one would want to buy that bond.

 

In addition, this legislation drastically affects the market for the bonds already outstanding. In other words, if you owned a redevelopment bond issued several years ago at the time the petition was presented and the petition had to go on the ballot and you wanted to sell your redevelopment bond to someone else because you needed the money to buy a house, you are required under our securities law to advise whoever you are going to sell the bonds to about any bad things going on with the bond. In fact, the city is required to make disclosures to the bond market. It is likely the bond market would know about this petition and no one would want to buy your bond because this petition, that if adopted, at least on its face, would stop the very tax going to repay the bond.

 

It seems to me the bill is a danger to Nevada and would be a danger for any bonds any Nevada entity proposes to issue. This came up in Las Vegas, but we can think of other possibilities. If enough taxpayers signed a petition to prohibit the city from levying a property tax, that action would be unconstitutional as applied to outstanding bonds, but this bill would prevent the city from challenging it in court.

 

Vice Chairman Tiffany:

We will close the hearing on A.B. 292 and I will turn the chairmanship over to Chairman O’Connell.

 

Chairman O’Connell:

We will open the hearing on A.B. 539.

 

ASSEMBLY BILL 539 (1st Reprint): Makes various changes concerning contracts into which members of certain governing bodies may enter with governing body. (BDR 27-169)

 

Mr. List:

This bill addresses situations where a board of county commissioners seeks to enter into a contract with a board member for provision of goods and services. Whether or not these contracts are legal or illegal is a mixed matter within the Nevada Revised Statutes. The Nevada Ethics in Government Law enacted in 1993 states such contracts are legal as to the provisions related to county officers and employees and to the powers and duties of cities. However, such contracts are not legal pursuant to the Local Government Purchasing Act enacted in 1978. There is also a conflict between the opinion issued by the Commission on Ethics No. 99-27, dated March 8, 2000, which states these contracts are legal and Attorney General Opinion No. 02-119, which states such contracts are not legal. In A.B. 539, we went into five different sections of the NRS; we cross-referenced them all so these contracts are legal, provided seven different criteria are met. Right now, it is legal in certain sections, but you only need one or two criteria. We are making such contracts legal in all sections of the NRS, provided the seven criterions are met. The existing criteria in the NRS are just scattered throughout. Assembly Bill 539 would amend these five sections to clarify the ”gouging” of the contracts.

 

The seven criteria are: One, the board member must disclose his or her pecuniary interest in the contract; Two, the contracting process must be controlled by rules of open, competitive bidding, if applicable; Three, the sources of supply must be limited; Four, the board member must not have taken part in developing the contract plans or specifications; Five, the board member must not be personally involved in opening, considering, or accepting offers; Six, a two-thirds vote in the affirmative would be required; Seven, the public meeting notice for that particular meeting must state that such a contract will be considered.

 

Section 1 of the bill would amend the local government purchasing act, NRS 332.155. Sections 2 and 3 amend provisions related to county officers and employees in the powers of cities to utilize its contracts. In sections 4 and 5, the proposed language amends the provisions of the Nevada Ethics in Government Law. Assembly Bill 539 provides clarifications on these types of contracts. Clarification will strengthen the Ethics in Government Law and ensure that public officials can continue to earn a living at their chosen professions while engaging in public service. We urge prompt consideration of the bill. I am submitting my testimony for the record (Exhibit H).

 

Chairman O’Connell:

When one of the interim committees met in Elko on a horrendous day, some concerns were raised during the meeting about the problems they had with not having anyone else in town to do the job, and they were prohibited from bidding on the opportunity. They would have to go to Utah, or across the border to try to bring in a contractor, or whatever the situation demanded, because they were prevented from bidding in their own city.

 

Mr. List:

It is exactly the situation we are considering. This came up in Elko County with ex-commissioner Nolan Lloyd. I believe he is a well driller; the county needed some wells drilled, they could not hire him to do the work because of this one inconsistency in the NRS, and had to hire somebody from Salt Lake City at a higher price with a greater distance.

 

John H. Milton III, Board of Commissioners, Humboldt County:

This item first came to NACO through Lincoln County with a member of the board who is also a professional land surveyor; he is the only land surveyor in that county. Over the course of the year, the same thing happened in Humboldt County, where I live. I am the only professional land surveyor between Elko and Fernley. If Humboldt County wishes to hire a land surveyor, it has to go to Elko, Fernley, Fallon, or Reno and recently we have had the opportunity to have to go to Elko to hire an attorney. In our initial review of the cost, it is probably double the cost of the services, so we would ask A.B. 539 be passed to allow the contracting with a member of the board. During our hearing in the Assembly, they questioned the amount a governing body may purchase of $300. It was original language in the bill, and through discussions they came up with changing that item to $1500. Assemblyman Goicoechea pressed the issue and explained there was a county commissioner who owned the only auto parts house in Esmeralda County. As soon as he sold the county $300 worth of parts, the county had to go to Elko to purchase the rest of the parts. Nowadays, one simple part can cost $300. That is the reason they raised the amount from $300 to $1500.

 

Senator Care:

Mr. List, how long had the $300 figure been on the books?

 

Mr. List:

The $300 limit was established in 1973. I took that number and indexed it through the consumer price indexes and it came out at $1021. Assemblyman Goicoechea and Assemblyman Collins said we could set the limit at $1000, but decided it was too low, since we probably will not revisit that figure for another 10 or 15 years. The Assemblymen then suggested $1500, and that is how the bill came out of the committee.

 

Ms. Jennings:

We support this bill to strengthen laws to make them more clear for public officers and employees. We looked at this issue ourselves and could not find a way to fix it, so we commend NACO for coming up with a solution. Because of conflicting provisions in law, we did not find people in violation when there were other laws with which they were in compliance. We fully support this bill.

 

Chairman O’Connell:

We will close the hearing on A.B. 539 and open the hearing on A.B. 398.

 

ASSEMBLY BILL 398 (3rd Reprint): Establishes temporary alternative procedure pursuant to which certain performance contracts for cost-savings energy measures in buildings occupied by governmental entities are bid. (BDR 27-1115)

 

Assemblyman Jason D. Geddes, Assembly District No. 24:

The purpose of the legislation is to add a new code of section allowing state departments and all other public entities to enter into energy, water, waste disposal, and other resource-savings performance contracts, either as installment payments or lease purchase contracts. The bill is being presented with some proposed amendments; as the bill was passed out of the Assembly, we were proposing additional safeguards to ensure public notices and strengthen the bill.

 

Sections 1 through 14 of A.B. 398 apply to local governments. Sections 15 through 21.5 define operational cost saving and the associated terms. Section 22 enables entry into the performance contracts and spells out the minimum qualifications necessary for a qualified service company to be qualified by the State Public Works Board. Section 23 provides for third party financing. Section 24 addresses section 3 of Article 9 of the Nevada Constitution clarifying debt. Section 25 addresses payments. Section 26 ensures the prevailing wage provisions will be followed. Section 27 addresses long-term monitoring of savings. Section 28 requires reporting of the projects to the Nevada State Office of Energy. Section 29 addresses contractual requirements to guarantee the savings.

 

I hope we have addressed the concerns this committee had with Senate Bill No. 22 of the 71st Session brought by Senator Townsend; the draft you see with the various amendments will address everyone’s concerns. We have expanded Assembly Bill 398 beyond electricity, we have included natural gas and several other operational savings, which you can see in section 19.

 

Chairman O’Connell:

Are the amendments a result of the minutes you read?

 

Assemblyman Geddes:

Yes, the amendments resulted from others who came forward as well as discussions in the Assembly. Based on how the bill came out of the Assembly, some of the amendments needed to be changed.

 

The first amendment deletes sections 1 through 14. The bill was changed to be an interim procedure; we decided to leave it at the state level, run it for the 2 years, see how the program works, and sunset the procedure in 2 years. In the next legislative session, we would review the status and apply it to the local governmental agencies.

 

The bill sought to repeal the current local government agency provisions for retrofit. Amendment 2 would make sure those stayed in, since we are not dealing with local governments at this time.

 

Section 3 changes the language to help ensure everybody who goes through the process and is certified by the State Public Works Board gets notified of each and every project, and has an opportunity to work on these projects.

 

Section 22, subsection 5 is modified to protect the taxpayer using the criteria that reflect the public interest standard. I think there will be an additional amendment on that based on some of the State Treasurer’s language.

 

Section 22, subsection 7 clarifies the State Division of Purchasing may procure sufficient funding from the qualified service company through negotiation to obtain the services of a third-party consultant. What this means is you can go out and get an independent third party to review the project and process to make sure everything is going in correctly. This cost will be built into the project so some of these using agencies that do not have the technical expertise on staff can get it from an independent third party.

 

Section 24, subsection 2, seeks to extend the contract period from 4 years to 20 years. Originally, the contracts could be 20 years. The bill was scaled down to 4 years in the Assembly, but we would like to return to 20 years. Section 29, subsection 2, changes the word “may” to “shall.”

 

I am submitting a packet of information for the record (Exhibit I. Original is on file in the Research Library.).

 

What we are looking for in legislation is the ability to go in and perform the retrofits on State buildings, whether they are energy-related, water conservation-related, or waste minimization-related. The idea is to enter into these lease contracts and be able to put in a new heating system or window shading or alternative energy system, where the energy savings we get back from these newer systems will pay off the cost of installing those systems. Once the systems are paid for, the savings will revert to the General Fund.

 

On page 18 of the packet (Exhibit I) is a letter of support from the Nevada Renewable Energy and Energy Conservation Task Force; Assembly Bill 398 is in concurrence with their goals. There are favorable newspaper articles on pages 20 and 21.

 

I would highlight examples of A.B. 398-type projects on page 22. The City of Caldwell, Idaho, entered into such agreements, had $120,000 worth of retrofits done on their buildings, and saved the town $30,000 per year. In 4 years, Caldwell was able to pay off the costs and every year thereafter saved $30,000 that would have been paid for energy.

 

Louisiana State University did a comprehensive audit of its campus. The school spent approximately $18.6 million on retrofits, anticipated $4.3 million in savings a year, but realized $4.7 million. They entered into a 10-year payback agreement, but paid back the costs in 5 years. They are presently saving just under $5 million a year in energy costs.

 

Chairman O’Connell:

Are these the same amendments presented to the Assembly, which they rejected?

 

Assemblyman Geddes:

No. We were working on the bill on the last hour of the last day of the session. The length of the contracts had been reduced to 4 years. We were concerned about the length of the contract. We reasoned if we could work on other safeguards and provisions to strengthen the bill, they would entertain extending the time to 20 years. These 7 amendments were an effort to return to the 20‑year time frame.

 

Chairman O’Connell:

Has the Assembly seen and agreed with both sets of amendments?

 

Assemblyman Geddes:

The second set was not made available from the Office of the State Treasurer. I informed Assemblywoman Leslie I would make a copy available to her.

 

Chairman O’Connell:

It is important she is informed. Our committee will be addressing this bill in our work session. We would want to know there is an agreement to the amendments proposed prior to acting on the bill with the amendments. In section 22, subsection 7, did you say, “shall procure?”

Assemblyman Geddes:

We considered the word “shall,” but “may” is correct. We determined the word “shall” would be too restrictive when considering projects being done over in state facilities. The first time a retrofit was evaluated they would need the third‑party expertise, but the Purchasing Division would be comfortable with the expertise and the costs would not need to be added to another state building.

 

Senator Tiffany:

This is really outside the Purchasing Division’s expertise. Why are you going around the State Public Works Board?

 

Assemblyman Geddes:

It is a combination of things. We have had this process in place for 4 years, in terms of being able to do energy retrofits and having the procedure in current language. The process has been entirely through the State Public Works Board, which has only been able to do three projects in that time frame. We have come up with a combination where all people performing retrofits or any of this work would have to be prequalified by the State Public Works Board. We tap into their expertise and knowledge of how companies perform as well as which companies are qualified to do the work. Purchasing is more adept at handling these contracts. We blended the State Public Works Board and the Purchasing Division to get the retrofit process in place more quickly and realize the saving sooner.

 

Senator Tiffany:

Many of the entities concerning cost savings were subjective.

 

Assemblyman Geddes:

Those types of considerations are built into the process. There is a full energy audit, which looks at heating, air conditioning, and water electricity conservation. The company does a complete audit, on a case-by-case basis, determining what the operational savings are for that building. They would compose a list of changes, along with the projected savings. The third party could advise which projects on the list would be most beneficial.

 

Senator Tiffany:

Why is there not some flexibility within the agency for the selection process? The bill goes into detail as to how the selection process will work, including a list of the criteria the jurisdiction shall use. Why should the jurisdiction not have the flexibility to determine what criteria should apply to its operation?

 

Assemblyman Geddes:

This is model legislation we have adapted to meet the needs of Nevada. It has been used in many states. Each agency wanting to do a retrofit on a building or facility would discuss what would be best for it with the Purchasing Division. There would be a list of the contractors the State Public Works Board has approved, and based on its needs, the agency could choose the companies that would meet those needs. The remainder of the packet contains examples of the process and several projects that have been completed.

 

Carl Linvill, Administrator, Nevada State Office of Energy:

I am here to support this bill. We went to the State Treasurer’s Office and sought their advice on technical amendments they felt were beneficial. I will read the amendments (Exhibit J), which will clarify the language in the bill and were advised by the Purchasing Division. The safeguards in the bill are significant, in particular, section 22. The Purchasing Division is here to address the safeguards in that statute to ensure a full and competitive process. The Purchasing Division will facilitate the solicitation in accordance with NRS. We would like to delete the term “person” and change it to “any firm or agency.”

 

Mr. Wasserman:

Are you trying to change the definition in NRS 0.039, which says a person means a natural person, any form of business or social organization and any other nongovernmental legal entity? Are you aware this definition would apply to a person as used in this chapter? Are you attempting to limit it?

 

Mr. Linvill:

No, the reason that we suggested this specific meaning was out of concern that person was not specifically defined. You are right; we would not need that language.

 

In section 22, subsection 1, line 44, of A.B. 398, “after purchase contract” we want to insert the sentence: “A performance contract entered into pursuant to this act is subject to the provisions of chapter 353.500 to 353.630 of NRS.” Those sections of the statute refer to the lease-purchase process. In section 25, a rewording for clarification in subsection 2 deletes a current sentence and replaces it with “the period over which payments are made, on a performance contract, shall equal the period over which the operating cost savings are amortized. The payments shall not commence until the measures are installed.” In section 29, we want to change “may” to “shall’ to match Assemblyman Geddes’ amendment, and also insert the phrase “by the Treasurer.”  

 

Greg Smith, Purchasing Officer, Purchasing Division, Department of Administration:

We are excited to be a part of this process and should this legislation pass, we believe it is a great opportunity for various factions of our government to do what they do best.

 

Larry Kinney:

I work for the Southwest Energy Efficiency Project. We are a not-for-profit, public-interest organization that is supportive of this bill because we support energy efficiency. This form of contracting is nothing new; it has been on the air for 20 years. I am submitting my testimony (Exhibit K) for the record.

 

Ken Baker:

Rebuild America supports energy efficiency through renewable energy networks for the U.S. Department of Energy. We are in favor of this bill; there is a definite potential for savings in state agencies. I think it will help state agencies deal with deferred maintenance. I am submitting my testimony for the record (Exhibit L).

 

Jay Johnson:

I am with Arizona Public Service and I support A.B. 398 with the amendments; it is a good improvement to the existing legislation.

 

Joseph L. Johnson, Lobbyist, Sunrise Sustainable Resource Corporation, and Toiyabe Chapter/Sierra Club:

I would like to express support of A.B. 398, particularly the amendment extending the 4 years of the contract to 20 years.

 

Kaitlin A. Backlund, Lobbyist, Nevada Conservation League:

We support the bill.

Craig Hartman:

I am a subcontractor in favor of the bill, but have a concern. Would the subcontracting bids be let for open bidding, or would that be open to inspection? They are not at present, but would they under this bill?

 

Chairman O’Connell:

The bids would have to be open bidding.

 

Mr. Smith:

The main contract would be open to public bidding. I do not know about the subcontracts. The general contractor proposes a list of subcontractors that we would either approve or not approve. I will get the information to you.

 

Mr. Hartman:

Would the subcontractors be liable if the audit failed? Would their pay be withheld? For example, what if the air conditioning was not effective because the windows were not tinted sufficiently?

 

Chairman O’Connell:

If the subcontractor did the work he would be liable. When a general contractor bids a job, he considers every aspect of the project and his reputation would be on the line if he has not planned the job properly. If the air conditioning effectiveness depended on the degree of window tinting, which was not sufficient, he would not have done a good job with the plan and not be hired again.

 

Mr. Hartman:

If the audit showed there was no energy savings, would the subcontractor be paid?

 

Chairman O’Connell:

If you did the job, you would be paid.

 

Assemblyman Geddes:

When the State Public Works Board qualifies people for the projects, they qualify the general contractors and all the subcontractors. Under the notification process in A.B. 398, all the contractors and subcontractors would be notified of every project.

 

Greg MacRenaris:

I am in support of this bill and recommend the following issues for evaluation: One, the bill specify contracts and any amendments, exhibits, change orders, or attachments become public documents which must be made available upon request. Two, there be an open pool of qualified providers, that the lowest bid be granted the job to save taxpayers dollars, but with a 5 percent variable to allow the State agency a degree of choice. Three, there is a self-serving effect in this program when a resource management company gets paid a percentage of what is spent; this is a disincentive to less expensive and more efficient approaches. Fourth, add to the program specific penalties such as disqualification and elimination of anyone committing crimes against the State like bribery, kickbacks, or misappropriation of funds; this will allow energy conservation measures to move at a quicker, less-regulated pace and maintain the original intent of the bill.

 

Chairman O’Connell:

Sir, would you please put your comments in writing and submit them to Senator Townsend?

 

Mr. MacRenaris:

I have already spoken to Senator Townsend about the matter. This is a wonderful bill, but it should have more safeguards.

 

Chairman O’Connell:

We will close the hearing on A.B. 398 and open the hearing on A.B. 424.

 

ASSEMBLY BILL 424 (1st Reprint): Revises provisions concerning penalty for person who contracts with state agency and fails to perform according to terms of contract. (BDR 28-959)

 

Assemblyman Geddes:

Assembly Bill 424 is very short bill. Basically it places the responsibility for vendor performance with State Purchasing and when Purchasing does the performance rating, those ratings must be accompanied by a system that prevents contractors from receiving additional state contracts from another agency within the state when they have not performed adequately on the existing contract. An example of this is the awarding of a large contract to BEST Consulting, Incorporated, by the Nevada Department of Motor Vehicles, while the Department of Taxation was suing them for failure to live up to the contractual obligations. The due process issues surrounding that would be dealt with in regulation. I urge your support. I am submitting my testimony for the record (Exhibit M).

 

Mr. Smith:

This gets right to the heart of Greg MacRenaris’s testimony. Unfortunately, he had a very poor experience with the University of Nevada, Reno. I do not know the specifics. However, I do want to assure you this State is very serious about holding vendors accountable and implementing specific penalties when they do not provide the goods and services for which they are contracted. This is more or less a housekeeping bill; it adds services and service contracts where previously it was just reference bids. We have gotten away from when we bid out facsimile machines, staplers, and other things. We are now into service contracts, and again, this holds people accountable to do business with us in the proper way.

 

Senator Care:

Regarding section 1, subsection 1, the language reads, “… a penalty of not more than 5 percent of the total value of the bid or contract.” I am wondering if there is a distinction between the bid and the contract. When would you apply the former as opposed to the latter, or are they always going to be the same figure?

 

Mr. Smith:

I think the bid refers to the old terms of when items were goods; items were put out to bid when we bought a certain lot of equipment and paid a certain price. The contract refers to the services, again to modernize and upgrade this. They are really interchangeable terms as far as our office is concerned, but many people told us you could not hold a service contract accountable in the same manner because it did not reference it in the law. They are interchangeable terms on our part.

 

Senator Tiffany:

I was kind of in the middle of the particular example you used with BEST Consulting, Incorporated, and am a little concerned. BEST Consulting, Incorporated was very successful at other agencies; they only had the one problem with taxation, which they made multiple attempts to remedy. The director at that time was a bit litigious. I am not certain what you would use as the criteria of whether you would allow them to go on because I think this was a master services agreement contract that would do it. I do not know if you are involved at that level, so this gets a bit convoluted.

 

Mr. Smith:

A current project the State Purchasing Division is dealing with relates to an LCB audit of state contracting in general. I spend at least 50 percent of my time protecting vendors from the unscrupulous business practices of state agencies. It cuts both ways. The Purchasing Division has established a contract management class, to be unveiled July 1, that contract managers and monitors from all agencies will be required to attend with a test at the end, so they understand how that part works.

 

Another component of this is a vendor database which will begin to track all the contracts of the State. Many of them do not go through our office. I do see them often at the State Board of Examiners meetings I attend monthly, but many of them do not go through our office. A component of the database is a vendor performance-rating module, where the individual contract monitors will rate and add comments into this vendor performance. A panel, which will consist of myself, Mike Kuckenmeister, who is the chief of our material management section, and Rochelle Summers, from the Department of Information Technology, will review any derogatory comments. We will judge these comments and decide if they are sour grapes or have some real basis that deserves further discussion. The administrator of the Purchasing Division will make the ultimate decision as to whether or not we disbar a vendor or impose a 5 percent penalty, but we are currently in the process. Again, July 1 is the unveiling date of really getting our arms around this.

 

Contract performance is a very serious issue, certainly something that has the potential to wind up in a court proceeding. We want to make sure we are working with the Attorney General’s Office every step of the way in implementing this procedure to ensure confidence, integrity, and the desired result, which is vendors complying with what they said they were going to do.

 

Senator Tiffany:

Do you really need a statute to do this?

 

Mr. Smith:

To my knowledge, I cannot think of the last time the statute was used. Given the vendor-rating performance component of this overall project, we plan to get much more serious than we have in the past about compliance issues, making sure deliverables are paid for on time, and delivered on time. The LCB audit was quite critical of state contracting in general, for simply issuing checks when invoices came in, with very little attention given to whether or not the service was even performed.

 

Senator Tiffany:

Again, I do not know if you need a statute. Tell me why you want this bill to do what you are talking about.

 

Mr. Smith:

If everything works in a perfect world, then I suppose you would not.

 

Senator Tiffany:

Do you need to have someone to comply because it is in statute?

 

Mr. Smith:

In essence, we need a hammer to tell somebody he or she has not complied.

 

Senator Tiffany:

Is it to get state agencies to work together?

 

Mr. Smith:

Keep in mind, this is existing language which has always been in the statute. Assembly Bill 424 broadens the scope from the Purchasing Division or another agency of this state to include other state agencies that grant contracts, which have never had the ability to effectively lay down the hammer. Your point is well-taken; we have yet to use this. But I would also suggest we have yet to get serious about compliance issues with vendors in the arena where they are simply not supplying the goods or performing the services to meet their contracts.

 

Mr. Hartman:

I was not aware of this bill until just now, but before I came here, I walked around and looked at some poor quality work done by someone in my industry. Three of these pictures came from the Attorney General’s Office. I am embarrassed to be in the same business as the people who did this work. The two other pictures came from the Supreme Court Building; there is some poor quality work within a 5-minute walk of this building. I am for this bill.

Chairman O’Connell:

We will close the hearing on A.B. 424 and open the hearing on A.B. 529.

 

ASSEMBLY BILL 529 (1st Reprint): Makes various changes concerning reporting of campaign contributions and expenditures. (BDR 24-558)

 

Renee Parker, Chief Deputy Secretary of State, Office of the Secretary of State:

This was originally our bill. In its current form, it is no longer the bill we proposed. Assembly Bill 529 actually does the opposite of what we had originally proposed, which is why I do not have a section by section explanation, because it is pretty much the Assembly Committee on Elections, Procedures and Ethics, bill as it stands. I have handed out some proposed amendments (Exhibit N) to get it back in its original form. The purpose of the original bill, as we proposed it, was to provide timely and meaningful public access to the information about the financing of political campaigns.

 

We were attempting to add so-called “sunshine” to our campaign disclosure laws to assure the citizens of Nevada the governmental system and the individuals who operate it are open and honest. As you know, Secretary of State Heller believes the public's right to know the financing of political campaigns far outweighs any contention that such matters remain secret and private.

 

Unfortunately, the bill was substantially revised in the Assembly and it no longer retains any of these principles. In fact, in its current form, the bill is about 180 degrees the reverse of what we were trying to accomplish, which was to ensure the citizens were allowed an in-depth look at who was financing campaigns before deciding which candidates or ballot proposals deserved their support. We had originally proposed audit authority. As you know, we cannot act on a report if there is inaccurate information, unless we receive a written complaint. Even if we see something blatant in the report, we have no means of acting unless we receive a written complaint. To remedy that, and ensure accurate information is available for the public in a timely manner, we had asked for some audit authority, which is in the proposed amendment.

 

Senator Townsend:

Will you give me an example of something blatantly obvious on someone’s financial report?

The reason I ask this is your tone today is a little sensitive to many of us who spend a great deal of time and money to make sure what we fill out is accurate. I presume you are talking about somebody else.

 

Ms. Parker:

I understand, Senator Townsend, and I am not talking about anybody on this committee.

 

Senator Townsend:

I am not saying you are, I just do not like the fact that no matter what party we represent, all of us are criminals unless we pass this legislation.

 

Ms. Parker:

I am not trying to imply that you are criminals if you do not pass it.

 

Senator Townsend:

I do not like the fact the bill got changed in the Assembly 180 degrees and, therefore, is not any good. This is not an appropriate approach to take if you want us to consider what you are offering. Can I help you with that? Anybody who runs for office is not automatically a criminal.

 

Ms. Parker:

I am not trying to imply anybody who runs for office is a criminal and I am sorry if my testimony came out that way.

 

Senator Townsend:

Give me an example, then.

 

Ms. Parker:

Senator Townsend, the purpose is mainly the audit authority to correct some of the filings so you do not get into civil penalties or have some complaint forwarded to the Attorney General's Office saying this person engaged in fraud and we get a written complaint. The bill remedies this and allows amendment of the report. In most circumstances I would agree, many inaccuracies in the report are oversights. What we are trying to get at with the audit authority is if the report is intentionally misleading.

 

Senator Townsend:

I go back to my original request. Give me an example.

Ms. Parker:

In most cases, it is a mathematical error on the summary sheet, or we receive information that our office has a so-called, in-kind contribution. The value of the contribution was reported at a lesser amount or reported in the wrong reporting period or not reported at all.

 

Senator Townsend:

Is it blatantly obvious? 

 

Ms. Parker:

If we have the information in our office, it is obvious in some circumstances. Our point with the audit authority is if there is a mathematical oversight, which happens in most cases, and there is an error in the adding, you cannot make the numbers add up. Most of the time we get phone calls from people saying something is wrong. Unless somebody files a written complaint, there is no action. Our purpose in the audit authority would be to call the person who filed the report and say you may want to amend this; it looks like there may have been an oversight, there may have been an error. At the same time, we go forward to ensure continued accuracy by maybe taking a handful of reports at a time; we obviously could not audit every report. When we have information in our office that there may be an oversight because of the reporting of an in-kind contribution and we have other information in our office as to the value of that contribution or the services provided, we cannot act on it unless somebody complains. As previously stated, in most circumstances, I do not believe the error is intentional, it is just oversight, and the purpose would be to correct the oversight.

 

Senator Townsend:

Have you ever filled out these forms for a 4-year term?

 

Ms. Parker:

No.

 

Senator Townsend:

You ought to get an average person who is not involved in this process, just take him off the street and give him these forms and see if he or she can figure them out. Most of us use accountants to figure these forms out. If you wonder why somebody who perhaps does not use one of those might make a mistake, it is because the forms are awful. Maybe we designed them wrong, shame on us. Maybe you guys designed them wrong, shame on you. They do not add up. This is where most of the mistakes occur, because nobody can figure out what to do, and is 99 percent of your problem. The 1 percent, if a person wants to be a criminal under these statutes, they will find a way to do it.

 

If the Secretary of State’s Office has a problem with Senator X or somebody holding office and can go in and audit till the cows come home, you are opening up something you do not want to open up. You come in here and I am starting to feel like you are looking at everything I do, why should I give you the authority to make it worse? We have spent a great amount of time on election reform in the last 20 years and I do not know if we are getting any closer to what the public wants.

 

Senator Care:

Ms. Parker, this is no reflection on Dean Heller, but who is going to audit the Secretary of State if he is the incumbent and he is running for reelection? Who makes that decision? I am not trying to sound facetious, but although I have not filled out as many of these forms as other members of this committee, I have done my share of them and feel like I am having to fill out the 1040s a few times a year, at least in an election year. I always get the calls from the reporters because inevitably I made a mathematical error somewhere. I would prefer to just put it all in a shoebox and send everything to the Las Vegas Review-Journal and say “I have nothing to hide, send it back when you’re done looking at it.”

 

I am sure there are abuses, no question about it. My instinct is the press will get a hold of this and do their examination. The Attorney General might decide this is something we need to prosecute, but it is frustrating for all of us. I fully appreciate what Senator Townsend is saying. Having been told three or four times by reporters on different occasions that my numbers do not check out, I have gone back and have tried to carry the decimal one over and it never checks out.

 

Senator Townsend:

Ms. Parker, let me quote NRS 294A.410:

 

Except as otherwise provided, if it appears that the provisions of this chapter (campaign practices) have been violated, the secretary of state may conduct an investigation concerning the alleged violation and cause the appropriate proceedings to be instituted and prosecuted in the first judicial district court or re-refer the alleged violation to the attorney general. The attorney general shall investigate the alleged violation and institute and prosecute the appropriate proceedings in the first judicial district court without delay. A person who believes that any provision of this chapter has been violated may notify the Secretary of State, in writing, of the alleged violation.

 

Now, what more do you need?

 

Ms. Parker:

I am in full agreement with you. When I was appointed in December 2000, I read the same statute and had the same argument, that we did have the authority I am now seeking. Unfortunately, the Attorney General’s Office represents our office and advised NRS 294A.410 does not give us the authority to refer or to investigate a potential violation alleged as inaccurate reporting because its interpretation of the statute requires the report to be filed, but arguably does not require the report to be accurate. I am with you; I agree this statute is enough, but unfortunately our counsel advises we need specific audit authority in order to question any information on those reports.

 

Senator Townsend:

I would ask our legal counsel to give us an interpretation. We wrote NRS 294A.410 and I would like to know if it expresses our intent. I think it does, otherwise it would not have passed Ms. Erdoes’s desk. At some point, you are not going to get anyone to run for office anymore. There are good people out there who cannot afford it and that is a tragedy because we need everyone representing the State of Nevada from all walks of life. You are going to make this so onerous and absurd, people are going to be afraid to do anything. I do not want to see the checks, write them, or see the reports other than when I sign them. I am terrified. We have turned this into where we are all criminals who have to prove our own innocence. You have gone way overboard and are going to hurt the process more than help it.

 

Chairman O’Connell:

Assemblyman Beers are you here to represent the bill before us, since it is not what the Secretary of State proposed?

 

Assemblyman Bob Beers, Assembly District No. 4:

Yes. Many of the members of our Assembly Committee on Elections, Procedures and Ethics are in the Commerce hearing on the telecommunication deregulation bill. Because I am unable to participate, they asked me to present A.B. 529.

 

Early in the last campaign season, we received the forms required to file our campaign activity. I was very surprised to see the inclusion of the form for the under-$100, date-and-amount-only page. If you will recall, this came about in the 1999 Legislative Session as an unintended consequence of some different legislation. As an accountant, as well as a veteran campaign form filler‑outer for a number of candidates as well as the Republican Party for a period of years, I believe that information is useless to citizens trying to understand the process. Bear in mind, this is the date and the amount of an under $100 transaction, both in terms of contributions and expenses. We do not disclose who gave us that money. As well as not being very useful to the press or members of the public, it is also really obnoxious to maintain and fill out the form data. I was surprised to see it there because in the 2001 Legislative Session, we explicitly removed the requirement. I called the Secretary of State’s Office and asked what this is doing here. He replied we did not tell him they could not ask for that information. Later, I learned it had been written into regulation in 1999 and was not repealed in 2001, so, technically, there was a regulation in place. That became the precipitating idea for something our committee has been kicking around for a couple of years: to go ahead and actually put the form in the law. The intent of this bill as amended accomplishes that. If it is any consolation, there was a significant error in the instructions on the cover sheet of this form as well, which emphasized the point of the Las Vegas Review-Journal article after our third reports, the form was just confusing.

 

With the collective experience, not just of our committee members, but your committee members as well, we have come up with the ideal reporting form and want to include the actual form in law so there is no ambiguity. We do not have to try to explain what we want and then have the Secretary of State try to understand what we are explaining. The form is simply there in statute.

 

On page 2, you will see the new proposed cover sheet. Under the cash-on-hand section, the two lines should be moved over one column and parallel with the two lines on the ending cash on hand, as well as parallel to the columns themselves.

In the current forms, we did this cycle did not have a running total for the cycle for anything, it just had a “this period” column. In the past, we have had a “this period” and a “running total” column. So we have included two columns, although in period 1, there would only be one of those numbers. There are no significant changes on pages 3 through 7, and then page 8 expresses a new idea. Currently, the Ethics Commission is the caretaker of this form, which is our annual disclosure of what we do for a living and what our relatives do for a living. Since it is an annual filing, the idea was to include that with this form and make the Secretary of State the caretaker of this information, and consolidate the whole operation for the State. However, that form is under revision by the Ethics Commission and you will hear about a friendly amendment that would pull this out of the packet until they get the form squared away.

 

Chairman O’Connell:

The expense category has always been a problem for me. With the gentleman I work with on my campaign, the billing I get does not break out the amounts for the different purposes. I am always asking for the backup information to the total bill. It takes me a while to receive the breakdowns and we are trying to coordinate the breakdown bottoms with the total amount of the bill. There are consultant fees in there which are troublesome. Is there anything you discussed on how to best require that information? Sometimes they will just ask for a bill because you have to pay everything ahead of time, then you do not have the exact amount broken out. It is not an after the fact, it is a before the fact.

 

Assemblyman Beers:

I would offer a couple of things. First of all, even if we were to get a smooth way to do expenses in State law, we certified public accountants (CPA) have to go to extra classes to make sure no two of us categorize exactly the same way. I do not know if you can get around the problem, but I would add that in the 1999 Legislative Session, we took out the requirement to have a subtotal by category and there is currently no requirement to subtotal expenses by category. What I have done for candidates who are clients is notate multiple categories, if appropriate, in the category column of the expense report. I will not delineate the amount of each one, and to some extent that does not make it consistent between each of us as candidates, but as I said, you can get different answers from each CPA.

Chairman O’Connell:

If you paid after the fact, it would be helpful, but you are paying before the fact, so you do not know the exact amount.

 

Assemblyman Beers:

I believe the public’s interest is far more to whom we wrote the check or from whom we received the payment rather than the categorization between mail and printing in the act of getting brochures into people’s homes. There is always going to be some slack in precision in that area of reporting.

 

Chairman O’Connell:

I can see how an error in addition can easily take place, because you are not paying by a specific receipt. And then the company might have paid whatever you did not cover and they end up keeping the receipt. It is confusing and a pain in the neck to make sure you are on target and exactly correct. You are never sure.

 

Assemblyman Beers:

Although we did not incorporate it into this package, under the Federal Election Commission regulations for federal campaign reporting, for example, if you were to use a credit card for a campaign expense, you then turn around and write a check to American Express. Ordinarily, that does not tell anybody what you did with the money. The federal requirements have a line with American Express listing address, the date and amount of disbursement, and then below that, a memo entry to delineate what vendors American Express turned around and paid with your money. So, there is a more complete disclosure, but it is also more onerous.

 

I do not know how widely used credit cards are in our campaigns, it might be something we want to look over. Having been involved in the development and improvement of our forms, we are seeking to get to a walking pace here first, and then we can run.

 

The other major change is the timing. In the next election cycle, we will be reporting along the lines of August, some 18 months of activity. Our reporting dates are keyed off of election dates, so we are required to report initially X days before the primary election, then primary voters have access to our disclosed information and there is a report between the primary and the general election. Lastly, there is a report due X days after the general election that leads to some very odd things. For example, in the last couple of years, X days after the election has actually been a few days after the end of the year, so our reporting goes through January 1, 2, 3, or 4. Then we are required to report the disposition of our unspent contributions, except we are already beyond the period where you report your excess contributions. The report simply makes no sense in an election year for somebody who is going to be running again.

 

We have removed the disposition of unspent contributions and attempted to go to an annual reporting, so in years you do not have an election, you report the preceding calendar year by January 15, just like your tax return only due quicker. Technically in off-election years, the report could possibly be extended out 30 days, if that is what the committee decided.

 

Assemblyman Beers:

We also have another form that if you raise more than $10,000 in an off year, you must report your revenue. It is kind of unclear for someone who is in your situation as to whether you have to report those monies again. In an attempt to simplify all of this, we are trying to go to an off-year reporting cycle that is calendar‑based, and then during election cycle years, we go with the same periodicity keyed off of election dates, with one exception. The third or final period, post general, cuts off at the end of the year, cleanly. This has the benefit of making the next off-year cycle cleanly start on January 1 for a nice, clean calendar year and we accountants love this stuff.

 

That is pretty much the intent of this legislation; we hope to get to a single form that can be used. However, when you do choose to retire, you will no longer have the disposition of unspent contributions report to make. We are not proposing any changes to the law governing what you can do with those monies, merely how you would report them on the same old form at the next calendar year.

 

We did make one change, which is the common practice of using your unspent contributions in your next campaign. Though not explicitly stated currently in the list of things allowed, we thought it appropriate to state you can use unspent contributions in an Assembly race to run for a Senate, county commission, or a constitutional office.

 

We do not want to hide anything or run anything past anybody, but we have had significant problems in recent years successfully describing what we want, or we have had problems with the Secretary of State’s Office understanding what we are trying to describe. This is an attempt to cut through the multiple layers of translation and put it down in law.

 

Ms. Jennings:

We had spoken with the Secretary of State’s Office last fall about the possibility of moving at least a portion of the financial disclosure statement filings to his office. What A.B. 529 proposes to do is to move the responsibility for collecting the candidate and elected officer financial disclosure forms to Mr. Heller’s office. We would retain the appointed public officers and when anyone filed late or did not file, we would let Mr. Heller know who those people were and then he would be responsible for enforcing the civil penalties associated with late filing.

 

The other major change to financial disclosures is the due date would change from March 31 to January 15, consistent with the reporting proposed in this bill. A lot of people are very confused about whether to file these forms with our office or with the Secretary of State’s Office. We do accept each other’s date stamps and exchange those documents when they get filed at the wrong location. This is really a policy decision for you. The commission is happy to keep all the reporting as proposed in S.B. 147, when you changed our civil penalties. Or, if you chose to move forward with A.B. 529 and give part of that to the Office of the Secretary of State, we are supportive of that as well.

 

We have offered two amendments to S.B. 147. One would strip all the financial disclosure statements out of the bill, the other one would make a couple of technical corrections realized after the bill passed out of the Senate. We are more than happy to do whatever this body tells us to do.

 

Ms. Parker:

The original intent of the bill is to promote full disclosure and streamline the processes. When we started out with the bill, we actually proposed putting the forms in statute and working with the Assembly to come up with the ideal form. Unfortunately, as it approached the end of a deadline, Mr. Beers took most of what we proposed in writing, and most of that is in here. We were in favor of the cumulative reporting, and we brought forth the idea to the Assembly, to combine all the reports so you do not have to worry about the disposition of unspent money in excess of $10,000. Our intent was to move to an annual reporting period and then the three reporting periods during the election year. I think the form itself in the annual filing captures that with one exception, because what we were repealing was the excess of $10,000 as a separate form. The concept in this current version of the bill is also being deleted so you do not report until the election year, which means January 15 of the election year would be the first annual reporting form, whether or not you received contributions in excess of $10,000 in any prior year. That is one of the amendments we had proposed which retains the original intent of combining the forms, moving to an annual form in the off-election cycle, and simplifying the form.

 

Assemblyman Beers:

The statutory requirement that we report expenses contracted for, but not yet incurred, is an interesting one. It is outside generally accepted accounting principles. Simply contracting to incur an expense later is not a reportable accounting event under generally accepted accounting principles. You have to have incurred the expense. For example, signing a contract in May for $75,000 of television time to be executed in September and October is not an expense until September or October under generally accepted accounting principles.

 

Chairman O’Connell:

I have run into this with my accountant and she says she cannot use that until I spend some money.

 

Assemblyman Beers:

Also under those principles, you can have the service delivered today, but not pay for it yet, and that is a reportable expense and we call it the timing difference in accounts payable, or a loan.

 

Ms. Hansen:

I really appreciate the work the Assembly did in cleaning up many of the concerns I had about this bill. I spoke with Ms. Parker about many of these. What the bill says is when you go to file for public office, at the same time, you are supposed to turn in your financial disclosure statement. There are problems with this statement. It appears you may not be able to file for office if you do not turn in your financial disclosure statement then. That is a significant burden on anyone trying to file for office and needs to be clarified. Filing the financial disclosure statement should not be required when you first turn in your papers for candidacy, because it might create the appearance you have to turn it in to file as a candidate. It also makes it more difficult to get people to want to run for office; I have been arguing that since 1997. This is one of the many reasons why people are refusing to run for office. I am submitting an article and letter for the record (Exhibit O).

 

Mr. Wasserman:

The provision, you sign these forms under penalty of perjury, is an existing law, even though it is new language. It just sets forth new dates, but is actually in existing law.

 

Chairman O’Connell:

I will close the hearing on A.B. 529 and we are adjourned at 3:38 p.m.

 

 

RESPECTFULLY SUBMITTED:

 

 

 

                                                           

Olivia Lodato,

Committee Secretary

 

 

APPROVED BY:

 

 

 

                                                                                         

Senator Ann O'Connell, Chairman

 

 

DATE: