02/20/2015 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB81 | |
| HB86 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | HB 81 | TELECONFERENCED | |
| += | HB 86 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
February 20, 2015
3:17 p.m.
MEMBERS PRESENT
Representative Kurt Olson, Chair
Representative Shelley Hughes, Vice Chair
Representative Jim Colver
Representative Gabrielle LeDoux
Representative Cathy Tilton
Representative Andy Josephson
Representative Sam Kito
MEMBERS ABSENT
Representative Mike Chenault (alternate)
COMMITTEE CALENDAR
HOUSE BILL NO. 81
"An Act relating to an exemption from the regulation of
construction contractors."
- MOVED CSHB 81(L&C) OUT OF COMMITTEE
HOUSE BILL NO. 86
"An Act relating to investment of the power cost equalization
endowment fund; and providing for an effective date."
- MOVED HB 86 OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: HB 81
SHORT TITLE: EXEMPTION: LICENSING OF CONTRACTORS
SPONSOR(s): REPRESENTATIVE(s) TILTON
01/28/15 (H) READ THE FIRST TIME - REFERRALS
01/28/15 (H) L&C
02/11/15 (H) L&C AT 3:15 PM BARNES 124
02/11/15 (H) Heard & Held
02/11/15 (H) MINUTE(L&C)
02/20/15 (H) L&C AT 3:15 PM BARNES 124
BILL: HB 86
SHORT TITLE: PCE ENDOWMENT FUND INVESTMENT
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
01/30/15 (H) READ THE FIRST TIME - REFERRALS
01/30/15 (H) L&C, FIN
02/18/15 (H) L&C AT 3:15 PM BARNES 124
02/18/15 (H) Heard & Held
02/18/15 (H) MINUTE(L&C)
02/20/15 (H) L&C AT 3:15 PM BARNES 124
WITNESS REGISTER
PATRICK DALTON
Delta Junction
POSITION STATEMENT: Testified in opposition to HB 81.
ERIC CLARK
Soldotna, Alaska
POSITION STATEMENT: Testified in support of HB 81.
MIKE COONS
Palmer, Alaska
POSITION STATEMENT: Testified during the discussion of HB 81.
PAMELA GOODE
Delta Junction
POSITION STATEMENT: Testified in opposition to HB 81.
JAMES SQUIRES
Delta Junction
POSITION STATEMENT: Testified in opposition to HB 81.
AL NAGEL, Supervisor
Mechanical Inspection
Division of Labor Standards and Safety
Department of Labor & Workforce Development (DLWD)
Anchorage, Alaska
POSITION STATEMENT: Answered questions during the discussion of
HB 81
GREY MITCHELL, Director
Central Office
Division of Labor Standards & Safety
Department of Labor & Workforce Development (DLWD)
Juneau, Alaska
POSITION STATEMENT: Answered questions during the discussion of
HB 81.
SARA CHAMBERS, Acting Director
Division of Corporations, Business, and Professional Licensing
Department of Commerce, Community, & Economic Development (DCCED)
Juneau, Alaska
POSITION STATEMENT: Responded to questions during the
discussion of HB 81.
ERROL CHAMPION, Chair
Legislative Issues Committee
Alaska Association of Realtors (AAR)
Juneau, Alaska
POSITION STATEMENT: Testified in support of HB 81.
KONRAD JACKSON, Staff
Representative Kurt Olson
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified and answered questions on HB 81,
on behalf of the House Labor & Commerce Standing Committee,
Representative Kurt Olson, Chair.
JERRY BURNETT, Deputy Commissioner
Office of the Commissioner
Department of Revenue (DOR)
Juneau, Alaska
POSITION STATEMENT: Testified and answered questions during the
discussion of HB 86.
ACTION NARRATIVE
3:17:18 PM
CHAIR KURT OLSON called the House Labor and Commerce Standing
Committee meeting to order at 3:17 p.m. Representatives LeDoux,
Colver, Tilton, Kito, Josephson, Hughes, and Olson were present
at the call to order.
HB 81-EXEMPTION: LICENSING OF CONTRACTORS
3:17:34 PM
CHAIR OLSON announced that the first order of business would be
HOUSE BILL NO. 81, "An Act relating to an exemption from the
regulation of construction contractors."
3:18:03 PM
REPRESENTATIVE TILTON, speaking as prime sponsor, emphasized
that HB 81 will not prevent Alaskans from building or selling
their own homes or requiring them to obtain a new license. Some
questions have arisen in terms of the two-year time limit in the
current bill. She explained that HB 81 simply seeks to
reasonably include all individuals engaged in home construction
as a business to be subject to the existing residential
contractor licensure. She characterized this bill as a consumer
protection bill.
3:18:56 PM
REPRESENTATIVE COLVER noticed a discrepancy between the sponsor
statement and provisions in AS 08.18. He said the sponsor
statement read, "In cases where an owner-builder finds that they
need to sell their home for a legitimate reason, there is a
provision for the Department of Labor to waive any enforcement
action." Thus, the commissioner of the DLWD would need to okay
the sale within two years. However, the definitions under AS
08.18 refer to the Department of Commerce, Community & Economic
Development (DCCED. He asked for further clarification on who
will be doing the enforcement. In response to a question, he
replied the language for this provision is the same in the
original version and the proposed committee substitute (CS) for
HB 81, Version W.
3:20:01 PM
CHAIR OLSON stated the bill would "trump" the sponsor statement.
3:20:05 PM
CHAIR OLSON reopened public testimony on HB 81.
3:20:26 PM
PATRICK DALTON said he found this bill to be disturbing. He
works as a specialty contractor and he likes to do the best job
he can, but these issues would be better addressed at the city
and borough level since the closer the decisions are to the
local community, the better. He expressed concern that this
bill will be difficult to enforce in rural Alaska. For example,
the sponsor statement reads, "In cases where an owner-builder
needs to sell [his/her] home for a legitimate reason, there is a
provision for the Department of Labor to waive any enforcement
action." He pointed out that the Declaration of Independence
originally read, "Life, liberty, and property," which was later
changed to "life, liberty, and the pursuit of happiness." Thus
property is very important to Americans and some in the
unorganized borough really value property and freedom, he said.
He expressed his concern that this bill tells people they can't
sell their property without being illegal, which he said is
close to stealing.
MR. DALTON said although is just a citizen, he has a conscience
and it is his moral responsibility to point out to the
legislature when bills are drafted that infringe on people's
rights and freedoms. Many people live in the unorganized
borough because they like freedom. He urged members to keep
this type of draconian measure out of the boroughs so people can
go and be free to build the way they like. He thanked members
for the opportunity to provide his input.
3:24:18 PM
ERIC CLARK stated that he and his wife, along with ten other
homeowners, found themselves in a situation on the Kenai
Peninsula. He described his experience, in which he purchased a
home from an unlicensed contractor, who built two to three homes
per year with substantial construction defects, including a lack
of vapor barrier, undersize wiring, absence of venting, and
other structural defects. These homes must be stripped to the
studs to make the repairs and replace the entire plumbing, which
will cost $100,000 per home to correct. These homes never
should have passed inspection, but even the home inspector did
not find defects. He said he is currently pursuing the matter
by filing a civil lawsuit. However, in an effort to prevent
other people from experiencing similar issues, he also filed
licensing complaints, but only the builder was fined. He
encouraged members to pass HB 81 since the Department of Law has
not been able to prosecute unlicensed contractors. He urged
members to help prevent other people from experiencing
situations such as his by passing HB 81.
3:29:08 PM
MIKE COONS stated that he has discussed this bill with
Representative Tilton and Colver. He related his understanding
that the purpose of the bill is to address issues that the
previous speaker encountered. However, in terms of real estate,
selling more than one home per year requires a real estate
license. Thus, it seems that builders would be under the same
provisions. For example, builders cannot purchase ten-acre
parcels and build multiple homes for sale and refer to
themselves as owner/builders without being in business. He
suggested corrective language on [page 2] line 21-25, as
follows," ... construction is advertised for sale or sold during
the period of construction unless the owner can produce to the
department's satisfaction a full list of the contractor's
subcontractors used for the construction with full documentation
of their licenses, bonding and insurance that then would then
protect the future homeowner and integrity of the construction
industry." He suggested that Representative Colver has been
working on an amendment that works to address his concern, but
he did not think Representative Colver's proposed amendment goes
far enough.
3:32:11 PM
PAMELA GOODE asked whether the bill is constitutional, which she
thought is questionable. She further asked whether this bill
increases or diminishes anyone's individual liberty, which she
thinks [the bill] it does. Finally, she asked whether [the
bill] would increase the size or power of government and she
offered her belief that it does. She said that prefers to err
in favor of liberty and freedom. She suggested that bills such
as this one are introduced because someone has been wronged, and
the person seeks governmental remedies so others won't also be
wronged. However, people have the Internet and easy access to
newspapers that could forewarn consumers about [unlicensed
contractors]. Furthermore, if people can't sell their products,
they will go out of business since consumers seek to purchase
the best product for the best price. She cautioned that when
government is involved it drives costs up through licensing,
rules, and regulations. She referred to [page 2, lines 21-25 of
HB 81], which read, " ... the exemption in this paragraph does
not apply if the structure under construction is advertised for
sale or sold during the period of construction or for two years
after the period of construction ends, unless the owner can
demonstrate to the department's satisfaction ...." She said she
lives in an unfinished home and she knows others who do, as
well. She expressed concern that based on this language owners
won't be able to sell their homes and in particular, the
language "department's satisfaction" is a subjective term. She
objected to owners needing to seek approval from the department
which diminishes their individual liberty and also fails her
litmus test. She appreciated the opportunity to testify.
3:35:01 PM
JAMES SQUIRES described himself as an "Alaska Constitution
Article I, Section 2 Alaskan." He said he is not a contractor
but is a certified public accountant by profession. He said he
opposes HB 81. He lives remote and off the grid in the
unorganized borough and people who live in the urban parts of
the state may not realize the unintended consequences of this
bill. He quoted Mark Twain as saying, "No man's life, liberty,
or property are safe while the legislature is in session." He
objected to the language in the bill that states "two years
after the period of construction ends". He suggested that over
one-half of the state is in the unorganized borough and many
people pay cash for their land, build as they can afford to, and
live safely and comfortably in unfinished structures. Many
people have multiple properties and structures, which are often
times all unfinished for a variety of reasons. He expressed
concern that they could be adversely affected by this bill.
MR. SQUIRES noted that he did not hear any discussion of an
instance in which an owner-builder puts up his own capital and
doesn't recover it unless the entrepreneur sells it for more
than he has invested. This person bears the full risk of the
market as compared to the contractor who does not put up
capital. He said the dictionary definition of a contractor is
one of the parties to a contract, which wouldn't apply to an
owner/builder. He suggested that there is a huge difference
between the sales contract and the building contract. He quoted
Adolf Hitler, who said, "The best way to take control over a
people and control them utterly is to take a little of their
freedom at a time, to erode rights by a thousand tiny and almost
imperceptible reductions. In this way, the people will not see
those rights and freedoms being removed until past the point at
which these changes cannot be reversed." He said he was also
opposed to the bill when it was introduced last year. He
suggested that legislators and lobbyists are paid, but he
surmised those testifying on this bill are not paid in any form.
He further suggested that testifiers must be continually
vigilant. He stated that even with a zero fiscal note, it costs
the state significant time and money for this bill to be
repeatedly dragged through the legislative process, particularly
during a time of fiscal crisis. He offered that if this issue
creates problems in some urban areas of the state, that it
should be handled locally by borough or municipal ordinances.
He suggested that the bill may have unintended consequences. He
requested that members take a roll call vote when the time
comes.
3:40:01 PM
REPRESENTATIVE JOSEPHSON asked how the changes on page 2, lines
21-25 of HB 81 will improve the chance of enforcement since a
limitation of two years exists for an owner/builder.
AL NAGEL, Supervisor, Mechanical Inspection, Division of Labor
Standards and Safety, Department of Labor & Workforce
Development (DLWD), answered that the concerns stem from within
the industry. He said that enforcement will remain consistent
with current statute since the prohibition for an owner/builder
to start and complete a structure is currently two years. He
suggested the more egregious violators hold off for two years
before they start building another in a series of homes. He
characterized this as a means to "level the playing field" for
contractors since unlicensed contractors conduct business
without carrying the overhead the licensed contractors carry.
3:42:31 PM
REPRESENTATIVE JOSEPHSON asked whether this would increase the
aforementioned requirement to four years.
MR. NAGEL answered no.
3:43:17 PM
REPRESENTATIVE HUGHES said the committee has heard testimony
expressing concern about individual liberties for
owner/builders. She interpreted the bill as allowing typical
Alaskans to continue to have the freedom to do so. She related
her understanding that an issue would only arise when licensed
contractors notice someone is not following the rules and file a
complaint that would be investigated by the department. She
said she is very supportive of individual liberties; however,
there is a misunderstanding of how this bill might impact an
Alaskan building his/her home. She suggested that removing all
the regulations and requirements would also create a level
playing field; however, so long as contractor licensure is
required in Alaska, everyone engaging in contracting needs to
follow the rules. She asked for comments on how this bill would
affect the typical Alaskan building his/her own home.
3:45:15 PM
GREY MITCHELL, Director, Central Office, Division of Labor
Standards & Safety, Department of Labor & Workforce Development
(DLWD), stated the proposed change created additional
restrictions for those attempting to evade the licensing
requirements for contractors. He said it would not affect
Alaskans building their own homes or building and selling their
homes. Instead, this bill would assist the department in
identifying and prosecuting unlicensed contractors who are
building homes and offering them up for sale on a recurring
basis. He acknowledged that the bill can help stop this
practice to the degree that it is unfairly competing with
contractors who compete in the business.
3:46:27 PM
REPRESENTATIVE HUGHES related her understanding there was
nothing onerous in the bill nor any additional administrative
steps an owner-builder would need to comply with, for example,
as one testifier mentioned in the event spouse dies and the
family needs to sell their home. She asked for further
clarification on whether an owner-builder will have any problem
or need to contact the department or answer to anyone or if the
owner/builder would just move forward and sell his/her home.
MR. MITCHELL agreed that was correct, although the wording makes
it sound like a person would need to obtain the department's
approval; however, he envisioned the practical application of
this provision is that the department would only get involved in
the event a complaint was filed that raised the issue of
unlicensed contracting. He said the department does not have
the resources to check into routine home sales.
3:47:51 PM
REPRESENTATIVE HUGHES asked whether an owner/builder who did not
check in with the department will be in violation of the
statute.
MR. MITCHELL answered no.
3:48:09 PM
REPRESENTATIVE LEDOUX related a scenario in which a person sold
their home and the buyer later encounters a problem. She asked
how the buyer would be protected if the department is not
involved.
MR. MITCHELL answered that the language is not designed to catch
every case, but is designed to provide one more tool to make it
more difficult for someone to operate as an unlicensed
contractor building and selling homes. He reiterated that this
language is not intended to apply to owner/builders who build
and sell their own homes. The department would only investigate
if a complaint triggered one.
3:49:32 PM
CHAIR OLSON asked whether that would be considered an "as is"
sale.
MR. MITCHELL answered that he was not sure.
CHAIR OLSON surmised it would fall under an "as is" sale.
3:49:48 PM
REPRESENTATIVE LEDOUX asked whether Mr. Clark's situation will
be protected or if the same thing could happen.
MR. MITCHELL said the same thing could happen. He stated that
the provision in HB 81 will provide the department with one more
tool to identify unlicensed contractor activity. It would allow
the department the opportunity to investigate whether an
unlicensed contractor built and sold three homes in a few years,
which would be an enforcement issue. However, an issue would
not arise for an owner/builder who built his/her house and was
trying to sell it.
3:50:51 PM
CHAIR OLSON said he was aware of Mr. Clark's situation, which
involved ten homes.
3:51:13 PM
REPRESENTATIVE TILTON stated that she obtained a legal opinion
as to whether home sales by an owner who is not a licensed
contractor violates any constitutional provisions. She asked
permission to pass it out to members.
3:51:32 PM
The committee took an at-ease from 3:51 p.m. to 3:45 p.m.
3:54:22 PM
REPRESENTATIVE COLVER commented that the Department of Labor &
Workforce Development (DLWD) enforces the statute with respect
to home sales; however, the statute is AS 08 which applies to
the Department of Commerce, Community & Economic Development
(DCCED) and not to Department of Labor & Workforce Development.
He asked for further clarification on who provides enforcement.
SARA CHAMBERS, Acting Director, Division of Corporations,
Business, and Professional Licensing, Department of Commerce,
Community, & Economic Development (DCCED), answered that the
Department of Labor & Workforce Development (DLWD) has a
reimbursable services agreement (RSA), or contract, to provide
enforcement services for construction contractors, mechanical
and electrical administrators. She stated that the DCCED uses
the DLWD as an efficiency measure since the DLWD's inspectors
are already in the field conducting inspections. This effort
has been happening successfully for several years.
3:55:50 PM
REPRESENTATIVE COLVER asked which department would make the
determination that the sale of a home would circumvent
requirements of this chapter as stated on page 2, lines 21-25 of
HB 81.
MS. CHAMBERS answered that the responsibility resides within
Department of Commerce, Community & Economic Development (DCCED)
in partnership with Department of Labor & Workforce Development
(DLWD). She said that the DLWD would be the most likely agency
to detect illegal activity and issue a cease and desist order.
The final arbitration and licensing action or fine collection
and due process rights to appeal the cease and desist order are
all elements that would be handled within the DCCED, she said.
3:57:01 PM
REPRESENTATIVE COLVER asked for clarification on the costs to
enforce the regulations in this section. He recalled earlier
testimony that indicated the department would need to promulgate
regulations outlining under what conditions an owner could sell
his/her home within the two-year period. He asked for an
estimated cost to administer, prepare regulations, and oversee
it.
MS. CHAMBERS said the division's average cost to promulgate
regulations was estimated at $2,500, which includes the cost of
legal services and publication. She did not anticipate any
measureable increase in enforcement costs since these are the
types of things the division is structured to do. She said she
and Mr. Mitchell are "on the same page" in terms of how this
statute would be applied. The department would not seek advance
permission of owner/builders, but in the event a complaint is
filed the department would investigate it to determine whether
the owner/builder qualifies for the exemption.
3:58:25 PM
REPRESENTATIVE COLVER asked for an estimate of the time
investigations will take.
MS. CHAMBERS answered that much of the investigative time
depends on the complainants' willingness to work with the
agency. She said she couldn't really predict; however, she
didn't envision any significant increase in enforcement
activity.
3:58:52 PM
REPRESENTATIVE COLVER related his understanding that the
existing statute doesn't prohibit sale of an owner constructed
home, but that an owner/builder is restricted to build only one
newly constructed home within two years. He further understood
there would not be any prohibition on owner/builder home sales.
MS. CHAMBERS answered that is correct.
3:59:45 PM
ERROL CHAMPION, Chair; Legislative Issues Committee, Alaska
Association of Realtors (AAR), stated that the AAR is in support
of HB 81. He related his understanding that an assistant
attorney general has said the current statute is not clear
enough to have the Department of Labor & Workforce Development
(DLWD) or the Department of Commerce, Community & Economic
Development (DCCED) prosecute violators of unlicensed
construction contracting. This bill would clarify that the
owner/builder cannot have a home for sale, especially if it is
listed on a multiple listing service unless properly licensed to
do so. In fact, realtors must verify that aspect at the time
they take a listing, he said. Contractors must have a
construction contractor's license with a residential
endorsement, as well as submit to continuing education similar
to the ongoing education realtors submit to as a condition of
license renewal. Under the bill, the Department of Labor &
Workforce Development (DLWD) can force the owner/builder to
obtain the appropriate license or stop building. These changes
are not intended to make it more difficult in rural areas, but
when homes are "flipped" every two years the intent is clear.
He concluded by saying that the AAR supports the adoption of HB
81.
4:01:19 PM
CHAIR OLSON, after first determining no one wished to testify,
closed public testimony on HB 81.
4:01:39 PM
REPRESENTATIVE HUGHES moved to adopt the proposed committee
substitute (CS) for HB 81, Version W, labeled 29-LS0346\W,
Nauman/Strasbaugh, 2/16/15 as the working document.
CHAIR OLSON objected for the purpose of discussion.
4:02:01 PM
KONRAD JACKSON, Staff, Representative Kurt Olson, Alaska State
Legislature, explained that page 2, lines 10 of Version W will
add language to read, "an existing structure on" and on page 2,
line 12, will add, "existing." This language was added at the
recommendation of Mr. Mitchell, DLWD, he said.
4:02:37 PM
REPRESENTATIVE COLVER referred to Mr. Clark's case. He pointed
out that the Alaska State Troopers issued a case number 12-7320
dated February 8, 2012.
CHAIR OLSON asked whether this is pertinent to the committee
substitute, Version W.
REPRESENTATIVE COLVER answered yes; since the aforementioned
case is fraud. He stated that the building inspection was
signed off by a home inspector. The police report identified
fraud committed by the home inspector, which is much bigger than
a licensing issue since the home inspector misrepresented the
home that was for sale. He wanted to ensure that the record is
clear that this matter has been investigated as fraud and
recommended for prosecution by the investigating trooper.
4:04:16 PM
REPRESENTATIVE COLVER commented on another very sad incident in
which a family died of asphyxiation in a Wasilla home. He
suggested that the testifier alluded to this as an instance of
an owner-built home that resulted in death.
CHAIR OLSON asked whether this is pertinent to the proposed
committee substitute, Version W, which is before the committee.
REPRESENTATIVE COLVER answered that it is pertinent since the
proposed committee substitute takes action to regulate an
activity, but it needs to be very clear that people didn't die
because it was an owner-built home, but because the home was
modified by the homeowner to vent the family's utility room to
the master bedroom to pull excess heat, which resulted in carbon
monoxide poisoning. While it is very sad, it is not relevant to
whether it was an owner-built or licensed contractor built home,
but it was a modification to the heating system that caused that
tragedy, he said.
4:06:15 PM
CHAIR OLSON, in response to a question, asked members to limit
comments to the proposed committee substitute (CS) for HB 81,
Version W.
CHAIR OLSON removed his objection. There being no further
objection, Version W was adopted.
4:06:38 PM
REPRESENTATIVE TILTON moved to adopt Amendment 1, labeled 29-
LS0346\W.1, Strasbaugh, 2/18/15, which read as follows:
Page 1, following line 2:
Insert a new bill section to read:
"* Section 1. The uncodified law of the State of
Alaska is amended by adding a new section to read:
LEGISLATIVE INTENT. It is the intent of the
legislature that the exemptions listed in
AS 08.18.161, as amended by sec. 2 of this Act, be
construed broadly in order to allow individuals the
freedom and ability to construct and sell their own
homes based on their own discretion."
Page 1, line 3:
Delete "Section 1"
Insert "Sec. 2"
Renumber the following bill section accordingly.
Page 3, line 2:
Delete "sec. 1"
Insert "sec. 2"
REPRESENTATIVE COLVER objected.
4:07:08 PM
REPRESENTATIVE TILTON said that Amendment 1 would add
legislative intent language to make it clear that this bill is
intended to be interpreted in a way to not infringe on the
freedom of Alaskans to construct and sell their own homes acting
as contractors in a lawful manner.
4:07:41 PM
REPRESENTATIVE COLVER said that he can't support the intent
language since it sounds nice but intent language will only have
meaning if the legislative history is reviewed for legislative
intent. He said that this language will not have any place in
the statutory evaluation in how paragraph [11] is applied.
Further, it contradicts the clear language that limits the sale
of the home with the statement that it doesn't have any effect
on property rights; however, he thinks it does have an effect.
The holding by the Alaska Supreme Court is that intent language
is merely an intent statement and not law.
[Representative Colver's objection was treated as maintained.]
4:08:34 PM
A roll call vote was taken. Representatives Hughes, LeDoux,
Tilton, Kito, Josephson, and Olson voted in favor of Amendment
1. Representative Colver voted against it. Therefore,
Amendment 1 was adopted by a vote of 6-1.
4:09:20 PM
REPRESENTATIVE COLVER made motion to adopt Amendment 2, labeled
29-LS0346\A.4, Strasbaugh, 2/18/15, which read as follows:
Page 1, following line 2:
Insert a new bill section to read:
"* Section 1. AS 08.18.051 is amended by adding new
subsections to read:
(d) A residential contractor or the agent of a
residential contractor shall prominently display the
license number of the residential contractor on all
advertising by the contractor for the initial sale of
a residential structure constructed by the contractor.
(e) An owner who acts as the owner's own
contractor consistent with the exemption provided
under AS 08.18.161(11) shall, for two years after
construction on a structure begins, state on all
advertising for the initial sale of the structure that
the owner of the structure acted as the owner's own
contractor."
Page 1, line 3:
Delete "Section 1"
Insert "Sec. 2"
Renumber the following bill section accordingly.
Page 2, line 21, following "years":
Insert "and shall comply with AS 08.18.051(e)"
Page 2, lines 21 - 25:
Delete "the exemption in this paragraph does not
apply if the structure under construction is
advertised for sale or sold during the period of
construction or for two years after the period of
construction ends, unless the owner can demonstrate to
the department's satisfaction that the sale would not
result in circumvention of the requirements under this
chapter;"
Page 3, line 2:
Delete "sec. 1"
Insert "sec. 2"
CHAIR OLSON objected for the purpose of discussion.
REPRESENTATIVE COLVER explained Amendment 2. He stated that the
bill helps enforce contracting law to achieve better built
homes. He said that he thinks we can get better enforcement by
requiring disclosure. Amendment 2 would require contractors to
display their license number on any advertising of a new home
and require owner/builders offering a home for sale within two
years to display and disclose that it was built by an owner.
This would keep the government out of it and the Department of
Commerce, Community & Economic Development will not make
decisions on who can opt out of the two-year sale provision, or
the additional staff time by the agency or the Department of Law
or Department of Labor & Workforce Development. Finally,
Alaskans won't have to ask permission to sell their lawfully
built homes. He offered his belief that disclosure and
advertising can accomplish the same mission - to avoid having
unlicensed builders building homes - since everyone will be
aware of the signs. He clarified that Amendment 2 will delete
the provision restricting the owner/builders from selling their
homes in two years and avoids having the government infringe on
individual property rights or place unreasonable burdens on
property owners.
4:11:40 PM
REPRESENTATIVE KITO referred to subsection (d) of Amendment 2,
which identifies a residential contractor or the agent of a
residential contractor. He asked whether he could explain if
the agent of the residential contractor would be a general
contractor.
REPRESENTATIVE COLVER answered that agent would refer to a real
estate agent.
4:12:16 PM
REPRESENTATIVE TILTON suggested that subsection [d] is already
addressed under AS 08.18 051, related to identification
requirements for contractors.
MR. NAGEL answered that the existing statute in AS 08.18.051
requires substantially the same thing that is in subsection (d)
of Amendment 2. He acknowledged that it may be clearer in
subsection (d) but the requirement is still there in subsection
(b) and (c) of the current statute.
4:14:20 PM
REPRESENTATIVE HUGHES asked how the bill might impact an
ordinary Alaskans wanting to build their own homes, noting they
wouldn't need to do anything different under current law.
However, she said [Amendment 2] would add a requirement for
owner/builders. She said that Amendment 2 would actually add
onerous requirements on Alaskans who desire to build their homes
and it does not promote individual liberties. Therefore, she
will not be supporting Amendment 2, she said.
MR. MITCHELL answered that [Amendment 2] does seem to create
another requirement for owner/builders who build their own homes
to put some statement to that effect in their advertising.
4:15:40 PM
REPRESENTATIVE COLVER pointed out the reason the bill is before
the committee is to enforce unlicensed contractors. Further,
the concern from the industry is that unlicensed builders are
selling homes. He offered his belief that the reason most
owners build homes is to live in their homes. He said if people
do not get a contractor's license, they need to state that they
are owner/builders acting as their own contractors. Doing so
makes it clear to the public that they are buying homes that
were built by owner/builders and not contractors. Further, the
advertising is prominently displayed, which is the clarification
between the language in [Amendment 2] and the existing statutory
language. He characterized it as the "golden seal" since it
identifies any homes built by licensed contractors. He
acknowledged that home inspections are part of the due diligence
performed by the buyers. He offered his belief that [Amendment
2] creates something that is straightforward and simple rather
than requiring owner/builders to ask the government permission
to sell their homes within two years. This simply requires
disclosure and the government will not be involved in the
process, he said; instead, the onus is on public and it is
similar to how many things are handled.
4:17:48 PM
REPRESENTATIVE LEDOUX asked for the reason to set up two classes
of people, with one group that must be licensed and bonded and
another group of people who are [building homes] as a business
who don't need to be licensed and bonded. She said she has a
problem with this amendment but she likes the bill.
4:18:40 PM
REPRESENTATIVE JOSEPHSON said he is not likely to vote for
Amendment 2, but he did not think the burden in subsection (e)
is so egregious. After all, the law already restricts owners to
build one home every two years. Thus, current law creates a
break on pure liberty interest and restricts owners. He
understands the point the sponsor of Amendment 2 attempts to
make, which is to create notice and cure the problem in a
different way. He expressed concern with Amendment 2 since a
person could be working on a home for two years. Certainly the
timeframe could spill in to second year and the notice will be
eaten up by the time of construction, since [subsection (e)
states it will begin after construction. He said the time could
end at time of sale so he was unsure that there would be a
"whole lot of" notice.
REPRESENTATIVE COLVER maintained his objection.
4:20:06 PM
A roll call vote was taken. Representative Colver voted in
favor of Amendment 2. Representatives Hughes, LeDoux, Tilton,
Kito, Josephson, and Olson voted against it. Therefore,
Amendment 2 failed by a vote of 1-6.
4:20:52 PM
REPRESENTATIVE COLVER moved to adopt Amendment 3, labeled 29-
LS0346\A.5, Strasbaugh, 2/18/15, which read, as follows:
Page 2, line 22, following "is":
Insert "in a home rule, first class, or second
class borough or unified municipality"
CHAIR OLSON objected.
REPRESENTATIVE COLVER explained that Amendment 3 basically
exempts unorganized communities. He said it would apply in a
home rule, first class, or second class borough or unified
municipality.
4:21:30 PM
REPRESENTATIVE JOSEPHSON pointed out that as a general rule that
some code enforcement will occur in larger communities. He
assumed that the problem the sponsor is trying to remedy exists
in rural Alaska, as well.
CHAIR OLSON responded that the issues in his district are from
areas outside the city limits and not in Kenai or Soldotna.
4:22:40 PM
REPRESENTATIVE COLVER offered his belief that Amendment 3 will
help reduce inspections by the Department of Labor & Workforce
Development (DLWD) of owner/builder homes in rural Alaska. He
said it does not apply in the Kenai Peninsula Borough, but it
will apply in communities such as Tok and Glenallen, as well as
areas along the river systems. He suggested that funding
doesn't exist to enforce the current law.
4:23:32 PM
REPRESENTATIVE KITO added that protection is needed in the
unorganized areas to protect them from actions.
CHAIR OLSON maintained his objection.
4:23:52 PM
A roll call vote was taken. Representative Colver voted in
favor of Amendment 3. Representatives Hughes, LeDoux, Tilton,
Kito, Josephson, and Olson voted against it. Therefore,
Amendment 3 failed by a vote of 1-6.
4:24:39 PM
CHAIR OLSON stated Version W is before the committee.
4:24:52 PM
REPRESENTATIVE JOSEPHSON said he has spent considerable time on
this bill. He acknowledged Representative Colver's point that
too much government isn't a good thing and if people are foolish
and make bad purchasing decisions that it is on them. They need
to be grownups, be vigilant, and look after themselves or
basically, caveat emptor - "let the buyer beware". He suggested
all of these things apply to this bill. In terms of liberty, if
it took someone two years to build, the person could be tied to
the home for four years, which somewhat concerns him, but he is
not surprised by the Legislative Legal opinion since he has read
some of the cases cited. However, there are over 300 million
people in the U.S. and our country is much more complicated than
when it was founded. He said rules are designed to keep us
safer. He said the idea of "meeting the department's
satisfaction" as a deciding factor seems arbitrary and
capricious since he has no idea what that phrase actually means.
He also was not sure how these key lines will help much since
enforcement costs money. He pointed out dry cabins can be built
outside of Anchorage. Ultimately, what Mr. Green wrote on
February 18, 2015 in a letter in support of HB 81 was
persuasive, which read, "If you believe anybody should be able
to be a builder, then we need to change and/or do away with the
requirements we now place on our licensed general contractors."
He said that was the deciding factor for him. Thus, he
recommends voting to move HB 81 out of committee with a positive
recommendation.
4:28:02 PM
CHAIR OLSON agreed with the comments of the previous speaker.
4:28:12 PM
REPRESENTATIVE COLVER said that the issue raised in this bill
comes from his community. However, passing this bill won't
change the competitive landscape. He suspected that if a few
builders are not getting licensed, they will likely get a
license, but the "playing field" will not change since there are
competitive business models used to gain an advantage. He
predicted that what will happen is Alaskans will lose freedom.
He said Alaskans don't want to go to the government to ask
permission to sell their property just as they don't go to the
U.S. Securities and Exchange Commission to ask permission to
sell their stocks. Instead, individuals are free to buy and
sell as they see fit.
REPRESENTATIVE COLVER said the law allows Alaskans to build
their own homes every two years. He suggested that a lack of
adequate enforcement exists, which has led to this measure.
However, he characterized HB 81 as an overreach that will cost
government money. Further, he questioned whether it is the
government's decision since it's not clearly defined in the bill
when people can sell their homes. He suggested that is yet to
be determined, which really needs to be worked out. He said a
lot of Alaskans feel strongly about their rights and he joins
them. He suggested it is possible to have a competitive
landscape and a well-licensed, well-regulated building industry,
but many communities, such as the greater Mat-Su Borough do not
want building permits. Thus, the approach taken will regulate
the industry through another angle, which is to have the state
intervene. He offered his belief that some of these issues need
to be solved locally. He estimated 60-70 percent of the homes
currently being built are owner/builder homes, in which Alaskans
buy land, build a home, add on to it, and if they sell, the
prospective buyers will obtain their own inspectors.
REPRESENTATIVE COLVER pointed out that an instance of simple
fraud and falsified documents led to this bill. He concluded
that this bill is overkill. He cautioned members about limiting
liberty and asked members to tread lightly on Alaskans' freedom.
4:31:48 PM
REPRESENTATIVE LEDOUX answered that she supports having a level
playing field. She understood the argument for individual
liberty, which is as important to her as it is to anyone else in
this body. However, she suggested that the committee either
passes this bill or should simply eliminate licensing
requirements for everyone in the industry. She said that for
most of this century, the idea of caveat emptor - "let the buyer
beware" - did apply to construction contracts; however, the
legislature previously made policy decisions to require builders
and contractors to be licensed and bonded. Therefore, let's
make it for everyone, she said.
4:32:45 PM
REPRESENTATIVE HUGHES said she would not be supportive of the
bill if it limited liberty of individual Alaskans. However,
this bill does not require individual Alaskans who are
owner/builders to seek permission from the government. Further,
it does not place any burden on Alaskans who have built their
own homes. She agreed with Representative LeDoux that the
legislature has previously made policy decisions. She referred
to a Legislative Legal Services memo that opines that HB 81 does
not constitute any constitutional issues with respect to an
unwarranted restraint of trade for an owner/builder who is not a
licensed construction contractor.
REPRESENTATIVE HUGHES acknowledged previous testimony related to
a home inspector who was being recommended for prosecution;
however, there were underlying problems with the home that was
built. In fact, policy decisions have been made in order for
Alaskans to have safe homes. Although she would love it if the
market could take care of the problems, and people can get the
best product for the best price, but buyers can't see everything
in the walls, nor are all people experts. Certainly people can
hire inspectors, but things can be missed. However, buyers need
assurances that their homes have been built by someone who knows
what they are doing and who is following the rules. She asked
to place on the record that this bill does not require
individual Alaskans to seek permission from the government and
Alaskans will continue to have the liberty to build and sell
their own homes as owner/builders.
4:35:18 PM
REPRESENTATIVE TILTON stated that she appreciated the questions
that have been raised. She stated it is not her desire to
prevent people from building or selling their own homes. She
said that HB 81 is intended to close a loophole [for unlicensed
contracting] and not remove any personal liberties.
4:36:34 PM
REPRESENTATIVE HUGHES moved to report the proposed committee
substitute (CS) for HB 81, labeled 29-LS0346\W,
Nauman/Strasbaugh, 2/16/15 [Version W], out of committee with
individual recommendations and the accompanying fiscal notes.
REPRESENTATIVE COLVER objected.
4:36:47 PM
A roll call vote was taken. Representatives Hughes, LeDoux,
Tilton, Kito, Josephson, and Olson voted in favor of moving to
report the proposed committee substitute (CS) for HB 81, Version
W out of committee. Representative Colver voted against it.
Therefore, the CSHB 81(L&C) was reported out of the House Labor
and Commerce Standing Committee by a vote of 6-1.
4:37:14 PM
The committee took an at-ease from 4:37 p.m. to 4:39 p.m.
HB 86-PCE ENDOWMENT FUND INVESTMENT
4:39:35 PM
CHAIR OLSON announced that the final order of business would be
HOUSE BILL NO. 86, "An Act relating to investment of the power
cost equalization endowment fund; and providing for an effective
date."
4:39:47 PM
JERRY BURNETT, Deputy Commissioner, Office of the Commissioner,
Department of Revenue (DOR), stated that HB 86 would remove
"seven percent" from the statute and replaces it with a phrase
that reads, "to meet the objectives of the power cost
equalization and rural electric capitalization fund (AS
42.45.100)." He clarified that none of the other funds have a
numerical objective in statute, but risk is involved in trying
to reach a specific numerical objective over time.
4:40:59 PM
REPRESENTATIVE JOSEPHSON asked whether anything unfortunate
happened to the account or the language is just being adjusted.
MR. BURNETT stated that he has been with the department for 10
years. He recalled that the department suffered some fairly
large losses in 2008 in the fund, but relatively speaking there
haven't been any bad decisions during that time; however, since
he has been with the department, all five commissioners have
supported removing the number from statute.
4:42:01 PM
REPRESENTATIVE KITO said it seemed as though the investment
goals may have changed, since enough income is being generated
by the fund to pay for the current Power Cost Equalization
Program. He said it appeared as though the department wants to
manage it and not lose the ability to do so.
MR. BURNETT said it is currently probably less important to be
an aggressive investor than it might have been a few years ago.
The balance in the fund is over $950 million and a 7 percent
payout is more than what is required to manage the power cost
equalization (PCE) expenditures. He suggested it is well within
the objectives of the fund to "ratchet down risk" a little bit.
4:43:06 PM
CHAIR OLSON reported that the committee has received
documentation today that since 2000 the PCE fund has averaged
6.05 percent return on investment.
MR. BURNETT said it is a geometric annualized return and not an
arithmetic average of the returns year to year, but is a
geometric average, which includes the losses.
4:43:32 PM
REPRESENTATIVE HUGHES asked whether this is now just being
brought forward due to the market. She asked for further
clarification on the types of investments.
4:44:01 PM
MR. BURNETT said Gary Bader previously testified on the standard
deviation between different types of investments and how having
a riskier investment may look like it will reap a higher return,
which will happen arithmetically over time, but the geometric
return can be reduced due to the losses. He stated that capital
market assumptions change each year so the department considers
different levels of risk. This year the goal might be a 6
percent return and next year it might be a 9 percent return,
depending on the market. He referred to the different types of
investments such as stocks relative to bonds, or fixed
investment - which currently has little return. He reported
that the stock market has been going up for the past six years,
but it has never gone up for seven years. It doesn't mean it
won't but it has never happened since 1802, he said. This
matter was introduced in last legislature, but it did not move
through the process, he reported.
4:45:41 PM
REPRESENTATIVE HUGHES related her understanding that the 7
percent requirement was established in statute since it was what
was considered necessary to pay the PCE expenditures. She asked
for the target return to meet expenditures.
MR. BURNETT answered that the statute for the payout is 7
percent of the average of the prior three years. He said that
this is reported to the Alaska Energy Authority and they use
that figure as the maximum that it could request. He recalled
that the budget for the PCE is in $50 million range, which is
approximately between a 5-6 percent return.
4:47:03 PM
CHAIR OLSON, after first determining no one wished to testify,
closed public testimony on HB 86.
4:47:22 PM
REPRESENTATIVE HUGHES moved to report HB 86 out of committee
with individual recommendations and the accompanying fiscal
note. There being no objection, HB 86 was reported from the
House Labor and Commerce Standing Committee.
4:47:56 PM
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
4:47 p.m.