Legislature(2003 - 2004)

03/18/2003 01:35 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
          SENATE LABOR AND COMMERCE STANDING COMMITTEE                                                                        
                         March 18, 2003                                                                                         
                           1:35 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Con Bunde, Chair                                                                                                        
Senator Ralph Seekins, Vice Chair                                                                                               
Senator Gary Stevens                                                                                                            
Senator Hollis French                                                                                                           
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Bettye Davis                                                                                                            
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                              
SENATE BILL NO. 86                                                                                                              
"An Act relating to the rate of interest on delinquent taxes."                                                                  
                                                                                                                                
     HEARD AND HELD                                                                                                             
                                                                                                                                
CS FOR HOUSE BILL NO. 9(FIN) am                                                                                                 
"An Act relating  to the registration of  individuals who perform                                                               
home   inspections;  relating   to  regulation   of  contractors;                                                               
relating  to registration  fees for  specialty contractors,  home                                                               
inspectors,  and  associate  home inspectors;  relating  to  home                                                               
inspection  requirements  for   residential  loans  purchased  or                                                               
approved by  the Alaska Housing Finance  Corporation; relating to                                                               
civil  actions  by  and  against home  inspectors  and  to  civil                                                               
actions arising  from residential  unit inspections;  repealing a                                                               
law that limits liability for damages  based on a duty to inspect                                                               
a  residential unit  to  damages caused  by  gross negligence  or                                                               
intentional misconduct; and providing for an effective date."                                                                   
                                                                                                                                
     HEARD AND HELD                                                                                                             
                                                                                                                                
SENATE BILL NO. 114                                                                                                             
"An  Act increasing  the fee  for a  state business  license; and                                                               
providing for an effective date."                                                                                               
                                                                                                                                
     HEARD AND HELD                                                                                                             
                                                                                                                                
PREVIOUS ACTION                                                                                                               
                                                                                                                                
SB 86 - No previous action to consider.                                                                                         
                                                                                                                                
HB 9 - No previous action to consider.                                                                                          
                                                                                                                                
SB 114 - No previous action to consider.                                                                                        
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
Mr. Darwin Peterson                                                                                                             
Staff to Senator Wilken                                                                                                         
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT: Commented on SB 86 for sponsor.                                                                           
                                                                                                                                
Mr. Dan Dickenson, Director                                                                                                     
Tax Division                                                                                                                    
Department of Revenue                                                                                                           
PO Box 110400                                                                                                                   
Juneau, AK  99811-0400                                                                                                          
POSITION STATEMENT: Supported SB 86.                                                                                          
                                                                                                                                
Mr. Wayne Walker, President                                                                                                     
A & W Wholesale                                                                                                                 
2525 Phillips Field Rd.                                                                                                         
Fairbanks AK 99709                                                                                                              
POSITION STATEMENT: Supported SB 86.                                                                                          
                                                                                                                                
Representative Rokeberg                                                                                                         
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT: Sponsor of HB 9                                                                                           
                                                                                                                                
Mr. Rick Jarvis                                                                                                                 
2600 Cordova #100                                                                                                               
Anchorage AK 99503                                                                                                              
POSITION STATEMENT: Supported SB 9                                                                                            
                                                                                                                                
Mr. Bill Brady, Chairman                                                                                                        
Anchorage Board of Realtors                                                                                                     
PO Box 11010                                                                                                                    
Anchorage AK 99511                                                                                                              
POSITION STATEMENT: Supported HB 9.                                                                                           
                                                                                                                                
Ms. Carol Perkins, Inspector                                                                                                    
PO Box 871825                                                                                                                   
Wasilla AK 99645                                                                                                                
POSITION STATEMENT: Commented on HB 9.                                                                                        
                                                                                                                                
Mr. David Owen                                                                                                                  
Owen's Inspection Services                                                                                                      
PO Box 3589                                                                                                                     
Palmer AK 99645                                                                                                                 
POSITION STATEMENT: Supported HB 9.                                                                                           
                                                                                                                                
Commissioner Edgar Blatchford                                                                                                   
Department of Community & Economic Development                                                                                  
PO Box 110800                                                                                                                   
Juneau, AK 99811-0800                                                                                                           
POSITION STATEMENT: Supported SB 114.                                                                                         
                                                                                                                                
Mr. Rick Urion, Director                                                                                                        
Occupational Licensing                                                                                                          
Department of Community & Economic Development                                                                                  
PO Box 110800                                                                                                                   
Juneau, AK 99811-0800                                                                                                           
POSITION STATEMENT:  Commented on SB 114.                                                                                     
                                                                                                                                
Mr. Ronald Jordan                                                                                                               
8170 Woodgreen Creek                                                                                                            
Anchorage AK 99518                                                                                                              
POSITION STATEMENT: Commented on SB 114.                                                                                      
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
TAPE 03-13, SIDE A                                                                                                            
Number 0001                                                                                                                     
                                                                                                                                
              SB  86-INTEREST ON DELINQUENT TAXES                                                                           
                                                                                                                                
CHAIR CON  BUNDE called  the Senate  Labor and  Commerce Standing                                                             
Committee meeting  to order at 1:35  p.m. and announced SB  86 to                                                               
be up  for consideration. Present were  Senators Seekins, French,                                                               
Stevens; Senator Davis was excused.                                                                                             
                                                                                                                                
SENATOR WILKEN, sponsor, related to the committee that:                                                                         
                                                                                                                                
     SB 86  was brought to  him by  a constituent and  is an                                                                    
     act relating to the  interest on delinquent taxes. When                                                                    
     a  business  in Alaska  submits  a  tax report  to  the                                                                    
     Department  of  Revenue,  the  department  reviews  the                                                                    
     report to insure  its accuracy. When an  error is found                                                                    
     in a  report resulting in  an under payment or  an over                                                                    
     payment in  the taxes, an  interest of 11%  is attached                                                                    
     by statute.  This interest rate  is set in  statute, AS                                                                    
     43.22.05,   which   mandates   the  interest   on   the                                                                    
     delinquent taxes  to be 5  percentage points  above the                                                                    
     District  12   Discount  Rate  or  11%,   whichever  is                                                                    
     greater.                                                                                                                   
                                                                                                                                
     SB  86  proposes  to eliminate  the  reference  to  11%                                                                    
     interest and  retain the  12th District  Discount Rate,                                                                    
     plus  5% as  the  formula for  calculating interest  on                                                                    
     delinquent  taxes.  This  will  establish  a  fair  and                                                                    
     reasonable method  of calculating interest  by allowing                                                                    
     it  to  float  with  the   market.  We  believe  it  is                                                                    
     inappropriate  to  charge  Alaskans 11%  on  delinquent                                                                    
     taxes, especially since  many delinquencies result from                                                                    
     honest mistakes, as you will hear today.                                                                                   
                                                                                                                                
     Another  disturbing  practice  is that  the  department                                                                    
     often doesn't find the discrepancy  in a tax report for                                                                    
     two  or three  years. Unfortunately,  for the  business                                                                    
     owner, the 11%  interest accrues from the  date the tax                                                                    
     report  was filed,  not the  date  the discrepancy  was                                                                    
     discovered.                                                                                                                
                                                                                                                                
     According  to the  Department  of  Revenue, the  fiscal                                                                    
     impact to  the state  as a  result of  this legislation                                                                    
     will be  marginal. The  state will  receive a  fair and                                                                    
     reasonable interest  from the delinquent  taxpayers and                                                                    
     will  also  pay  a  fair  and  reasonable  interest  on                                                                    
     refunds to tax payers.                                                                                                     
                                                                                                                                
CHAIR  BUNDE   asked  what  were   the  typical   interest  rates                                                               
throughout the nation when the 11% was first set.                                                                               
                                                                                                                                
MR. DARWIN  PETERSON, Staff to  Senator Wilken, replied  that the                                                               
interest rate was higher than  that. The interest rate in statute                                                               
was simple 8%  until the legislation was enacted  that changed it                                                               
to 5% above the 12th District  Discount Rate or 11%, whichever is                                                               
greater.                                                                                                                        
                                                                                                                                
CHAIR BUNDE asked what the discount rate was then.                                                                              
                                                                                                                                
MR. PETERSON  replied in 1980  the discount  rate was 12%  in the                                                               
12th District.                                                                                                                  
                                                                                                                                
SENATOR STEVENS asked how this  legislation would change the date                                                               
of filing  for the charges  starting to  accrue if a  mistake had                                                               
been made.                                                                                                                      
                                                                                                                                
MR.  PETERSON replied  that  all  this bill  does  is change  the                                                               
interest rate.  The fact  that it takes  the department  years to                                                               
discover  a mistake  begs  the question  that  could be  answered                                                               
under separate legislation  at the end of the  budget process. He                                                               
understands that  statute requires  the department to  discover a                                                               
mistake within  three years.  Since that is  what is  in statute,                                                               
the department often  waits and reviews tax reports  when it gets                                                               
close to  the statutory  deadline. It was  20 months  before they                                                               
realized  there  was  an  honest  mistake  in  Mr.  Walker's  tax                                                               
reports. At that  time the 11% interest rate had  accrued for the                                                               
entire 20 months.                                                                                                               
                                                                                                                                
SENATOR STEVENS  continued saying that  if it's a  floating rate,                                                               
it could be greater or lesser  than when the mistake was actually                                                               
filed. This would base it on when it was discovered.                                                                            
                                                                                                                                
SENATOR  SEEKINS said  this  would  also have  an  effect on  the                                                               
interest  the state  pays  for overpayments  of  taxes and  asked                                                               
where that would tie in statutes.                                                                                               
                                                                                                                                
MR. PETERSON  said that the state  is also liable for  the 11% if                                                               
there is an overpayment of taxes.                                                                                               
                                                                                                                                
SENATOR SEEKINS  asked if  they had considered  putting a  cap on                                                               
the rate.                                                                                                                       
                                                                                                                                
MR. PETERSON said that is a possibility.                                                                                        
                                                                                                                                
MR.  DAN   DICKENSON,  Director,  Tax  Division,   Department  of                                                               
Revenue, said  he wanted to  give them  a little history  of this                                                               
section of the law.                                                                                                             
                                                                                                                                
     Up  until 1980,  if the  taxpayer underpaid  his taxes,                                                                    
     interest was  calculated at 12% simple  interest when a                                                                    
     company  finally  paid  the  amount  due.  As  Governor                                                                    
     Hickel characterized  this situation in his  March 1991                                                                    
     letter  of transmittal  for the  bill that  resulted in                                                                    
     the  current law,  he said  the state  ends up  loaning                                                                    
     billions  of dollars  to  its tax  payers  at very  low                                                                    
     interest rates.                                                                                                            
                                                                                                                                
     As everyone knows,  a huge backlog built up  of oil and                                                                    
     gas  taxes over  the state.  I  was able  to locate  an                                                                    
     accounts receivable payment from  March 1991 that shows                                                                    
     $3.6 billion  dollars in outstanding taxes.  As you can                                                                    
     imagine, over  $3 billion  of that was  in oil  and gas                                                                    
     back taxes.                                                                                                                
                                                                                                                                
     The   legislature  and   administration  made   a  good                                                                    
     decision  in  1991; they  changed  the  law. They  made                                                                    
     three cases.  First of  all interest  was moved  from a                                                                    
     simple   to  more   standard  commercial   practice  of                                                                    
     compounding interest.  The change to  compound interest                                                                    
     made  a dramatic  difference in  the  interest owed  on                                                                    
     long  delayed cases.  Second, interest  was defined  as                                                                    
     the federal  reserve inter-bank rate  plus 5% or  - and                                                                    
     this third point  is the interesting point  - a minimum                                                                    
     of 11%. This  change was designed to  get the attention                                                                    
     of companies that had been  underpaying their taxes and                                                                    
     it did.                                                                                                                    
                                                                                                                                
     At the same  time, in 1991, a change was  made in Title                                                                    
     38 putting  oil and  gas royalties  on the  same higher                                                                    
     intra bank rate  or 11% compounded. Over  the next five                                                                    
     years,  $3.5 in  back taxes  and royalties  flowed into                                                                    
     the CBRF, the constitutional  budget reserve fund and a                                                                    
     whole  different  attitude  became  apparent.  Clearly,                                                                    
     there was more than just  interest rate changes at work                                                                    
     in  this  situation, but  it  is  also clear  that  the                                                                    
     interest rate change played a significant role.                                                                            
                                                                                                                                
     Now,  in  2003,  our  accounts receivable  in  the  tax                                                                    
     division is $71  million or about 2% of what  it was in                                                                    
     1991. So  now it's time  for another good  decision, to                                                                    
     bring  the  interest rates  more  in  line with  market                                                                    
     rates. I don't think this  will bring about a return to                                                                    
     backlog. Since this change  sticks with compound rates,                                                                    
     tax  payer  delay will  rapidly  become  more and  more                                                                    
     expensive to the  tax payer. This bill  does not change                                                                    
     the interest  rate on  tax due  oil and  gas royalties.                                                                    
     This  legislation  simply  eliminates the  11%  minimum                                                                    
     rate on taxes and allows the  rate to float at 5% above                                                                    
     the federal reserve's intra-bank  rate. And just as the                                                                    
     new  rate  structure applies  to  back  taxes owed  the                                                                    
     state, it would also apply  to certain tax refunds paid                                                                    
     by  the  state,  thereby  saving  us  some  money.  The                                                                    
     administration supports  this bill and urges  you to do                                                                    
     the same.                                                                                                                  
                                                                                                                                
CHAIR BUNDE asked him to comment on language stating that the                                                                   
clock starts ticking at the time the taxes are filed rather than                                                                
when the error is found.                                                                                                        
                                                                                                                                
MR. DICKENSON,  in response, asked  the committee to "put  on the                                                               
glasses"  of  a  large  corporation who  is  paying  hundreds  of                                                               
millions of dollars  in taxes to the state.  There are frequently                                                               
conceptual problems  about how things  get characterized  in both                                                               
royalty  or  the  tax  situation.  These  are  sophisticated  tax                                                               
requirements and sophisticated royalty payers.                                                                                  
                                                                                                                                
     In those  situations, we don't  want to have  the state                                                                    
     essentially lending  money to  the companies;  in other                                                                    
     words,  have  the companies  underpay.  We'll  be in  a                                                                    
     dispute  with them  for  a year  or  two, three,  four,                                                                    
     these can  go on, and,  then when it's  finally agreed,                                                                    
     then  the  interest clock  starts  to  run. The  notion                                                                    
     should be that when a tax  amount is agreed upon, we go                                                                    
     back and look  when that was due and we  make sure that                                                                    
     the company doesn't gain any  advantage from not having                                                                    
     paid  when   it  was  due.  That's   a  very  different                                                                    
     perspective than  the small business owner  who perhaps                                                                    
     made an  inadvertent error and  is faced with  the same                                                                    
     situation.                                                                                                                 
                                                                                                                                
CHAIR BUNDE  asked what  would preclude  the interest  clock from                                                               
starting  to tick  the  moment  you found  an  error rather  than                                                               
waiting until after everything was litigated.                                                                                   
                                                                                                                                
MR. DICKENSON  replied that  nothing would  preclude it  and that                                                               
would  set a  small advantage  for the  companies for  not paying                                                               
their taxes.                                                                                                                    
                                                                                                                                
     What it would  really do is totally change  the way the                                                                    
     division was  organized and approaches  problems. Right                                                                    
     now when we, and I'll  just use Exxon, because everyone                                                                    
     understands that  they're a tax payer  here and they're                                                                    
     the world's   largest industrial organization.  When we                                                                    
     audit them,  we don't want  to be going in  every month                                                                    
     and -  the pay production  tax as  a monthly tax  - and                                                                    
     try to catch  the errors so that we  start the interest                                                                    
     clock running. We  wait until we have  a two-year cycle                                                                    
     and go  in, step  back, look  at it  closely, sometimes                                                                    
     subsequent  events have  occurred  that are  important,                                                                    
     sometimes we need to hire  experts that understand some                                                                    
     aspects of the business.                                                                                                   
                                                                                                                                
     We are  certainly organized around a  principle that if                                                                    
     a  company  has  underpaid,  we  can  be  thorough  and                                                                    
     careful and make sure that  we get the right amount and                                                                    
     that we're not  penalized for taking the time  to do it                                                                    
     correctly. If we  were to change the  statute, we would                                                                    
     have to  think about our  emphasis and think  about how                                                                    
     dealt with the timeliness  of findings and pointing out                                                                    
     these kinds of errors...                                                                                                   
                                                                                                                                
SENATOR FRENCH asked  where the statute says  the refund interest                                                               
rate is set the same as the delinquent tax.                                                                                     
                                                                                                                                
MR.  DICKENSON replied  AS 43.05.280  - Interest  on overpayments                                                               
(a) -  Interest shall be  allowed and  paid on an  overpayment of                                                               
tax under  this title at the  rate and the manner  provided in AS                                                               
43.05.225, section 1.                                                                                                           
                                                                                                                                
SENATOR FRENCH  said the  fiscal note  spoke about  the potential                                                               
difference of  close to $1 million  per year in the  amount going                                                               
to the constitutional budget reserve  and asked him to comment on                                                               
that.                                                                                                                           
                                                                                                                                
MR.  DICKENSON replied  that it's  hard to  estimate because  the                                                               
number of payments  is fairly small and the  volatility is fairly                                                               
high. Interest is  about one third of the dollars  going into the                                                               
CBRF and that  could change because the division  is getting more                                                               
and  more caught  up, currently  auditing 2000  and 2001  for the                                                               
major companies and 2002 for some  of the smaller ones. They also                                                               
need to  look at  what future  interest rates  are going  to look                                                               
like. Most  folks think  we're at  an historic  low and  it's not                                                               
safe to use the 7.25%, which  is what the interest rate is today.                                                               
Using  assumptions, they  came up  with a  ballpark figure  of $1                                                               
billion.                                                                                                                        
                                                                                                                                
     In the income tax arena,  we based our analysis on what                                                                    
     the  IRS does.  They are  much further  behind than  we                                                                    
     are.  So, let's  say  we got  notice  of an  adjustment                                                                    
     [indisc.] to  1993 and  made a  tax adjustment  and the                                                                    
     taxpayer  paid us  more tax  based on  that. From  1993                                                                    
     until the  effective date  of this  law, you'd  use the                                                                    
     11% and then  for the number of months  after that, you                                                                    
     would drop  down and use  the 7.25%. So, for  the first                                                                    
     couple of  years, you see  almost no drop in  the CBRF,                                                                    
     but then as you go  out several years, that's where you                                                                    
     see the drop in [indisc.] and perhaps even go over it.                                                                     
                                                                                                                                
SENATOR FRENCH asked how he picked the fed plus 5% figure.                                                                      
                                                                                                                                
MR. DICKENSON replied that he  wasn't directly involved with that                                                               
legislation, but they  take what someone characterized  as a risk                                                               
free rate  and added 5%. Credit  card rates are much  higher than                                                               
that.                                                                                                                           
                                                                                                                                
CHAIR BUNDE asked if they wanted  to keep enough penalty "to keep                                                               
a careful pencil."                                                                                                              
                                                                                                                                
MR. DICKENSON  replied that is  exactly right. He added  that the                                                               
Supreme Court has ruled that  interest has no punitive aspects to                                                               
it; it is merely the time value of money.                                                                                       
                                                                                                                                
MR.  WAYNE  WALKER,  President, A&W  Wholesale,  thanked  Senator                                                               
Wilken and  Mr. Peterson  for working on  this issue  and thanked                                                               
the Department  of Revenue for  trying to help him.  He explained                                                               
that since  1970 he has  been the  sole respondent in  filing the                                                               
tax returns for his company on  cigarettes and they have as clean                                                               
a business as  anybody. A precedent was set by  the Department of                                                               
Revenue that  within a  few weeks  after receiving  their filing,                                                               
the department would  send a letter on whether  it was overstated                                                               
or  understated and  penalties and  interest and  by the  time of                                                               
their next  month's filing,  they were  expected to  pay whatever                                                               
they owed  including penalties  and interest.  That went  on from                                                               
1970  at least  through 1995  and  maybe further.  The report  in                                                               
question  was  sitting  somewhere   for  20  months  before  they                                                               
received a  report from  the Department of  Revenue. If  they had                                                               
received  a report  from them  sooner, the  fine would  have been                                                               
paid immediately.                                                                                                               
                                                                                                                                
MR. WALKER  said the first  letter he  received was for  what was                                                               
owed  on the  cigarettes,  which was  almost  $16,000. Five  days                                                               
later, they got  another letter adding $3,000  worth of interest.                                                               
The reason  they were upset  is because they  couldn't understand                                                               
why 20 months  passed when there was 25 years  worth of precedent                                                               
of a couple of weeks. He said also  it came at a bad time for his                                                               
company as  they had discontinued  selling cigarettes  almost two                                                               
years ago, which  means they didn't have the cash  flow they used                                                               
to have.                                                                                                                        
                                                                                                                                
CHAIR BUNDE thanked him for  his testimony. There were no further                                                               
testifiers  and he  announced that  he  would hold  the bill  for                                                               
further work.                                                                                                                   
                                                                                                                                
               HB   9-HOME INSPECTORS/CONTRACTORS                                                                           
                                                                                                                                
CHAIR BUNDE announced HB 9 to be up for consideration.                                                                          
                                                                                                                                
REPRESENTATIVE ROKEBERG,  sponsor, said this was  the 23rd public                                                               
hearing  on  this  bill.  He  explained that  25%  of  the  state                                                               
domestic  product   (GDP)  is  real  estate   transactions.  This                                                               
legislation  sets  forth the  requirements  for  becoming a  home                                                               
inspector  including  continuing  education  and  the  regulatory                                                               
scheme under which one would be working.                                                                                        
                                                                                                                                
SENATOR FRENCH asked  why he would choose such a  short period of                                                               
time for  bringing an  action if the  statute of  limitations for                                                               
contract law is three years.                                                                                                    
                                                                                                                                
REPRESENTATIVE  ROKEBERG  referenced  page 10,  section  17,  and                                                               
answered he thought it was  important that the timeframe to bring                                                               
an action forward  should be quite limited because  any defect or                                                               
omission should  be discoverable  within one year  or with  a new                                                               
home, within a two year period.  The basis for that is that there                                                               
is a warranty  by homebuilders for condos for  a two-year period.                                                               
He noted  this was only  for residential activities.  He intended                                                               
to keep the commerce of the  state moving forward by limiting the                                                               
time in which a lawsuit can be brought forward.                                                                                 
                                                                                                                                
SENATOR SEEKINS said language on page  4, line 26, says there are                                                               
three different  examining organizations  for existing  homes and                                                               
one for new homes and asked him to explain those.                                                                               
                                                                                                                                
REPRESENTATIVE  ROKEBERG replied  that  the  American Society  of                                                               
Home Inspectors  (ASHI) is the primary  national organization for                                                               
existing home  inspectors. The  other two  are the  American Home                                                               
Inspectors  Training Institute  and the  National Association  of                                                               
Home  Inspectors that  are somewhat  competing organizations  and                                                               
are recognized  by various  states to a  lesser degree  than ASHI                                                               
is. New home inspectors use  International Conference of Building                                                               
Officials. He just codified existing practice.                                                                                  
                                                                                                                                
SENATOR SEEKINS asked  if he was satisfied  that any examinations                                                               
offered  by  those  organizations   would  meet  the  nation-wide                                                               
standard and  be adequate  in protecting the  home buyer  if they                                                               
passed the test.                                                                                                                
                                                                                                                                
REPRESENTATIVE ROKEBERG replied yes.                                                                                            
                                                                                                                                
MR.  RICK JARVIS,  Anchorage resident,  supported HB  9. He  said                                                               
that they  are looking for  continuity of education for  all home                                                               
inspectors  who  might  have  different  industrial  backgrounds.                                                               
Nearly half the states regulate home inspectors.                                                                                
                                                                                                                                
MR. BILL  BRADY, Chairman, Anchorage  Board of Realtors,  said he                                                               
was  a member  of Alaska  Association of  Realtors and  that both                                                               
associations  supported  this bill.  He  said  that this  is  the                                                               
biggest purchase some people are  going to make in their lifetime                                                               
and it would  be nice to know  that all home inspectors  are on a                                                               
level   playing  field   with  the   same  basic   knowledge  and                                                               
requirements.  "If one  consumer gets  hurt, that's  one consumer                                                               
too many."                                                                                                                      
                                                                                                                                
MS. CAROL  PERKINS said she  is a new construction  inspector and                                                               
has  followed  this  bill  for  three years.  "With  a  few  more                                                               
tweakings, I  think I can live  with this bill and  make a living                                                               
and continue to serve my constituents out here."                                                                                
                                                                                                                                
One  of  her  biggest  concerns   was  section  41  that  repeals                                                               
protection  from  Alaska Housing.  Any  city  inspector has  that                                                               
protection given  to them  through the building  codes. She  is a                                                               
private   building  inspector   and  doesn't   have  a   building                                                               
department to back her up and  if they repeal that, she will have                                                               
very  little  protection  from  anyone  who  thought  she  didn't                                                               
interpret codes the way they wanted her to.                                                                                     
                                                                                                                                
2:22 p.m.                                                                                                                       
                                                                                                                                
TAPE 03-13, SIDE B                                                                                                            
                                                                                                                              
MS.   PERKINS  explained   that  new   home  and   existing  home                                                               
inspections  are  two  different  reports.   She  saw  a  lot  of                                                               
improvement  in the  current version  and a  few more  tweaks and                                                               
they would be there.                                                                                                            
                                                                                                                                
MR. DAVID OWENS,  Owens Inspection Services, said  he had opposed                                                               
HB  9 for  the  last  five years,  but  changed  his position  to                                                               
support.  However, he  requested some  amendments especially  the                                                               
liability  clause being  removed  from  Alaska Housing  statutes.                                                               
With the  insurance crisis, he  is no  longer able to  buy errors                                                               
and  omissions  insurance   in  the  state  of   Alaska  for  new                                                               
construction. Existing construction inspectors have that luxury.                                                                
                                                                                                                                
He suggested  three amendments,  one a  partial title  change and                                                               
another  deals  with  the  liability   that  might  impact  small                                                               
inspectors in rural areas who does only 10-15 houses per year.                                                                  
                                                                                                                                
CHAIR BUNDE  asked him to  make sure  he faxed his  amendments to                                                               
his office.                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG  asked if  two of  the amendments  were a                                                               
title change that went with the section 41 repeal.                                                                              
                                                                                                                                
MR. OWENS  replied yes,  the second  amendment would  be changing                                                               
the language from  two years to one  year on page 10,  line 6, so                                                               
it would be consistent with  the existing home inspectors and the                                                               
general  warranty that  builders  offer new  home  owners on  new                                                               
construction.                                                                                                                   
                                                                                                                                
REPRESENTATIVE ROKEBERG said he had  an amendment on page 8, line                                                               
19.                                                                                                                             
                                                                                                                                
SENATOR SEEKINS moved amendment #1.               23-LS0029\SA.1                                                                
                                                        Lauterbach                                                              
                                                            4/7/03                                                              
                                                                                                                                
                                                                                                                                
                       A M E N D M E N T                                                                                    
                                                                                                                                
                                                                                                                                
OFFERED IN THE SENATE                                                                                                           
     TO:  CSHB 9(FIN) am                                                                                                        
                                                                                                                                
     Page 8, line 19, before "unless":                                                                                          
     Insert "or "home inspector""                                                                                               
                                                                                                                                
CHAIR BUNDE objected for discussion purposes.                                                                                   
                                                                                                                                
REPRESENTATIVE  ROKEBERG  explained  that it  closed  a  loophole                                                               
about who can hold themselves out to be a home inspector.                                                                       
                                                                                                                                
CHAIR BUNDE removed  his objection and amendment  #1 was adopted.                                                               
He asked him to speak to the repeal issue.                                                                                      
                                                                                                                                
REPRESENTATIVE ROKEBERG said the public's  good is best served by                                                               
taking  the immunity  out for  Alaska Housing,  because no  other                                                               
lender  has  it.   One  of  the  witnesses   said  the  municipal                                                               
inspectors  inspecting  homes  have immunity  under  the  locally                                                               
adopted codes. If there are  complaints, people do have recourse,                                                               
but here a private homeowner  engages a private home inspector to                                                               
make a  home inspection. It  seems that there  is a duty  owed by                                                               
the inspector to the builder under new home construction.                                                                       
                                                                                                                                
CHAIR BUNDE  thanked him  and said  he would  hold this  bill for                                                               
further work.                                                                                                                   
                                                                                                                                
              SB 114-INCREASE BUSINESS LICENSE FEE                                                                          
                                                                                                                                
CHAIR BUNDE announced SB 114 to be up for consideration.                                                                        
                                                                                                                                
COMMISSIONER  EDGAR  BLATCHFORD,   Department  of  Community  and                                                               
Economic  Development, supported  SB 114.  The legislation  would                                                               
increase the business  license fee from $25 per year  to $200 per                                                               
year, collected on  a bi-annual basis. This is  a large increase,                                                               
but the cost of the business  license has remained the same since                                                               
1949 and the  census of 1950 had the population  at about 130,000                                                               
people, many  in the military.  A business license that  cost $25                                                               
in 1950  adjusted for  inflation would cost  about $188  in 2003.                                                               
The increase  would generate an  additional $8.5 million  in FY04                                                               
and would  provide general fund revenues,  which would contribute                                                               
to a  variety of  state services ranging  from public  safety and                                                               
protection  to  road  maintenance   and  education,  to  business                                                               
support.                                                                                                                        
                                                                                                                                
CHAIR BUNDE asked why the fiscal note says only $6.9 million.                                                                   
                                                                                                                                
COMMISSIONER   BLATCHFORD   replied  that   additional   research                                                               
indicated that $6.9 was a more accurate figure.                                                                                 
                                                                                                                                
CHAIR  BUNDE  asked  if  an  attrition rate  is  built  into  the                                                               
figures.                                                                                                                        
                                                                                                                                
COMMISSIONER  BLATCHFORD  said he  thought  it  was, although  he                                                               
didn't want  to speculate  as to  the intent  of people  who file                                                               
their IRS returns.                                                                                                              
                                                                                                                                
SENATOR SEEKINS asked what attrition rate he used.                                                                              
                                                                                                                                
MR. RICK  URION, Director, Occupational Licensing,  answered that                                                               
they  assumed 50%  of  the  sole proprietors  would  drop out,  a                                                               
little over 21,000 licenses.                                                                                                    
                                                                                                                                
SENATOR  SEEKINS asked  if he  was assuming  that the  people who                                                               
dropped out would be the small 1-4 employee license purchaser.                                                                  
                                                                                                                                
MR. URION replied  that they assumed all of them  would be in the                                                               
0-4 category.                                                                                                                   
                                                                                                                                
CHAIR BUNDE  asked if  he had  a way to  determine how  many have                                                               
zero employees.                                                                                                                 
                                                                                                                                
MR.  URION   replied  that  his  department   didn't  have  those                                                               
statistics,  but  the  Department  of Labor  has  statistics  for                                                               
employees.  There are  less than  16,000 employers  in the  state                                                               
with employees that file quarterly  reports for the Department of                                                               
Labor. There are 56,000 business licenses.                                                                                      
                                                                                                                                
SENATOR SEEKINS asked if he had  built any kind of model based on                                                               
a  variable  rate where  maybe  less  than  half of  those  small                                                               
proprietorships  would fall  out if  they had  an increased  rate                                                               
that was reasonable, but not the $200 rate.                                                                                     
                                                                                                                                
MR. URION replied that the  House adopted an amendment that would                                                               
have a stepped number of employees  and directed him to come back                                                               
to  them  with  a  number  of  scenarios.  He  would  share  that                                                               
information with the committee when it was fully developed.                                                                     
                                                                                                                                
SENATOR  SEEKINS said  he mentioned  it because  there are  other                                                               
reasons to have a business than for tax reasons, like insurance.                                                                
                                                                                                                                
SENATOR STEVENS asked  if a franchises and  large businesses like                                                               
Safeway with multiple sites get just one business license.                                                                      
                                                                                                                                
MR. URION replied that franchisees  are individual owners and all                                                               
must get their own license, but  there are a number of businesses                                                               
in the state  that have more than one location,  like Safeway and                                                               
Cost Co. Under  existing law, they only have to  get one business                                                               
license, if their business is exactly the same in all locations.                                                                
                                                                                                                                
SENATOR FRENCH pointed out that  the proposed fee of $200 exceeds                                                               
the fee adjusted  for inflation, which the  commissioner said was                                                               
$188.  He  also wondered  if  the  administration wanted  to  pad                                                               
education costs to keep up with inflation.                                                                                      
                                                                                                                                
SENATOR SEEKINS said that one size never fits all.                                                                              
                                                                                                                                
     The mom and pop having to  pay exactly the same rate as                                                                    
     someone  with  multiple  locations  that  has  multiple                                                                    
     employees is not a fair  system. That one size fits all                                                                    
     doesn't sit well  with me personally. I'd  kind of like                                                                    
     to look  at some models  and see  what they do  in that                                                                    
     regard.                                                                                                                    
                                                                                                                                
MR.  URION said  that his  research shows  them that  90% of  the                                                               
business licenses have 0-4 employees.                                                                                           
                                                                                                                                
MR.  RONALD JORDAN  said he  had owned  several small  businesses                                                               
over the years and he had some anxiety about the fees.                                                                          
                                                                                                                                
CHAIR BUNDE  asked if there  was a substantial increase  in fees,                                                               
would it be  more palatable to go  back to a yearly  instead of a                                                               
bi-annual payment system and what would it cost to do that.                                                                     
                                                                                                                                
MR.  URION replied  that the  business license  fee is  the first                                                               
license  and the  only  license  that they  issue  that has  been                                                               
brought into  the 21st Century  with technology. It  is available                                                               
to  purchase  on-line.  "We  would prefer  to  have  a  bi-annual                                                               
license  if we  could  do that....We  could do  it  on an  annual                                                               
basis, but we would have to change our software."                                                                               
                                                                                                                                
CHAIR BUNDE  said it would be  interesting to know what  the cost                                                               
would be  and if  that would  reduce some  anxiety. He  asked Mr.                                                               
Urion to get that information for  him and said this issue needed                                                               
a  little  more gestation  and  appointed  Senator Seekins  as  a                                                               
subcommittee to address the multiple model issue.                                                                               
                                                                                                                                
SENATOR SEEKINS accepted with enthusiasm.                                                                                       
                                                                                                                                
CHAIR BUNDE adjourned the meeting at 2:57 p.m.                                                                                  

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