LOS ANGELES - Only a handful of Nevada's local governments are expected to file a written debt management policy by the Jan. 1 deadline mandated under a new state law, a state official said this week.

Senate Bill 557, signed into law July 13 by Gov. Bob Miller and sponsored by state Sen. Ann O'Connell, R-Clark County, requires all local governments in the state to file debt policies by New Year's Day.

But as of Tuesday, just eight of the state's 247 local governments had filed a debt policy with the Nevada Department of Taxation, said Janice Wright, the department's deputy executive director.

Under the law, policies are to be filed with the department plus the county clerk's office and the county general obligation bond commission in the county where the local government is based.

The policy must include a discussion of seven debt-related topics and a statement about how the local government plans to sell its debt, the statute says. Also required is a discussion of the government's "general obligation debt per capita as compared with the average for such debt of local governments in this state."

The local governments that have filed policies are Clark County, Clark County School District, Douglas County School District, Lander County Hospital District, Las Vegas, Mineral County School District, Reno Redevelopment Agency, and Reno-Sparks Convention and Visitors Authority.

The relatively small number of local governments responding by this week are some of the most active issuers in the state, several Nevada market observers said. The vast majority of nonparticipating local governments, particularly rural localities that do not plan to incur debt now or in the future, likely are not aware that the statute requires them to prepare a policy, the observers said.

Under SB 557, local governments that decline to comply with the law altogether or file their debt policy after the Jan. I cutoff date are not subject to any penalties. They would, however, be required to file a policy before issuing debt.

"Right now, everyone is experiencing, as with any new legislation, difficulty in trying to comply," said Jennifer Stern, a partner with Swendseid & Stern, a Reno-based law firm that provides counsel to local governments.

Nevada has 17 counties and 18 incorporated cities, but most of the state's 247 local governments are single-purpose general improvement districts, special purpose districts, or unincorporated towns, said Robert Hadfield, executive director of the Nevada Association of Counties. Each of the local governments has a "political boundary" and under state law is technically eligible to issue debt, Hadfield said.

Wright of the Department of Taxation expects a number of local governments to file their policies after attending the annual state Government Finance Officers Association meeting Jan. 13 and Jan. 14 in Las Vegas. At the annual meeting a forum will be held to provide guidance to local governments trying to figure out how to comply with SB 557, Wright said.

Wright also expects compliance to grow when the smaller entities realize they can meet the letter and spirit of SB 557 by filing debt policies no longer than two to three pages.

Once filed, the policy would need to be updated periodically with bond issuance information, a procedure that Wright said would not be onerous for most local governments. They could pull the required figures from "statement of existing indebtedness" forms, which are filed annually with the department of, she said.

SB 557 requires local governments to file a capital improvements plan by next June and annually thereafter. The statute says the plan "must include any contemplated issuance of general obligation debt" in the ensuing three years.

The capital improvements plan should be filed at the same time local governments complete the statement of indebtedness form, according to Carole Vilardo, president of the non-profit Nevada Taxpayers Association, a nonpartisan group that helped to draft SB 557.

Vilardo said SB 557 strengthens Nevada's 17 county GO bond commissions, which vote on whether proposed bond issues should be placed on an election ballot for a public vote.

Formerly, the commissions could give a bond measure a green light to go on the ballot if a simple majority of commission members and to it. Under SB 557, the commissions must now approve such bond measures with a two-thirds vote.

The new law also broadens the commissions' oversight of voter-approved tax overrides, short-term financings, and other taxes that now must receive a favorable two-thirds vote of the commissions before they are submitted to a public vote.

By providing the commissions with an expanded oversight role, "this makes everybody more accountable," said O'Connell said.

She said she decided to introduce SB 557 in the Nevada Legislature after an incident earlier this year involving the bond commission in White Pine County, an economically depressed mining area of 10,000 residents in Nevada's central-eastern region.

White Pine County's bond commission is supposed to monitor compliance with Nevada's maximum overlapping limit on ad valorem taxes of $ 3.64 per $100 of assessed valuation, O'Connell said.

In 1992, the bond commission voted to allow the White Pine School District to ask county voters to approve $14 million of GO bonds for two new schools. Voters approved the bond measures in November 1992 and the district issued a portion of the bonds in January 1993.

However, the bond issue increased tax levies countywide, causing several local governments to exceed the $3.64 cap, O'Connell said. The problem could have been avoided if the bond commission had "looked at the entire picture" of overlapping tax levy increases.

To resolve the problem, the school district agreed to pay out roughly $175,000 to compensate several local governments in White Pine County that surpassed the $3.64 cap, said Lisa Gianoli-Reck, recorder-auditor for White Pine County.

O'Connell said White Pine County's experience provided a lesson to Nevada lawmakers that "there has to be some coordination" between the bond commission and other local governments "to see what is going on with the debt limit. There wasn't coordination up to the time of the passage of the law."

O'Connell said SB 557's description of what local governments must include in their debt management policy was modeled after a policy developed by Clark County and formally adopted last August.

Guy S. Hobbs, comptroller for Clark County's finance department, said the county's 48-page debt management policy is designed to match the fast-growing county's capital needs with economic resources and demonstrate that proposed levels of debt issuance will not erode credit quality. Rating agencies "like surprises less than we do," Hobbs said.

Clark County's policy tries to create a level playing field with would-be underwriters of negotiated issuances, Hobbs said. According to a section of the policy titled "Underwriter Selection for Negotiated Sale," underwriters will be chosen through a formal prequalification process.

Requests for proposals are now being prepared for distribution to underwriters who previously have bid on competitive issues, but Hobbs said the county does not have a specific project in mind.

The county has often worked on negotiated issues with Smith Barney, Haff is Upham & Co., now Smith Barney Shearson, because the firm "performed well" and "was familiar" with Clark County, Hobbs said.

But the policy emphasizes that "we want to hear from all" investment bankers, Hobbs said. "We don't want them to feel it is a closed environment."

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