Legislature(2017 - 2018)SENATE FINANCE 532
04/07/2017 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB6 | |
| HB16 | |
| SB45 | |
| SB78 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 45 | TELECONFERENCED | |
| + | SB 78 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 6 | TELECONFERENCED | |
| += | HB 16 | TELECONFERENCED | |
SENATE BILL NO. 45
"An Act relating to an exemption from the regulation
of construction contractors."
9:41:28 AM
SENATOR MIA COSTELLO, SPONSOR, provided context for the
bill, and discussed the economy and job losses in the
state. She presented her sponsor statement:
Senate Bill 45 provides better protections for
consumers purchasing a home from an unlicensed
builder.
Following the housing market crash of the 1980
Alaska State Legislature raised the standards for
homebuilders. Residential contractors were required to
obtain a state-license, a residential endorsement,
bonding, and insurance. In addition, programs on
energy ratings and efficiency were established through
the Alaska Housing Finance Corporation. These efforts
helped Alaska develop a home construction industry
that offers quality options for home buyers that are
efficient and affordable.
Currently state law provides an exemption that allows
individuals to build structures without a contractor
license. Alaska law AS 08.18.161 allows anyone to
build one structure every two years without a license.
While the exemption was intended to allow Alaskans to
build their own home, the industry is seeing a growing
number of individuals using the exemption to operate
construction businesses.
In 2013, the Mat-Su Home Building Association
estimated that almost one-half of all new construction
home sales in their area were from unlicensed
construction companies. Without a construction
contractor license, unlicensed builders avoid
requirements for bonding and insurance that apply to
licensed builders. The wording of the exemption
creates enforcement problems and allows for potential
abuse by those who would seek to build homes for sale
without the required state license. Senate Bill 45
helps prevent abuse of this exemption. The bill would
require anyone who builds and sells a home without a
contractor license to disclose the fact that they do
not have a license to the state within two years of
completing construction.
Senate Bill 45 does not prohibit owner-builder
construction or require any form of state approval, it
simply calls for disclosure to the Department of
Commerce, Community & Economic Development for
builders selling structures without a license.
SB 45 is supported by the Alaska State Home Building
Association.
9:43:28 AM
JULIANA MELIN, STAFF, SENATOR MIA COSTELLO, stated that SB
45 was a consumer protection bill that addressed issues of
individuals using an exemption in state law to operate a
business that would otherwise require a license. She
relayed that AS 08.18.116 provided that individuals were
allowed to build a structure without a license, every two
years; the intent of the statue was to allow Alaskans to
build and live in their own homes. She stated that there
was a growing trend of individuals using the exemption to
operate a construction business while avoiding the
licensure insurance and bonding that licensed contractors
are required to obtain. She noted that in 2013 the Mat-Su
Homebuilding Association had indicated that one-half of all
new construction home sales in the area were being built by
unlicensed contractors. She relayed that the bill addressed
consumer protection against the future cost of a home that
has structural problems. She reiterated the sentiments of
the sponsor statement.
9:46:06 AM
Ms. Melin read from the Sectional Analysis (copy on file):
Section 1. Adds a new section of statue specifying the
Legislature's intent to support an individual's
freedom and ability to construct and sell their own
homes.
Section 2. Amends AS 08.18.116 by adding a new
subsection specifying when the Department shall
investigate and take action when it is found an owner
is operating a business that would otherwise require
contractor licensing.
Section 3. Amends 08.18.161 (Exemptions) with
conforming changes including numbering and clarifying
language. It adds new language requiring an owner
using the owner-builder to file with the department
indicating they are not engaged in illegal business in
selling or advertising the structure for sale within
two years after the beginning of construction.
Section 4. Adds a new section of statute on
applicability defining the "beginning of construction"
as either the time at which construction began, or,
when an agreement for labor or the supply of materials
is made between an owner and subcontractor for the
building of the structure.
9:47:47 AM
Co-Chair MacKinnon asked whether a loophole could be
created if the build occurred over two seasons without the
structure being put on the market. She expressed concern
that a builder could begin two separate projects and hold
their capital for the second year, bypassing compliance.
Ms. Melin relayed that the language defined "within two
years from the beginning of construction." She added that
if a sale was made, or advertised, within the two years
then it would be a violation of the law.
9:49:25 AM
Co-Chair MacKinnon OPENED public testimony.
9:49:45 AM
AARON WELERTON, ALASKA STATE HOMEBUILDERS ASSOCIATION,
FAIRBANKS (via teleconference), testified in support of the
bill. He believed that the disclosure forms required by the
bill would help with the promotion of quality construction
and fair practices. He believed that industry and other
stakeholders would need to work to make the disclosure
system a success. He said that the bill was small but would
help immensely.
9:51:18 AM
KEVIN SAIKI, MATSU HOME BUILDERS ASSOCIATION, MATSU (via
teleconference), spoke in support of the bill. He
appreciated the independence and freedom allowed in the
state for private home construction. He said that he had
been witness to both responsible and irresponsible
construction. He believed that the bill would offer
consumer protection. He shared that he had witnessed people
under the guise of an Owner/Builder operating illegally and
providing a substandard product. He believed that the bill
would help to protect legally operating contractors and the
investments of consumers.
9:53:19 AM
DAVID OWENS, OWENS INSPECTION SERVICES LLC, PALMER (via
teleconference), testified in support of the legislation.
He stressed the importance of protecting Owner/Builder
rights. He felt that the bill balanced the protections of
the public, the Owner/Builder, and the contractors.
9:54:41 AM
PATRICK DALTON, SELF, DELTA JUNCTION (via teleconference),
testified in opposition to the bill. He thought that
unorganized areas of the state needed the legislation more
than the organized areas. He lamented that the sponsor
statement failed to mention that the legislation targeted
rural areas of the state. He referred to the letter he had
sent to the committee (copy on file). He did not believe
that it was in the best interest of unorganized areas to be
regulated.
Co-Chair MacKinnon understood that the caller was in
opposition to the bill. She wondered what about the
process, proposed by the legislation, was not appropriate
for rural areas of the state.
10:00:32 AM
DEBORAH BROLLINI, SELF, ANCHORAGE (via teleconference),
spoke in opposition of the legislation. She expressed
concern with the disclosure process.
10:01:19 AM
Co-Chair MacKinnon CLOSED public testimony.
Co-Chair MacKinnon directed the committee to review Mr.
Dalton's written testimony.
10:02:19 AM
Senator Micciche asked about the exemption contained in the
bill and wondered what limited the owner to building only
one structure every two years. He wondered how the
department would be able to track the number of structures
built.
JANEY HOVENDEN, DIRECTOR, DIVISION OF CORPORATIONS,
BUSINESS AND PROFESSIONAL LICENSING, DEPARTMENT OF
COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, stated that
the department's investigative unit was driven by
complaints. She informed that anytime that a complaint was
received it would be investigated. She added that the
department contracted with the Department of Labor to save
costs and when inspecting construction sites, the
investigators also checked for fulfillment of licensing
requirements.
Senator Micciche wondered whether the department was
limited to knowledge of construction sites that were
permitted for construction. He suggested that the rules
could be broken more easily in an unorganized borough.
Ms. Hovenden was unsure how far, or often, the Department
of Labor traveled into the unorganized boroughs.
10:05:00 AM
Senator von Imhof thought then when a buyer used
conventional financing, the bank would require an occupancy
certificate.
Ms. Hovenden concurred, and stated that under conventional
home loans, inspections would be required by the department
and the bank.
Senator von Imhof asked whether the loan could be an avenue
by which to gather information to track homebuilders that
were regularly building and selling houses.
Ms. Hovenden answered in the affirmative.
10:06:42 AM
Senator von Imhof queried whether banks cared whether the
house to be built would be located in an organized or
unorganized borough and whether there were uniform
requirements. She pondered if the bank's requirements were
uniform, a sort of certificate of occupancy, or related
document, would be necessary and could be used to track
homebuilders.
10:07:23 AM
Co-Chair MacKinnon understood that the bill was trying to
address the problem in some communities of labor being
brought in from out-of-state and building homes then sold
for cash, avoiding the banking system and selling sub-
standard housing. She recognized that unorganized areas of
the state took issue with the legislation because they
lacked resources to perform the logistical paperwork
process.
Co-Chair MacKinnon relayed that amendments would be due on
Monday at 5 PM.
10:09:14 AM
Vice-Chair Bishop discussed the fiscal notes. There was a
previously published zero fiscal note from the Department
of Commerce, Community and Economic Development.
SB 45 was HEARD and HELD in committee for further
consideration.
10:09:53 AM
AT EASE
10:16:47 AM
RECONVENED