HB 64-PERMANENT MOTOR VEHICLE REGISTRATION    [Contains brief discussion of HB 10, a related bill that affects noncommercial trailer registration fees.] 1:07:51 PM CHAIR P. WILSON announced that the first order of business would be HOUSE BILL NO. 64, "An Act relating to permanent motor vehicle registration; and providing for an effective date." CHAIR P. WILSON asked Representative Petersen to report on the work the subcommittee did on the motor vehicle and trailer registration fee bills. 1:08:21 PM REPRESENTATIVE PETERSEN referred to the subcommittee work on HB 10 and HB 64 and indicated the subcommittee met and have made suggestions to the committee for consideration. He asked his staff to provide details. DAVID BREMER, Staff, Representative Pete Petersen, Alaska State Legislature, explained the changes the subcommittee recommended, which he said are incorporated into a proposed committee substitute for the committee's consideration. He stated that the subcommittee suggested removing the language in proposed subsection (b) that referred to the lesser of five times the rate or $100, and replaced it with "three times the rate" which would apply to the registration fee rate and the Motor Vehicle Registration Tax (MVRT) collection. The subcommittee suggested adding a new section, proposed section 4, which would allow a municipality to establish a permanent MVRT. A municipality could charge more or less than the three times set in subsection (b) of the bill. MR. BREMER reported the subcommittee considered issues with respect to collections budgeting discussed at prior committee hearings for both the vehicle registration and noncommercial trailer registration. He stated that the state revenues would increase for two years, but revenues would drop off for each year thereafter. Currently, emissions tests (I/M) are required in Anchorage. Owners would still be required to obtain emissions test and present the results to the DMV at the time of renewal. Older vehicles are most likely to fail I/M testing, and someone who has permanent registration may move into an I/M area and there is no way to verify the vehicle can comply with the IM requirements. Owners in I/M areas would still be required to obtain I/M testing. 1:13:30 PM MR. BREMER related that HB 64 is based on Montana's law, which allows for permanent motor vehicle registration based on a fee of five times the vehicle registration rate for vehicles that are 11 years old. The subcommittee suggests inserting language eight years old and three times the rate. Once a vehicle reaches 14 years, a municipality would begin to lose revenue. The benchmark arrived at is a combination of the vehicle age and a multiplier of the registration rate. He said that 34 years is the point at which the bill becomes revenue neutral. Montana permanent registration also applies to light vehicles only, or vehicles of one ton or less whereas the proposed HB 64 would apply to all vehicles. Montana provides the county treasurer the authority to collect the motor vehicle tax. In Alaska, the tax is an MVRT, which is not collected by municipalities. However, the bill allows a municipality to establish a permanent MVRT. in the original HB 64, motorcycle fees were set higher than the MVRT. The subcommittee removed the lesser of five times the rate or $100, which addresses the motorcycle fee issue, he said. MR. BREMER recalled the issue of safety, noting that people may wish to drive their motor vehicle longer, which could lead to an increase in the number of unsafe cars on the roadway. Permanent registration is not transferable, but is not enforceable unless a driver is pulled over by law enforcement. Some members expressed concern over liability issues if a vehicle with permanent registration is sold and not reregistered. This issued is not easily detected unless the person is involved in a vehicular accident. 1:16:10 PM MR. BREMER related a concern with respect to DMV funding, which is receipt based funding. If the DMV revenues decreased to a level below the necessary funding level, the legislature would need to enact a new funding mechanism for the DMV's day-to-day operations. MR. BREMER highlighted the current Municipality of Anchorage (MOA) tax cap limits the amount of taxes the MOA can collect. This bill would increase MVRT revenues in the first two years significantly with a corresponding property tax decrease. In year three and thereafter, MVRT revenues would significantly decrease, which could adversely affect MOA property tax rates. The MOA's tax cap is calculated annually based on all tax revenues collected, including property tax, liquor taxes, tobacco taxes. As MVRT tax income decreases property taxes would increase. MR. BREMER related that the subcommittee discussed potential amendments to HB 64. The first amendment was proposed and withdrawn for further discussion by the full committee. The subcommittee considered on page 1, line 12 of HB 64 to replace "eight" with "fourteen" to push back the eligibility date of vehicles to lessen potential revenue loss. He reiterated that the amendment was proposed, discussed, and withdrawn. MR. BREMER stated the subcommittee considered on page 2, lines 5-6 of HB 64, to replace "three" with "six" times the permanent registration fees to increase permanent registration cost and reduce revenue loss. This amendment was considered and withdrawn. Finally, the subcommittee considered on page 2, line 29 of HB 64 to replace 2012 with 2014 to allow municipalities to set a permanent MVRT. The municipality must file a notice of change by January 1 of the preceding year in which the tax change would take effect. A municipality may not change the amount of the tax imposed more than once every two years. Some municipalities set their MVRT last year and would need the effective date adjusted to enact a permanent motor vehicle registration tax without incurring a drastic loss of revenue. 1:20:40 PM MR. BREMER recapped the subcommittee's work on HB 10. Currently, owners can register their commercial trailers by paying a one-time fee for permanent registration. This bill, HB 10, would offer the same consideration for owners to register noncommercial trailers. Some of the same issues were raised, but the revenue issues were minimal. The sponsor suggested incorporating language from Section 4, of 64 into HB 10, in order to allow municipalities a mechanism to collect any permanent MVRT for trailers. This provision is necessary in the event that HB 10 passes prior to passage of HB 64. 1:21:52 PM REPRESENTATIVE PRUITT moved to adopt the proposed committee substitute (CS), labeled 27-LS0327\I, Luckhaupt, 3/14/11, as the working document. There being no objection, Version I was before the committee. 1:22:23 PM DARRELL BREESE, Staff, Representative Bill Stoltze, Alaska State Legislature, on behalf of one of the prime sponsors of HB 64, Representative Bill Stoltze, stated that the sponsor reviewed and the agrees with the changes incorporated into the proposed CS, Version I. He also discussed the effective date change with the sponsor, who agrees since it would allow the municipalities to make an adjustment to the MVRT. Additionally, the sponsor agreed to add the language from proposed Section 4 of HB 64 to HB 10, which would allow the permanent registration rate to be set for noncommercial trailer ownership. 1:23:14 PM REPRESENTATIVE MUNOZ referred to the issue for the MOA. She asked if the municipality takes advantage of increased revenues and budgets the revenues over ten years whether the MOA would run into the problem of revenue shortfalls after year two of the permanent registration for motor vehicles. MR. BREESE answered no. He discussed this with the MOA mayor's office, who advised him that so long as the MVRT is collected in 2010 but accounted for 2011-13, that the MOA would not have issues with major adjustment to the tax cap or tax revenue collected. The MOA could assign the MVRT revenue to a different year, such as 2011-2013, the revenue would affect the tax cap in the subsequent years. 1:24:24 PM REPRESENTATIVE MUNOZ recapped the amendments the subcommittee discussed. The subcommittee did not have consensus on two amendments. She clarified that the subcommittee brought up the first amendment for discussion to push back the eligibility date to a higher level but did not reach any consensus. 1:25:24 PM MR. BREESE, in response to Chair P. Wilson, explained that if a municipality decides to set an MVRT rate, the rate it sets would cover the municipal tax imposed for the life of the vehicle. In further response to Chair P. Wilson, he described the registration fees. Currently, Alaska statutes allow a motor vehicle registration tax (MVRT) rate to be collected on the age of the motor vehicle. As per the table set in existing statute, once a vehicle is eight years old, the rate is flat. Thus, additional MVRT is not imposed on motor vehicles eight years or older. A municipality can also elect to impose an additional MVRT, by ordinance. He recalled that currently, 16 municipalities have done so. He related a scenario in which a municipality would charge $50 or $100, instead of charging a fee of $25 set in current statute. The municipality can set the rate based on the vehicle age and at a rate that a municipality determines provides adequate revenue for the municipality. CHAIR P. WILSON asked whether a municipality could add additional fees in year nine or 10. MR. BREESE answered that after year eight, the MVRT rate would be flat, but the provision would allow a municipality to set a fee for motor vehicle owners who elect to have permanent registration. Thus, a municipality could impose an extra fee and decide the amount of the fee required to register the vehicle permanently to keep the municipal revenue neutral. Additionally, the municipality could decide to accept the "three times" fee as currently written. The proposed Section 4 of the committee substitute (CS) for HB 64 would allow a municipality to set a certain tax for permanent motor vehicle registration. It is possible an owner could decide to wait until his/her vehicle is 12 years old before permanent registration is selected. At the point an owner selects permanent registration, any municipal fees would apply, if the municipality has passed an ordinance imposing additional one-time registration fees on motor vehicles, he said. In further response to Chair P. Wilson, Mr. Breese he reiterated the process municipalities would use to collect either three times the MVRT or another amount set by municipal ordinance for any amount it elects to adopt. 1:29:37 PM REPRESENTATIVE PETERSEN pointed out that the MOA's Treasurer, Cheryl Frasca, said the collection of the MVRT is based on collection rather than on budgeting. He related his understanding that the MOA is not set up to collect taxes in one year and budget it over other years. 1:30:15 PM RICK GIFFORD, Manager, Kodiak Island Borough (KIB), stated that the KIB still has concerns with HB 64. He said it was unclear in HB 64 exactly how the MVRT will be administered and collected. He related his understanding that municipalities use the MVRT funds for abandoned vehicles, noting that the older vehicles cause problems in Kodiak. He recalled that the DMV had a similar fund and reducing the overall MVRT collected would impact the DMV's ability to assist municipalities. He expressed his concern over HB 64. 1:32:45 PM WHITNEY BREWSTER, Director, Division of Motor Vehicles (DMV), Department of Administration (DOA), stated the CS drastically reduces the fiscal note from the DMV. She advised the FN was submitted just prior to this hearing. She highlighted that removing certain language from the bill solidifies the fees collected by the DMV. CHAIR P. WILSON related that she has not yet received the fiscal note and asked for clarification. MS. BREWSTER understood. The Governor's office prepared a draft fiscal note since the CS had not yet been adopted. In the first year, FY 2012 the change in revenue would increase to $3,550,000, and revenue would increase in FY 2013 to $4,120,000. In FY 2014, the DMV anticipates a revenue reduction of $1.2 million, in FY 2015 the DMV anticipates a revenue reduction of $1,500,000, in FY 2016 the DMV estimates a revenue reduction of $1,500,000, and in FY 2017 the DMV estimates a $1,800,000 revenue reduction. She stated that the CS dramatically changes the fiscal note. In response to Chair P. Wilson, she responded that the DMV's proposed budget is approximately $16 million. She stressed that with the adoption of the proposed CS, the DMV does not see an impact on the DMV's budget. In further response to Chair P. Wilson, she indicated that the proposed changes will reduce the overall revenue collected, but in FY 10 the DMV collected approximately $65.8 million in revenue, which is still substantially more than necessary to run DMV. CHAIR P. WILSON related the revenue collected would be less revenue collected for the general fund each year. MS. BREWSTER agreed. 1:36:16 PM KATHIE WASSERMAN, Executive Director, Alaska Municipal League (AML), stated that she spoke to a number of municipalities prior to the meeting. Many of them indicated that the MVRT funds help with junk car removal. If this bill passes, the municipalities will need to determine how much tax to require. She said the municipalities would estimate the proposed MVRT, since it is not possible to determine how many years an older vehicle may operate. Thus, some municipalities will have shortfalls or excesses, accordingly. Additionally, municipalities would still need to adopt the tax change by ordinance and may result in some "pushback" from residents. She is most familiar with the City and Borough of Juneau, which collects $22 per registered motor vehicle, or basically $11 per year. If an automobile will be on the road for an indeterminate amount of time, the municipalities express concern. The system seemed to work fine. She concluded that the municipalities are at a loss in terms of assessing the overall impact, which would likely increase personnel. She said, "The municipalities are not comfortable with this bill." 1:38:46 PM CHAIR P. WILSON, after first determining no one else wished to testify, closed public testimony on HB 64. 1:38:57 PM REPRESENTATIVE PETERSEN suggested considering the age of vehicle for eligibility for one-time registration. The current CS uses eight years, the Montana model uses 11 years. He wondered if the bill was moved to 11 years it may allow municipalities to be revenue neutral until motor vehicles are 17 years old. The number of motor vehicle on the roadway greater than 17 years old diminishes rather quickly, he said. Thus, it would likely have a little less effect on municipalities strapped for funding, he said. 1:41:03 PM REPRESENTATIVE PETERSEN made a motion to adopt Conceptual Amendment 1 to HB 64. He referred to page 1, line 12 of HB 64, to change the applicable vehicle age from "eight" to 11. REPRESENTATIVE JOHNSON objected. REPRESENTATIVE JOHNSON related the committee spent considerable time discussing how to best accommodate the municipalities, but little time to discuss the convenience or cost savings to consumers. The point of this bill has somewhat been missed, which is to save money, time and convenience for consumers. He said it might be inconvenient for municipalities. He pointed out that any money municipalities lose is money that is saved by consumers. He maintained his objection. 1:43:10 PM A roll call vote was taken. Representatives Munoz, Gruenberg, and Petersen voted in favor of Conceptual Amendment 1. Representatives Johnson, Feige, Pruitt, and P. Wilson voted against it. Therefore, Conceptual Amendment 1 failed by a vote of 3-4. 1:43:55 PM REPRESENTATIVE PRUITT moved to report the proposed committee substitute (CS) for HB 64, labeled 27-LS0327\I, Luckhaupt, 3/14/11, out of committee with individual recommendations and the accompanying fiscal note. There being no objection, CSHB 64(TRA) was reported from the House Transportation Standing Committee.   HB 10-NONCOMMERCIAL TRAILER REGISTRATION FEE    1:44:54 PM CHAIR P. WILSON announced that the next order of business would be HOUSE BILL NO. 10, "An Act relating to the registration fee for noncommercial trailers and to the motor vehicle tax for trailers." REPRESENTATIVE PRUITT moved to adopt the proposed committee substitute (CS) for HB 10, labeled 27-LS00091\B, Luckhaupt, 3/14/11, as the working document. There being no objection, Version B was before the committee. 1:45:12 PM DARRELL BREESE, Staff, Representative Bill Stoltze, Alaska State Legislature, on behalf of one of the prime sponsors, Representative Bill Stoltze, stated that the only change to the bill contained in the proposed CS is the inclusion to allow municipalities to adopt by ordinance the permanent vehicle registration rate for noncommercial trailers. 1:46:17 PM REPRESENTATIVE PETERSEN made a motion to adopt a Conceptual Amendment to change the effective date from 2012 to 2014. He stated he misstated his amendment since the CS for HB 10 does not have an effective date. He withdrew his amendment. REPRESENTATIVE PETERSEN made a motion to adopt a Conceptual Amendment to create an effective date for bill as 2014. REPRESENTATIVE JOHNSON objected. He pointed out that 2014 is not a date. CHAIR P. WILSON referred to the date in the previous bill the committee just passed out, which was January 1, 2014. REPRESENTATIVE PETERSEN made a motion to adopt a Conceptual Amendment to create effective date for HB 10 of January 1, 2014. REPRESENTATIVE JOHNSON raised a point of order. He said a motion is before the committee and the motion must be withdrawn REPRESENTATIVE PETERSEN withdrew his prior motion which did not contain the date, January 1, 2014. 1:48:30 PM REPRESENTATIVE PETERSEN made a motion to adopt a Conceptual Amendment to create an effective date in HB 10 of January 1, 2014. REPRESENTATIVE JOHNSON objected. He asked to hear from sponsor. MR. BREESE answered that the sponsor agrees with the inclusion of the effective date of January 1, 2014. REPRESENTATIVE JOHNSON withdrew his objection. There being no further objection, Conceptual Amendment 1 was adopted. 1:49:14 PM REPRESENTATIVE PRUITT moved to report the proposed committee substitute (CS) for HB 10, labeled 27-LS00091\B, Luckhaupt, 3/14/11, as amended, out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, CSHB 10(TRA) was reported from the House Transportation Standing Committee.