Legislature(1997 - 1998)
05/05/1997 03:28 PM L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE LABOR AND COMMERCE STANDING COMMITTEE May 5, 1997 3:28 p.m. MEMBERS PRESENT Representative Norman Rokeberg, Chairman Representative John Cowdery Representative Bill Hudson Representative Jerry Sanders Representative Joe Ryan Representative Tom Brice MEMBERS ABSENT Representative Gene Kubina OTHER HOUSE MEMBERS PRESENT Representative Con Bunde COMMITTEE CALENDAR Oversight Hearing: Deprivatization of State Recorder's Office Activities CS FOR SENATE BILL NO. 88(L&C) "An Act relating to the Board of Public Accountancy; extending the termination date of the Board of Public Accountancy; and providing for an effective date." - MOVED CSSB 88(L&C) OUT OF COMMITTEE HOUSE BILL NO. 203 "An Act relating to actions for unlawful trade practices." - MOVED CSHB 203(L&C) OUT OF COMMITTEE * SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 142 "An Act relating to the sale or transfer of new or used motor vehicles; relating to the confidentiality of certain information related to attorney general investigations of unlawful trade practices and antitrust activities; establishing additional unlawful trade practices; relating to the exemptions from telephonic solicitation regulation; regulating the sale of business opportunities; amending Rules 4 and 73, Alaska Rules of Civil Procedure; and providing for an effective date." - HEARD AND HELD; ASSIGNED TO SUBCOMMITTEE HOUSE BILL NO. 178 "An Act relating to letters of credit under the Uniform Commercial Code; and providing for an effective date." - SCHEDULED BUT NOT HEARD CS FOR SENATE BILL NO. 126(FIN) "An Act relating to the retirement incentive program for state employees; and providing for an effective date." - SCHEDULED BUT NOT HEARD (* First public hearing) PREVIOUS ACTION BILL: SB 88 SHORT TITLE: BOARD OF PUBLIC ACCOUNTANCY SPONSOR(S): RULES BY REQUEST OF LEGISLATIVE BUDGET AND AUDIT JRN-DATE JRN-PG ACTION 02/14/97 356 (S) READ THE FIRST TIME - REFERRAL(S) 02/14/97 357 (S) L&C, STA 03/06/97 (S) L&C AT 1:30 PM FAHRENKAMP RM 203 03/06/97 (S) MINUTE(L&C) 03/07/97 626 (S) L&C RPT CS 4DP SAME TITLE 03/07/97 626 (S) DP: LEMAN, MACKIE, HOFFMAN, KELLY 03/07/97 626 (S) FISCAL NOTE TO SB & CS (DCED) 03/07/97 626 (S) FIN REFERRAL ADDED 04/10/97 (S) STA AT 3:30 PM BELTZ ROOM 211 04/10/97 (S) MINUTE(STA) 04/15/97 (S) STA AT 4:30 PM BELTZ ROOM 211 04/15/97 (S) MINUTE(STA) 04/16/97 1161 (S) STA RPT 3DP (L&C)CS 04/16/97 1161 (S) DP: GREEN, MACKIE, WARD 04/16/97 1161 (S) ZERO FN TO L&C CS (DCED) 04/24/97 (S) FIN AT 8:30 AM SENATE FINANCE 532 04/24/97 (S) MINUTE(FIN) 04/24/97 (S) MINUTE(FIN) 04/25/97 1472 (S) FIN RPT 6DP (L&C)CS 04/25/97 1472 (S) DP: PEARCE, SHARP, PHILLIPS, ADAMS, 04/25/97 1472 (S) PARNELL, DONLEY 04/25/97 1473 (S) ZERO FISCAL NOTE TO CS (DCED) 04/28/97 (S) RLS AT 10:45 AM FAHRENKAMP RM 203 04/28/97 (S) MINUTE(RLS) 04/28/97 1514 (S) RULES TO CALENDAR 4/28/97 04/28/97 1515 (S) READ THE SECOND TIME 04/28/97 1515 (S) L&C CS ADOPTED UNAN CONSENT 04/28/97 1515 (S) ADVANCED TO THIRD READING UNAN CONSENT 04/28/97 1516 (S) READ THE THIRD TIME CSSB 88(L&C) 04/28/97 1516 (S) PASSED Y19 N- E1 04/28/97 1516 (S) EFFECTIVE DATE(S) SAME AS PASSAGE 04/28/97 1531 (S) TRANSMITTED TO (H) 04/30/97 1393 (H) READ THE FIRST TIME - REFERRAL(S) 04/30/97 1393 (H) LABOR & COMMERCE 05/02/97 (H) L&C AT 3:15 PM CAPITOL 17 05/02/97 (H) MINUTE(L&C) 05/05/97 (H) L&C AT 3:15 PM CAPITOL 17 BILL: HB 203 SHORT TITLE: ACTIONS FOR UNLAWFUL TRADE PRACTICES SPONSOR(S): REPRESENTATIVE(S) DYSON, Croft JRN-DATE JRN-PG ACTION 03/18/97 738 (H) READ THE FIRST TIME - REFERRAL(S) 03/18/97 738 (H) L&C, JUDICIARY 04/23/97 (H) L&C AT 3:15 PM CAPITOL 17 04/23/97 (H) MINUTE(L&C) 05/05/97 (H) L&C AT 3:15 PM CAPITOL 17 BILL: HB 142 SHORT TITLE: BUSINESS PRACTICE REGULATIONS SPONSOR(S): REPRESENTATIVE(S) DAVIS, Croft JRN-DATE JRN-PG ACTION 02/17/97 374 (H) READ THE FIRST TIME - REFERRAL(S) 02/17/97 374 (H) L&C, JUDICIARY 02/19/97 408 (H) COSPONSOR(S): CROFT 04/08/97 1025 (H) SPONSOR SUBSTITUTE INTRODUCED-REFERRALS 04/08/97 1025 (H) LABOR & COMMERCE, JUDICIARY 05/02/97 (H) L&C AT 3:15 PM CAPITOL 17 05/02/97 (H) MINUTE(L&C) 05/05/97 (H) L&C AT 3:15 PM CAPITOL 17 WITNESS REGISTER ROBERT MOTZNIK Motznik Computer Services 8301 Briarwood Anchorage, Alaska 99516 Telephone: (907) 344-6254 POSITION STATEMENT: Oversight Hearing: Deprivatization of State Recorder's Office Activities. NICO BUS, Chief Financial Services Division of Support Services Department of Natural Resources 400 Willoughby Avenue Juneau, Alaska 99801-1724 Telephone: (907) 465-2406 POSITION STATEMENT: Oversight Hearing: Deprivatization of State Recorder's Office Activities. SHARON YOUNG, State Recorder State Recorder's Office Division of Support Services Department of Natural Resources 3601 "C" Street, Suite 1180 Anchorage, Alaska 99503-5947 Telephone: (907) 269-8882 POSITION STATEMENT: Oversight Hearing: Deprivatization of State Recorder's Office Activities. REPRESENTATIVE FRED DYSON Alaska State Legislature Capitol Building, Room 428 Juneau, Alaska 99801 Telephone: (907) 465-2199 POSITION STATEMENT: Sponsor of HB 203. REPRESENTATIVE ERIC CROFT Alaska State Legislature Capitol Building, Room 430 Juneau, Alaska 99801 Telephone: (907) 465-4419 POSITION STATEMENT: Answered questions regarding CSHB 203(L&C). CATE REMME, Consumer Advocate Alaska Public Interest Research Group P.O. Box 101093 Anchorage, Alaska 99510 Telephone: (907) 278-3661 POSITION STATEMENT: Testified in support of CSHB 203(L&C) and SSHB 142. PEGGY MULLIGAN Capital City Task Force of the American Association of Retired Persons Box 240335 Douglas, Alaska 99824 Telephone: (907) 364-3144 POSITION STATEMENT: Testified in support of CSHB 203(L&C) and commented on SSHB 142. VERA GAZAWAY Older Person's Action Group Address not provided Juneau, Alaska Telephone: (907) 586-1777 POSITION STATEMENT: Testified in support of CSHB 203(L&C). DAVEED SCHWARTZ, Assistant Attorney General Commercial Section Civil Division Department of Law 1031 West Fourth Avenue, Suite 200 Anchorage, Alaska 99501 Telephone: (907) 269-5265 POSITION STATEMENT: Testified on CSHB 203(L&C) and SSHB 142. REPRESENTATIVE GARY DAVIS Alaska State Legislature Capitol Building, Room 513 Juneau, Alaska 99801 Telephone: (907) 465-2693 POSITION STATEMENT: Sponsor of SSHB 142. ANGELA ARD 924 East 45th Court, Number 1 Anchorage, Alaska 99503 Telephone: (907) 563-4819 POSITION STATEMENT: Testified in support of SSHB 142. CHRYSTAL SMITH, Legislative Liaison Civil Division Department of Law P.O. Box 110300 Juneau, Alaska 99811-0300 Telephone: (907) 465-3600 POSITION STATEMENT: Testified in support of SSHB 142. ACTION NARRATIVE TAPE 97-56, SIDE A Number 001 CHAIRMAN NORMAN ROKEBERG called the House Labor and Commerce Standing Committee to order at 3:28 p.m. Members present at the call to order were Representatives Rokeberg, Cowdery, Sanders and Hudson. Representative Brice arrived at 3:29 p.m. and Representative Ryan arrived at 5:15 p.m. OVERSIGHT HEARING: DEPRIVATIZATION OF STATE RECORDER'S OFFICE ACTIVITIES Number 174 CHAIRMAN ROKEBERG announced the first order of business would be an oversight hearing of the Department of Natural Resources (DNR) State Recorder's Office. ROBERT MOTZNIK, Motznik Computer Services, came before the committee. He explained his business has processed all the DNR State Recorder's Office information on his computer for eleven years. He indicated his business has done most of the distribution of that data to the people who need it such as title companies, banks, collection agencies, state and federal agencies, et cetera. Mr. Motznik indicated he wrote the original recording office system in 1971 for the state and has written every program that has ever processed the Recording Office information. MR. MOTZNIK said when he first started putting the information on- line he went to the state, as they were still using the key punch card system, and informed them that he would write their programs and performing their processing on his computer, at no cost, if they would key into his computer. That would get the data more up to date. He noted at that time they were two months behind in getting a document through the old system. The Recorder's Office agreed to do that which resulted in what is called a "zero based" contract. Mr. Motznik informed the committee members that the key to that contract was that he would have no rights to the data. It would be a public file and the Recorder's Office would be responsible for the content of the data. He said he did the programming and the processing. It was agreed that he would cover the cost of the programming to the DNR State Recorder's Office specifications. The DNR State Recorder's Office wrote the specifications for the system and he did the designing and programming. The key to that was the state would pay for the enhancements after the original writing of the system. The state was also to pay for additional disk space, printing and a few more things. Mr. Motznik said that gradually, over the years, his company dropped those requirements. They went to a cooperative agreement in 1991, as opposed to a zero based contract so that it would be easier for the state to pay part of the cost of enhancements. Mr. Motznik explained he performed the enhancements at no cost. Number 385 MR. MOTZNIK indicated that DNR is saying that they are asking for $1.2 million do the system themselves because his company would not do all the enhancements that DNR wanted at no cost. He noted that was never in their contract and that the state was supposed to pay for enhancements. He noted he has provided enhancements and several of them were at no cost and he was never obligated to do so. Mr. MOTZNIK stated that DNR has made several attempts to perform this processing on their own. The last attempt was $1.2 million in the current budget, last year it was $440,000 and a few years before that it was $330,000. Mr. Motznik informed the committee members that it is his understanding that the DNR did not receive the $1.2 million. Number 454 MR. MOTZNIK explained he has a letter from Commissioner John Shively that says effective July 1, 1997, the department is going to take over the system on their own. They're going to make a skeletal system on the state's machine. The letter states that they will have a hard time doing that and there will be disruptions in the DNR State Recorder's Office data and backlogs. Mr. Motznik said to him, that is very irresponsible. He stated he has run this system since 1971, and there has never been a data interruption and a self-induced one, as a threat to get funding, is irresponsible. MR. MOTZNIK said part of the DNR's press release is that the reason they have to do this on July 1, is because he has refused to continue processing for free. Mr. Motznik stated that is not true. He informed the committee members that about two years ago, the recorder changed the procedures they use in entering names and addresses in their index system. He compared the index system to a phone book which is an alphabetical list to find a name to see if there is a judgement against someone. Mr. Motznik explained there are thousands of documents out there that can't be found because of indexing errors. He said documents are being indexed under first names. Mr. Motznik indicated the state recorder has instructed that names be keyed exactly as they are on the document. So if the document says "C Street Auto," you can't find that document under C, you have to look under ". He stated this is a big thing. There was already one court case a year ago where Sharon Young had to write an affidavit that the document was indexed under the wrong name and under the wrong property description. Mr. Motznik stated the bankruptcy court ruled that was equivalent of not being recorded. Pacific Rim Title was told they did not have to pay title insurance because the end document was completely indexed wrong, therefore, was equivalent of not being recorded. Mr. Motznik said, "The title companies have also been trying to get Ms. Young to clean this up. For quite awhile she would not acknowledge it. He stated in his letter to Ms. Young he said he would continue processing after July 1, 1997, for free, but he wants them to address the errors in the data that is being keyed. Key it as accurately as it has historically been and he would process it for free. Number 738 MR. MOTZNIK said the state conducted a very extensive campaign for the $1.2 million. Ms. Young would call the title companies regularly and then he would receive a call from the title companies saying, "Hey, now she says this." MR. MOTZNIK said he wrote a letter to the legislature. Mr. Nico Bus wrote a letter back saying a lot of the statements in the Motznik letter were not correct. MR. MOTZNIK referred to the system the state wanted the $1.2 million for and said in the state's promotion of trying to get the users to support that new system. They said the new system will produce an index and image of the data. The users would be able to dial in and get the service from the state. Mr. Motznik said a bank wrote a letter supporting Ms. Young's request and then called him the next day and apologized for writing the letter. The bank said the reason they wrote the letter was it affected their bottom line. The state was promising services, for free, that they now pay for. In the letter Mr. Bus wrote, he said the new system wouldn't compete with Mr. Motznik's system. Mr. Motznik said if the state will provide the service for free, then they would put him out of business. He noted Western Microfilm currently distributes the images of the documents as they microfilm the documents. If somebody wants a copy of a document, they can call Western Microfilm, their title company or contact the DNR State Recorder's Office. He stated if the state is going to provide all the images for free, then Western Microfilm will be out of business too. If the state received the $1.2 million in funding, they would have provided many services that are currently provided by private enterprise. Mr. Motznik said the DNR has basically tried to deprivatize the system for years. Currently, his business saves the state quite a bit of money. He said if he is providing a service that's free to the state and then the state agency says "No thank you," something is wrong. Imaging is not the issue, deprivatization is the issue. He said this is a turf fight. The state wants to provide the services that he is currently providing and pay for it with public money. Mr. Motznik asked if he is right or wrong. Number 935 REPRESENTATATIVE JOHN COWDERY said Mr. Motznik has been providing these services for 11 years. He asked how many state workers his service displaces. MR. MOTZNIK indicated the state would need one good systems analyst with a programmer for a year to replace what they are currently getting for free. Mr. Motznik indicated Mr. Bus has complained that the department doesn't own the software. He said that is the state's option. Mr. Motznik said when this system first started, he wrote the programs and the state didn't want to pay anything for them. So he said, "Fine, I'll write the programs that you don't pay anything for them, but you don't own them. So if you want to own them, pay me." Number 1033 REPRESENTATIVE COWDERY referred to the present system being discontinued June 30, 1997, and asked what would be in place July 1, that the public entities could use. MR. MOTZNIK said all he knows is he received a letter from Commissioner Shively saying, "Thank you very much, you're done July 1." Mr. MOTZNIK read from a press release from the DNR, "DNR Commissioner Shively announced that the department will attempt to create an interim indexing program as a stopgap measure to all the recording offices to function until a long term solution can be implemented. This will be a very bare bones temporary solution. The public should anticipate there will be some disruption in service and possible backlogs as a result of having to create this interim system." Mr. Motznik said at the end of the statement, Commissioner Shively urges the recording system users to make their concerns known to the legislators as soon as possible to help mitigate this potential crisis situation. Mr. Motznik said he can't see how the DNR would have a system by July 1. Number 1209 NICO BUS, Chief, Financial Services, Division of Support Services, Department of Natural Resources, was next to address the committee. He said he would like to acknowledge Mr. Motznik's excellent service over the past 11 years. He has done the state a great service by providing this information for free. He explained the DNR State Recorder's Office was transferred to the DNR from the Court System. He said the department had very poor equipment and Mr. Motznik stepped in and helped out. The department ended up with surplus terminals. Mr. Motznik wrote a computer program and got the department where they were operational on the system they are currently using. MR. BUS informed the committee in 1990, the first agreement was up for renewal. Mr. Motznik said he would do it again. Mr. Bus said the department talked to Mr. Motznik about the terms and conditions. He said the one thing Mr. Motznik says is that it is a no cost agreement, no cost to the state, but a lot of cost to him that has been beneficial to the state. Mr. Bus said the one problem they have run into is Mr. Motznik is driving a lot of the improvements the state would like to see. Often times, the DNR would ask for these improvements in making the system more responsive to the users or for state employees and Mr. Motznik said he would have to evaluate whether or not he had the time or if there were costs. Mr. Motznik has expressed repeatedly that he would like to see some reimbursement for that service. Mr. Bus stated he would like to do that so they would have a contractual agreement that would be beneficial to both parties. Number 1347 MR. BUS said the department is trying to make some efficiencies in their office, specifically in relation to the way they do their operating budget. The DNR State Recorder's Office has a tight budget and operates 14 different offices, many of which have a single staff person. Mr. Bus said over the past few years, the DNR has worked very diligently to clean up their internal processes and get the system to be more responsive, accurate and to the point where they can not only do the recording, but also do their archiving responsibility. He noted they are very backlogged in their archiving. MR. BUS referred to industry standards and said the DNR looked at other recording offices. Many offices are switching to new technology and different software systems. Many counties are using package software and imaging technology. He said imaging is a very useful tool as the department could save 10 percent to 15 percent of their staff time and rededicate that time to their archiving responsibilities. The department could improve service to the customers as they customer could receive the data faster. He noted when you keypunch, there will be errors. Imaging would be a letter perfect picture of what the customer presents to the department. Mr. Bus explained the legislature didn't fund that last year. The Office of Management and Budget (OMB) decided to do a management audit on the operation for the DNR State Recorder's Office. They determined that there were many things that had been done that were correct. Mr. Bus said the department came to the legislature last year and legislation was approved to clean up some of the recording statutes which has helped save a lot of time and effort. Number 1502 MR. BUS informed the committee members that in 1996, the contract with Mr. Motznik expired. Mr. Motznik agreed to continue without a formal signed agreement. In the meantime, the department asked repeatedly that certain enhancements be made. Some of the enhancements Mr. Motznik agreed to make. Mr. Motznik invested in some equipment and, again, the issue of cost came up. Because it was a no cost agreement, the department could not go and pay Mr. Motznik for his services without going to a competitive bid to give other vendors an equal chance at it. He said the situation was explained to Mr. Motznik and he agreed to continue. When the contract expired last year, Commissioner Shively suggested issuing a request for interest to see who else would be interested in doing an arrangement similar to Mr. Motznik's and to find out what else is out there in terms of technology. This was done in September, and there were seven responses. Those responses said they would either provide the service Mr. Motznik is providing for free or they had software that was state of the art that could be used. Mr. Bus indicated that most of the people who said they would do it for free would do it only based on the criteria that they would have sole right to the data. Mr. Bus pointed out Mr. Motznik is correct in that he doesn't own the data. He has written the computer software program, which is his propriety right, but the data that comes out of it is public information. MR. BUS referred to the oversight hearing and said the state of Alaska feels that privatization is really important issue. The department put out a request for interest to see if people were willing to do something like Mr. Motznik has been doing. He noted Mr. Motznik did not respond to the request for information. He stated the department will continue to talk to Mr. Motznik about the arrangement. However, the department is in a situation where they need to see what can be done. The no cost arrangement with Mr. Motznik is currently to the point where it does cost the state a lot of money. Mr. Bus said the cost is basically an issue of control and when the state wants to make changes and when it can be done. He said his preference is that the operating budget be adequate to pay for the service Mr. Motznik is providing, without that, other alternatives need to be looked at. Number 1666 MR. BUS informed the committee members that the department's plan with their proposed capital budget was to spend $1.2 million which was basically for all the equipment that it would take to modernize the DNR State Recorder's Office. It was not necessarily to replace the Motznik system, but to have a system that will work for the state which will speed up the recordation, do the archiving function and make the data available to the public at large. The department feels their customers pay for that. Mr. Bus pointed out that the DNR State Recorder's Office operating budget is fully funded by the users and there are no general funds going into the operation. The customers pay for recordation and, over the last five years, they have put well over $7 million in excess of what it takes to fund the recording. Mr. Bus explained that Mr. Motznik agrees imaging will speed things up, but his idea is we should wait awhile in that the time will come where the cost of imaging technology will come down. Number 1734 MR. BUS informed the committee members that the department has done surveys with the National Association of County Recorders and the larger counties are switching to imaging and most counties are currently using imaging technology. Imaging technology will make public data available to more people in a digital format. Mr. Motznik has said that will deprive him of some business. Mr. Bus stated it is a library and everybody should have access to the information. The department wants to make access to the information easier. It also would allow employees in the DNR State Recorder's Office the ability to sort and get information that currently Mr. Motznik does provide and charges a fee for. MR. BUS said if their budget is funded, a system would be provided to people like Mr. Motznik, who are service providers and do specialized service for the title and banking industries. The proposed capital project would make a major leap into new technology. Number 1862 MR. BUS said the question of what will happen on July 1, is an important question. He said, "We need to get either to a system where somebody steps in, from the private sector, and does it all for free or takes stuff so they can make their money on the side, or we need to get to a system that we make it available to everybody and then they can choose what they want to do." Mr. Bus said over the last year there are people and organizations that have asked for the information. He said if they go to imaging technology he believes it will speed up commerce and a lot of things. Number 1994 REPRESENTATIVE COWDERY said if the Recorder's Office isn't keeping up with their work now, how will they keep up later. MR. BUS explained what he commented on was that the department aren't keeping up with their archival responsibilities, but they are keeping up with the recording responsibilities. He noted those duties are two distinct separate issues. He indicated some of their old books are falling apart and some of the microfilm isn't very readable. Mr. Bus pointed out that a couple of years ago the legislature did fund a new camera so they can go back and film the old records. He noted they have rooms that are filled with old records at $2 to $3 a square foot. He said in the current situation of no cost, the department is completely dependent on Mr. Motznik. The department can't say, "Tomorrow we'd like to change all these programs. Could you please do it?" He stated the department has asked Mr. Motznik to do so and he has been very accommodating. He has said, "He'll get to it on his schedule." Mr. Motznik said to the point he feels it is important to his operation, he can make those decisions. Mr. Bus said, "What I'm saying as a public servant is that we, as the managers of that record, we'd like to be in the driver's seat and we feel it is important to improve that record and pay Mr. Motznik for it. That's the preferred option." The department looked for alternatives and that is why they came up with the $1.2 million for a capital project. They feel that would significantly improve accessibility to all the records plus the archival function for everybody. Number 2135 CHAIRMAN ROKEBERG asked Mr. Bus to make available to the committee a copy of the request for interest. MR. BUS said he would do so and also make available a copies of the responses. CHAIRMAN ROKEBERG said Mr. Bus' testimony was that he had seven responses, but his understanding of what was said was there were seven nonresponsive bidders because they didn't meet the specs of no cost and they desired the sole exclusive rights to the data. That wouldn't have been responsive. MR. BUS said there were seven people who responded to the request for interest. He referred to the criteria in which they responded and said there was different feedback. Some of them said they would do it at "no cost" with the condition that they would get sole propriety rights to the records. One even said, "If you can get copies of all of Mr. Motznik's computer programs, we'd be happy to do this." Mr. Bus stated his point is that Mr. Motznik has seen the wisdom of running this for the past 11 years and when the department asks for anything, they need to see at least if anybody else is interested in doing something similar. Number 2192 REPRESENTATIVE COWDERY said Mr. Bus is asking for $1.2 million in capital funding. He asked if with or without the funding, the department would proceed. MR. BUS indicated that is incorrect. He said what the $1.2 million would do is completely retool their offices. They would get imaging equipment with all the hardware it would take. Currently, they don't have the funding so they have the option of duplicating Mr. Motznik's system. He said he has talked to the department's computer people and they feel they can make it work. Mr. Motznik is skeptical. He noted without the funding, the department feels they can continue the service they have been providing in relation to the recording. They would not do the imaging and digitizing the $1.2 million would provide for. REPRESENTATIVE COWDERY asked if hard copies and everything that is microfilmed would continue to be available to the private sector. MR. BUS stated that is correct. Number 2256 CHAIRMAN ROKEBERG said for the purposes of the discussion, Mr. Bus should assume the department wouldn't get the $1.2 million. MR. BUS stated he is assuming that. He said on July 1, without the $1.2 million, the department will build a system that is like Mr. Motznik's system and they would make the tapes available to Mr. Motznik and he can keep doing what he is doing with the title industry. That would give the department the control to update the program as they see fit and whenever they see fit. Number 2278 CHAIRMAN ROKEBERG asked Mr. Bus how many scanners he thinks he could buy for about $7,200. MR. BUS responded without the software to run whatever is scanned, the scanner won't do anything. CHAIRMAN ROKEBERG said the reason he asked the question is because he would like to know why the department raised the state recorder's salary range from range 20 to a range 22 last year. MR. BUS said most everybody in the DNR State Recorder's Office is a range 10 or a range 12. The recording responsibility is a very serious responsibility. The Department of Administration asked for a complete analysis of all the positions in the DNR State Recorder's Office. They classified those positions and Sharon Young, as the state recorder and the responsibility that she has as a section chief, was classified at a range 22. He noted that is what all other section chiefs in the state of Alaska are paid. Ms. Young is responsible for a staff of 50 people and has 14 offices. She also has a significant judiciary responsibility for all of the records. The Department of Administration classification system decided that she was never paid correctly, therefore, they classified her as a range 22. Number 2352 REPRESENTATIVE COWDERY asked Mr. Bus if the department intends to duplicate Mr. Motznik's system whether they receive the money or not. MR. BUS responded that they intend to automate the DNR State Recorder's Office system that is currently run by Mr. Motznik. REPRESENTATIVE COWDERY asked if they intend to do this without any disruption to the public. MR. BUS said that is the department's plan. REPRESENTATIVE COWDERY asked how the department can afford to duplicate a system that has been in place for so long within their own budget. MR. BUS explained the no cost agreement goes at a great cost in their operation. They decided that was worth the effort to get control of the system so they could streamline the operation. He noted they are continually facing downward pressures. Mr. Bus said they have done layoff notices in the office. He said Mr. Motznik has done a great job, but the DNR State Recorder's Office system is not always Mr. Motznik's priority. He referred to the changes the office might ask for and said if there is a cost to Mr. Motznik, he makes the decision as to whether or not to make that enhancement. Number 2429 CHAIRMAN ROKEBERG asked who will pay and where will the software come from. MR. BUS referred to the software and explained that is what they are writing between now and June 30. CHAIRMAN ROKEBERG asked Mr. Bus if he has ever consulted with the Church of Latter-Day Saints about using them as a free source of microfilming the records of the state of Alaska. MR. BUS indicated he has not personally contacted them. TAPE 97-56, SIDE B Number 001 REPRESENTATIVE BILL HUDSON said there are two separate interests that the department is trying to achieve. One is the recorder's responsibility that exists by statute and the other is the archival responsibility. He said to him like what the department is aiming for is one fix that would handle both. Representative Hudson indicated that this is difficult for him to follow even though he was the commissioner of the Department of Administration when the DNR State Recorder's Office was in that department. He said he believes it would be a good idea to put something down in language that separates the recording and archiving. It should state where the department is and what they are looking for. This would help understand where the problem is. Representative Hudson said it sounds like the department is preparing to take care of the matter anyway. They are going to rewrite the programs. He asked if that is for not only the recording responsibilities, but also for the archiving. MR. BUS responded it would be just for the recording side. He invited the committee members to tour the operation so they can get a firsthand view. Number 100 SHARON YOUNG, State Recorder, State Recorder's Office, Division of Support Services, Department of Natural Resources, testified via teleconference from Anchorage. She referred to privatizing any of the recording functions and said her office isn't opposed to doing so. In fact, they feel that making the recording information available to a wider number of customers in a multitude of media formats would actually stimulate entrepreneurial activity throughout the state. Ms. Young stated there are many vendors who already purchase copies of recording and filing information from the Recorder's Office in both case and microfilm format. She said those vendors are able to market a value-added product that is unaffected by the acquisition of a new system and that new system could be designed to streamline their internal operations and improve customer service. MS. YOUNG referred to the indexing system, which is maintained by Motznik Computer Services, is only one function of many functions that are preformed by the DNR State Recorder's Office. She pointed out that there are may layers of functions and some of them are manual. There is also lot of duplication of data entry, but each of these functions are required by statute and are essential to the recording process. MS. YOUNG referred to what they have learned by observing and studying other new technology in other jurisdictions is that there are comprehensive systems that combine all of the functions, recording, stamping, receiving, indexing, scanning, filming and document returns, into a single system. Ms. Young said by eliminating the layers of this process is the only way they can streamline the work flow enough to create efficiencies in that process and enable they to do more with (indisc.) in the future. MS. YOUNG informed the committee the current process is very labor intensive. She noted there are about 250,000 documents that come through the office each year. Each document is handled on an average of 10 to 12 times throughout the process which takes weeks to complete. She said it is not a matter of just adding, for example, imaging technology to an existing layered system. You have to be able to combine the functions and work laterally in order to distribute the workload and create efficiencies. Number 237 MS. YOUNG indicated a point she would like to follow up on is that this has been a valuable function that has been served by the operation of the indexing system by the private sector, but it has not been without cost to the state. There have been operational costs associated with duplicate data entry. They have to enter the material into Mr. Motznik's system and then input much of the same information into the state revenue and billing system. She stated that there is loss in terms of the duplication that occurs and the many manual processes on which this indexing system depends. Ms. Young said they also have an inability to obtain specified management reports to meet specific criteria to support their operations or to respond to customers who come to them for specific report information out of the public record. Ms. Young said they continue to have to refer those customers to Mr. Motznik for customized extractions or other information that he might be able to provide with the state's information. MS. YOUNG stated she would like to emphasize that they did undertake a customer survey questionnaire over a two year period. The results of the survey are summarized in the OMB audit, which was a very expensive and thorough audit of their entire operation. She said the survey questions indicated that there is quite a discomfort level among their customers when it comes to using the existing computer system for locating the records through that system. Out of all the questions that were included in the customer survey, that question yielded a negative response in about one out of every four responses. She said that was a concern to her office, it continues to be a concern and they are trying to do everything they can to improve the operation and make more information available to a wider number of customers in the formats they require. Number 354 REPRESENTATIVE COWDERY asked if the department has put out a request for proposals (RFP) and how long it would take to finalize it. MS. YOUNG explained they are working on an RFP, but given the grim situation involving the capital budget, the timetable may have to be pushed back. She stated they had originally envisioned having an RFP ready by June 1. Unfortunately, if it comes to pass that they do not proceed with the modernization of the system there wouldn't be an RFP until a later time. Ms. Young stated they have not issued an RFP, but they have done exhaustive studies. REPRESENTATIVE COWDERY asked Ms. Young if they have determined what the annual cost will be to maintain a new system and what costs will be eliminated. He indicated he would like an answer in writing. Number 478 CHAIRMAN ROKEBERG said given the present circumstances and the fact that the department probably won't receive the capital budget monies that the department requested, the commissioner has gone so far as to say in an April 25, 1997, press release, that creating this interim indexing program is going to be a stopgap measure. It is going to be a very bare bones temporary solution and will cause disruptions in service and possible backlogs as a result including service disruptions and backlogs. Chairman Rokeberg said he doesn't understand why they state would be going down this path when they can anticipate these types of disruptions and the further accumulation of backlogs. He questioned what the reason is. MS. YOUNG responded, "Our intent is, at this time, that the privatization would be fully transparent to the public. That there would be no adverse impact of any kind, but until we see this system up and running and have it tested and can ensure that it is doing what the Motznik system has done as far as indexing information, and in many respects improving the functions under the current system. Until we can see that tested, we cannot be sure there will be no backlog, but it's our intent that they be minimized and as transparent as possible for the public as well as for our internal operations." Number 562 CHAIRMAN ROKEBERG said it can't be transparent. He noted in the press release admits that it won't be transparent. Chairman Rokeberg asked Ms. Young how she can in seven weeks create a transparent seamless transition. He said he thinks it is impossible. Number 573 MS. YOUNG responded that the programmers are in the computer section of the Support Services Division and aren't part of the DNR State Recorder's Office component. She said she would have to defer to Mr. Bus regarding the time frames and the time that is associated with developing the product. Number 619 CHAIRMAN ROKEBERG asked Mr. Motznik to come before the committee to respond to questions and comments that were made. MR. MOTZNIK referred to the figure of $1.2 million for imaging and said that would not at all solve indexing errors. In indexing, you have to look at the document, you have got to find the name and key the name in right. That does not change if you are doing imaging or microfilming. He stated the indexing errors are something that needs to be addressed. Mr. Motznik said in continuing the free service, he really wants the DNR State Recorder's Office to start looking at the errors that are made in the indexing. He said he doesn't see any way in the world they can get the system going as there are man years of effort in writing the programs. Number 662 CHAIRMAN ROKEBERG questioned if there is already existing software that can be used or does a program have to specifically designed. MR. MOTZNIK explained it has to be compatible with the existing system. You cannot start up a new recording office system and then say, "Well I'm going to search the title up to this point, until July, 1997. Now I'm going to go this new system." He said that would be a mess. Number 679 REPRESENTATIVE COWDERY asked how can the state afford to duplicate something that Mr. Motznik may have worked on for 20 or 30 years. MR. MOTZNIK said, "My understanding of the state data center they would not even allow them to do what all we do." He said the Nome Recorder's Office can request a granter/grantee index of a range of serial numbers. He informed the committee members that he wrote the software that creates that on-line print on their printer in their office. It is his understanding that the state data center will not allow it to route print at a printer at a remote location immediately. He referred to the duplication of the current system and said he doesn't think that even if the programmers could write it that the state data processing shop would support it. Number 730 MR. MOTZNIK referred to Mr. Bus saying that one of the reasons for doing this is they need to get control. Mr. Motznik said he has been doing this for many years. Five years ago, there was a proposal from the DNR for $330,000 to write the existing system on their system. At that time, they had to agree that they couldn't do it as well as he was doing it. The reason was that they wanted to get control. Mr. Motznik said he would like to assure the committee members that this is a turf war. He said he has offered to make a proposal to incorporate imaging into the current system and they weren't interested. Mr. Motznik noted he could probably provide the system they want at maybe half of what they are going to have pay on their own and they aren't interested. MR. MOTZNIK said Ms. Young keeps talking about duplicate entry. He said when the system was first started, the DNR State Recorder's Office didn't account for each transaction. They keyed the dollars that they charged into his system. Mr. Motznik said he produced an accounting report and they used that to make their general ledger increase. About five or six years ago, they decided they have to issue a receipt to each individual that comes in. The question was should it be done through the Motznik system or through the state's system. The DNR decided they would do it on the state's system. As soon has they had it up, they would drop keying the information into his system. Mr. Motznik said they had trouble. They got it onto the state's system to issue receipts, but the programmers could never get the statistics they needed out of the state's system. That is why they do the duplicate entry. They do the duplicate entry because the first decision did not follow through. Mr. Motznik said, "If they keyed information into my system, I'm on a mainframe the state's on a mainframe, I can dump that information and go into the current accounting system. There is no reason for her to be doing the duplicate entry, but she is not interested in stopping the duplicate entry." He stated this is a turf war because the state isn't interested in solving the things that have been complained about. Number 849 REPRESENTATIVE JERRY SANDERS said, "This looks to me like a high tech version of laying off the road grader. They're not getting their money. They're going to lay you off. The public is going to be mad and come back..." MR. MOTZNIK said there is going to be a crises. The public is going to demand that the legislature give the DNR State Recorder's Office the money to fix the crises and it will be millions. Number 910 CHAIRMAN ROKEBERG asked Mr. Bus to come back before the committee. He said, "There has been some comments in the public that Ms. Young has been telling certain institutions, banks and all and perhaps title companies and so forth in the Anchorage area, that I'm aware of, that they're going to -- if they would get behind the state's endeavors that they're going to be getting their information free which here to fore they've been purchasing from Mr. Motznik. Is that correct?" MR. BUS responded, "The proposal that we had in the capital project was that if you wanted that information, you could just come our office and get whatever you wanted and that was how you could get it for free. If there would be manipulation by any of our staff, we would not do that. We would defer to the service providers and say `Do that.' But it's like in anything if you have a database and you can call that database up, then you can use that data for whatever. It's like the way we go to our public libraries right now. You can go on the Internet. You can get a lot of information for free. It's all public records. Our public records are available for the public and if they want to look it up, that's fine. If they want prints or they want any extra work, they would have to pay for that. The free reference was to the fact that the software had certain manipulation capabilities and search capabilities that people could do on their own. They would not necessarily have to go to a service provider because they say, `Okay, give me all the National Bank of Alaska transactions.' They could push the button and they could thumb through it just like any search engine on a database. And that's -- right now the system doesn't allow that. So that's an enhancement in the system. The free -- I want to clarify again, the customer pays to get the data recorded. So the customer paid for it in the first place. Then if they want to get to that and they want to spend the time and effort to look it up, and that is available to them as long as it doesn't require our interaction, that would be free. If there would be manipulation for title agent or whatever we say, `Go see Mr. Motznik, go see GeoNorth - whoever the service provider is.'" Number 999 CHAIRMAN ROKEBERG stated it is third parties mostly who would be looking at the information. It wouldn't be the customer who paid the recording fees. Normally, the public would retain certain service organizations. The public would maintain a service provider to look up that information for a specific purpose. MR. BUS noted it is the public record. The public record is available to everyone who spends the time to look it up. Mr. Bus urged the committee to look at how different counties do it in the Lower 48. He said he feels it will enhance commerce. Number 1088 CHAIRMAN ROKEBERG stated the committee would be issuing a letter on this issue. He suggested the department return to the bargaining table so there isn't a crises that could interrupt the commerce of the activities of the state of Alaska. MR. BUS said he would be happy to talk to Mr. Motznik and the committee members. CHAIRMAN ROKEBERG closed the oversight hearing. CSSB 88(L&C) - BOARD OF PUBLIC ACCOUNTANCY Number 1122 CHAIRMAN ROKEBERG announced the committee would address CSSB 88(L&C), "An Act relating to the Board of Public Accountancy; extending the termination date of the Board of Public Accountancy; and providing for an effective date." He noted the committee has addressed HB 140, which is the same bill. He said he would entertain a motion to move CSSB 88(L&C). REPRESENTATIVE COWDERY made a motion to move CSSB 88(L&C), Version E, out of committee with a zero fiscal note and individual recommendations. Hearing no objection, CSSB 88(L&C) moved out of the House Labor and Commerce Standing Committee. HB 203 - ACTIONS FOR UNLAWFUL TRADE PRACTICES Number 1190 CHAIRMAN ROKEBERG said the next order of business would be HB 203 "An Act relating to actions for unlawful trade practices." REPRESENTATIVE FRED DYSON, sponsor of HB 203, indicated he has supplied the committee members with a committee substitute dated April 24, 1997. He said he introduced the bill because of concerns from people he has spoken with who are struggling because of consumer business fraud. The Office of the Attorney General isn't currently a part of this business and the Better Business Bureau has limited capacity. He stated when the bill was previously heard, several concerns came up. He referred the committee to page 2 of the committee substitute. CHAIRMAN ROKEBERG asked if the committee substitute is Version L. REPRESENTATIVE DYSON indicated that was correct. Number 1300 REPRESENTATIVE HUDSON moved to adopt CSHB 203(L&C), dated 4/24/97, Version L, for the purpose of discussion. CHAIRMAN ROKEBERG asked if there was an objection. Hearing none, CSHB 203(L&C) was before the committee. Number 1320 REPRESENTATIVE DYSON referred the committee to page 2, lines 29 through 31, and said he believes this wording takes care of concerns brought up by Chairman Rokeberg. CHAIRMAN ROKEBERG said a subsection (b) was added to correspond with the award that would be made to the plaintiff in subsection (a). REPRESENTATIVE DYSON said that is correct. He said it levels the playing field in that if the cause of action isn't justified, then the defendant has a recovery mechanism. Mr. Dyson said he has thought about how someone could use this kind of an action in a competitive advantage. He said he added subparagraph (c) on page 3, "In an action brought under AS 45.50.471 - 45.50.561, if the court finds that the action was brought by the plaintiff to obtain a competitive business advantage and the plaintiff is not the prevailing party, the court shall award the defendant costs as provided by court rule, full reasonable attorney fees at the prevailing reasonable rate, and any damages suffered by the defendant as a result of the plaintiff's allegations." Representative Dyson noted he doesn't remember anybody on the committee directing him to do something with this paragraph. He said it seems reasonable to him. CHAIRMAN ROKEBERG referred to the term "by court rule" and asked if this is rule 82 or if there is another court rule that would apply. Number 1475 REPRESENTATIVE ERIC CROFT came before the committee. He referred to full cost and said it is understanding from the drafter of the bill that there is a question about whether that requires changing a court rule. There is a difference of opinion as to whether the court rule on cost needed to be changed. He said rather than getting into the area, they just said you are due costs as defined by the applicable court rule to avoid conflict. Representative Croft stated, "I read the court rules as saying anytime you are entitle to them, this is what we mean by costs, but not really getting into the area of when you are or not entitled to them. But it's a little ambiguous, so they thought that wording would avoid us getting conflict...." Number 1546 CATE REMME, Consumer Advocate, Alaska Public Interest Research Group, testified via teleconference from Anchorage. She said she was asked by her membership to come and testify in support of the legislation which would put consumer protection language back in the state of Alaska. She said she would like to compliment Daveed Schwartz for his hard work and also for HB 142. Ms. Remme stated consumers crime is a serious crime and affects people's lives. There is a tendency to treat this crime as white collar crime and not as seriously as people who are victimized by violence. MS. REMME indicated earlier in the week, she met with some high school students and their consensus is that the state of Alaska does not prosecute white collar crime in the same way that they prosecute crimes that are committed with weapons or where violence was involved. The students do realize that in many cases that people's lives are seriously affected and, in some cases, destroyed by being conned. She said she receives many calls asking what people can do, if there is a law or is there consumer protection in the attorney generals office. Ms. Remme said she thinks that because of the (indisc.) laws, regardless of their profession or their class of economic status, we should recognize the presence of a legal force from the Attorney General's office. That is absolutely mandatory in deterring this type of crime. Ms. Remme said her organization has produced a report on consumer protection titled "The Alaska Perspective," written by Dr. Jammie Campbell and indicated she would be happy to send a copy of it to the committee. She noted it contains statistics gathered from other states that have consumer protection. Number 1756 REPRESENTATIVE HUDSON asked Representative Dyson if the CS includes the amendments the committee members have. REPRESENTATIVE DYSON indicated the CS doesn't include the amendments. He noted the amendments are in response to a concern Representative Ryan brought up. CHAIRMAN ROKEBERG said the committee would continue with testimony and then address the amendments. Number 1798 PEGGY MULLIGAN, Capital City Task Force of the American Association of Retired Persons, came before the committee to testify. She stated she testified a couple of weeks ago in support of the measure and she also supports the committee substitute. REPRESENTATIVE DYSON asked Ms. Mulligan if it is her sense with the seniors that they are being approached and preyed upon by predators. MS. MULLIGAN indicated she believes this is taking place. She said her organization's priority for the summer is to put out knowledge about telemarketing fraud. She said they feel they can educate the public about consumer fraud. Ms. Mulligan stated she definitely believes there is a problem. Number 1876 VERA GAZAWAY, Older Person's Action Group, testified from Juneau. She said her organization also supports the committee substitute. CHAIRMAN ROKEBERG suggested moving the proposed amendment for the purpose of discussion. Number 1918 REPRESENTATIVE COWDERY made a motion to move the following Amendment 1 for the purpose of discussion: Page 1, lines 9 - 10: Delete ",or who is otherwise aggrieved," Page 2, lines 3 - 7: Delete all material. Renumber the following bill sections accordingly. CHAIRMAN ROKEBERG clarified the amendment would delete subsection (f) of AS 45.50.531. REPRESENTATIVE DYSON informed the committee members this was a concern that was raised. The amendment deletes the wording "or who is otherwise aggrieved." It takes out any award of damages for anything subjective. He said, "It is not a material damage, quantifiable, then it's eliminated." Representative said page 2 lines 3 through 7 would delete Section 3. It eliminates the subparagraph (f) to make it consistent. Number 2116 DAVEED SCHWARTZ, Assistant Attorney General, Commercial Section, Civil Division, Department of Law, was next to testify via teleconference from Anchorage. He noted he doesn't have a copy of the committee substitute and said he is at a loss to give specific feedback. He said with respect to what has been discussed regarding the attorney fees, it sounds like the section addresses the concerns that were brought up previously. CHAIRMAN ROKEBERG referred to Section 45.50.537 and said a subsection (b) has been added. He continued to read the section, "In an action brought under AS 45.50.471 - 45.50.561, the court shall award the defendant costs as provided by court rule and full reasonable attorney fees at the prevailing reasonable rate if the action is found to be frivolous." Chairman Rokeberg referred to there being no vexatious litigation statute, he asked if there is a common law definition of frivolous. MR. SCHWARTZ explained rule 82, in the Alaska Rules of Civil Procedure, does contain a subsection dealing with vexatious and frivolous litigation. Judges make this kind of determination all the time under rule 82. He said he believes case law discusses numerous instances in which litigation has been found to be vexatious or frivolous. Mr. Schwartz said he thinks there is common understanding in the superior, district and supreme court of Alaska as to what constitutes vexatious or frivolous litigation. He said he thinks it is a determination the courts make on a routine basis whether or not the litigation is frivolous in order to assess rule 82 fees at this time. He stated he doesn't believe it will be a new concept at all. Number 2207 CHAIRMAN ROKEBERG said, "In regard to the terms used in what you have in the original bill the under attorney fees, costs and damages, the terms `by court rule,' which is used as it relates to the defendant also now, would that be rule 82 or are we talking about the full costs? We've got the court rule and `for reasonable attorney fees.' Now what are we talking about here?" Number 2291 MR. SCHWARTZ said he believes under rule 82, a court could rule for reasonable attorney fees. CHAIRMAN ROKEBERG asked if it wouldn't be a percentage of the fees. MR. SCHWARTZ said that is a routine award under rule 82. It is generally 20 percent of attorney fees, but rule 82 also allows a court to adjust the attorney fees depending on the circumstances. CHAIRMAN ROKEBERG asked Representative Dyson if that was his intent. REPRESENTATIVE DYSON said, "Our intent was, Mr. Chair, that the defendant who prevails in a course of action..." TAPE 97-57, SIDE A Number 001 REPRESENTATIVE DYSON asked Mr. Schwartz if there is any way the language could be strengthened to accomplish their purpose. MR. SCHWARTZ responded he thinks the existing language does provide the level paying field that he understood the committee wanted in the bill from the discussion at the prior hearing on the bill. Number 061 REPRESENTATIVE CROFT said there was a concern about the wording "costs by court rule." He said what the drafter told him was that was necessary to invoke and not contradict rule 68 defining what court costs are. MR. SCHWARTZ indicated he was confused earlier. He apologized and said he believes that appraised by court rule actually applies to the award of costs and the award of costs is addressed in Alaska Civil Rules of Procedure number 79. Full costs are routinely awarded regardless of whether you've got a rule 82 attorney fee situation or a full reasonable attorney fee situation. He said the "by court rule" phrase refers to the award of costs under rule 79 and does not relate to the award of full attorney fees. Number 170 CHAIRMAN ROKEBERG said there was no further witnesses to testify and closed the public hearing. He asked if the sponsor agrees with the intent of Amendment 1. REPRESENTATIVE DYSON indicated he does agree. Number 187 REPRESENTATIVE HUDSON moved to adopt Amendment 1. CHAIRMAN ROKEBERG asked if there was an objection. Hearing none, Amendment 1 was adopted. Number 209 REPRESENTATIVE HUDSON moved and asked unanimous consent to move CSHB 203, Version L, as amended, out of committee with individual recommendations and a zero fiscal note. CHAIRMAN ROKEBERG asked if there was an objection. Hearing none, CSHB 203(L&C) moved out of the House Labor and Commerce Standing Committee. Number 257 CHAIRMAN ROKEBERG called for a brief at-ease at 5:11 p.m. He called the meeting back to order at 5:13 p.m. SSHB 142 - BUSINESS PRACTICE REGULATIONS Number 267 CHAIRMAN ROKEBERG announced the next order of business would be SSHB 142, "An Act relating to the sale or transfer of new or used motor vehicles; relating to the confidentiality of certain information related to attorney general investigations of unlawful trade practices and antitrust activities; establishing additional unlawful trade practices; relating to the exemptions from telephonic solicitation regulation; regulating the sale of business opportunities; amending Rules 4 and 73, Alaska Rules of Civil Procedure; and providing for an effective date." Number 315 REPRESENTATIVE GARY DAVIS, prime sponsor of SSHB 142, came forward to explain the bill. He informed the committee members the bill was initiated, drafted and introduced quite awhile ago. He said the reason a request to hear the bill was just recently submitted to the committee was because there has been a lot of work done between him and the department to get a clean bill. He informed the committee they ran into complications with the Automobile Dealers Association. He indicated he attended the Automobile Dealers Association meeting held in Juneau. Representative Davis stated he understands a lot of the association's concerns and also agrees with a lot of their concerns as indicated in the sponsor statement. A large portion of the test in the bill relates to used car dealers and how they expose problems that may exist on a vehicle. At the Automobile Dealers Association meeting, the association indicated that over the years there has been numerous pieces of legislation that deal with the used car dealers. Of course a lot of people will associate used car dealers reputations right along with politicians. So there is a lot of public concern with how things are dealt with. REPRESENTATIVE DAVIS said it would be his recommendation to simplify the bill and delete Section 2, that deals with public disclosure. This section is questionable and probably needs some work. He indicated he thinks the department will agree with the change. Representative Davis said, "Section 2 of the bill that deals with problems with the vehicles that not only the used car dealers, but new car dealers and manufacturers must convey, what is felt in a reasonable fashion in the bill, to the consuming public." Number 576 REPRESENTATIVE DAVIS pointed out Section 1 deals with the inspection/emissions certification that is required in Anchorage and Fairbanks. There have been some problems. Some people would say significant problems and others would say they are relatively minor problems. He indicated there are people to testify. REPRESENTATIVE DAVIS said, "The other sections of the bill relate to some consumer problems that have come up in court cases and also some tweaking of recent legislation that the Consumer Affairs Section of the Department of Law, I believe is how it can be presented - I'm not exactly who - what Daveed Schwartz office is called, but they've come across some problems that I believe are just some housekeeping measures in the bill relating to catalog sales. And our telemarketing legislation that we passed, I believe last year, they found a loophole in the catalog exemption sales or it's not addressed properly. That's being addressed in here. It's just closing a loophole there. Then in some recent situations around the state with some of these business opportunity sales people that come in and give some high power speeches in how to go into business and make a quick buck and they're the ones making the quick buck and there isn't much chance for anybody else. So that's being addressed also. So of course having being familiar with the sections, I feel there is just some technicalities being cleaned up, but of course I hope I can convince the committee of the same and other testifiers of the same." Number 745 REPRESENTATIVE COWDERY asked if the legislation would also pertain to private transactions. REPRESENTATIVE DAVIS said the same question came up by the Automobile Dealers Association. He noted that is not addressed in Section 2. It should be addressed if that section stays in the bill. Number 780 CHAIRMAN ROKEBERG said he would like to take public testimony. He noted it is his intention to move the bill to a subcommittee for interim study as it is a very broad and major bill dealing with consumer protection in other areas. CHAIRMAN ROKEBERG said, "As it relates to Section 2, as suggested by the sponsor, it is the desire of the chair right now to leave that in the bill because we want to review to see, if in all probability reviewing it, that perhaps another bill would be generated out of it to make sure that those concerns are properly covered in whatever vehicle. We'll be working with the bill sponsor on that." Number 865 ANGELA ARD testified via teleconference on behalf of herself as a citizen of Anchorage. She read the following statement into the record: "On July 29, 1996, I purchased an $11,000 GMC Sierra from a well- known Anchorage known Anchorage used auto dealer. During negotiations, I indicated that I would like to take the vehicle to a mechanic for an inspection before purchasing it. I was told by the salesman that an inspection wasn't necessary and the truck was in great shape. I proceeded to close the deal. The following morning, upon attempting to start the truck, it made a horrible grinding noise and had to be towed back to the dealership for repairs. I was informed by the dealership that the truck would not pass I/M certification and had to have part of the engine repaired because of extensive smoke damage. Had I known that this $11,000 vehicle would not pass I/M certification, I never would have purchased it. The dealership, however, required me to sign a disclosure guaranteeing that my trade-in auto would pass I/M certification, and that if it failed, I would pay to fix it. They offered no such guarantee on the truck they were selling me. "After the dealership made the necessary repairs to the truck, I took it to a mechanic for an inspection and learned that the truck had been in a prior wreck and had no air conditioning. I had asked a mechanic at the dealership why the air wasn't working, and he told me to, quote, let it run a little longer. In actuality, the entire air conditioning system had been removed from the vehicle because of the wreck it had suffered. "After failing to find me a decent vehicle, I asked the dealership to unwind the deal. They refused. I finally sought legal assistance, at which time they unwound the deal. "It was very frustrating and disappointing to be mislead and taken advantage of by this auto dealership. If this bill were in effect when I was in the market for purchasing a used vehicle, it would have saved me from purchasing this `lemon.'" Number 986 CHAIRMAN ROKEBERG said Ms. Ard's fact pattern is very similar to something he heard last session. REPRESENTATIVE COWDERY asked Ms. Ard if she bought the vehicle from a dealer in Anchorage. MS. ARD said that is correct. REPRESENTATIVE COWDERY asked if he was right in saying the dealership wouldn't make the deal good until after she sought legal assistance. MS. ARD responded that was correct. She noted several times they tried to give another vehicle which they keep increasing in price. She stated she had those vehicles checked out and they had several mechanical problems. She said she spoke to Mr. Schwartz and he spoke and wrote a letter to the dealership. The dealership then agreed to unwind the deal after that. REPRESENTATIVE COWDERY questioned if the dealer is still in business. MS. ARD indicated they are still in business. Number 1077 CATE REMME, Consumer Advocate, Alaska Public Interest Research Group, testified via teleconference from Anchorage in support of SSHB 142. She stated he has the same feelings as Ms. Ard. She referred to Representative Davis' discussion regarding removing Section 2 and said the whole concept of consumer protection revolves around the notion consumers should get what they paid for, be aware of the contents of the items when purchased, be guaranteed the safety of those products and be aware of any policies and practices affecting the finances of their private lives and have recourse for breaches of any of these principles. Ms. Remme said without legal recourse, these consumer issues are very often unresolved. REPRESENTATIVE COWDERY informed the committee he owns four vehicles. He said he sells them when he starts seeing that the repair bills increase, but there isn't anything particularly wrong at the time. Representative Cowdery asked Ms. Remme if the legislature should address this kind of a scenario towards the private section. MS. REMME said it is her understanding that there is no jurisdiction over private sale. One of the major complaints they receive is dealers, who are posing as private citizens, sell previously wrecked vehicles that have been totaled by insurance companies. They create very dangerous driving situations. She said she doesn't have answer to Representative Cowdery's question, but currently there is no jurisdiction that addresses that. Number 1183 REPRESENTATIVE DAVIS said he would like to assure Ms. Remme if Section 2 does get deleted from the bill, the issue will still be looked at, but may not be a part of this legislation. PEGGY MULLIGAN, Capital City Task Force of the American Association of Retired Persons, testifying from Juneau, stated she thinks her organization will probably support the legislation. Ms. Mulligan stated she would like to wait to testify until the bill comes out of the subcommittee. Number 1225 CHRYSTAL SMITH, Legislative Liaison, Civil Division, Department of Law, came before the committee. She stated she would like to express the division's support for SSHB 142. Ms. Smith said she reviewed the bill from the view of a consumer. She stated she would like to make it clear that nothing in the bill is intended to harm honest straight forward business people. It is her belief that people who are in business in Alaska are doing it according to the rules. If there are bad actors in a profession, it harms those who are not bad actors. MS. SMITH said the bill has five parts. One is the emissions certificate that would let a person know what the status is before a sales contract is signed. She noted that cleans up legislation which was passed in 1992. MS. SMITH referred to Section 2 and said it deals with confidentiality of investigative records for consumer protection antitrust cases. MS. SMITH referred to the telemarketing and said there has been problems with people saying that they were exempt from the telemarketing registration requirement because they were mail order catalog people. Ms. Smith stated there are certain requirements for being a legitimate mail order business. MS. SMITH referred to the question of business opportunities and said, "I guess it wasn't one of you although I'm sure you have all had this experience with your constituents, we did get a call recently - somebody saying - a legislator saying `Well what can we do about these, quote, business opportunities?' The one that I think Representative Davis said they're making more money off them then the folks we get taken in by the deals. So there is a comprehensive statute included in this bill that would require registration of business opportunity people." Ms. Smith indicated the department would also would be willing to work on the bill over the interim. Number 1404 REPRESENTATIVE COWDERY said when he was a legislator in the 1980s, the "lemon law" was established. He asked if SSHB 142 would impact that law. MS. SMITH said it is her understanding that this legislation would supplement the "lemon law." She noted that as she understands, the "lemon law" is for new vehicles. Number 1443 REPRESENTATIVE RYAN said when he was a young man, there were many jokes going around about the fellow that bought the horse. He said it seems to him it has now moved to automobiles. You have to really be careful of what you're buying because if you don't, you could get stuck with something. He asked where the responsibility comes on the person who is laying their money down. MS. SMITH informed Representative Ryan that she just bought a used car. She went to every dealer in Juneau. She said she felt uncomfortable enough in that she went to her mechanic and asked him to help her find a used car because she believes if a person doesn't know something in a specific area, you can get taken advantage of. Number 1586 DAVEED SCHWARTZ, Assistant Attorney General, Commercial Section, Civil Division, Department of Law, testified via teleconference from Anchorage. He said he would give technical comments on the legislation when it comes up in the subcommittee. Mr. Schwartz said he believes Ms. Smith has articulated the philosophy behind the Department of Law's interest in supporting the legislation. MR. SCHWARTZ explained Section 1 ensures that a person who is buying a used car, that requires an auto emissions inspection, is going to be notified up front prior to the sale of the emissions of the status of the vehicle. He said Ms. Ard's testimony illustrates the need for Section 1. Mr. Schwartz noted he personally deals with the Anchorage I/M Office frequently regarding problems and they have told him that on an average, over a year, they receive about ten complaints per month from people who buy a used car from a used car dealer. They find out after they have obligated themselves to the sale that the car will not pass I/M and they will have to invest quite a bit of additional funds to get it to pass I/M so they can register it and legally drive the vehicle. Number 1659 MR. SCHWARTZ referred to Section 2 and said there are all kinds of situations that arise in terms of the failure to disclose damage that used car dealers may know that a vehicle has. The Office of the Attorney General prevailed in a three week jury trial against a major Anchorage auto dealer, who was found to be liable on 18 of 22 counts of civil fraud in that he failed to disclose that 8 vehicles that had been sold were previously wrecked and totalled. He noted some of the vehicles were extreme safety hazards. MR. SCHWARTZ referred to Sections 4, 5 and 6 and said these sections clarify the existing state of affairs with regard to the confidentiality in the investigative records in the Office of the Attorney General for consumer protection antitrust investigations. It would ensure sure that businesses that have alleged to have violated the law don't have their names (indisc.) about simply because there are allegations that may turn out to be unfounded. It also ensure that witnesses who may want to testify for or against business that have been alleged to have violated the law will not be subjected to a lot of publicity simply because they have offered testimony to the Office of the Attorney General. MR. SCHWARTZ explained Section 7 deals with clarification of the existing exemptions, the provision that deals with the mail order catalog exemption to the telemarket or registration law. He said there was a case involving a San Diego telemarketer who had a catalog that they only distributed in San Diego, but they were telemarketing to Alaskans. They refused to register under our 1993 Telemarketing Registration Act. The Alaska supreme court agreed in January of this year that the mail order catalog exemption did not cover that particular instance. He said they are now trying to clarify the existing statute to make sure that everyone knows what it takes to qualify as a mail order catalog operation and, therefore, be exempt from telemarketing registration. Number 1774 MR. SCHWARTZ informed the committee that Section 8 is the Comprehensive Business Opportunities Disclosure Act legislation which will get primarily at the Lower 48 business opportunity sellers who largely work with sales kits/business kits to Alaskans, particularly around permanent fund dividend time. They then use the sale of the kits, which usually range anywhere from $500 to several thousands of dollars, as an entree to sell Alaskans even more services that range up to $10,000 to $15,000 per year. This would require registration, disclosure, bonding and other protections for people who have an entrepreneurial spirit, but really get caught up in the excitement and high pressure sales that occur in the large hotel ballroom where most of these sales of business opportunity (indisc.) are pitched. Number 1826 CHAIRMAN ROKEBERG said, "I've got a really significant concern here because this committee is in the process of rewriting the entire real estate statute, if I can only recall the title right now, but business opportunities are something that, in part but not exclusively, have been handled by real estate brokers. And I appreciate at what you're getting at here - those folks who advertise on late night T.V. for these seminars I guess is the thrust of your thing here. I'm kind of concerned about the sweep here and what you're getting into as it relates to some of these other things and, in essence, creates some type of kinds of a defacto licensure, if you will, or something going here that might more properly be under another title or something. What you're getting at is -- are you endeavoring to prohibit these types of sales activities, regulate them or infringe on real estate brokers? What's the thrust here?" MR. SCHWARTZ indicated he is not trying to do that at all. The bill actually has a series of exemptions and tend to be exact. He noted that they can be found on page 17, line 8 through page 18, line 11. He pointed out the tenth exemption deals with if the seller or the buyer is licensed as a real estate broker, associate real estate broker or real estate sales person under Title 8 of the Alaska statutes and the sales or offers regulated by Title 8. He said it is not their intent to create a new licensure for real estate agents, brokers or other people already regulated. Mr. Schwartz said this whole registration scheme is modeled after the existing telemarketing registration law. The two policies driving the exemptions in the telemarketing law and in this bill for business opportunity registration would be that there would be no attempt to require registration of those activities that are otherwise regulated by statute in a similar way. Also, there would be no attempt to require registration of activities that don't seem to pose a problem. He noted the last thing the Department of Law wants to do is to duplicate existing registration and regulations. Number 1951 CHAIRMAN ROKEBERG questioned which department they register with. MR. SCHWARTZ referred to telemarketing and said the bill would require registration with the Office of the Attorney General. CHAIRMAN ROKEBERG asked if it is correct to say that if you weren't a member of the Bar or if you weren't a licensed real estate broker, you would have to registered with the Office of the Attorney General to do something like selling businesses. MR. SCHWARTZ responded that there are some exemptions, but he would have go over each and every exemption with the committee members. He said, "After you get past the exemptions, what this bill really gets at is the kind of sale where it's advertised on a late night T.V. info commercial and what they're selling are T-shirt businesses, 900 number businesses, distress merchandise businesses for anywhere from $500 to $3,000 or more and it's that kind of sale that this registration is aimed at rather than activities that are already regulated or don't seem to pose a problem. One exemption, for example, is the sale of a business opportunity to an ongoing business, just as an example of the many (indisc.) exemptions to narrow the scope of this registration requirement. The goal here would be to really target the problem." Number 2019 CHAIRMAN ROKEBERG asked if it is a new Chapter 66. MR. SCHWARTZ responded it would be a new chapter in the Consumer Protection Act. CHAIRMAN ROKEBERG asked if the areas about down payments, escrow accounts only relates to this particular chapter. MR. SCHWARTZ responded that was correct. He continued by saying Section 8 goes from page 6, line 31, to page 21, line 8. Mr. Schwartz said he would answer any questions the committee may have. Number 2073 CHAIRMAN ROKEBERG said it is his intention to appoint a subcommittee to look into the legislation, SSHB 142, during the interim. He then appointed himself, Representative Ryan and Representative Brice to the subcommittee. He closed the public hearing. ADJOURNMENT Number 2118 CHAIRMAN ROKEBERG adjourned the House Labor and Commerce Standing Committee meeting at 5:44 p.m.