Board shoots down plan to finance state buildings

Thursday, Nov. 2, 2000 | 10:23 a.m.

CARSON CITY -- The state Board of Examiners Wednesday scuttled Treasurer Brian Krolicki's scheme to open the door for a new way to finance state buildings, rather than paying $18 million a year in rent for private office space.

The board accepted the advice of Attorney General Frankie Sue Del Papa and her senior deputy, Brett Kandt. They advised that Krolicki's proposal was flawed and that there is a better way to proceed, by going through the 2001 Legislature.

Board members agreed more options are needed to pay for state office buildings, but the disagreement came on how to accomplish the goal. Board Chairman Gov. Kenny Guinn has been critical of the state paying private landlords without anything to show for it.

"We're paying $18 million, and we're not getting anything back," the governor said.

Krolicki, a close ally of Guinn, had taken up the challenge to find a new way of financing. He presented the board a contrived plan for a lease-purchase agreement in which the state at the end of the lease would be the owner of the building.

Lease-purchases, according to a 1970 Nevada Supreme Court decision, are part of the state's debt. The Nevada Constitution limits how far the state can go into debt. That means many building projects have to be delayed until there is additional capacity within that limit.

For its construction program, which includes the University and Community College System of Nevada, state prisons and office buildings, the state cannot borrow more than 2 percent of its assessed valuation. As of July 1 this year, the 2 percent represented $916.2 million. But the state had already issued general obligation bonds of $787.1 million against that cap, leaving $129 million unobligated

Krolicki's plan called for the state Department of Conservation and Natural Resources to lease purchase a building in Carson City owned by Employers Insurance Co. of Nevada for $1.7 million over 20 years. The scenario called for the examiners board to deny the contract and a suit to be filed in the Supreme Court, asking it to take another look at lease-purchase agreements to see if they might be considered outside the state's debt limit.

But Del Papa, a board member, said the voters in 1994 overwhelmingly rejected a plan to amend the Constitution to allow lease-purchase agreements outside the debt limit. A better way to attack the problem, Del Papa said, is to go to the 2001 Legislature and ask it to pass a lease-purchase law.

Any law approved by the Legislature is presumed constitutional, Kandt said. Then somebody could challenge that law. Kandt said that would put the state in a better legal position to defend the law.

There is a hitch to this argument. The Legislature has been reluctant to approve any law that its legal advisors say is unconstitutional.

Krolicki argued that going to the Legislature would delay the court test of a lease-purchase agreement.

Guinn and fellow board member Secretary of State Dean Heller originally followed the Krolicki script, but Del Papa's arguments convinced them to rescind their action and to let the matter lapse.