02/13/2014 09:00 AM Senate STATE AFFAIRS

               SB 127-VEHICLE TRANSACTION AGENTS                                                                            
                                                                                                                                
9:42:54 AM                                                                                                                    
SENATOR DYSON announced  that the next item of  business would be                                                               
SB 127.                                                                                                                         
                                                                                                                                
9:43:19 AM                                                                                                                    
FORREST  WOLFE, Staff  for Senator  Cathy  Giessel, Alaska  State                                                               
Legislature, Juneau,  Alaska, explained SB  127 on behalf  of the                                                               
sponsor. He  said SB  127 aims  to reduce  the Division  of Motor                                                               
Vehicle's  (DMV)  work,  thereby increasing  its  efficiency  and                                                               
making  customer  lines  shorter  through  the  use  of  Advanced                                                               
Business  Partnerships  (ABPs)   contracted  to  perform  certain                                                               
transactions statutorily mandated to  the DMV. It would outsource                                                               
certain  services to  the private  sector. Currently,  businesses                                                               
that  offer  these  services  are   paying  the  fees  for  these                                                               
transactions.                                                                                                                   
                                                                                                                                
He said SB  127 allows businesses to  retain administrative costs                                                               
for transactions  they are already conducting.  This is necessary                                                               
in  the interest  of fairness  because private  businesses should                                                               
not be footing the bill for  assisting the state by providing the                                                               
services. By allowing businesses to  retain these costs, there is                                                               
an  increased incentive  for businesses  to provide  the services                                                               
more frequently or to begin offering the services.                                                                              
                                                                                                                                
He pointed out  that this is not  a new concept in  Alaska. It is                                                               
already  being  used  by  the  Department of  Fish  and  Game  in                                                               
allowing  private  businesses  to  sell  and  issue  hunting  and                                                               
fishing  licenses. He  continued to  say, in  the face  of budget                                                               
shortfalls,  strategies  like SB  127  are  an effective  way  to                                                               
reduce government  through innovative use of  the private sector.                                                               
He concluded it  is good for the government,  for businesses, and                                                               
for the public. He urged support of SB 127.                                                                                     
                                                                                                                                
9:45:32 AM                                                                                                                    
SENATOR  WIELECHOWSKI   understood  that  businesses   have  been                                                               
providing this service for many years.                                                                                          
                                                                                                                                
MR. WOLFE said that was correct.                                                                                                
                                                                                                                                
SENATOR WIELECHOWSKI inquired how much the service fee is now.                                                                  
                                                                                                                                
MR. WOLFE said that is left up to the businesses.                                                                               
                                                                                                                                
SENATOR WIELECHOWSKI  inquired if SB  127 would result in  a loss                                                               
to the state of $1.2 million per year.                                                                                          
                                                                                                                                
MR. WOLFE said yes.                                                                                                             
                                                                                                                                
SENATOR WIELECHOWSKI noted  that the bill does not  have a Senate                                                               
Finance Committee referral.                                                                                                     
                                                                                                                                
MR. WOLFE agreed that it did not.                                                                                               
                                                                                                                                
SENATOR  WIELECHOWSKI summarized  that the  state is  giving $1.2                                                               
million to businesses for doing  work that they have already been                                                               
doing for years.                                                                                                                
                                                                                                                                
MR. WOLFE  agreed. He added that  it is more of  a fairness issue                                                               
to the private sector.                                                                                                          
                                                                                                                                
9:46:58 AM                                                                                                                    
SENATOR  WIELECHOWSKI  pointed  out   that  the  businesses  were                                                               
already charging a  service fee. He maintained that  the state is                                                               
transferring $1.2 million of the  people's money to companies for                                                               
doing  work they  have  been  doing for  years  and were  getting                                                               
nothing in return.                                                                                                              
                                                                                                                                
MR.  WOLFE indicated  that the  bill  would help  save the  state                                                               
labor costs  at DMV and would  assist the public's not  having to                                                               
wait in line at DMV.                                                                                                            
                                                                                                                                
SENATOR WIELECHOWSKI  asked for evidence of  personnel savings to                                                               
the state in the fiscal note.                                                                                                   
                                                                                                                                
MR. WOLFE said that is not reflected in the fiscal note.                                                                        
                                                                                                                                
9:48:28 AM                                                                                                                    
SENATOR GIESSEL explained that approximately  25 percent of DMV's                                                               
work load is performed by  businesses that have been facilitating                                                               
licenses and  footing the administrative cost.  She noted letters                                                               
of support for SB 127.                                                                                                          
                                                                                                                                
CHAIR DYSON noted  that in a diverse state such  as Alaska, there                                                               
are  a  lot of  small  communities  that  might open  a  boutique                                                               
registration  shop  within  another  business  as  a  service  to                                                               
clients.                                                                                                                        
                                                                                                                                
CHAIR DYSON opened public testimony.                                                                                            
                                                                                                                                
9:49:46 AM                                                                                                                    
MELISSA  CUCULLU,  General  Manager,   Alaska  Tags  and  Titles,                                                               
Palmer, Alaska, testified in support  of SB 127. She related that                                                               
her business has four convenient  locations in high traffic areas                                                               
for ease  of service  in Anchorage,  Wasilla, and  Fairbanks. She                                                               
said  she  was  approached  in  the summer  of  2004  to  open  a                                                               
privatized DMV office  in Wasilla to meet a need  the state could                                                               
not.  Between September  of  2004 and  December  of 2013,  agents                                                               
processed  341,000 transactions  generating over  $30 million  in                                                               
state revenue, saving  Alaskans a minimum of 20  years waiting in                                                               
line.                                                                                                                           
                                                                                                                                
She explained that on a daily  basis, branches receive 100 to 400                                                               
phone calls, the majority of  which pertain to drivers' licenses,                                                               
required documents,  and DMV  hours and  locations. The  calls do                                                               
not correlate to income for the  firm. With the increase in phone                                                               
calls, the firm  needed an upgraded phone system  and a dedicated                                                               
employee  whose  function is  to  answer  customer questions  and                                                               
navigate the state website.                                                                                                     
                                                                                                                                
She concluded that  the bill will assist the  company with credit                                                               
card processing fees, the required  technology and equipment, and                                                               
overhead costs,  allowing for expansion  to better  meet customer                                                               
needs. She thanked  the committee for its  time and consideration                                                               
of SB 127.                                                                                                                      
                                                                                                                                
9:51:52 AM                                                                                                                    
SENATOR WIELECHOWSKI asked  Ms. Cucullu if she  charges a service                                                               
fee.                                                                                                                            
                                                                                                                                
MS. CUCULLU replied  that they charge a service fee  based on the                                                               
transaction; $20 for  a registration renewal, $25  for a transfer                                                               
of title, and $30 for commercial fees.                                                                                          
                                                                                                                                
SENATOR WIELECHOWSKI  assumed that the company  received at least                                                               
a $20-to-$30 service fee for the 300,000 transactions.                                                                          
                                                                                                                                
MS. CUCULLU said that was correct.                                                                                              
                                                                                                                                
SENATOR WIELECHOWSKI  asked if  those are  standard rates  and if                                                               
the business is limited by what it can charge.                                                                                  
                                                                                                                                
MS. CUCULLU  replied that the state  does not dictate fees  to be                                                               
charged. The fees are standard amongst businesses.                                                                              
                                                                                                                                
SENATOR WIELECHOWSKI inquired if SB  127 would allow the business                                                               
to collect 15 percent. He asked how much the fees total.                                                                        
                                                                                                                                
MS. CUCULLU remarked that the  fees are based on the transaction.                                                               
For a duplicate  registration, the fee is $2, a  duplicate tag or                                                               
plate is $5, a registration for  transfer of title would be $115,                                                               
and  a commercial  transaction  is  based on  the  weight of  the                                                               
vehicle.                                                                                                                        
                                                                                                                                
CHAIR DYSON said this is eye-opening.                                                                                           
                                                                                                                                
9:54:29 AM                                                                                                                    
AVES  THOMPSON, Executive  Director, Alaska  Trucking Association                                                               
(ATA),  Anchorage, Alaska,  testified in  support of  SB 127.  He                                                               
related   his  company's   involvement  as   DMV  partners   that                                                               
facilitate the  handling of DMV transactions.  He maintained that                                                               
in order to  continue to provide that service,  ATA must generate                                                               
more revenue  to maintain and  grow the business. Each  day since                                                               
2006 ATA  has processed transactions  with no  compensation other                                                               
than nominal  service fees. He  said DMV provides  some supplies,                                                               
such as  title, registration forms,  tag and plates. In  order to                                                               
meet  the demands  of DMV  services, ATA  provides personnel  and                                                               
time. Compensation became  an issue when the  business started to                                                               
grow and  more income was needed.  He said ATA has  had to borrow                                                               
money  to  make DMV  payment  schedules,  and  has not  missed  a                                                               
deadline since 2006.                                                                                                            
                                                                                                                                
He  related  that   in  2013  ATA  processed   more  than  11,000                                                               
transactions and  generated more  than $1.6  million in  fees and                                                               
local taxes, of  which, $1.1 million in fee revenue  went to DMV.                                                               
He said he would  like to see the commission rate  in line 13, on                                                               
page  1, be  the same  for all  partners and  be memorialized  in                                                               
statute. He  concluded that it is  a matter of fairness  to share                                                               
the revenues with DMV's partners.                                                                                               
                                                                                                                                
9:58:20 AM                                                                                                                    
AMY ERICKSON,  Director, Division  of Motor  Vehicles, Anchorage,                                                               
Alaska,  answered  questions related  to  SB  127. She  expressed                                                               
appreciation  for the  sponsor's  desire to  codify the  business                                                               
relationships DMV has  been participating in since  1995 with the                                                               
first  emissions testing  service. That  service acted  as a  DMV                                                               
agent and  provided registration  renewal services. She  spoke of                                                               
DMV's  relationship  with  Alaska   Tags  and  Titles  and  other                                                               
services.  In  early  2000 DMV  opened  its  document  processing                                                               
program to  dealerships, financial institutions, and  stores. The                                                               
partnerships no  longer include  emissions testing  services, but                                                               
allow businesses to administer other  DMV services. She concluded                                                               
that  this legislation  would make  official  DMV's practices  of                                                               
partnering  with  private  business  to  conduct  its  title  and                                                               
registration services  and should positively impact  existing and                                                               
future business partnerships.                                                                                                   
                                                                                                                                
CHAIR   DYSON  asked   Ms.  Erickson   to   respond  to   Senator                                                               
Wielechowski's concern about loss of revenue to DMV.                                                                            
                                                                                                                                
MS. ERICKSON responded  that DMV does not have a  position on the                                                               
15 percent  charge. It would mean  a loss of $1.2  million to the                                                               
general fund - to all of  Alaskans. She noted that DMV is receipt                                                               
supported.                                                                                                                      
                                                                                                                                
10:00:58 AM                                                                                                                   
SENATOR  WIELECHOWSKI asked  if there  are parameters  related to                                                               
business partner service fees and  what the general range of fees                                                               
is.                                                                                                                             
                                                                                                                                
MS.  ERICKSON replied  that DMV  puts no  guidelines on  the fees                                                               
businesses can  charge. She said she  did request a list  of fees                                                               
each of  the for-profit partners' charges.  She said transactions                                                               
for registration  fees range  from $12  to $20,  plus $20  to the                                                               
state for registration.                                                                                                         
                                                                                                                                
SENATOR WIELECHOWSKI asked  about a chart that  shows DMV revenue                                                               
sources from  1997 to 2007. He  pointed out that 57.8  percent of                                                               
the revenue was  generated from DMV offices in  1997. That number                                                               
peaked at  61 percent and then  dropped to 45.8 percent  in 2007.                                                               
In that  same period  of time, the  business partners'  source of                                                               
revenue  increased   from  10.8  percent  to   28.3  percent.  He                                                               
suggested that  more people are  going to the  business partners.                                                               
He  concluded  that  those  companies  do  not  need  a  monetary                                                               
incentive to provide  DMV services because they  are making money                                                               
from service fees.                                                                                                              
                                                                                                                                
MS. ERICKSON commented that the  document was not provided by DMV                                                               
and she could not speak to it.                                                                                                  
                                                                                                                                
10:03:36 AM                                                                                                                   
SENATOR GIESSEL  indicated it  is noteworthy  that the  public is                                                               
choosing  the  more convenient  location  being  provided by  the                                                               
public sector.                                                                                                                  
                                                                                                                                
CHAIR  DYSON asked  if the  public  is aware  of the  comparative                                                               
prices  when weighing  convenience  against a  higher  cost at  a                                                               
business provider.                                                                                                              
                                                                                                                                
SENATOR GIESSEL speculated that the  cost is on the renewal form,                                                               
yet the public is choosing to go to the small businesses.                                                                       
                                                                                                                                
10:04:45 AM                                                                                                                   
DUANE  BANNOCK, Former  Director,  Department  of Motor  Vehicles                                                               
(DMV), Department of Administration,  Kenai, Alaska; testified in                                                               
support of SB  127. He stated that  the goal of DMV,  at the time                                                               
he was  director, was to decrease  the amount of time  the public                                                               
spent in line  at DMV. He said  a solution was to  expand the DMV                                                               
business partnership  program. He  referred to the  chart, saying                                                               
Senator  Wielechowski  is  correct  that in  2007,  there  was  a                                                               
decrease of  revenue in DMV  offices and an increase  in business                                                               
partner revenue.  He opined  that the  program was  doing exactly                                                               
what it was designed to do.  He shared a personal story about his                                                               
use of a business partner. He  testified in support of SB 127 and                                                               
said the concept is not new.                                                                                                    
                                                                                                                                
10:07:15 AM                                                                                                                   
CHAIR DYSON set aside SB 127 temporarily.                                                                                       
               SB 127-VEHICLE TRANSACTION AGENTS                                                                            
                                                                                                                                
[Due  to technical  difficulties,  the recording  began again  at                                                               
10:14.]                                                                                                                         
                                                                                                                                
CHAIR  DYSON  returned  to  SB   127  and  public  testimony.  He                                                               
described his positive experiences with DMV.                                                                                    
                                                                                                                                
10:14:32 AM                                                                                                                   
CHAIR DYSON  suspected DMV business  partners gain  business from                                                               
DMV-related traffic.                                                                                                            
                                                                                                                                
SENATOR  COGHILL asked  if DMV  has a  good working  relationship                                                               
with the vendors.                                                                                                               
                                                                                                                                
MS. ERICKSON said it was a cordial relationship.                                                                                
                                                                                                                                
10:16:18 AM                                                                                                                   
CHAIR DYSON closed public testimony.                                                                                            
                                                                                                                                
10:16:30 AM                                                                                                                   
SENATOR COGHILL  brought up  the delta  to the  cash flow  of the                                                               
state. He inquired  about the value of this  service to Alaskans,                                                               
aside from convenience.                                                                                                         
                                                                                                                                
SENATOR GIESSEL noted that letters  of support for SB 127 provide                                                               
evidence  of a  qualitative benefit,  rather than  a quantitative                                                               
benefit.  A variety  of users,  such as  cab companies,  trucking                                                               
organizations,  and others,  appreciate the  convenience and  use                                                               
private vendors a lot.                                                                                                          
                                                                                                                                
SENATOR COGHILL agreed  that DMV has improved  the convenience of                                                               
their services, but there are  still many in-person requirements.                                                               
In Fairbanks, the DMV office is  18 miles away, whereas, a vendor                                                               
is  only 6  miles away.  He agreed  with Chair  Dyson that  it is                                                               
about serving Alaskans better. He spoke in support of the bill.                                                                 
                                                                                                                                
CHAIR DYSON  said snowmobile dealers allow  registration. Dealers                                                               
largely provide for a service that is related to their business.                                                                
                                                                                                                                
10:19:10 AM                                                                                                                   
SENATOR  COGHILL  moved to  report  SB  127 from  committee  with                                                               
individual recommendations and attached fiscal notes.                                                                           
                                                                                                                                
SENATOR  WIELECHOWSKI  agreed  that vendors  are  convenient  for                                                               
consumers.  He voiced  concern that  the  businesses are  already                                                               
getting money  for transactions and  should not be paid  more. He                                                               
did not think  it was fiscally prudent for the  state to pay $1.2                                                               
million to  businesses for  DMV services.  He suggested  that the                                                               
bill have  a Senate Finance  Committee referral. He said  he will                                                               
vote "do not pass" on SB 127, as it is currently written.                                                                       
                                                                                                                                
SENATOR GIESSEL  countered that the bill  provides an opportunity                                                               
to  reduce the  size  of government  and  encourages the  private                                                               
sector to take on more  pieces of government; it provides revenue                                                               
to and convenience for, the community.                                                                                          
                                                                                                                                
CHAIR  DYSON shared  some of  Senator Wielechowski's  concern. He                                                               
opined that  businesses will not  raise fees due  to competition,                                                               
so they  are asking  for a  cut from  DMV to  subsidize business,                                                               
instead. He noted  that several businesses reported on  a need to                                                               
upgrade their  equipment and technology  in order to  continue to                                                               
provide services.                                                                                                               
                                                                                                                                
10:22:19 AM                                                                                                                   
SENATOR  GIESSEL  remarked   that  it  is  a   quality  issue  of                                                               
convenience. The public is willing to  pay a few more dollars for                                                               
the convenience. She opined that the  loss of $1.2 million to DMV                                                               
has actually been  a gain to DMV all this  time because companies                                                               
have been providing the service all along.                                                                                      
                                                                                                                                
CHAIR DYSON asked Ms. Erickson if DMV endorses SB 127.                                                                          
                                                                                                                                
MS.  ERICKSON  replied that  DMV  is  neutral  on the  bill.  She                                                               
appreciated that  it would  codify what DMV  is already  doing in                                                               
practice.                                                                                                                       
                                                                                                                                
CHAIR DYSON asked  if the administration is  comfortable with the                                                               
net loss to the general fund.                                                                                                   
                                                                                                                                
MS.  ERICKSON said  she has  not had  any conversations  with the                                                               
Department of Revenue or the commissioner about that.                                                                           
                                                                                                                                
SENATOR  WIELECHOWSKI asked  Ms. Erickson  if she  stated SB  127                                                               
would codify what DMV does in practice.                                                                                         
                                                                                                                                
MS. ERICKSON said agreements are  in place with business partners                                                               
and the bill would make them official.                                                                                          
                                                                                                                                
SENATOR WIELECHOWSKI asked if DMV  is compensating businesses for                                                               
15 percent of the proceeds now.                                                                                                 
                                                                                                                                
MS. ERICKSON said DMV does not currently compensate businesses.                                                                 
                                                                                                                                
10:25:20 AM                                                                                                                   
CHAIR DYSON asked  if the fees businesses charge  for service are                                                               
currently codified.                                                                                                             
                                                                                                                                
MS.  ERICKSON said  fees  are not  codified.  She apologized  for                                                               
making the previous blanket statement.                                                                                          
                                                                                                                                
SENATOR  WIELECHOWSKI summarized  that, currently,  companies are                                                               
allowed  to  charge  a  service  fee. The  bill  allows  that  to                                                               
continue,  plus  companies will  be  allowed  15 percent  of  the                                                               
proceeds.                                                                                                                       
                                                                                                                                
MS. ERICKSON agreed.                                                                                                            
                                                                                                                                
10:26:22 AM                                                                                                                   
CHAIR DYSON announced that the committee would stand at ease.                                                                   
                                                                                                                                
10:27:30 AM                                                                                                                   
SENATOR COGHILL withdrew the motion to report SB 127 out of                                                                     
committee.                                                                                                                      
                                                                                                                                
CHAIR DYSON announced that SB 127 would be held in committee.