Transcript Prepared by the Clerk of the Legislature

Transcriber's Office

Committee on Revenue

January 29, 1999


Page 38


SENATOR COORDSEN:  Which means, then, that we have closed the hearing on LB 381, and here to open on LB 87, Senator Wickersham.


LB 87


SENATOR WICKERSHAM:  Senator Coordsen, members of the committee, LB 87 is a bill that you have seen before.  It was advanced last year by the committee.  It is a variation on interlocal agreements.  It does have a little bit of resonance with the discussion that we had about agricultural societies the other day because under the current- Interlocal Cooperation Act, you can perform a function under provisions of that act in two different ways.  You can have a generalized governing board that carries out the activity or, secondly, you can form an entity to carry out that function.  If you form an entity to carry out that function because either you need to own property or you're going to hire employees, there are a variety of reasons for forming an entity to perform an activity agreed to under the Interlocal Cooperation Act.  But if you do that, it is most


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often going to be a 501(c)3 corporation, the members of which are the political subdivisions that are signatories to the interlocal agreement.  The bill before you gives a third option and that is to actually form a new political subdivision having the powers and the capabilities that are assigned to it by the signatories to the interlocal agreement.  Now that simplifies things in a number of respects if you want to engage in an activity through the use of an interlocal agreement.  That entity is, of course, exempt from taxation, income and property taxation.  it would qualify for protection under the Tort Claims Act.  it does give you a way to have the employees potentially participate in retirement plans that the political subdivision might ...  that they might be running.  It has a provision to carry over various kinds of insurance coverage to the property of the entity and to the employees of the entity so it becomes more an an extension, a direct extension, of the political subdivisions that are really its parents.


SENATOR LANDIS:  Bob, I'm going to interrupt you for just a minute, if I could, George having stepped out of the room, we're going to get back to your opening in just a second.  How many are here to testify for...  is it 87?




SENATOR LANDIS:  Any testifiers?  Testifiers in opposition?  Neutral testifiers?  Two.  I want you to come on up since you're the only ones ...  testifiers to sign in so we can have an orderly transition, and I'm going to guess we can tell the neutral's testimony in what...  about 15 minutes.  Put your heads together.  That'd be great.  Bob, please continue.


SENATOR WICKERSHAM:  Part of this neutral testimony is bond counsel so you don't want to be ...  but you're used to dealing with bond counsel, I guess.  At any rate, that is the gist of the bill, Senator Landis and other members of the committee.  It I say, it's a bill which should be familiar to you from last year, and Senator Redfield, my apologies if I've made somewhat of an abbreviated opening, but that shouldn't...


SENATOR LANDIS:  By the way, would you remind me again the


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way in which the joint public agency is begun.


SENATOR WICKERSHAM:  Interlocal agreement.


SENATOR LANDIS:  I think it's contractual but there is also a vote on that creation but then, secondly, the way in which it is undone.


SENATOR WICKERSHAM:  It could be undone by whatever processes are set up in the interlocal agreement.  That is ...  the creation and the undoing would both be governed by the underlying agreement.  Now one component of this that I need to point out, it was an issue last year.  People were raising the question, although the bill was identical in its provisions this year.  The issue was raised who can serve on the governing board, and the bill specifically restricts that to elected officials, so you're not going to have someone appointed.


SENATOR LANDIS:  Are there questions for Senator Wickersham?  Senator Redfield.


SENATOR REDFIELD:  On page 33, there is a section which deals with the fact that people in this joint entity would not be considered state employees.  They would be entirely independent of the state.  And again, when I looked at the fiscal note, I saw a large expenditure, an estimate from the Property Tax Administrator that it would take nine people to administer the provisions of this bill.  Could you address that?


SENATOR WICKERSHAM:  What?  I don't see why.  No, I can't.  speak to that.


SENATOR LANDIS:  Well, there is a fiscal note for 87.  It's $350,000 for the year 2000-2001, $462,000 for 1999-2000.


SENATOR WICKERSHAM:  Well, I confess I haven't seen that.  I don't...


SENATOR LANDIS:  Property Tax Administrator estimates the need for nine full-time FTEs to administer the provisions of LB 87.




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SENATOR LANDIS:  Property Tax Administrator beat a hasty retreat with the last bill, Bob.  Guess we're going to have to keep her in the room when we want to talk to her.


SENATOR WICKERSHAM:  Well, I think somebody put a wrong number on this.  Doesn't have anything to do with the ...  excuse me.


SENATOR REDFIELD:  Well, okay.  Thank you.  I ...


SENATOR WICKERSHAM:  Okay.  We'll take that up, Senator.  Thank you.


SENATOR LANDIS:  That makes perfect sense to me that there's an error in numbering.


SENATOR WICKERSHAM:  Yes.  Thank you very much for bringing that to my attention, Senator.  I cannot imagine that this bill has any impact on the Property Tax Administrator's office.


SENATOR HARTNETT:  We should look at last year's.  We should look at last year's, you know.




SENATOR LANDIS:  Are there other questions for Bob?


SENATOR WICKERSHAM:  But thank you, Senator, for calling that to my attention.


SENATOR LANDIS:  If the Property Tax Administrator is here, Bob, on your way back, you might have a chat with Cathy.  Let's have our first neutral testifier.  Have you signed in, Ms.  Dibbern?




SENATOR LANDIS:  Good.  And if the next person will sign in as well so we can move from one witness to another without waiting to sign pieces of paper.


CHRIS DIBBERN:  Senator Wickersham, members of the Revenue

Committee, my name is Chris Dibbern, and that's


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D-i-b-b-e-r-n, and I am the Governmental Affairs Counsel and a registered lobbyist for NMPP Energy, and I appreciate the opportunity to appear today on a neutral position on LB 87.  We serve approximately 164 small towns in the Midwest.  We provide electricity, natural gas and utility-related services, and the average size of our town, if we exclude the Lincoln Electric System, is about 4,000 people, so a lot of small towns.  And we are here on a neutral position but we care a great deal about the Interlocal Cooperation Act.  We have ...  we'd like to praise the bill sponsor and we've made some suggestions...


SENATOR LANDIS:  Let's skip the praising and get to the testimony that is new.


CHRIS DIBBERN:  ...  for necessary modifications.


SENATOR LANDIS:  We all think well of him.  Well, let's get to the business at hand, Chris.


CHRIS DIBBERN:  We ...  and I'm going to summarize.


SENATOR LANDIS:  Good.  Good idea.


CHRIS DIBBERN:  I've prepared a testimony.  I'm not planning to read it.  (Exhibit 4.) It has 12 points that we'd like you to look at.


SENATOR LANDIS:  Get to the gist.  That's right.


CHRIS DIBBERN:  But there are three points that we'd like you to focus in on.  We have worked with Senator Wickersham last year with 1089 and he incorporated many of the changes we suggested in the new bill.  However, there is an amendment that we think is needed with this bill that we can exist and continue to live under the Interlocal Cooperation Act.  The main purpose of my testimony today is to persuade you that this piece of legislation needs this amendment.  It needs to carve out the Interlocal Cooperation Act.  The act itself is 20 pages long.  The act has been used by hundreds of cities, counties, schools and public entities and, as Senator Wickersham pointed out, you can use the act as an agreement and you can use the act as a joint entity.  In his new bill, LB 87, he has created a new kind of entity called a public joint agency, so I'll ...  I kind of call it a super


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entity, something that can do more.  We wrestled with many of the issues that are in LB 87, the insurance issues, the taxing issues, the Tort Claims Act.  Those are all good things that he has put into that new act, that this new public joint entity can use.  But what we found is that if you tinker with the Interlocal.  Cooperation Act itself, you have put a whole new kind of organization on top of it, and we're concerned about that.  Not that we don't think that that now kind of organization may be useful or may have a service in the future.  It might, but you put it on top of an act that we have always enjoyed and understood and worked with and has seemed to work well, that concerns us.  We have three organizations that are formed under the Interlocal Act, and NMPP Energy is kind of an umbrella for public groups, for municipalities to work together.  The first organization is the Nebraska Public Gas Agency.  it's six years old.  It sold about $20 million worth of public bonds.  We purchase and supply natural gas to small towns.  The American Public Energy Agency is a brand...  is a new interlocal, created under Nebraska law, and you're going to hear a little bit more from that from a bond counsel later on so I'm not going to go into that.  PACE is the newest interlocal and it has...  it serves 56 municipalities, and it sells natural gas to retail users.  So we have used the interlocal and appreciate how it works.  If we had to abide by all of the elements of LB 87, if agreements or Join entities had to abide by the elements of 67, that would cost us substantial time, money and concern.  So we feel like if you could pull the two of them apart, make it a Public Joint Agency Act and keep the Interlocal Act alone, that that would work.  We have offered this amendment to Senator Wickersham and he's willing to look at the amendment.  The amendment ...  but he also said, I don't want to complicate the statutes; if I could put this act, the Public Joint Agency on top of the Interlocal, that makes it simpler for our statutes.  And we appreciate that, too.  If you carved out the Public Joint Agency, this looks ...  and I brought copies in case you'd like to take it, but it's a work in progress.  It takes about 33 pages to do Senator Wickersham's bill.  However, there are another hundred pages in the statutes that just mention the name Interlocal Act, and so wherever you mention the name Interlocal Act, the bill drafters have also put Public Joint Agency Act, so the bill looks much longer because of tying those two acts together.  But truly, the bill would be about 30 pages ...  changes.  We've not


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examined the amendment in great detail.  We're working with Senator Wickersham's office on that.  We believe it is about 30 pages.  The back pages are just cross references to the Interlocal Act, and we have copies available if you'd like to see the amendment that we're working on.  And to summarize our statements, I've put 12 other little elements, how they distinguish, how they compare.  We would like you to carve the bill out, create a new Public Joint Agency Act, with the suggestions that we've made, and we continue to work with the senators on this issue and are intrigued with this issue.  One of our members is Lincoln Electric System, and they are also supportive of carving out the interlocal, too.  They use the interlocal to do heating and cooling districts in Lincoln.


SENATOR LANDIS:  Your neutrality, Chris, is because this is ...  because you have this discussion going along with Senator Wickersham, and the reason I ask is this.  Let's assume that the committee failed to make the suggestion of carving out and reported this bill out.  You would then be forced into a new ...  a negative position on that situation?


CHRIS DIBBERN:  Yeah, I ...  I think we would be somewhat alarmed about the bill, even though we like the public joint agency.


SENATOR LANDIS:  Okay.  I understand.  Now let's imagine that we do carve out the interlocal agreement from the Joint Public Agency, and let's assume that language relatively along the lines of what you could imagine would be in there.  Do you then switch from being neutral to be positive on that idea...




SENATOR LANDIS:  ...  or do you just, while moving between the choice of being neutral and negative?


CHRIS DIBBERN:  I think we've moved to a positive position.  We found the Interlocal Act to be a good act.  We think joint ...  working together...


SENATOR LANDIS:  Okay.  You just don't want to screw that up when people are using their bonds and that kind of stuff?

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CHRIS DIBBERN:  That's exactly right.


SENATOR LANDIS:  Questions for Ms.  Dibbern?  Thanks, Chris.


CHRIS DIBBERN:  Thank you for your time.


SENATOR LANDIS:  Next testifier in neutral capacity?  Following this testifier, are there any other neutral testifiers?  Ah, the answer to the money questions.


JOHN MUSSELMAN:  Senator Wickersham, members of the committee, I am John Musselman, M-u-s-s-e-l-m-a-n.  I am a bond counsel with Kutak Rock in Omaha.  I'll make this fairly quick.  The point that I would make to you in support of keeping the Interlocal Act separate is a simple one which revolves around the issue of selling our bonds, that being the Interlocal Act bonds to the public, particularly to institutions.  As you probably can appreciate, we have to be very, very careful about distinguishing a revenue bond from any bond which has a potential or any kind of claim on taxation.  We go to a lot of trouble on our...  in our security stock and must make sure that's clear.  In the last few years, as municipal financing, these public financings have got more complex, that issue has also gotten a little bit more difficult to communicate.  And an example of that is if you look at the fiscal note, the description of this act refers to the bill also allows for a local option tax to be imposed by one or more of the participating entities and so forth.  That is exactly how it would probably be described by an institutional investor or somebody like that, an analyst who is looking at the Interlocal Act, trying to describe to investors and so forth what it really means.  Now whether they're right about that, of course, is a different issue.  And lawyers can parse that out and we can explain it, but all we're saying is that from the point of view of clarity of presentation of the existing Interlocal Act, it would be preferable to keep it separate so we can make our point that these are always revenue obligations.  Lastly, I would say that, you may say, well, this is really just a clerical issue for you folks that have to explain it.  I would say that there's some truth to that except that sometimes all the explaining in the world isn't enough to force somebody to buy your security, who's looking at the option of buying another security.  The other thing, of course, that they can do is extract a little bit more of


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an interest rate because of the perception of complexity and so forth, so we're really looking at a very narrow issue here of trying to preserve what has been a very good statute used by, as Ms.  Dibbern said, a lot of entities in Nebraska very successfully, and we'd like to see that continue in the future.


SENATOR LANDIS:  John, if I get the point, there isn't a change in legal responsibilities?




SENATOR LANDIS:  Isn't a change in financial commitments or obligations ...  there is a difficulty if this is a merged act, to explain to an ultimate consumer or purchaser of bonds what their rights are and how those rights are carried out in an entity that's potentially as complex as the bill would become, particularly if they were using in the local interlocal agreement language to begin with.


JOHN MUSSELMAN:  That's exactly right.


SENATOR LANDIS:  Okay.  Questions for Mr. Musselman?  Thank you, John.  Appreciate your time.


CATHERINE LANG:  Senator Landis.


SENATOR LANDIS:  Following Ms.  Lang, we'll go back -to Senator Wickersham for closing and then move on to the next bill.


CATHERINE LANG:  Thank you, Senator Landis, members of the Revenue Committee.  I am here to state that the representation that there would be fiscal cost to the Property Tax Division is completely inaccurate.  We were not asked to provide any fiscal note.  We did not provide a fiscal note on this bill, would not need to provide a fiscal note on this bill; therefore, the reference to the Division is not correct.




CATHERINE LANG:  I cannot answer to whom...


SENATOR LANDIS:  So we have the mystery fiscal impact


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CATHERINE LANG:  ...  yes, you do.  Yes.


SENATOR LANDIS:  Some bill is out there with a $500,000 price tag and we're not going to know about it because the number got screwed up.  Okay.


CATHERINE LANG:  There you go.


SENATOR LANDIS:  Well, thanks.


CATHERINE LANG:  Just need to defend the Division on that one.


SENATOR LANDIS:  Bob dodged that bullet.




SENATOR LANDIS:  Thank you very much.  We're going to assume there are questions.  Bob is waving.  I don't know if that's sort of a white flag of surrender or if it's a waiving of a closing.  However, we will return to the agenda and pick up LB, 657.  Senator Schrock in here.  Ed, come on up.  Testifiers in favor?  In opposition?  Neutral?  So we have two proponents.  We can tell this story in 20 minutes, gentlemen, can't we?




SENATOR LANDIS:  Or less?  Good.  Bob.