Legislature(2021 - 2022)BELTZ 105 (TSBldg)

04/13/2021 01:30 PM Senate TRANSPORTATION

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01:37:49 PM Start
01:38:23 PM HB36
02:01:41 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
-- Invited & Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
            SENATE TRANSPORTATION STANDING COMMITTEE                                                                          
                         April 13, 2021                                                                                         
                           1:37 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Senator Robert Myers, Chair                                                                                                     
Senator Peter Micciche                                                                                                          
Senator Jesse Kiehl                                                                                                             
MEMBERS ABSENT                                                                                                                
Senator Mike Shower, Vice Chair                                                                                                 
Senator Click Bishop                                                                                                            
COMMITTEE CALENDAR                                                                                                            
HOUSE BILL NO. 36                                                                                                               
"An Act relating to an application for a license to operate as a                                                                
dealer in motor vehicles; and requiring a dealer in motor                                                                       
vehicles to maintain liability and property insurance."                                                                         
     - HEARD & HELD                                                                                                             
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: HB 36                                                                                                                   
SHORT TITLE: MOTOR VEHICLE DEALERS: APPLIC.; INSURANCE                                                                          
SPONSOR(s): REPRESENTATIVE(s) CLAMAN                                                                                            
02/18/21       (H)       PREFILE RELEASED 1/8/21                                                                                
02/18/21       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/18/21       (H)       L&C, FIN                                                                                               
03/03/21       (H)       FIN REFERRAL REMOVED                                                                                   
03/03/21       (H)       L&C AT 5:45 PM BARNES 124                                                                              
03/03/21       (H)       Heard & Held                                                                                           
03/03/21       (H)       MINUTE(L&C)                                                                                            
03/12/21       (H)       L&C AT 3:15 PM BARNES 124                                                                              
03/12/21       (H)       Moved HB 36 Out of Committee                                                                           
03/12/21       (H)       MINUTE(L&C)                                                                                            
03/15/21       (H)       L&C RPT 6DP                                                                                            
03/15/21       (H)       DP: SNYDER, NELSON, MCCARTY, SCHRAGE,                                                                  
                         KAUFMAN, SPOHNHOLZ                                                                                     
03/25/21       (H)       BEFORE HOUSE IN THIRD READING                                                                          
03/25/21       (H)       TRANSMITTED TO (S)                                                                                     
03/25/21       (H)       VERSION: HB 36                                                                                         
03/26/21       (S)       READ THE FIRST TIME - REFERRALS                                                                        
03/26/21       (S)       TRA, L&C                                                                                               
04/09/21       (S)       L&C AT 1:30 PM BELTZ 105 (TSBldg)                                                                      
04/09/21       (S)       -- MEETING CANCELED --                                                                                 
04/13/21       (S)       TRA AT 1:30 PM BELTZ 105 (TSBldg)                                                                      
WITNESS REGISTER                                                                                                              
REPRESENTATIVE MATT CLAMAN                                                                                                      
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Sponsor of HB 36.                                                                                         
SOPHIE JONAS, Staff                                                                                                             
Representative Matt Claman                                                                                                      
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Provided a Sectional Analysis on HB 36 on                                                                 
behalf of the sponsor.                                                                                                          
MARTEN MARTENSEN, Owner                                                                                                         
Continental Automobile Group                                                                                                    
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Testified by invitation on HB 36.                                                                         
MARCUS WAEHLER, Owner                                                                                                           
Red, White and Blue Auto Sales; Board Member                                                                                    
Alaska Automobile Dealers Association                                                                                           
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Testified by invitation on HB 36.                                                                         
ACTION NARRATIVE                                                                                                              
1:37:49 PM                                                                                                                    
CHAIR ROBERT MYERS called the Senate Transportation Standing                                                                  
Committee meeting to order at 1:37 p.m. Present at the call to                                                                  
order were Senators Kiehl, Micciche, and Chair Myers.                                                                           
        HB 36-MOTOR VEHICLE DEALERS: APPLIC.; INSURANCE                                                                     
1:38:23 PM                                                                                                                    
CHAIR MYERS announced the consideration of HOUSE BILL NO. 36 "An                                                                
Act relating to an application for a license to operate as a                                                                    
dealer in motor vehicles; and requiring a dealer in motor                                                                       
vehicles to maintain liability and property insurance."                                                                         
1:38:40 PM                                                                                                                    
REPRESENTATIVE MATT CLAMAN, Alaska State Legislature, Juneau,                                                                   
Alaska, paraphrased the sponsor statement:                                                                                      
[Original punctuation provided]:                                                                                                
     The purpose of House Bill  36 is to strengthen Alaska's                                                                    
     motor   vehicle   dealer    license   requirements   by                                                                    
     modernizing  the statute  and incorporating  reasonable                                                                    
     standards  for  obtaining   a  motor  vehicle  dealer's                                                                    
     license  without creating  barriers to  entry into  the                                                                    
     field or restricting competition.                                                                                          
     Alaska's  current requirements  for  obtaining a  motor                                                                    
     vehicle  dealer's   license  are  some  of   the  least                                                                    
     stringent  in the  nation. Under  current law,  a motor                                                                    
     vehicle dealer  in Alaska  must register  biennially by                                                                    
     filling  out an  application,  pay  a $50  registration                                                                    
     fee, and maintain  a surety bond of $50,000.  By way of                                                                    
     comparison,  the  requirements   for  a  motor  vehicle                                                                    
     dealer's license in other states are more stringent.                                                                       
1:39:18 PM                                                                                                                    
     Many  states provide  for a  grievance process,  ground                                                                    
     for revocation  and proof of a  physical location. Many                                                                    
     states  also   require  dealers  to   obtain  liability                                                                    
     insurance covering bodily harm and property damage.                                                                        
     Alaska's  more lenient  requirements make  it easy  for                                                                    
     unscrupulous actors to obtain  dealer licenses and gain                                                                    
     access  to dealer-only  auctions  where  used cars  are                                                                    
     sold at discounted rates.                                                                                                  
     House  Bill 36  ensures that  reasonable standards  for                                                                    
     becoming  a dealer  are in  place as  well as  adequate                                                                    
     financial  protections for  purchasers should  the sale                                                                    
     not work out.                                                                                                              
1:39:54 PM                                                                                                                    
REPRESENTATIVE CLAMAN continued to paraphrase the sponsor                                                                       
     House  Bill 36  updates the  surety bond  requirement                                                                      
     which hasn't been changed in  20 years   to $100,000 to                                                                    
     stay  in  line  with   the  current  economics  of  the                                                                    
     automobile  industry.  Furthermore,  it  requires  that                                                                    
     dealers obtain liability  insurance. There is currently                                                                    
     no requirement  that dealers carry  liability insurance                                                                    
     even though  Alaska requires drivers to  have liability                                                                    
     insurance  for  their  vehiclesand  dealers  may  allow                                                                    
     uninsured  drivers to  take cars  for  test drives.  It                                                                    
     also  limits   ownership  of  persons  who   have  been                                                                    
     convicted of felonies for  fraud or embezzlement within                                                                    
     five  years  of  the   application  date.  Finally,  it                                                                    
     requires dealers  with employees  to confirm  that they                                                                    
     are   aware  of   associated   workers  comp   coverage                                                                    
1:40:39 PM                                                                                                                    
REPRESENTATIVE CLAMAN continued:                                                                                                
     The  purpose  of  HB  36  is  to  establish  reasonable                                                                    
     standards for  car dealer licensing  and to  reduce the                                                                    
     potential  for  harm  through increased  bond  amounts,                                                                    
     mandatory  insurance  and additional  disclosures  that                                                                    
     will  hold  automobile   dealers  more  accountable  as                                                                    
     business owners than under current statute.                                                                                
1:40:59 PM                                                                                                                    
SOPHIE JONAS, Staff, Representative  Matt Claman, Juneau, Alaska,                                                               
stated that  HB 36 strengthens automobile  consumer protection by                                                               
requiring  potential automobile  dealers  to  follow an  improved                                                               
application process. She reviewed a sectional analysis of HB 36.                                                                
[Original punctuation provided]:                                                                                                
     Section 1 AS 08.66.030. Form of application                                                                                
     Adds the following  requirements to dealer registration                                                                    
   • a valid telephone number for the business;                                                                                 
   • a statement that no person holding a five percent or                                                                       
     greater interest in the business  has been convicted of                                                                    
     a    felony   involving    fraud,   embezzlement,    or                                                                    
     misappropriation   of   property  within   five   years                                                                    
     preceding the date of application;                                                                                         
   • a statement acknowledging that the applicant has                                                                           
     reviewed  the  requirements for  workers'  compensation                                                                    
     insurance  and  will   maintain  workers'  compensation                                                                    
     insurance under AS 23.30, if applicable; and                                                                               
   •  a copy of the liability insurance policy in                                                                               
     compliance with section 3 of this bill.                                                                                    
1:41:57 PM                                                                                                                    
MS. JONES continued to read the sectional analysis:                                                                             
     Section 2 AS 08.66.060. Bond.  Raises the amount of the                                                                    
     bond required  for dealer registration  applicants from                                                                    
     $50,000 to $100,000.                                                                                                       
     Section 3 AS 08.66.085.  Insurance requirements. Adds a                                                                    
     new section to AS  08.66 that requires dealers maintain                                                                    
     public liability  and property damage insurance  of not                                                                    
     less  than $50,000  for property  damage, $100,000  for                                                                    
     injury  to a  single person,  and $200,000  for injury,                                                                    
     including death, to more than one person.                                                                                  
MS. JONES noted invited testifiers.                                                                                             
1:42:55 PM                                                                                                                    
CHAIR MYERS turned to invited testimony.                                                                                        
1:43:02 PM                                                                                                                    
MARTEN   MARTINSEN,   Owner,    Continental   Automobile   Group,                                                               
Anchorage, Alaska, spoke  in support of HB 36. He  stated he is a                                                               
member of the Auto Dealers Association.                                                                                         
He  stated that  most auto  dealership businesses  had brick  and                                                               
mortar  locations  thirty  years  ago.  Since  then,  Alaska  has                                                               
experienced  a large  influx of  dealers. He  offered his  belief                                                               
that  this bill  should level  the playing  field and  update the                                                               
state's  standards  with  realistic  but  minimum  standards.  He                                                               
offered his  view that  the surety bond  rates for  dealers would                                                               
likely  increase  between  $500   to  $1,000,  depending  on  the                                                               
dealer's credit rating but it would be the only additional cost.                                                                
1:45:31 PM                                                                                                                    
MARCUS WAEHLER,  Owner, Red,  White, and  Blue Auto  Sales, Board                                                               
Member, Alaska Automobile  Dealers Association (AADA), Anchorage,                                                               
Alaska, spoke in  support of HB 36. He said  he initially brought                                                               
his concerns to the AADA's board.  He has been in business for 25                                                               
years. Over  20 years ago, all  the dealers at auction  had brick                                                               
and  mortar stores  and knew  one another.  Dealers would  bid on                                                               
vehicles,  recondition them,  and  sold them.  About seven  years                                                               
ago, in  part due  to the lax  registration process,  new dealers                                                               
started  attending auctions.  He began  noticing vehicles  he had                                                               
seen at  auction advertised  on craigslist  being sold  under the                                                               
guise  of being  private party  sales. Some  of these  cars would                                                               
later be sold to him. He  discovered dealers selling used cars on                                                               
craigslist  were  ones  without storefronts.  He  researched  the                                                               
dealer registration requirements and by  far, Alaska has the most                                                               
lackadaisical ones in the country.  He related that dealers could                                                               
start their business by paying  a $500 bond and $150 registration                                                               
fee. This  will allow the  dealers to attend auto  auctions. Many                                                               
of these  dealers do not disclose  that they are dealers,  do not                                                               
have storefronts and create a  consumer protection issue. He said                                                               
it also  hurts legitimate auto dealers,  so the goal is  to bring                                                               
minimum standards to the industry.                                                                                              
1:48:44 PM                                                                                                                    
MR. WAEHLER related a personal  experience to illustrate the type                                                               
of unscrupulous practices  that occur. About a year  ago an older                                                               
woman brought in  a Subaru Tribeca to his shop  as a trade-in. he                                                               
told him that  she paid $6,500 for Craigslist car  from a private                                                               
party, but  it was not  running well. He said  he uses an  app at                                                               
auction to take  notes on specific vehicles, which  allows him to                                                               
scan in  the Vehicle  Identification Number  (VIN). Thus,  he was                                                               
able to identify  her car was sold at auction.  His auction notes                                                               
showed the vehicle had low  oil pressure, which essentially meant                                                               
it needed  a new  engine. He  ran the  vehicle through  tests and                                                               
discovered the  someone had removed  the oil indicator  light. As                                                               
he suspected,  the vehicle needed a  new engine, so it  was worth                                                               
about $2,000, he said.                                                                                                          
1:50:34 PM                                                                                                                    
SENATOR MICCICHE asked for the insurance requirement increases.                                                                 
MR. WAEHLER  answered that  insurance costs  would depend  on the                                                               
amount  of inventory  and the  number of  employees. HB  36 would                                                               
formalize  the coverage  and make  dealers  acknowledge they  are                                                               
responsible  for  insurance  coverage  but  the  exact  insurance                                                               
amounts would vary.                                                                                                             
1:52:00 PM                                                                                                                    
REPRESENTATIVE  CLAMAN, in  terms of  insurance, advised  members                                                               
Lori Wing-Heier  from the Division  of Insurance will  testify at                                                               
the next  meeting. He  recalled that  she estimated  that typical                                                               
costs  for  coverage most  dealers  would  have would  run  about                                                               
$1,000  per  year. He  stated  that  his 26-year-old  legislative                                                               
staff pays  $750 per  six months for  liability insurance  so the                                                               
$1,000 per  year seemed reasonable.  Ms. Wing Heir  can elaborate                                                               
more on costs, he said.                                                                                                         
1:53:18 PM                                                                                                                    
SENATOR KIEHL asked him to expand  on the value of dealers having                                                               
storefronts and if it was to provide consumer protection.                                                                       
MR.  MARTENSEN  answered that  the  storefront  was a  reference.                                                               
Twenty-five years  ago, dealers all  had stores with cars  on the                                                               
lot. If any  issues arose, people could go back  to the store and                                                               
have  some  recourse.  As Mr.  Waehler  described,  some  dealers                                                               
purchase cars, list  them on craigslist and  run their businesses                                                               
from home.  When problems arise,  people do  not have any  way to                                                               
contact  the seller,  who often  does not  identify himself  as a                                                               
dealer. Dealers need to present themselves as dealers, he said.                                                                 
1:55:41 PM                                                                                                                    
SENATOR KIEHL  highlighted that he  knows a small  reputable auto                                                               
dealer with a website specializing in  a niche in the car market.                                                               
He  pointed   out  that  HB   36  does  not  appear   to  address                                                               
storefronts.  He  pointed out  that  HB  36  does not  appear  to                                                               
address   storefronts.  He   asked   whether   the  sponsor   was                                                               
comfortable  that consumers  would  have  adequate recourse  when                                                               
issues arose.                                                                                                                   
REPRESENTATIVE CLAMAN  responded that the bill  would create some                                                               
protections.   The   bonding   requirement   is   essentially   a                                                               
performance  bond  so  the  consumer can  collect  on  the  bond.                                                               
Ideally,  the dealer  would pay  and  never use  the bond,  which                                                               
provides  the  guaranty.  When  the  bond  requirement  was  set,                                                               
$50,000 equated to  three used cars so increasing  it to $100,000                                                               
more  accurately  represents  the  market  value.  Secondly,  the                                                               
insurance  requirement  will  provide  public  protection  if  an                                                               
uninsured  driver  has  an  accident   test  driving  a  vehicle.                                                               
Overall, the  bill should  give the  public with  confidence that                                                               
people selling  cars provide  a basic level  of service  to their                                                               
1:58:32 PM                                                                                                                    
SENATOR MYERS  noted that some  people flip  cars as a  hobby. He                                                               
asked him to  provide the benefits and detriments  for dealers as                                                               
compared to not becoming licensed.                                                                                              
REPRESENTATIVE CLAMAN  answered that the current  statute defines                                                               
a dealer  as someone who  sells five or  more cars per  year with                                                               
some exceptions.  The bill would  not change that  provision. One                                                               
exception  would  be  that  the business  was  not  the  person's                                                               
primary  income source.  He offered  his view  that the  dividing                                                               
point was  that a person  going to  auction must have  a dealer's                                                               
license  regardless of  the number  of vehicles  being bought  or                                                               
sold. Hobbyists would not be affected since they can show that                                                                  
car sales were not their primary source of income.                                                                              
2:00:43 PM                                                                                                                    
CHAIR MYERS opened public testimony and after first determining                                                                 
no one wished to testify, closed public testimony on HB 36.                                                                     
[HB 36 was held in committee.]                                                                                                  
2:01:41 PM                                                                                                                    
There being no further business to come before the committee,                                                                   
Chair Meyers adjourned the Senate Transportation Standing                                                                       
Committee meeting at 2:01 p.m.                                                                                                  

Document Name Date/Time Subjects
HB 36 Sponsor Statement 4.9.2021.pdf STRA 4/13/2021 1:30:00 PM
HB 36
HB 36 Sectional Analysis v. A 2.23.2021.pdf STRA 4/13/2021 1:30:00 PM
HB 36
HB 36 Testimony - Received as of 2.23.2021.pdf STRA 4/13/2021 1:30:00 PM
HB 36