MINUTES
OF THE
(NRS 209.4817)
A meeting of the Nevada
Legislature’s Interim Finance Committee’s Committee on Industrial Programs was
held at
COMMITTEE MEMBERS PRESENT IN
Senator
Maurice Washington
Al
Puliz, Chairman, Puliz Moving and Storage
COMMITTEE MEMBERS PRESENT IN
Assemblyman
John Marvel, Chairman
Assemblyman
Morse Arberry, Jr., Vice Chairman
Senator
Bob Beers
Bruce
Aguilera,
Vice President/General Counsel, Bellagio
Mike
Magnani, Labor Union Representative
Howard
Skolnik, Deputy Director, Prison Industries, Department of Corrections, (non‑voting
member)
Greg Smith, Administrator, Purchasing Division
Glen Whorton, Director,
Department of Corrections
COMMITTEE MEMBERS ABSENT:
STAFF MEMBERS PRESENT:
Yvonne
Goodson, Deputy Legislative Counsel, Legal Division
Mark Krmpotic, Senior Program Analyst, LCB Fiscal Analysis Division
Tracy
Raxter, Program Analyst, LCB Fiscal Analysis Division
Denise
Larsen, Secretary, LCB Fiscal Analysis Division
OTHERS
PRESENT:
Taylor
Allen,
Bill
Burgos, Teamsters
Local 995,
Greg
Cox, Department of Corrections,
Tom
Fronapfel, Division Administrator, Field Services, Department of Motor
Vehicles,
Pat
Hines, Friends and Family of Incarcerated Persons (FFIP),
Ginny Lewis, Director, Department of Motor Vehicles,
John
McCuin, Chief of Financial Services for Prison Industries,
Deborah
Reed, Budget Analyst IV, Department of Administration,
Pat
Sanderson,
Clay Thomas, Deputy Director, Department of Motor
Vehicles,
Jesse
Wadhams, Deputy Attorney General
Nancy
Wojcik, Department of Motor Vehicles,
EXHIBITS:
Exhibit
A - Agenda
Exhibit
B - Attendance Roster
Exhibit C - Copy of
the
Because
of their size, the exhibits are not attached to these minutes; however, upon
request, may be reviewed in the Fiscal Analysis Division of the Legislative
Counsel Bureau,
I. CALL
TO ORDER AND OPENING REmarks by CHAIRMAN
Marvel.
A
meeting of the Interim Finance Committee’s Committee on
Industrial Programs was called to order by Chairman Marvel at 10:00
a.m., Monday, March 13, 2006, in Room 4412 of the
Chairman
Marvel welcomed committee members and requested the secretary call roll. Noting that a quorum of committee members was
not yet present, Chairman Marvel indicated Agenda Item IX would be taken out of
order.
IX. INFORMATIONAL ITEM – FUTURE OF LICENSE PLATE
FACTORY AND REVENUE EARNED FROM LICENSE PLATE FEES COLLECTED BY THE DEPARTMENT
OF MOTOR VEHICLES.
Chairman
Marvel introduced and welcomed Ginny Lewis, Director for the Department of
Motor Vehicles (DMV). Chairman Marvel
informed committee members that rumors had been circulating regarding moving the
License Plate Factory out of the Nevada State Prison (NSP). Relating the meeting was not intended to be contentious,
Chairman Marvel indicated it would be good to “clear the air” in reference to
plans for license-plate manufacturing and the importance of the program to
Prison Industries. Apprising the
committee that he had started out with the program many years ago, Chairman
Marvel opined it would be devastating to Prison Industries to lose the program
for the production of license plates.
Ginny
Lewis introduced herself for the record and extended her appreciation to the committee
for allowing her testimony to be taken out of agenda order. Although she had met with the Governor’s staff
regarding the move for the License Plate Factory, Ms. Lewis said no
decisions had been finalized on the issue.
Ms. Lewis indicated she had been probing, gathering and reviewing
information with regard to the move to determine whether it would be beneficial
for the DMV and the state of
Ms.
Lewis advised the committee the DMV was transitioning into digital technology
for the production of license plates, which would require a considerable amount
of new equipment. She further advised
there would no longer be a need for much of the equipment presently located at the
NSP, such as the massive oven or the presses.
Ms. Lewis explained that with the change in equipment, it would no
longer be necessary to have the License Plate Factory
located within the confines of the NSP.
She further explained having the License Plate Factory with the NDOC on
the prison compound posed daily constraints for the DMV’s staff.
With
regard to the License Plate Factory, it was Ms. Lewis’ opinion the DMV was not operating
with maximum efficiency. Ms. Lewis
pointed out the following issues with the License Plate Factory on the prison
compound:
·
The DMV staff had
to wait for guards to assist them daily,
·
Problems arose
when delivery of materials were received, and
·
Any issues with
inmates had a direct impact on the DMV’s operations.
From
Ms. Lewis’ perspective, the location of the License Plate Factory within the
confines of the NSP was not a safe environment for the DMV employees. She reported that in 1999, a DMV employee was
shot at NSP. Although the shooting at
the NSP was an accident, Ms. Lewis opined the DMV employees were subjected
to an environment that was not as safe as offsite.
Referring
to Nevada Revised Statutes (NRS) 482.268, Ms.
Lewis related that according to the NRS, a
50-cent fee was collected from customers by the DMV on each license plate issued. Reporting the fees totaled approximately
$600,000 in FY 2005, Ms. Lewis informed the committee the funds collected from
the 50-cent fee per license plate were transferred to Prison Industries and said
to defray the cost of license-plate production.
Ms. Lewis stated that, collectively, the Legislative Branch and the
Executive Branch had a responsibility to the taxpayers. Ms. Lewis advised that
the DMV was funded from an appropriation from the Highway Fund. She further advised the budget for license-plate
production was over $2.7 million per fiscal year. As one of her responsibilities as the
Director of the DMV, Ms. Lewis related she was continually looking to offset
Highway Fund appropriations. Ms. Lewis’
interpretation of the law was that the 50-cent fee should be used to defray
license-plate production. She pointed
out the funds from the 50-cent fee could come into the budget for the DMV and
reduce the need for the Highway Fund appropriation.
Ms.
Lewis indicated she respected the fact the funds from the 50-cent fee per
license plate were a significant part of Prison Industries’ funding. However, it was her opinion that as long as
the law was worded that the funds were to be used to defray license‑plate
production, there should be an open discussion on the subject. Ms. Lewis reiterated a decision had not been
finalized on the License Plate Factory with regard to the move, and the
Governor would make a decision with consideration as to what would be best for
the state as a whole.
Chairman
Marvel conveyed his appreciation for Ms. Lewis’ testimony. Chairman Marvel indicated that if analyzed,
results would show that Prison Industries saved the state of
Howard
Skolnik, Deputy Director, Prison Industries, Department of Corrections,
informed the committee that in 1986, the Legislative Commission and Legislative
Counsel Bureau created a study whose members traveled around the country and observed
industrial programs for prisons. Although
at the time it was not the case in
Mr. Skolnik
informed the committee that were Prison Industries to lose the revenue
generated by the 50-cent license-plate registration fee, the impact would be
devastating for the Prison Industries program.
He informed the committee Prison Industries performed a review of costs
of the business with the elimination of the revenue. The results of the review revealed the
necessity for either a substantial increase in the pricing of most of Prison
Industries products across the state and an increase for the rent Prison
Industries charged to private industries (which would discourage many of the
present renters), or a reduction in Prison Industries’ Central Office by 50
percent and the elimination of any marginal programs. Mr. Skolnik indicated the cost of cutting the
central office or the elimination of programs would be in excess of the
$600,000 generated by the 50-cent registration plate fee.
Calling
attention to the impact these programs had on the institution that was not
measurable, Mr. Skolnik pointed out that the industrial programs afforded
800 inmates meaningful activity off the prison yard that was not disruptive and
did not require intensive supervision. It
was Mr. Skolnik’s opinion the overall negative impact of eliminating these
funds from the NDOC far outweighed any benefits that would be provided to the
DMV and the Highway Fund. It was Mr.
Skolnik’s hope that the statutes as they currently stood, which required the
license plates be made within the prison and the 50-cent fee for registration, would
continue to provide for the operation of the industrial program.
Director
Whorton introduced himself for the record and indicated he concurred with
Mr. Skolnik regarding the importance of the industrial program for
license-plate manufacturing. Agreeing
the impact of the Prison Industrial programs went beyond the simple dollar
amount, Director Whorton said the general purpose of prison industry programs
was to generate optimism and hope within the inmates that they would be
employed in an industry job. He
explained the Prison Industrial programs were a means to control and motivate
inmates to perform appropriately within the NDOC.
In
response to Chairman Marvel, who questioned whether the elimination of the industrial
program to manufacture license plates would have an impact on recidivism,
Director Whorton answered he would not make such a statement as he did not
like the term recidivism. He opined
recidivism was a difficult word to define.
Director Whorton explained the Prison Industrial programs as a
management tool went beyond the scope of recidivism.
Addressing
the issue of the safety of the DMV employees, Mr. Skolnik said the
controls for staff working in the Prison Industries’ environment were stringent;
due to these controls, staff might be safer within that environment than they
would be walking to the mall on a weekend.
Mr. Skolnik said this was not to take away from the accident that
happened in 1999.
In
response to Chairman Marvel, who questioned if Ms. Lewis thought there might be
a change in the statutes concerning the license-plate manufacturing at the NSP,
Ms. Lewis said if the DMV were to propose a change in the statutes and
pursue the change in the budget, it would be with the support of the
Governor. She reiterated a final
decision had not been made regarding the move.
Ms. Lewis reported she met with the Governor’s Chief of Staff, Keith
Munro, who had been Legal Counsel for Prison Industries in the past regarding
the issue. Although Mr. Munro understood
Ms. Lewis’ interpretation of the statutes with regard to the 50-cent fee
and the defrayal of cost for the license-plate production, he had
pointed out the impact of the move would be devastating to Prison Industrial
programs and did not commit one way or the other.
Chairman
Marvel revealed he had a bias with regard to the move as he had been with
Prison Industries since 1987and had watched the program for license-plate
production grow. He reiterated he would
hate to see anything happen that would devastate the Prison Industrial program. Chairman Marvel called for questions or comments
from committee members regarding the potential move. Hearing none, Chairman Marvel expressed his
appreciation for Ms. Lewis’ appearance before the committee.
Noting
the committee now had a quorum, Chairman Marvel indicated he would now accept a
motion for the approval of the minutes of the November 14, 2005, meeting.
II. APPROVAL OF THE MINUTES OF THE NOVEMBER 14, 2005,
MEETING.
SENATOR BEERS MOVED TO APPROVE THE MINUTES OF THE
GREG SMITH SECONDED THE MOTION.
Chairman
Marvel questioned whether members had any discussion or changes regarding the
minutes. Hearing none, he called for a
vote on the motion.
THE MOTION PASSED UNANIMOUSLY.
Chairman Marvel
requested Howard Skolnik proceed with Agenda Item III.
III. DISCUSSION OF POTENTIAL INDUSTRY PROGRAMS
AND COMMITTEE RECOMMENDATIONS (NRS 209.4818): - ALPINE
STEEL (STRUCTURAL STEEL FaBRICATIOn) – High Desert State Prison
Mr.
Skolnik informed the committee Alpine Steel had been a customer at the Southern
Desert Correctional Center’s (SDCC) Metal Shop for some time. Since Alpine Steel’s needs exceeded the space
provided at SDCC, they approached Prison Industries with interest in setting up
a manufacturing operation at High Desert State Prison (HDSP). Mr. Skolnik advised Alpine Steel was
interested in renting a 10,000 square-foot area in order to manufacture
structural steel, predominately stair rails and stairs.
Mr. Skolnik
apprised the committee a contract had been drafted for the manufacturing
operation at HDSP. He requested the
committee’s approval to continue with the contract between Alpine Steel and
Prison Industries for the operation.
Responding
to Chairman Marvel, who questioned whether he had time to review the contract,
Jesse Wadhams, Deputy Attorney General, indicated he had not yet reviewed the
contract.
Chairman
Marvel indicated he would entertain a motion for Mr. Skolnik to pursue
negotiations with Alpine Steel for the contract for the rental of the 10,000
square-foot area.
bruce AGUILERA MOVED fOr APPROVal for prison industries to pursue negotiations
with ALPINE STEEL for a CONTRACT to RENT A 10,000 SQUARE-FOOT AREA AT high
desert state prison FOR THE FABRICATION OF STRUCTURAL STEEL.
Senator beers SECONDED THE MOTION.
Chairman
Marvel called for any discussion regarding the motion.
Director
Whorton questioned if the contract included language concerning security and
compensation for staff.
Mr. Skolnik
affirmed the contract contained language that addressed these issues. He explained that at the request of the Warden
at HDSP, every contract for HDSP included a request for one-third of a
correctional officer per a 10,000 square-foot area. He said with this request, there would be two
full-time officers in the area. Mr. Skolnik
further explained that any off-shift work would require the occupant to pay 100
percent of the cost for security required.
With regard to a question regarding metal detectors for inmates leaving
the area, Mr. Skolnik indicated the HDSP was constructed with metal detectors
and a secure changing room, thus such protection was inherent in the
building.
Chairman
Marvel called for any further discussion regarding the motion. Hearing none, he called for a vote on the
motion.
tHE MOTION passed unanimously.
Mr. Skolnik related that committee member
Chairman Marvel requested
Mr. Skolnik proceed with Agenda Item IV.
IV. STATUS REPORT FROM PRISON INDUSTRIES AND
COMMITTEE RECOMMENDATIONS REGARDING THE FOLLOWING ITEMS:
A. GARMENT FACTORY (MANUFACTURING CLOTHING) AT LOVELOCK
CORRECTIONAL CENTER.
Noting the Garment Factory at the Lovelock Correctional
Center (LCC) was progressing nicely, Mr. Skolnik informed the committee
the Las Vegas Sun had recently
published a complimentary article with regard to Prison Industries’ private
clothing line. With regard to Chairman
Marvel’s request for a copy of the article, Mr. Skolnik agreed to provide
a copy of the article to staff for distribution to the committee members.
Continuing, Mr. Skolnik advised the committee Prison
Industries planned to expand the clothing line by adding clothing that would supplement
the motorcycle production. He pointed
out the financial reports depicted the Garment Factory’s sales were
substantially ahead of last year’s sales.
B. ALLWIRE CABLE (CABLE SHEATHING) –
Reminding the committee that Allwire Cable had planned
to construct a building at the Southern Nevada Women’s Correctional Facility (SNWCF), Mr. Skolnik said he was
unsure of Allwire Cable’s status. He
explained that Allwire Cable had indicated their negotiations with their
largest customer, Nevada Power, had been successful concerning a law regarding
costs incurred by public utilities. Mr.
Skolnik reported that Allwire had been advised by Nevada Power that they would
retain the pre‑formed, conduit-wrapped cable, as opposed to requesting
developers pull cable. He reiterated he
was unsure whether Allwire would proceed with their plans for construction of
their building.
Mr. Skolnik advised the committee that Jacobs Trading
Company, who planned to construct a 20,000 square-foot building to be
located in front of the facility across from the sallyport at the SNWCF, had abandoned
their plans due to rising costs. The
original cost estimate for the proposed building was approximately $700,000;
however, with imposed requirements by the North Las Vegas Planning Commission
and the Public Works Board, the estimate had risen to $1.8 million.
Mr. Skolnik apprised the committee if Allwire Cable
did not move quickly, his recommendation would be to put Jacobs Trading Company’s
building inside the perimeter at the SNWCF to free up the space inside the
institution for other industrial programs.
In response to Chairman Marvel, who questioned whether there was room
for both programs, Mr. Skolnik indicated there was room inside the perimeter for
one of the industry programs, but not both.
Mr. Skolnik said it was a disheartening experience to watch the climb of
construction costs for proposed buildings.
Agreeing, Chairman Marvel indicated that the cost for
every Capital Improvement Project (CIP) the state funded during a legislative
session had soared out of site by the time construction of the project was
started. He said many projects had to be
scaled down in an attempt to cope with rising costs.
C. COOK/CHILL PROCESSING PROJECT (MEAL PREPARATION)
– HIGH DESERT STATE PRISON.
Mr. Skolnik informed the committee that, at the
request of Director Whorton, the Cook/Chill processing project for Prison
Industries had been tabled pending the election of the next governor. Mr. Skolnik apprised the committee it was
Director Whorton’s opinion (and Prison Industries concurred) that it was
unfair to “saddle” a new governor with such a significant change in policy and
procedure.
Responding to Chairman Marvel’s question regarding
the amount the Cook/Chill processing program could save the state, Mr. Skolnik
reported Prison Industries was unsure of the savings.
Referring back to the possible move of the proposed building
for the Jacobs Trading Company, Chairman Marvel questioned the amount that
could be saved by moving the building from the front of the facility to within
the perimeter at the SNWCF.
Mr. Skolnik explained that approximately seven years
ago, the Legislature passed a bill that allowed local government control over
state buildings on state land within their jurisdiction; therefore, the North
Las Vegas Planning Commission would still have jurisdiction over the proposed
building. He apprised the committee
Prison Industries was not sure of the amount that could be saved by the move.
Chairman
Marvel welcomed Assemblyman Arberry to the meeting and introduced Deborah Reed,
Budget Analyst IV, Department of Administration, to committee members.
D. THOMSON
EQUIPMENT COMPANY (WATER TRUCK PRODUCTION) – SOUTHERN DESERT CORRECTIONAL
CENTER.
Mr. Skolnik apprised the committee that 90 percent of
the Thomson Equipment Company of
Mr. Skolnik apprised the committee that in order for
Thomson Equipment Company to fulfill their contract for 500 water trucks within
the year, the expansion of their existing space was necessary. It was Thomson Equipment Company’s
hope to complete their expansion to HDSP by April 2006. Mr. Skolnik indicated the initial refurbishing
of the trucks would be conducted at the SDCC, while placement of the tanks and
final finishing work for the operation would be accomplished at HDSP.
Responding to Chairman Marvel, who questioned whether
the industry program was profitable, Mr. Skolnik affirmed it was; Thomson
Equipment Company had paid all of their bills and was current with Prison
Industries.
Mr. Skolnik informed the committee that Prison
Industries was having issues with ADCOR, the company that manufactured concrete
castings and Sedco, the company that owned the equipment that had been placed
in the Prison Industries’ Building at HDSP.
He advised that attorneys had been in contact with Mr. Wadhams, representative
for Prison Industries from the Office of the Attorney General, regarding the
equipment. Mr. Skolnik further advised representatives
from ADCOR could no longer be located.
Responding to Chairman Marvel, who questioned whether
ADCOR owed money to Prison Industries, Mr. Skolnik advised ADCOR owed Prison
Industries approximately $10,000. Mr.
Skolnik further advised discussions occurred indicating Sedco might donate the
building ADCOR was to occupy to Prison Industries to satisfy the debt. Mr. Skolnik pointed out if the donation of
the building were to occur, the donation would far exceed the debt owed.
Mr. Skolnik clarified the Sedco company had no debt
with Prison Industries. They were a
company who paid ADCOR, who, in turn, was to pay Prison Industries. It was Mr. Skolnik’s understanding Sedco had
paid all of ADCOR’s bills except Prison Industries.
F. MICRO BREW (BREW TANK MANUFACTURING) – HIGH
DESERT STATE PRISON.
Mr. Skolnik apprised the committee that Micro
Brew, a company that had been operating in the
Mr. Skolnik recalled for the committee that Jesse
Wadhams, representative for Prison Industries from the Office of the
Attorney General, had sent Micro Brew correspondence regarding their debt with
Prison Industries. He reported Prison
Industries had filed for collection against Micro Brew. Referring to the statutes regarding debt collection,
Mr. Skolnik requested Mr. Wadhams address the issue for the committee.
Mr. Wadhams, Deputy Attorney General and Counsel to Prison Industries, introduced
himself for the record and advised that the collection for Micro Brew raised
several issues concerning debt collection.
He related it was difficult to track representatives of businesses to
collect debt. Mr. Wadhams said he was originally
led to believe that debt collection was solely the purview of the Office of the
State Controller; however, in reviewing the Nevada Revised Statutes (NRS) 353 C with regard to debt collection, he
discovered the statute was generic. He
informed the committee he hoped to create a “cookbook style” summary judgment
and a certificate of liability in order for Prison Industries to move forward
and secure a court order with regard to the debt. Mr. Wadhams explained that a certificate of
liability could prevent the movement of valuable property out of county lines
and the state in order for Prison Industries to have some leverage for
collection.
Mr. Wadhams said since Prison Industries had not realized
much value from the Office of the State Controller in collecting debt and the
statues allowed individual agencies to set up their own collections, he
recommended Prison Industries seek a third-party collection agency to pursue amounts
overdue to Prison Industries. In
response to Chairman Marvel, who questioned the success rate for third‑party
collection agencies, Mr. Wadhams indicated he was unsure of their success
rate. He added the Office of the State
Controller contracted with third-party collection agencies for
lower-end debts ($10,000 or less). He
speculated the third‑party collection agencies were not extremely
successful at the low end, but more successful at the higher end, as they do a
forensic accounting.
Mr. Skolnik interjected he did not recall Prison
Industries receiving any debt owed through collection. He explained that in the case of Micro Brew,
by the time Prison Industries could take action, Micro Brew’s property was gone. Mr. Skolnik was unsure of any other options
to collect the debt, unless Prison Industries could take the owner’s
house.
Greg Smith, Administrator, Purchasing Division,
questioned whether Mr. Skolnik and Mr. Wadhams were referring to the Office of
the State Controller’s contract with OSI Collections Services, Inc. Mr. Wadhams affirmed this was the specific
contract. Mr. Smith reported this
contract was established through the Purchasing Division in conjunction with
the Office of the State Controller. He
said the contract would need to be reviewed if it had been performing poorly. Mr. Smith indicated the nature of the debts might
be below the ceiling that OSI Collections Services, Inc., preferred to consider.
Mr. Smith advised that at the last Board of
Examiners’ meeting, the Governor had discussed debt collection for the Public
Employees’ Benefits Program (PEBP). Indicating
many agencies were somewhat lenient in pursuing debt collection while others
were very aggressive, Mr. Smith wondered what level of aggressiveness Prison
Industries took in pursuing their debts.
Responding to Mr. Smith’s question, Mr. Skolnik
indicated that Prison Industries would pursue collection on a $10 debt. He related that Prison Industries had done so
with staff. He explained Prison
Industries’ internal process: 1) initially, Prison Industries sent out a demand
letter; 2) subsequently, Prison Industries requested the Office of the Attorney
General get involved and a stronger letter was sent by the Attorney General’s
Office; and 3) ultimately, Prison Industries turned the debt over to the Office
of the State Controller for collection. Mr.
Skolnik added Prison Industries tried to obtain collection prior to turning
debts over to the Office of the State Controller; thus far, their success rate
was nil.
Mr. Wadhams clarified he did not want to give the
impression the contract with OSI Collections Services, Inc., was
performing poorly. He explained that at
a certain level of debt, not as much aggressiveness was exercised by the
company. In response to Chairman Marvel,
who questioned whether any statutory changes with regard to debt collection
were anticipated, Mr. Wadhams said he did not foresee any changes. He opined that NRS 353 C allowed latitude for
state agencies to pursue debts. He
explained obtaining a certificate of liability in each case of debt collection
would be beneficial to Prison Industries, as it would allow assets to remain
within Prison Industries’ custody until debts were settled.
Chairman Marvel suggested the Nevada Legislature’s
Interim Finance Committee’s Committee on Industrial Programs could submit a
Bill Draft Request (BDR) to facilitate debt collection if committee members
thought it would be beneficial for Prison Industries.
Questioning the nature of the debt, Senator Beers
asked whether Prison Industries was writing the payroll for the companies and
then seeking reimbursement from the companies for the payroll.
Affirming payroll was a portion of the debt, Mr.
Skolnik explained that since officers were on state payroll, Prison Industries
paid the officers overseeing the prison industry and billed the companies
involved. Although rent and payroll
constituted the most significant portion of Prison Industries’ losses, in past
cases, product also attributed to debt.
Mr. Skolnik informed the committee that Prison Industries had done
structural steel work for a company in
In response to Senator Beer’s question whether the
companies paid the inmates, Mr. Skolnik affirmed the companies were
required to pay the inmates directly. He
advised that in instances where Prison Industries and a company had a
partnership, Prison Industries paid the inmates (as Prison Industries was
making a profit from the inmate labor) and subsequently billed the partner
company. Mr. Skolnik added, that to date,
no debt problems had arisen with any of Prison Industries’ partner
companies.
Responding to Senator Beers, who questioned whether
Prison Industries had investigated the feasibility of an Automatic Clearing
House (ACH) transfer at the time of Prison Industries’ billing, Mr. Skolnik
advised that in the past, Prison Industries had collected and created deposits
for companies. However, these deposits
had never been sufficient, and Prison Industries ended up losing money. He advised the committee there was a $3,000
deposit with regard to ADCOR’s $10,000 debt.
Therefore, Prison Industries was facing a $7,000 loss.
Senator Beers asked whether Prison Industries had the
capability of accepting an automatic electronic funds transaction from a
company and questioned whether Mr. Skolnik knew how to set up such a
transfer.
Answering Senator Beers’ questions, John McCuin,
Chief of Financial Services for Prison Industries, affirmed that Prison
Industries could accept electronic payments.
He explained Prison Industries had been set up through the Office of the
Attorney General to receive electronic payments and had taken them in the past.
Noting that Prison Industries offered these companies
a competitive business advantage, which gave them motive to do business with
Prison Industries, Senator Beers questioned whether Prison Industries had
explored the feasibility of modifying contracts to extract instant payment from
the companies upon generation of an invoice as a policy.
Responding to Senator Beers’ question, Mr. McCuin opined
since it was difficult to obtain companies/partners for prison industry programs,
and Prison Industries did not want to discourage companies, they had not
requested immediate electronic transfers for payments as their policy. He indicated most companies/partners involved
with Prison Industries paid their debts in a timely manner. Correcting Mr. Skonik’s testimony on the
amount of the deposit required for ADCOR, Mr. McCuin informed the
committee the deposit for ADCOR was a $10,000 deposit, not a $3,000 deposit. He explained ADCOR was one of the companies
that Prison Industries paid salaries for inmate employees, and since their
payrolls were large, $20,000 in debt was accrued before there were signs of any
problems.
Senator Beers disagreed that an automatic electronic
transfer would be a deterrent to a potential company/partner.
Mr. Skolnik agreed with Senator Beers and indicated
Prison Industries could incorporate a requirement for a letter of credit in
their contracts. He said a letter of
credit would not be that costly to the company/partner and would provide Prison
Industries with assurance and protection.
Senator Beers advised more businesses were utilizing
electronic payments with the payment being pulled from the company that owed
the funds, rather than waiting for that company to trigger the payment when the
payments were an ongoing cost. Were
Prison Industries to use this method, they would have to be responsive to the
company/partner’s comfort zone with relationship to overcharging.
Mr. Skolnik agreed that Prison Industries could
investigate both the letter of credit and the use of electronic payment
transfers as solutions to debt issues.
Chairman Marvel thanked Senator Beers for his
comments regarding electronic transfer payments. He called for further discussion on any of
the industrial programs; hearing none, he requested Mr. Skolnik proceed to Agenda
Item V.
V. Review of
WORK PROGRAM SUBMITTED BY PRISON INDUSTRIES TO THE INTERIM FINANCE COMMITTEE
REQUESTING AN INCREASE IN THE REVENUE AND EXPENSE BUDGET AUTHORITY FOR THE
FURNITURE AND METAL SHOPS AT NORTHERN NEVADA CORRECTIONAL CENTER.
Mr.
Skolnik reported business for the Furniture Shop and Metal Shops at
Prison Industries had accelerated.
Collectively, the two shops had over $800,000 in open orders to be
completed before the end of the fiscal year.
Mr. Skolnik explained the request was for expenditure authority to
purchase raw materials to cover the increase in business.
Responding to Chairman Marvel, who questioned the status
of the silk-screening program at HDSP, Impact Design LLC, Mr. Skolnik indicated
the program was progressing nicely. He
added Impact Design LLC had increased inmate employment to approximately
40 inmates by adding a second shift. He
reminded the committee that, while in the
In
response to Chairman Marvel’s request for an update of further development on
the Industrial Park project at Indian Springs, Mr. Skolnik related a meeting
occurred recently with the architect, the general contractor and
representatives from Tamkin Development and Prison Industries regarding the
project. He advised that Tamkin
Development had hired an individual with private sector and prison industry
experience in his background to help solicit tenants. Mr. Skolnik further advised another meeting
was planned with this individual, the Nevada Development Authority (NDA) and
Prison Industries to discuss partnering.
He opined that building the Industrial Park in increments with room for
expansion as interest in occupancy increased, verses building all at once, was
a more realistic approach to the project.
Mr. Skolnik informed the committee he should have a memorandum of
understanding within the next few weeks that would lead to the development of a
contract.
Chairman
Marvel requested Mr. Skolnik keep staff informed on the progression concerning
the Industrial Park project, and he agreed to do so. Chairman Marvel called for further discussion
on other industrial programs. Hearing
none, he directed the committee’s attention to Agenda Item VI.
VI. Review of Financial Statements for Quarter
Ending
Directing
the committee to page 29 under tab VI of the meeting packet (Exhibit
C), Mr. McCuin said the mid-year financial statements depicted
improvement in all areas except the SDCC and the Ely Drapery Shop. He attributed the loss at the Ely Drapery
Shop to the loss of experienced inmates on the program due to the changes in
procedures implemented connected to the inmate escape.
In
response to Chairman Marvel’s request for clarification regarding the changes
implemented, Mr. Skolnik explained that in August 2005, an individual
escaped from the Northern Nevada Correctional Center (NNCC) on a Prison Industries’
truck. A review of classifications of
inmates throughout the state followed the escape, which resulted in the removal
of ten inmates from the Prison Industry program in Ely because they had prior
escapes in their records. Mr. Skolnik
said due to the new classifications, the Ely Drapery Shop lost skilled
inmates who had been in the program for 10 to 12 years.
Continuing,
Mr. Skolnik advised that in order to avoid another incident, NDOC had changed
operation procedures and had purchased heartbeat monitors for industrial
programs at the NNCC and the SDCC. He
explained these monitors were attached to vehicles to determine whether there
were heartbeats on the vehicles.
Although not effective in high winds, the monitors provided another
level of security for Prison Industries in the two facilities that had the
most movement in and out of the institutions. Mr. Skolnik informed the committee that due to
the escape, more than 17,000 production hours were lost in the month of October
2005 in Prison Industries’ own operations (aside from losses in private
industries) and three days of production were lost at DMV. He added that DMV had lost four days of
production for the calendar year (three due to the escape).
Responding to Chairman Marvel’s question regarding
the increase in net loss at the SDCC Auto and Upholstery Shop, Mr. Skolnik advised
the operation had been cyclical from the start of the program. Although the operation was under reevaluation,
Mr. Skolnik speculated the motorcycle manufacturing would help with the
profitability of the program. Review of
the Prison Industries’ operation revealed that vehicles had sat at the SDCC
Auto and Upholstery Shop awaiting parts for as long as 18 months, which was not
an effective way to earn revenue. Reiterating
the entire process was still under reassessment for increased productivity, Mr.
Skolnik said one of the benefits of the revenue earned by manufacturing license
plates for the DMV was the continuation of such programs. These industry programs may not be making a
profit; yet the operations provided training and skills for inmates, which
resulted in job opportunities upon the inmate’s release. Should the DMV program be cut, the operation
at the SDCC Auto and Upholstery Shop would be one of the first programs to be
eliminated.
In response to Chairman Marvel’s question whether the
motorcycle manufacturing could “pick up the slack” in the SDCC Auto and
Upholstery Shop, Mr. Skolnik indicated it was his hope the motorcycle
manufacturing would increase profitability for the shop. He advised Prison Industries had designated a
2,500 square-foot area in the shop at the SDCC and the operation should be
capable of producing five motorcycles per month. If calculations were correct, the operation
should generate profits of approximately $50,000 per month.
Chairman Marvel called for further questions for Mr.
McCuin regarding the financial statements.
Calling on Senator Beers, Chairman Marvel noted that although Michael Mackenzie,
Principal, Operations Improvement Company, was not able to attend the meeting,
it was good to have Senator Beer’s Certified Public Accountant (CPA) expertise
with regard to the review of Prison Industries’ financial statements.
Indicating the Summary of Financial Statements on
page 29 under tab VI of the meeting packet (Exhibit C), was beneficial,
Senator Beers questioned whether a revenue figure could be provided for cost
centers in the financial reporting. He
further questioned whether the positive figure on the line “Contrib to G &
A Exp” was revenue.
Mr. McCuin informed Senator Beers that the document,
Summary of Financial Statements, was provided by LCB staff. Senator Beers indicated he would discuss his
request and questions with LCB staff at a later time.
Observing the turn around for the Prison Farm/Dairy,
Chairman Marvel noted he was pleased to see positive improvement.
Referring
to the balance sheet on page 43 under tab VI of the meeting packet (Exhibit C),
Mark Krmpotic, Senior Program Analyst, LCB Fiscal Analysis Division, pointed
out Unrestrictive Cash was down from last year.
He noted greater amounts were tied up in Accounts Receivable and Inventories
- Accounts Receivable increased from $1.1 million to $1.4 million and Inventories
had increased from approximately $1 million to $1.3 million.
Mr.
Skolnik responded the increases were due to growth of the program. He added the accounts receivable aging was
approximately the same as it had been; however, Prison Industries was selling
more and required more material for production.
Chairman
Marvel indicated he had no problem with the increase in inventory, since
Mr. Skolnik was confident the inventory would be used in product.
Senator
Beers said the balance sheet depicted a $700,000 increase in Total Assets and
miniscule increase in Liabilities and $700,000 in Retained Earnings. He pointed out when the increase in assets
was attributed to retained earnings, rather than Current Liabilities, it was a
good thing.
VII. Review of Number of Inmates
Employed July 2003 through DeCember 2005.
Mr.
Skolnik noted there had been a gradual
increase in the amount of inmates employed since the aftermath of the August escape. He indicated Prison Industries had returned
to the “profitability mode” as opposed to the “workers mode” with regard to
inmate employment. It was Mr. Skolnik’s
opinion this change would be beneficial to the future of
Prison Industries.
Pointing
out the rapid increase in inmate population for the NDOC and the need for
industrial programs to sustain the increase, Chairman Marvel questioned whether
inmates were being released/paroled at a similar accelerated increase.
Director Whorton reported
the release rate was down. Over the last
year, the rate of parole had declined somewhat.
He reported the male population had grown approximately 4 percent per
year over the last ten years. The challenge
for the NDOC was the growth of female population, which had increased
nationwide.
In response to Chairman
Marvel, who expressed concern with regard to overpopulation for the NDOC due to
the increase in the police force in the
With
regard to the need for new prisons, Director Whorton informed the
committee that in the past, the state had done well in planning. Since
In
response to Chairman Marvel, who question whether the NDOC had been funded for
the design of the additional units, Director Whorton affirmed they had
been. He advised Jim Austin’s business,
JFA Associates, was used for projections.
Wendy Naro was the assistant who conducted the projections. Director Whorton apprised the committee
the life of a projection was only two years.
With
regard to Chairman Marvel, who requested (for the record) the amount
Prison Industries had received from the production of license plates, Mr. Skolnik
indicated the amount was approximately $600,000. He reiterated the fees were of critical
importance to the Prison Industries program.
Chairman
Marvel called for any questions from the committee regarding the number of
inmates employed. Hearing none, he
called for any public comment to come before the committee.
X. PUBLIC COMMENT.
Chairman
Marvel questioned whether there was further public comment. There was no further public comment.
X. ADJOURNMENT.
Chairman
Marvel asked if there was any further business to come before the committee. Hearing none, he thanked committee members
for their attendance and adjourned the meeting at 11:07 a.m.
Respectfully submitted,
_____________________________
Denise
Larsen, Committee Secretary
APPROVED:
_________________________________
Assemblyman John Marvel, Chairman
Date:_____________________________