Legislature(2013 - 2014)CAPITOL 106
04/01/2014 08:00 AM House STATE AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| SB127 | |
| HJR32 | |
| HB216 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 127 | TELECONFERENCED | |
| *+ | HJR 32 | TELECONFERENCED | |
| += | HB 216 | TELECONFERENCED | |
| + | TELECONFERENCED |
SB 127-VEHICLE TRANSACTION AGENTS
8:08:51 AM
CHAIR LYNN announced that the first order of business was SENATE
BILL NO. 127, "An Act authorizing the commissioner of
administration to enter into agreements with agents to perform
for compensation certain transactions related to vehicles;
relating to the duties of those agents; and providing for an
effective date."
8:09:46 AM
FORREST WOOLFE, Staff, Senator Cathy Giessel, Alaska State
Legislature, stated that the proposed House Committee Substitute
(HCS) for SB 127, Version 28-LS1263\C, Strasbaugh, 3/26/14,
would "clean up some of the language" in SB 127 by changing some
uses of the word "may" to "shall". He said it would allow the
Division of Motor Vehicles (DMV) "to honor the current
agreements while the department promulgates and adopts
regulations" and "to begin providing the 15 percent retained
commissions on the effective date of the bill, without waiting
for enabling ... regulations."
8:10:21 AM
SENATOR CATHY GIESSEL, Alaska State Legislature, as prime
sponsor, presented SB 127. She said the proposed legislation
would continue the support of a strong private/public
partnership in the DMV. She related that ten years ago, the
concept of making the division more available, convenient, and
responsive was made a reality. She explained that at that time,
Advanced Business Partnerships (ABPs) were formed to handle the
following for the DMV under contract: vehicle titles and
renewals; registration renewals; duplicate registrations; lost
license plates; lost tabs; transfers of plates; and driving
record transactions for truck drivers, among other functions.
She stated that the ABPs are run by car dealerships and private
companies located across the state; the locations and hours are
convenient, and the service is prompt.
SENATOR GIESSEL said the process is also used by the Alaska
Department of Fish & Game (ADF&G), which uses ABPs to issue
fishing licenses in convenient locations. The difference is
that ADF&G allows the stores that sell fishing licenses to
retain a small fee from the cost of each license, in order to
cover the cost of the personnel selling the licenses. She said
the DMV does not allow its business partners to do that; all of
the costs of conducting business for the DMV is incurred by the
APBs. A few of the private businesses charge the consumer a
separate fee in order to cover their costs.
8:12:47 AM
SENATOR GIESSEL said the concept of having ABPs sell services
for the DMV has resulted in a huge shift in the number of
customers who go to the DMV. She directed attention to a graph
included in the committee packet, labeled, "DMV Revenue Sources
FY97-FY07," which she said indicates a rise in the number of
people using ABPs and a subsequent decline in the number of
people seeking the same services from the DMV. She said
consumers prefer the more convenient hours and locations
available through the ABPs. Currently, the ABPs are doing more
than 25 percent of the DMV's work. She stated that the goal of
SB 127 would be to allow the ABPs to retain some of the fee to
cover their costs, because they have to provide the facilities
and pay for utilities, printers, office supplies, credit card
systems, computers, and personnel. She said the transactions
performed for the DMV are more complex than those performed by
vendors selling fishing licenses for ADF&G, which means it costs
more.
8:14:11 AM
SENATOR GIESSEL said under SB 127, the ABPs providing DMV
services would be allowed to keep 15 percent of the fee, and the
rest of the fees would be passed on to the DMV. She pointed out
that there are 16 communities that charge a local motor vehicle
tax, and the ABPs collect that tax for the local governments.
She said all that tax money is sent to the DMV, which retains 8
percent of it and sends the rest on to the local governments.
She said calculations show that ABPs are doing over 336,000
transactions per year for the DMV. She said if the DMV covered
the 336,000 transactions, it would have to hire 32 new state
employees, which means the local businesses are doing the work
of 32 employees. Senator Giessel pointed to the fiscal note,
and she explained that it reflects a cost just under $2 million,
which is zeroed out by the just under $2 million it would cost
to hire the 32 employees, without the cost of hiring the three
supervisors for the 32 employees included. She said it is
virtually a zero fiscal note.
8:16:19 AM
SENATOR GIESSEL said SB 127 would support the continuation of
convenient services, hours, and locations for the public to
access DMV services outside of the DMV. She stated, "It's a
small step toward reducing the size of state government."
8:16:42 AM
SENATOR GIESSEL, in response to Chair Lynn, stated that there
are a total of 48 ABPs: 11 are stand-alone private businesses,
and 37 are automobile dealers.
CHAIR LYNN recollected that the last time he purchased a
vehicle, he was given a choice of going to the DMV for
registration or having the dealer take care of it for him.
CHAIR LYNN opened public testimony.
8:18:07 AM
TIM TOTH, Vice President, Alaska Auto Dealers Association,
offered a background on the current sales environment of
dealerships. He indicated that auto dealers were involved in a
class action lawsuit - regarding wage and overtime - that they
lost, because the judge followed the letter of the law rather
than the spirit of the law. He relayed that the dealers in
Alaska are paid in the same manner in which the dealers in the
Lower 48 are paid. He said another class action lawsuit has
begun, which will cost the dealerships in expenses.
MR. TOTH said dealerships incur many expenses, including those
for property taxes, utilities, health care, and in responding to
the demands from manufacturers to maintain a standard in
facilities. He said more dealerships have been entering the
market, which "splits the pie a little bit thinner." He said it
is getting increasingly difficult to absorb all the costs of
doing business. He said he does not know who initiated the
dealerships' involvement with collecting fees for the DMV. He
stated that the 15 percent, which auto dealerships that offer
DMV services would stand to get under SB 127, would not cover
all the extra costs, but would "help some." He opined that the
best option for the dealers would be to give the burden back to
the state; however, they have decided they will take on "some of
that burden" because it provides a convenience to their
customers. He emphasized the importance of the proposed 15
percent, because some of the dealers have said they are not
willing to continue the program anymore without it.
8:22:00 AM
MR. TOTH, in response to Representative Isaacson, said if auto
dealers decided not to participate in the program any longer,
then the burden would be shifted back to the state as it was in
the past. In response to a follow-up question, he reviewed that
years ago, the application for title and registration would be
printed out at the dealership, and at the end of business, a
courier would bring those applications to the DMV, which had a
special section that would accept them.
REPRESENTATIVE ISAACSON observed that the DMV-related service
offered by the car dealerships was convenient for the customer,
and the proposed legislation would allow the continuation of
that benefit, to which consumers have become accustomed.
MR. TOTH confirmed that Representative Isaacson was correct. He
reiterated that the proposed 15 percent would not cover all the
costs the dealers incur for offering these services, but dealers
are willing to make up for the rest of it to provide the
convenience to their customers.
8:24:36 AM
REPRESENTATIVE GATTIS asked if the dealers have the option to
say they do not want to offer the DMV services.
8:25:04 AM
MR. TOTH said he does not know. He said most dealers he knows
have DMV clerks; however, he does not know whether that resulted
from a state mandate.
REPRESENTATIVE GATTIS asked the prime sponsor if she knew the
answer. She said she is pro-private business and is willing to
pay extra to have a service available that will allow her not to
have to stand in line for a service; however, she would not want
a car dealership to be forced to offer the service.
8:26:23 AM
SENATOR GIESSEL ventured that offering the service is optional
for car dealers, based on the information that there are 37 auto
dealers that provide the service currently, and there are more
than 37 dealers in state.
8:26:49 AM
MR. TOTH clarified that the auto dealers do not charge extra to
the customer for the DMV services they provide. In response to
Representative Gattis, he surmised that the dealers could charge
an extra fee; however, he would be fearful that doing so may
result in litigation.
8:28:08 AM
TROY JARVIS, Alaska Auto Dealers Association; Lithia Auto
Dealers, stated that he was born and raised in Alaska and has
been in the auto business for over 35 years; therefore, he knows
what it was like before the dealers offered the DMV services and
the effects of doing so now. He said the [participating]
dealerships have been offering the services for free for 10
years, and during that time, their expenses have risen and
margins have shrunk. He echoed Mr. Toth's statement that the 15
percent that would be offered the dealers under SB 127 would
only cover a portion of those expenses. He indicated that the
dealerships are still willing to bear the remaining expense,
because they feel "it's a good value for the state" and is part
of good customer service both for car dealership customers and
DMV customers.
MR. JARVIS asked if anyone recollected the hours of waiting in
line at the DMV ten or more years ago. He opined that it was a
nightmare to go to the DMV back then. He said the dealerships
need the support of the state, and without it would consider
giving the burden back to the state. He echoed the joint
sponsor's remarks about the 32 people that the DMV would have to
hire and the associated expense of doing so, and he added that
that expense would only increase in the future. Further, he
suggested that the hiring of that many people would take time,
during which the wait time at the DMV would return to how it was
in the past. He characterized [the 15 percent offered under SB
127] as a "fair compromise for everybody."
MR. JARVIS, in response to the previous comments about charging
customers at the dealerships extra to provide the DMV services,
said he would not want to do that, because the public already
has the perception of car dealers as making profits, so charging
for the service would not be good for customer relations. He
indicated that the dealerships would most likely choose to hand
the service back to the state before it would consider charging
its customers for it.
CHAIR LYNN remarked that it is okay to make a profit, because
that is what businesses are supposed to do.
8:32:17 AM
MELISSA CUCULLU, General Manager, Alaska Tags and Titles, echoed
the prime sponsor's testimony that the private sector provides
the staff, facilities, technology, and office supplies to
process transactions for the DMV. She said the transactions
create millions of dollars for the State of Alaska. She said
the proposed legislation would allow the businesses to hire
additional employees, open new facilities, operate extended
hours, and create more options for Alaska residents, while
helping the businesses offset the incurred credit card fees.
She said SB 127 is about fairness and is a winning answer for
the state, the private businesses, and the public.
8:33:21 AM
AVES THOMPSON, Executive Director, Alaska Trucking Association
(ATA), said ATA is a statewide association representing the
interest of its nearly 200 member companies from across the
state. The association is also a business partner with the DMV.
He stated support of SB 127. He relayed that ATA was approached
[by the DMV] in late December, 2006, to find out if ATA was
interested in becoming a business partner. He said ATA thought
that the partnership could benefit its trucking members to
facilitate the handling of its members' DMV transactions. He
said not only ATA members, but also the general public that
walks into its offices has benefited. Mr. Thompson said about
half of ATA's customers are commercial vehicle operators, while
the other half are walk-in personal vehicle operators. He
stated that the association member companies enjoy prompt
service, and "members pay a lower fee for our DMV services." He
said ATA's walk-in customers are a cross section of the
Anchorage population, and they receive service from ATA that is
"generally prompt, friendly, supportive, and helpful." He said
ATA's customers appreciate the extra effort the association puts
into the transactions "to make the DMV experience a little more
user friendly."
MR. THOMPSON said ATA feels that asking the DMV to pay a modest
15 percent commission is a value for the work for which business
partners [currently] receive no compensation. He clarified,
"Every workday since 2006, we've processed transactions for the
State of Alaska with no compensation, other than the nominal
service fee that we charge our customers." He said the DMV
provides some supplies, including title and registration forms,
tags for the license plates, and the license plates themselves;
however, it has been the business responsibility of the ATA to
provide and pay for the following: personnel, reception space,
secure office space, dedicated computer systems, technical
support, copiers, paper, postage, and credit card fees.
MR. THOMPSON said ATA's business has grown over the years, and
compensation became an issue when the association realized that
more income was needed to finance its growth. He said ATA has
had to borrow money to make the payment schedules to the DMV,
and he offered his understanding that ATA has not missed a
settlement deadline since 2006. He reported that in 2013, ATA
processed more than 11,000 transactions for the DMV and
generated revenue of more than $1.6 million in fees and local
taxes, which means that ATA is not only a revenue generator for
the State of Alaska, but is also a tax collector for local
governments. He said, "Our calculations indicate that of the
$1.6 million, we generated a total of more than $1.1 million in
fee revenue for DMV."
8:36:37 AM
MR. THOMPSON paraphrased the page in the committee packet from
the prime sponsor labeled, "SB 127 Vehicle Transaction Agents
Explanation of Changes," which read as follows [original
punctuation provided]:
The change between version C and version A of SB 127
is simply to allow the DMV to honor the current
agreements during the time it takes for the department
to promulgate and adopt regulations covering the
agreement prerequisites and provisions set out in this
statute.
It will allow the department to begin providing the
15% retained commissions to the Business Partners on
the effective date of the bill without waiting for
enabling regulations.
This language is clear in that all proceeds, with the
exception of municipal taxes or other fees, are
eligible for the 15% retained commissions.
MR. THOMPSON added that the changes would also provide a 15
percent retained commission rather than a sliding scale. He
indicated that ATA believes the business partners are providing
valuable service, without increasing operating costs. Further,
he said ATA believes that the DMV's business partners should be
compensated for the service they provide for the state. He
said, "It boils down to sharing the revenue with the partner
that generates the revenue." He urged the committee to support
SB 127.
8:37:58 AM
AMY ERICKSON, Director, Division of Motor Vehicles, Department
of Administration, confirmed that the DMV has been partnering
with businesses to conduct title and registration transactions
since "the 2000s." She said the partnerships comprise DMV
services storefronts, car and snow machine dealerships, credit
unions, and banks. She said the DMV provides its business
partners with all the necessary supplies to conduct title and
registration transactions, including license plates, month and
year tabs, forms, commercial, non-commercial, and motorcycle
driver manuals, as well as handicap placards - all free of
charge. The DMV further provides free training to process
transactions, as well as free access to the DMV database. She
said the business partners charge fees for their services that
are not regulated by the DMV.
MS. ERICKSON relayed that while the business partners make up
approximately 26 percent of the DMV's revenues, the businesses
do not function autonomously; the DMV still touches each
transaction conducted by a business partner. In fact, she
noted, each DMV transaction has three separate components, which
must be completed before it's closed out: The first component
is the initial transaction where fees are collected; the second
is the auditing to verify the receipts of all information and
that the forms have been filled out correctly; and the third is
the reconciliation to verify that all [fees] were received and
put into the correct fee code. She said business partners
conduct about 30 percent of the transaction, whereas the DMV
conducts about the other 70 percent. She said the DMV has a
staff of seven people dedicated to support the everyday
operations of the business partners; it serves as the "de facto
help desk," spending hours proofing and correcting documents.
When errors have been made, the DMV uses its resources to
resolve them. She stated that the DMV is shifting into using
more on-line transactions. Currently, approximately 48 percent
of all its vehicle transactions are conducted on line, and the
DMV is working on legislation to provide even more services on
line.
8:40:09 AM
DUANE BANNOCK stated that he was a champion of the business
partnership program in his former career as a state bureaucrat,
and remains so in his current "financial affiliation with a
small used car operation." He said, "We use a business
partnership exclusively to perform our customers' title and
registration work - not putting that on the burden of the local
DMV office." He indicated that the major purpose behind the ABP
expansion was to offer, as a courtesy, time-saving convenience
to Alaska residents who must go to a DMV office; it was designed
as a time-saving effect, not a cost-saving effect. He referred
to the past testimony relating the long wait times at the DMV in
the past, and submitted that ABPs are the number one reason
those wait times have decreased.
8:42:00 AM
MR. BANNOCK cited the first part of AS 28.10.421(2), which read
as follows:
(2) an additional fee of $10 shall be added to
the registration fee set out in this section for
registration not conducted by mail or not conducted at
an emissions inspection station or contract office
offering vehicle registration services;
MR. BANNOCK concluded, "For the State of Alaska or for any
legislator to somehow criticize the surcharge, in my humble
opinion, sir, is the proverbial pot calling the kettle black."
CHAIR LYNN recognized Mr. Bannock's service [as former director]
of the DMV.
8:43:01 AM
CHAIR LYNN closed public testimony.
8:43:08 AM
SENATOR GIESSEL summarized that SB 127 was not just about
convenience, but was also about fairness, because the ABPs have
been doing work for the state for free. She mentioned a press
release from another committee, and she read as follows: "The
Division of Motor Vehicles director testified that they brought
in $48 million surplus ..., from DMV, in fiscal year 2013, from
registration fees." She opined that $2 of that actually belongs
to the ABPs.
8:44:02 AM
REPRESENTATIVE KELLER moved to adopt the proposed House
Committee Substitute (HCS) for SB 127, Version 28-LS1263\C,
Strasbaugh, 3/26/14, as a work draft. There being no objection,
Version C was before the committee.
8:44:15 AM
REPRESENTATIVE KELLER moved to report the proposed House
committee substitute (HCS) for SB 127, Version 28-LS1263\C,
Strasbaugh, 3/26/14, out of committee with individual
recommendations and the accompanying fiscal notes. There being
no objection, HCS SB 127(STA) was reported out of the House
State Affairs Standing Committee.