MINUTES OF THE MEETING

OF THE LEGISLATIVE COMMISSION’S SUBCOMMITTEE TO

STUDY COMPETITION BETWEEN

LOCAL GOVERNMENTS AND PRIVATE ENTERPRISES

December 5, 2001

Las Vegas, Nevada

The first meeting of Nevada’s Legislative Commission’s Subcommittee’s to Study Competition Between Local Governments and Private Enterprises for the 2001-2002 interim was held on Wednesday, December 5, 2001, at 9:30 a.m., in Room 4412 of the Grant Sawyer State Office Building, 555 East Washington Avenue, Las Vegas, Nevada. This meeting was videoconferenced to Room 3138 of the Legislative Building in Carson City, Nevada. Pages 2 and 3 contain the “Meeting Notice and Agenda.”

COMMITTEE MEMBERS PRESENT IN LAS VEGAS:

Senator Michael Schneider, Chair

Senator Ann O’Connell

Assemblyman Wendell P. Williams

Assemblyman David R. Parks

COMMITTEE MEMBERS ABSENT:

Senator Randolph J. Townsend

Assemblywoman Dawn Gibbons

LEGISLATIVE COUNSEL BUREAU STAFF PRESENT:

Michael J. Stewart, Senior Research Analyst, Research Division

M. Scott McKenna, Principal Deputy Legislative Counsel, Legal Division

Kennedy, Senior Research Secretary, Research Division

MEETING NOTICE AND AGENDA
Name of Organization:				Legislative Commission’s Subcommittee to Study Competition Between Local Governments and Private Enterprises
Date and Time of Meeting:				Wednesday, December 5, 2001 9:30 a.m.
Place of Meeting:				Grant Sawyer State Office Building Room 4412 555 East Washington Avenue Las Vegas, Nevada
Note:	Some members of the committee may be attending the meeting and other persons may observe the meeting and provide testimony, through a simultaneous video conference conducted at the following location:
				Legislative Building Room 3138 401 South Carson Street Carson City, Nevada
If you cannot attend the meeting, you can listen to it live over the Internet. The address for the legislative website is http://www.leg.state.nv.us. For audio broadcasts, click on the link “Listen to Meetings Live on the Internet.”
A G E N D A
I.	Opening Remarks and Introductions Senator Mike Schneider, Chairman
*II.	Brief Overview of Information and Research Relating to Competition Between Local Governments and Private Enterprises Michael J. Stewart, Senior Research Analyst, Research Division, Legislative Counsel Bureau
*III.		Discussion of Potential Competition Between Certain Health Care Providers in Clark County, Nevada Representative, University Medical Center Greg Griffin, Chief Executive Officer, Freemont Medical Centers Representative, Valley Medical Center (invited) Larry Preston, President, Pinnacle Medical Management L.L.C. Larry Matheis, Executive Director, Nevada State Medical Association
*IV.		Discussion of Potential Competition in the Contracting and Construction Industry John Madole, Nevada Chapter, Associated General Contractors
*V.		Discussion of Municipal Competition in the Telecommunications and Cable Television Industry Gardner Gillespie, Attorney at Law, Hogan & Hartson
*VI.		Overview of Possible Impacts of Competition Relationships on Local Government Robert S. Hadfield, Executive Director, Nevada Association of Counties Mike Alastuey, Assistant County Manager, Clark County Mary Walker, Lobbyist, Carson City, Douglas, and Lyon Counties
*VII.		Review of Measures of Fiscal Policy Principles for Consideration by Subcommittee When Addressing Competition Between Local Governments and Private Enterprises Carole Vilardo, President, Nevada Taxpayers Association
*VIII.		Discussion of Future Meeting Dates
IX.		Public Testimony
X.		Adjournment
*Denotes items on which the committee may take action.
Note:			We are pleased to make reasonable accommodations for members of the public who are disabled and wish to attend the meeting. If special arrangements for the meeting are necessary, please notify the Research Division of the Legislative Counsel Bureau, in writing, at the Legislative Building, 401 South Carson Street, Carson City, Nevada 89701-4747, or call Kennedy at (775) 684‑6825 as soon as possible.
Notice of this meeting was posted in the following Carson City, Nevada, locations: Blasdel Building, 209 East Musser Street; Capitol Press Corps, Basement, Capitol Building; City Hall, 201 North Carson Street; Legislative Building, 401 South Carson Street; and Nevada State Library, 100 Stewart Street. Notice of this meeting was faxed for posting to the following Las Vegas, Nevada, locations: Clark County Office, 500 South Grand Central Parkway; and Grant Sawyer State Office Building, 555 East Washington Avenue. Notice of this meeting was posted on the Internet through the Nevada Legislature’s website at www.leg.state.nv.us.

OPENING REMARKS

Chairman Michael Schneider called the meeting to order at 9:45 a.m. and welcomed members to the first meeting of the Legislative Commission’s Subcommittee to Study Competition Between Local Governments and Private Enterprises. He discussed the need for the study and suggested that governments should operate in a more business-like manner. He stated that the study would begin with issues brought forward from hospitals and public entities. Chairman Schneider announced that the study is comprised of five meetings to be held in various locations in the State of Nevada, including Elko in the spring of 2002.

BRIEF OVERVIEW OF INFORMATION AND rESEARCH RELATING TO

COMPETITION BETWEEN LOCAL GOVERNMENTS

AND PRIVATE ENTERPRISES

Michael J. Stewart

Michael J. Stewart, Senior Research Analyst, Research Division, Legislative Counsel Bureau (LCB), Carson City, Nevada, announced his role for the course of the study and said September 1, 2002, is the statutory deadline for submitting bill drafts for the 2001—2002 Legislative interim. He provided an overview of tentatively scheduled meeting dates and locations and provided budgetary figures for legislator salaries, travel and per diem costs, and printing.

Mr. Stewart referred to an informational binder (Exhibit A) and said the material comprises numerous articles, policy studies, and reports regarding competition between government and private enterprise. He explained that privatization, also referred to as “outsourcing,” is the primary method used by many governments to reduce or eliminate certain public and private relationships. Information on competition and outsourcing is less accessible at the local government level than that at the state or federal level. He provided a brief summary of Exhibit A and said the documents represent “all sides” of the issue.

DISCUSSION OF POTENTIAL COMPETITION BETWEEN

CERTAIN HEALTH CARE PROVIDERS IN CLARK COUNTY, NEVADA

Mike Alastuey

Mike Alastuey, Assistant County Manager, Clark County, and representative, University Medical Center (UMC), Las Vegas, Nevada, told members his testimony would focus on health care with regard to urgent care and primary care provided through UMC’s Quick Care Centers (QCCs). He said he could provide following information for the purpose of comparison between QCCs to clinics operated by the private sector, including:

· Historical data such as opening dates, placement of clinic, and services provided at each clinic;

· Feasibility reports to demonstrate the use of taxes which publicly support operations such as QCCs;

· Fiscal data such as payment of fee schedules and operation costs;

· Analysis data to demonstrate the effect of possible prohibition of provision of services by a governmental entity; and

· Options for minimizing effects on private businesses.

Continuing, Mr. Alastuey reported that QCCs experienced 500,011 patient visits in the past year. Of those 500,011 patients, nearly 400,000 patients required urgent care. He said those 400,000 patients would have sought medical attention at already overburdened emergency rooms throughout Clark County if QCCs were not available. Mr. Alastuey said that studies conducted by UMC indicate that the net benefit to the overall UMC hospital and Quick Care system is positive even though individual QCC sites do not show a positive gain. He said it is the philosophy of UMC that all individuals, regardless of income, have accessibility to health care at appropriate levels.

Mr. Alastuey explained that UMC pioneers urgent and primary care services in areas that do not offer any health care coverage. He listed positive contributions of UMC including: (1) minimizing tax impacts to the public; (2) avoiding overcrowding or divert situations at local emergency rooms; (3) providing a system to stop health care shortages in certain areas; and (4) offering health services during times of economic stress, particularly in reaction to the September 11, 2001, national crisis that resulted in numerous layoffs in the community. He cautioned members against “oversimplifying the issue” and “pulling out the UMC component” of the primary and urgent care system in Clark County because such an action, in his opinion, would be injudicious. Mr. Alastuey said the QCCs can justify their existence by public demand.

Additionally, Mr. Alastuey said that QCCs serve the county’s needy, and are fiscally responsible. The UMC Board of Trustees has adopted a set of criteria for consideration of opening new QCCs, including the examination of: (1) the existence of sufficient health care facilities or health care professionals in the area that can meet the needs of the uninsured, and underinsured or address growing demand for medical services in high population areas; (2) the need for better access to local public health care facilities or the need for additional public health care services; (3) alternative options or possible partnering opportunities; (4) the proximity of a new QCC to area emergency rooms or primary care providers; (5) cooperative efforts; and (6) sufficient opportunities for a new QCC to be financially viable or satisfy a key community health care need that is not currently met.

Concluding, Mr. Alastuey explained that Clark County realized that the Enterprise QCC, located near Martin Luther King Boulevard, will never be fiscally viable. He said that area continues to experience unmet need for health care services, demonstrating that service outreach decisions are occasionally made outside of financial advantage or stability. The Board of Trustees will base a future decision to expand the Quick Care network on a set of criteria, which include an analysis of service need and program costs. Mr. Alastuey said UMC has scheduled a meeting with private providers of primary and urgent care at the direction of the Clark County Manager, to compare the service infrastructure on the public side versus the private side.

Responding to a question from Senator O’Connell, Mr. Alastuey acknowledged an $8 million profit loss from QCCs, but explained that the loss does not accurately reflect the system’s positive net gain from operations and “foot traffic” at UMC’s hospital.

Responding to another question from Senator O’Connell, Mr. Alastuey said that indigents are handled at QCCs according to a point of service policy, which is currently under study and evolving. He said that as of two years ago, QCCs treated and screened indigents with urgent needs, especially children. Referrals for subsequent care were made to the Lied Ambulatory Care Center, located near the UMC campus on Charleston. He said that the policy has now evolved to indigent screening and treatment offered at all QCCs. He noted that primary care physician referrals for long-term needs are made to the Lied Ambulatory Care Center.

Chairman Schneider noted a pattern of UMC requesting funds ($8 million to $15 million) from the Clark County Commission but the requests have ceased in the past several years. Mr. Alastuey explained that the UMC’s patients began utilizing the services offered at QCCs and did not return. On a related topic, Mr. Alastuey explained that although the Spring Valley area is scheduled for the construction of two new hospitals, the QCC in that area will not close or relocate until it is determined that those clinics are not shielding the new emergency rooms from overcrowding. He said the QCCs in that area will continue to serve the non-emergency clients in Spring Valley until the balance of need and demand is achieved.

Greg Griffin

This individual was absent.

Representative from Valley Medical Center

This individual was absent.

Larry Preston

Larry Preston, President, Pinnacle Medical Management L.L.C., Las Vegas, said Pinnacle is a health care management company based in Las Vegas and that he has testified at every opportunity before legislative hearings in an attempt to impact QCC operations. He said the private sector does not share the same view of the Quick Care system that Mr. Alastuey conveyed because the spirit of competition has been overrun by UMC.

Mr. Preston said he has 16 years of experience in the hospital system and recognizes that Clark County’s growth created a need for private clinics to relieve pressure on emergency rooms. However, the ability of private physicians to compete by opening up their own offices is hampered because of the number of public freestanding centers. Mr. Preston said physicians in the private sector, as well as the Pinnacle Medical Management L.L.C., cannot compete with UMC’s Quick Care system for the following reasons:

· UMC’s higher wages and benefits package lures physicians away from Pinnacle or from opening up an independent practice;

· The QCCs do not have to make a profit because they are taxpayer subsidized and receive county funds;

· The number of QCCs appears unproportional, as evidenced by the situation in Spring Valley, which will soon have two QCCs and two new hospitals. The UMC Board of Trustees will not close the QCCs but chooses to compete with hospitals under the guise of community partnership (i.e., to stop emergency room overcrowding);

· The QCCs are open longer, later, and treat everyone;

· The UMC reports that QCCs are placed in areas of high need but downplay the fact that clinics are often placed in areas of high income, further hampering the unsubsidized private sector’s ability to compete;

· The UMC’s internal reports indicate that QCCs make 70,000 referrals per year and send 80 percent to UMC. That leaves 20 percent to private specialists in Las Vegas to compete for;

· The private sector is very limited in how it can operate. Federal legislation would consider funds returned to the private sector for the admittance of a patient to a hospital a “kick-back.” The UMC appears to use its QCCs to survive financially and recently reported $8 million in excess cash;

· The UMC has the only burn trauma center in Clark County and uses it to their advantage in their contracting by excluding the private sector if a potential contractor does not contract in return with the Quick Care system;

· Reports from another larger managed care organization indicate that the Quick Care system signed a contract resulting in a payment drop of 11.5 percent for outpatient visits. It does not make sense that the Quick Care system, which already admits a loss of $8 million to $15 million, signs a contract that no other private practice providers can possibly afford. The QCC reports increases of 3.5 percent for employees and a 3.5 percent for physicians, yet a contract is signed that will decrease their reimbursement by nearly 12 percent; and

· The success of QCCs is built on the elimination of the private sector. It forces patients into a system that the private sector cannot enter into due to risk and cost factors.

Concluding, Mr. Preston said Pinnacle is prepared to “take over the Quick Care operations” and save Clark County $8 million. He said QCCs are charging the taxpayers and the county too much and Pinnacle could run the clinics in a more fiscally prudent manner. He shared an incident from a recent board of trustees meeting where Clark County Commissioner Erin Kenny referred to the Quick Care clinics as “lost leaders” and “the buffets of the casinos.” He explained that casinos offer free buffets and other benefits to attract customers who will end up losing more money than the perks cost. He said the same analogy applies to QCCs, which refer patients to UMC at a cost of 112 percent to cover their fixed costs (salaries, labor, et cetera). He said, “It is very unjust that UMC uses their taxpayer money and their influence to eliminate our private enterprise.”

Responding to a question by Senator O’Connell, Mr. Preston agreed to provide information on federal, state, county, and local rules and regulations, and fee schedules applicable to the private sector but exempt for Clark County (a government subsidized business). Senator O’Connell commented that the study could offer a level playing field in the area of competition between local governments and private enterprises by requiring that all entities use the same set of rules.

Larry Matheis

Larry Matheis, Executive Director, Nevada State Medical Association, Las Vegas, reported that there was a considerable amount of testimony from physicians from clinic practices relating to their financial problems created by the competition during the 2001 Legislative Session. He reviewed the following basic principles:

· Local government needs to consider its approach to providing services as a public steward and reexamine any existing entrepreneurial enterprise philosophies;

· Local government typically takes or is given roles for which there is a significant public consensus on an unmet public need. This does not include a market need, for example, the need for a nice restaurant. Market need should not drive local government into the restaurant business, but if hunger was a public need, then the entity might consider an approach as to how to feed the public. These issues share commonality, but the approach is very different;

· Perception and policy can create conflict. Initially, the QCC were placed in communities with paying customers. They seemed to undermine their own mission when they referred nonpaying indigents to the UMC emergency room. Currently, QCCs are placed in locations that provide care to indigent populations, but the “political embarrassment” and conflict instigated by the media may negatively impact trust levels for future developments; and

· Governments tend to talk entrepreneurially during good times and desperately during bad times, reflecting changing values in decision making under different circumstances.

Concluding, Mr. Matheis said local governments want to be effective, but cannot be always be efficient and subsequently turn to the public resources. He suggested that fundamental principals respond to the following questions: (1) what is the goal or mission?; (2) what is the public need?; and (3) how will government have the resources to be able to provide services?

Assemblyman Williams commented that national events demand that local governments need to be more effective and efficient. He requested that future speakers show balance of both sides of the issue in their testimonies. He further requested Mr. Matheis to produce examples of things that the local governments can do but that the private sector cannot.

DISCUSSION OF POTENTIAL COMPETITION IN THE

CONTRACTING AND CONSTRUCTION INDUSTRY

John Madole

John Madole, Nevada Chapter, Associated General Contractors (AGC), Carson City, requested an opportunity to testify at future meetings of the subcommittee and provide specific legislative language for consideration. He listed his concerns of the less sophisticated and smaller construction firms, including:

· An imbalance in the permitting process. Government agencies are exempt from acquiring permits in certain projects such as road overlay and repairs in parks and school districts, however, private contractors are bound to permits and specification standards;

· An atmosphere of intimidation. The AGC encountered reluctance in hiring an engineer to document an abuse of specification standards on a project completed by a government agency. The engineering firm expressed a fear of not working again in the area. The solution includes hiring a Californian firm that may never care about working in Nevada; and

· Weak legislative language. Mr. Madole opined that NRS 338.147, which addresses whether or not a government agency on public works is performing work as efficiently and cost-effective as a private contractor, needs to be strengthened.

Concluding, Mr. Madole introduced Mr. Reeder.

Fred Reeder

Fred Reeder, TW Construction, Carson City, spoke of concerns for “double standards” between municipal entities and the private companies who cannot compete against them. He told members that the City of Carson purchased $300,000 worth of concrete pipe that ranged up to 60 inches in diameter and a city crew installed it near the airport. Less than a year later, the City of Sparks needed a building demolished and through joint agreement, enlisted Carson City’s assistance. Mr. Reeder said that Carson City’s crew ignored standards of notification for asbestos.

Senator O’Connell directed Mr. Holloway, Mr. Madole, and Mr. Reeder to provide subcommittee members with a report of handicaps and abilities belonging to the private sector but not to the governmental entity when both are competing for a job contract.

Steve Holloway

Steve Holloway, Executive Vice President, Associated General Contractors, Las Vegas Chapter, Las Vegas, asked members to address three problems:

· Local governments are performing work that in reality they are prohibited by statute from doing. Specifically, local governments are required to contract out new construction projects over $100,000.

· Private companies can perform more efficiently and effectively than local governments that operate at the expense of taxpayers; and

· Local governments take unfair advantage when competing with private companies.

Mr. Holloway further detailed how unfair advantages are utilized by producing a document of exemptions taken by local municipalities and sewer districts with regard to specification standards (Exhibit B).

Concluding, Mr. Holloway said Exhibit B is an example of how local government is held to a lower standard than private industry and he believes that it is an unfair competitive advantage.

Senator O’Connell inquired if municipal trucks are taxed and if they are bound to weight restrictions. She requested that Mr. Holloway provide information regarding his perceived advantages and disadvantages that the municipal government has over the private sector and vice versa.

DISCUSSION OF MUNICIPAL COMPETITION

IN THE TELECOMMUNICATIONS AND

CABLE TELEVISION INDUSTRY

Gardner Gillespie, Attorney at Law, Hogan & Hartson, Washington, D.C., shared his views on competition and the role of municipal governments in providing and regulating cable television and telecommunications services. He stated that he was appearing before the subcommittee on behalf of Cox Communications of Las Vegas, and the views he expressed were his own. Mr. Gillespie gave his legal credentials and teaching experience.

Mr. Gillespie told members that disputes between telecommunications/cable companies and municipalities is more than a century old, with the “new technology” being telegraph and telephone. He described how municipalities attempted to take advantage of technology to generate revenue for their general funds. The situation remains the same today, with technology encompassing data delivery, Internet access, and digital video. Mr. Gillespie sited examples of poor public policies used by municipalities, including:

· The policy to extract unreasonable fees from the providers of new technological services. The fees are passed through to customers and the blame for corresponding rate increases is inappropriately passed to the private companies;

· The policy to provide technological services and carry forward an assumption that municipalities can provide the same degree of service at a lower cost than their private competitors; and

· The policy to provide telecommunications services only to municipalities, avoiding the business of providing service to the public. This places the municipality in direct competition with private companies in the provision of services to that municipality.

Continuing, Mr. Gillespie said that municipalities justify high fees charged to private telecommunications and cable companies on an alleged right to rent the street. It is the state, he noted, that has the ultimate authority over the streets. He explained that municipalities have no right to “rent” the streets to any party, or to extract revenues for the use of the streets according to the state constitution or legislature. A law passed in Nevada’s 1997 Session limits the amount of fees that a municipality can demand from telecommunications and cable companies. That limitation is 5 percent of gross revenues.

Mr. Gillespie further explained the pitfalls of municipalities constructing their own cable or telecommunications infrastructures and stated that taxpayers bear years of losses until the municipalities acquire the majority of potential customers in the community. He said the end result is that private operators of cable or telecommunications go out of business. Nevada’s current legislation prohibits certain cities and counties from offering telecommunications or cable services to the public.

Additionally, Mr. Gillespie said municipalities often understate the difficulties of constructing self-supplying telecommunication or cable centers, including the ongoing costs of maintenance and upgrades. This situation should only exist where no private company is willing to provide the service at a competitive price.

Concluding, Mr. Gillespie said the goal of all levels of government should be to create an environment where private enterprise can provide services that the public wants. He cautioned that when the government itself becomes a competitor, the government has an incentive to substitute an abuse of its powers for efficient and fair competition.

Responding to a question by Assemblyman Parks, Mr. Gillespie said that Assembly Bill 508 (Chapter 565, Statutes of Nevada 1997), which revises provisions governing authority of certain local governments to regulate and impose fees on certain utilities and provide services of certain utilities, has not been tested yet. He said that law could be a model for other state legislatures because it requires that municipalities perform a study of the issue.

A complete copy of Mr. Gillespie’s testimony is available as Exhibit C.

OVERVIEW OF POSSIBLE IMPACTS OF COMPETITION RELATIONSHIPS ON LOCAL GOVERNMENT

Robert S. Hadfield

Robert S. Hadfield, Executive Director, Nevada Association of Counties (NACO), Carson City, said that A.B. 508 is a good example of a how telecommunication issues can be resolved through a collaborate effort of all the interested parties before the Legislature begins session.

Mr. Hadfield referred to a document (Exhibit D) and said that decisions regarding the provision of services at the local government level are best made by the policy maker at that same level.

Concluding, Mr. Hadfield said that the counties are aware that they are “providers of last resort” for services. The private sector relies on consolidation of industries, yet government is historically the stabilizing force. He said the role of government is to ensure stability, which can provide services during economic fluctuations and times of unmet needs. He said that dismantling the public service infrastructures leave citizens few options but to turn to local government to provide services.

Concluding, Mr. Hadfield offered the assistance of NACO and the Nevada League of Cities to work with the subcommittee during the course of the study.

Mike Alastuey

Mike Alastuey, Assistant County Manager, Clark County, Las Vegas, asked when does public need become market need? He said the issue of competition is complex and should not be over simplified by restricting the public sector from engaging in anything that could be served by the market, or forcing the private sector to fulfill humanitarian requirements. He offered the full cooperation and assistance of the Clark County staff.

Senator O’Connell directed Mr. Alastuey to work with Mr. Holloway to address the situation brought to the attention of the subcommittee in Agenda Item No. IV (Exhibit B).

Mary Walker

Mary Walker, Lobbyist, Carson City, Douglas, and Lyon Counties, Nevada, reviewed the provisions of Senate Bill 355, which failed in the 2001 Session, and said its effects are far reaching because it effects all services provided by both the private sector and local governments (i.e., ambulance services, child care programs, swimming pool, jazzercise, senior center food services, public health nurses, inoculations, attorneys for public defense, et cetera). She listed concerns for the implications of S.B. 355, had it passed, such as the practical application of the proposed law and provided a situation regarding ambulance service in Carson City where a private provider gave the city four days to take over its service.

Continuing, Ms. Walker said S.B. 355 contains situations where services are not applicable, or if they are, they are impractical to implement. She gave an example of community centers that house a variety of activities including jazzercise and noncompetitive basketball programs. She said it is challenging to pay taxes on this center because of the multiple uses of the facility. Additionally, the issue of business licensure and the associated fee structure cannot be applied to local governments because they would assess, tax, and then pay themselves.

Ms. Walker said that S.B. 355 could have unintended negative consequences such as interference with public policies regarding swimming pools or the duties of public health nurses. Both services are provided by local governments free of charge, or for low cost, and are designed to benefit the public from a safety standpoint. She said that imposing property taxes on Carson City’s swimming pool facility, if it were owned by the private sector, would result in a 20 percent increased fee rate for pool use. Conversely, she gave an example of a service better provided by the private sector than by local government, and provided a history on the privatization of the Eagle Valley Golf Course.

Concluding, Ms. Walker offered an explanation to earlier testimony regarding Carson City Public Works failure to bid out services on a pipe project. She said the incident, which occurred approximately three years earlier, was the result of a new street superintendent’s lack of knowledge on policy and assured the subcommittee that the situation was fully resolved.

REVIEW OF MEASURES OF FISCAL POLICY PRINCIPLES

FOR CONSIDERATION BY SUBCOMMITTEE WHEN ADDRESSING COMPETITION BETWEEN LOCAL GOVERNMENTS AND PRIVATE ENTERPRISES

Carole Vilardo

Carole Vilardo, President, Nevada Taxpayers Association, Las Vegas, referred to a statement adopted by the association’s board (Exhibit E) and explained several fiscal principles, including taxation and expenditure. She said there needs to be a mechanism to ensure accountability to the taxpayer as well as a balance between revenues and expenditures. She reviewed the association’s fiscal policy for general expenditure principles and recommended a systematic review of all programs to include efficiencies enhanced by providing for the consolidation of services where warranted and the contracting out of services when the necessary service level will be maintained and savings will occur.

Continuing, Ms. Vilardo encouraged the expanded application of a second general expenditure principle involving the competitive outsourcing of government functions that can be efficiently and cost effectively performed by the private sector. She recommended comparison studies and said that government should not enter into competition with, or displace services currently provided by, the private sector, unless the government: (1) abides by all rules, regulations, and permitting processes required of the private sector; and (2) pays all the taxes that would be required by the private sector.

Ms. Vilardo said that A.B. 508 provided an untested example of policies that can be provided without restricting the ability of local government to choose what they do and how they do it. She pointed out that the subcommittee could identify principles to be used in evaluating services provided and should consider the concept of privatization being replaced with “best practices.” She said that earlier testimony failed to highlight that the county absorbs the debt per capita for UMC. However, some services are obviously better candidates for private sector versus government, such as telecommunications. Regarding the failed private ambulance service in Carson City, she pointed out that poorly written contracts are the culprit and better contract guidelines should incorporate fail-safe provisions “on the back end.”

Concluding, Ms. Vilardo advocated that the subcommittee incorporate sound principles and create benchmarks in statutes. She said ultimately the issue of competition should be decided by determining the most efficient and cost-effective manner to deliver services that are deemed necessary by elected officials. And while there is no “one size fits all” solution, the policies and principals of evaluating delivery services can be put into statute and developed. She said she will work with the subcommittee on the issue further.

DISCUSSION OF FUTURE MEETING DATES

Michael J. Stewart, previously identified in these minutes, updated members on a previous poll of suggested meetings as follows:

· Meeting No. 2 — January 23, 2002, in Las Vegas;

· Meeting No. 3 — March 12, 2002, in Carson City;

· Meeting No. 4 — May 8, 2002, in Elko; and

· Meeting No. 5 — June 26, 2002, in either Carson City or Las Vegas.

SENATOR O’CONNELL MOVED FOR THE SUBCOMMITTEE TO STUDY COMPETITION BETWEEN LOCAL GOVERNMENTS AND PRIVATE ENTERPRISES TO ADOPT THE MEETING SCHEDULE FOR 2001—2002 INTERIM TO INCLUDE: (1) JANUARY 23, 2002; (2) MARCH 23, 2002; (3) MAY 8, 2002; AND (4) JUNE 26, 2002. THE MOTION WAS SECONDED BY ASSEMBLYMAN WILLIAMS AND CARRIED UNANIMOUSLY.

PUBLIC TESTIMONY

Jim Banner

Jim Banner, former Nevada State Assemblyman from Clark County, shared testimony regarding his personal medical experiences in recent years. He said he received quality care and encouraged support of the QCC in Clark County. Mr. Banner said he “never received better medical attention in all his life.”

Margaret McMillen

Margaret McMillen, representative, Sprint, Las Vegas, spoke in favor of Mr. Gillespie’s earlier testimony and said that earlier legislation for telecommunication issues appears to be working well.

Robert Gaston

Robert Gaston, Representative, Nevada State Cable Telecommunications Association, Carson City, said that A.B. 508 exempted the telecommunication provider in Churchill County and since then Churchill Telephone has expanded and explored the possibility of going into cable television business. He said that the LCB is currently examining Churchill Telephone’s request to rule out violations of Senate Bill 425 (Chapter 416, Statutes of Nevada 2001), which makes various changes concerning certain utilities operated by certain governmental entities.

Robin Keith

Robin Keith, President, Nevada Rural Hospital Project, Reno, Nevada, provided written testimony (Exhibit F) and said it is her opinion that government and regulators are trying to ensure the survival of rural hospitals while threatening their survival by creating a situation where the hospitals could lose their tax exempt status. She said that rural hospitals jeopardize their tax-exempt status by encouraging internal and incidental forms of competition such as x‑ray services and coffee/gift shops.

Concluding, Ms. Keith requested that Nevada’s rural hospitals be exempt from any action taken by the subcommittee on the issue of taxing public entities.

Mike Alastuey

Mike Alastuey, previously identified in these minutes, countered testimony by Ms. Vilardo by offering to provide members with capital acquisition and amortization figures for UMC’s QCCs.

Chairman Schneider directed Mr. Alastuey to provide Mr. Stewart with those figures.

Phil Stout

Phil Stout, Executive Director, Nevada Association of Independent Businesses, Henderson, Nevada, referred to Exhibit A – Tab J, and commended Ms. Vilardo on her testimony, which supported financial records and audit practices of government agencies behaving like businesses. He said this accountability provides valuable information to taxpayers.

Mr. Stout asked the subcommittee to be aware that convention services charge 25-cents per square foot and the competitive rate for the community is 35-cents per square foot. He said that convention services also benefit from approximately $16 million in room-tax subsidies. He said that leveling the playing field might include a requirement that convention services cannot undercut the rest of the community.

ADJOURNMENT

There being no further business to come before the committee, Chairman Schneider adjourned the meeting at 12:35 p.m. Exhibit G is the “Attendance Record” for this meeting.

Respectfully submitted,

Kennedy

Senior Research Secretary

Michael J. Stewart

Senior Research Analyst

APPROVED BY:

_______________________________

Senator Michael Schneider, Chairman

Date: _____________________________

LIST OF EXHIBITS

Exhibit A is a binder of information prepared by Michael J. Stewart, Senior Research Analyst, Research Division, Legislative Counsel Bureau (LCB), Carson City, Nevada, containing the following tabs:

A. A comprehensive legislative history of Senate Bill 355 of the 2001 Legislative Session, including minutes of committee discussion, pertinent exhibits, bill reprints, and a bill summary. Please note that the Legislative Commission’s Subcommittee to Study Competition Between Local Governments and Private Enterprises was modeled after S.B. 355 in its second reprint and the subcommittee has, to some degree, discretion to expand or limit its focus beyond the provisions of S.B. 355.

B. Legislative Counsel Bureau Bulletin No. 93-18, “Feasibility of Privatizing Provision of Governmental Services,” September 1992.

C. From the Reason Public Policy Institute (RPPI), Privatization 2001 – 15^th Annual Report on Privatization. This booklet highlights privatization trends in child welfare, education, “e-government,” environmental services, infrastructure, public safety, public sector services, public works, and transportation and addresses other emerging issues in privatization and competition.

D. From the Council of State Governments, “Private Practices: A Review of Privatization in State Government,” 1998.

E. Policy Study No. 272 of the RPPI, by Adrian T. Moore, Geoffrey F. Segal, and John McCormally, “Infrastructure Outsourcing: Leveraging Concrete, Steel, and Asphalt with Public-Private Partnerships,” September 2000.

F. From RPPI, e-brief #103, titled “Muni Power Grabs: Municipal Utilities, Tax exempt Debt, and the Competitive Market,” by Adrian T. Moore and Jeff Woemer, November 1999.

G. Policy Brief No. 18 of the RPPI, by Robin Johnson, “The Future of Local Emergency Medical Service Ambulance Wars 1 or Public-Private Truce?” August 2001.

H. Policy Study No. 180 of the RPPI, “Public Authorities and Private Firms as Providers of Public Goods,” by Clayton P. Gillette, September 1994.

I. E-brief #112 of the RPPI, “Privatization and Layoffs: The Real Story,” by Robin Johnson, March 13, 2001.

J. From the Nevada Association of Independent Business, “A Draft Report on Government Competition in the Private Sector in Nevada,” November 2001, provided by Phil Stout.

K. From the American Federation of State, County, and Municipal Employees (AFSCME), “Fact Sheet: Privatization,” March 2001.

L. “Legislative Approaches to Responsible Contracting,” from AFSCME (http://www.afscme.org/private/tools05.htm).

M. From Cornell Working Papers in Planning #194, Department of City and Regional Planning, Cornell University, “Taking the High Road: Local Government Restructuring and the Quest for Quality,” by Michael J. Ballard and Mildred E. Warner, April 2000.

Exhibit B is an undated four-page document provided by Steve Holloway, Executive Vice President, Associated General Contractors, Las Vegas Chapter, Las Vegas, Nevada

Exhibit C is a one-page memorandum by Gardner Gillespie, Attorney at Law, Hogan & Hartson, Washington, D.C.

Exhibit D is a two-page, undated document from Robert S. Hadfield, Executive Director, Nevada Association of Counties, Carson City, Nevada.

Exhibit E is a two-page, undated document submitted by Carole Vilardo, President, Nevada Taxpayers Association, Las Vegas, Nevada.

Exhibit F is a two-page letter to Senator Schneider from Robin Keith, President, Nevada Rural Hospital Project, Reno, Nevada.

Exhibit G is the “Attendance Record” for the meeting.

Copies of the materials distributed in the meeting are on file in the Research Library (775/684-6827) of the Legislative Counsel Bureau, Carson City, Nevada.