State prepares to challenge lease purchase prohibition

State officials hope that by leasing the Employers Insurance Company of Nevada building they can force a court challenge that will over turn a 30-year-old ruling forbidding such transactions.

The Board of Examiners on Friday approved a lease-purchase deal recommended by State Treasurer Brian Krolicki to buy the building on Musser Street. The state would buy the building by making rental payments on it for the next 20 years.

But they were told that would violate a 30-year-old court decision that said such long-term purchase deals are barred by the state constitution.

Based on an opinion by Deputy Attorney General Brett Kandt, the board consisting of Attorney General Frankie Sue Del Papa, Secretary of State Dean Heller and Governor Kenny Guinn rejected the contract.

They agreed they were forced to reject the contract because of the constitutional question and were unable to even consider whether it was a good business deal.

That, according to both Kandt and Legislative Counsel Bureau Director Lorne Malkiewich, creates the issue that will allow them to bring it before the Nevada Supreme Court.

Krolicki proposed the legal challenge saying at present the state can sign a deal to rent a building for a number of years but can't lease-purchase the same building for the same payments. He said the state pays out nearly $20 million in rent each year.

"We can rent for 20 years and have nothing or we can lease-purchase and own buildings," he said. "It's just good business.

Guinn said lease-purchase agreements are a standard tool of business and one which should be available to the state as well. He said he would still want to review individual lease-purchase deals to make sure they each made good business sense but that, until the supreme court ruling is changed, they can't even get to that point.

The proposal would have permitted the state to buy the building for a total of $1.7 million over the next 20 years.

Del Papa said she would prefer that the Legislature passed a statute and allowed the court to decide whether it was constitutional rather than doing it by forcing a lawsuit over the building. But Malkiewich said that would delay the entire process. He said the lawsuit can be brought before the high court and, hopefully, decided before the end of the 2001 Legislature.