04/25/2024 01:00 PM House TRANSPORTATION
| Audio | Topic |
|---|---|
| Start | |
| Presentation(s): Financing Infrastructure in Alaska | |
| HB233 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| + | SB 141 | TELECONFERENCED | |
| + | SB 127 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | HB 233 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE TRANSPORTATION STANDING COMMITTEE
April 25, 2024
1:02 p.m.
MEMBERS PRESENT
Representative Kevin McCabe, Chair
Representative Sarah Vance, Vice Chair
Representative Tom McKay
Representative Craig Johnson
Representative Jesse Sumner
Representative Louise Stutes
Representative Genevieve Mina
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
PRESENTATION(S): FINANCING INFRASTRUCTURE IN ALASKA
- HEARD
HOUSE BILL NO. 233
"An Act relating to rates and time allowances for motor vehicle
warranty work."
- HEARD & HELD
COMMITTEE SUBSTITUTE FOR SENATE BILL NO. 141(TRA)
"An Act naming the Raymond and Esther Conquest Bridge."
- BILL HEARING CANCELED
COMMITTEE SUBSTITUTE FOR SENATE BILL NO. 127(FIN)
"An Act relating to vehicle rental taxes; relating to the
issuance of subpoenas related to tax records; and providing for
an effective date."
- BILL HEARING CANCELED
PREVIOUS COMMITTEE ACTION
BILL: HB 233
SHORT TITLE: RATES: MOTOR VEHICLE WARRANTY WORK
SPONSOR(s): REPRESENTATIVE(s) TOMASZEWSKI
01/16/24 (H) PREFILE RELEASED 1/8/24
01/16/24 (H) READ THE FIRST TIME - REFERRALS
01/16/24 (H) L&C, JUD
03/06/24 (H) L&C AT 3:15 PM BARNES 124
03/06/24 (H) Heard & Held
03/06/24 (H) MINUTE(L&C)
03/15/24 (H) L&C AT 3:15 PM BARNES 124
03/15/24 (H) -- MEETING CANCELED --
03/22/24 (H) L&C AT 3:15 PM BARNES 124
03/22/24 (H) Heard & Held
03/22/24 (H) MINUTE(L&C)
04/18/24 (H) TRA REPLACES JUD REFERRAL
04/22/24 (H) L&C AT 3:15 PM BARNES 124
04/22/24 (H) Moved HB 233 Out of Committee
04/22/24 (H) MINUTE(L&C)
04/23/24 (H) TRA AT 1:00 PM BARNES 124
04/23/24 (H) <Bill Hearing Canceled>
04/24/24 (H) L&C RPT 2DP 4NR
04/24/24 (H) DP: WRIGHT, CARRICK
04/24/24 (H) NR: FIELDS, PRAX, SADDLER, RUFFRIDGE
04/25/24 (H) TRA AT 1:00 PM BARNES 124
WITNESS REGISTER
RANDY RUARO, Executive Director
Alaska Industrial Development and Export Authority
Anchorage, Alaska
POSITION STATEMENT: Co-presented a PowerPoint, titled
"Financing Infrastructure in Alaska."
BRANDON BREFCZYNSKI, Deputy Director
Alaska Industrial Development and Export Authority
Anchorage, Alaska
POSITION STATEMENT: Co-presented a PowerPoint, titled
"Financing Infrastructure in Alaska."
GEOFF JOHNS, Chief Investment Officer
Alaska Industrial Development and Export Authority
Anchorage, Alaska
POSITION STATEMENT: Co-presented a PowerPoint, titled
"Financing Infrastructure in Alaska."
MARK DAVIS, Special Counsel
Alaska Industrial Development and Export Authority
Anchorage, Alaska
POSITION STATEMENT: Co-presented a PowerPoint, titled
"Financing Infrastructure in Alaska."
DAVID GOFF, Staff
Representative Frank Tomaszewski
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Introduced HB 233 on behalf of
Representative Frank Tomaszewski, prime sponsor.
LES NICHOLS, General Manager
Fairbanks Nissan
Fairbanks, Alaska
POSITION STATEMENT: Presented a PowerPoint, titled "House Bill
233 Relating to Time Allowances for Warranty Work."
SUSAN HICKS, Service Director
Fairbanks Chrysler
Fairbanks, Alaska
POSITION STATEMENT: Gave invited testimony in support of HB
233.
JOSH GEIER, Service Manager
Seekins Ford Lincoln
Fairbanks, Alaska
POSITION STATEMENT: Gave invited testimony during the hearing
on HB 233.
ERIC CONNICK, General Manager
Lithia Kia of Anchorage
Anchorage, Alaska
POSITION STATEMENT: Gave invited testimony during the hearing
on HB 233.
JERRY HEADSTROM, Master Technician
Continental Honda
Anchorage, Alaska
POSITION STATEMENT: Gave invited testimony during the hearing
on HB 233.
TODD NOVAK, Service Manager
Anchorage Chrysler
Anchorage, Alaska
POSITION STATEMENT: Gave invited testimony in support of HB
233.
ACTION NARRATIVE
1:02:53 PM
CHAIR KEVIN MCCABE called the House Transportation Standing
Committee meeting to order at 1:02 p.m. Representatives McKay,
Vance, Stutes, Mina, and McCabe were present at the call to
order. Representatives C. Johnson and Sumner arrived as the
meeting was in progress.
^PRESENTATION(S): Financing Infrastructure in Alaska
PRESENTATION(S): Financing Infrastructure in Alaska
1:04:02 PM
CHAIR MCCABE announced that the first order of business would be
the Financing Infrastructure in Alaska presentation.
1:05:02 PM
RANDY RUARO, Executive Director, Alaska Industrial Development
and Export Authority, began a PowerPoint, titled "Financing
Infrastructure in Alaska" [hard copy included in the committee
packet] on slide 2, titled "What is AIDEA?" He expounded on
each point on the slide, which featured the mission statement of
the Alaska Industrial Development and Export Authority (AIDEA),
as well as an AIDEA overview. He spoke to AIDEA's purpose to
create jobs and economic development, but that there was a
finding made by the legislature some years back where they found
that unemployment was a "serious menace" to the health, safety,
and general welfare for the people of the entire state. He
explained that currently, there were data and studies related to
difficulties in rural Alaska, and that isolation and lack of
access to jobs, education, and socio-economic ability all
contributed to high suicide rates. He noted that the rates are
much reduced when people are gainfully employed.
1:08:11 PM
REPRESENTATIVE VANCE asked what the year of the legislative
finding was.
MR. RUARO offered his understanding that it was 1967, which was
well before the study which took place in approximately 2022.
CHAIR MCCABE interjected that it would be beneficial to find out
the difference in suicide rates for economically developed areas
versus those of places like fishing communities.
1:09:50 PM
MR. RUARO related that studies performed showed how important a
good job is to a rural subsistence lifestyle in terms of being
able to afford it, such as the prices of gasoline and food. He
continued on slide 3, titled "AIDEA's Purpose," which read as
follows [original punctuation provided]:
WITHIN AS 44.88.010(a)(10), the Legislature finds,
determines, and declares that:
It is in the public interest to promote the prosperity
and general welfare of all citizens of the state by:
(A) stimulating commercial and industrial growth and
expansion by encouraging an increase of private
investment by banks, investment houses, insurance
companies, and other financial institutions, including
pension and retirement funds, to help satisfy the need
for economic expansion; AIDEA's Purpose
(B) encouraging the production of raw materials and
goods for export, the expansion of exports and raw
materials and goods?;
(C) creating the Alaska Industrial Development and
Export Authority with the powers necessary to
accomplish the objectives stated in this paragraph,
including the power to issue taxable and taxexempt
bonds, to acquire ownership interests in projects, and
to provide development project financing
1:13:34 PM
BRANDON BREFCZYNSKI, Deputy Director, Alaska Industrial
Development and Export Authority, joined the presentation on
slide 4, titled "AIDEA's Financial Toolbox," which showed seven
components that he walked the committee through. Featured were
loan participation; project finance; conduit revenue bonds;
energy and resource development; AIDEA bonds; and strong
investment relationships and financial expertise.
1:16:27 PM
REPRESENTATIVE STUTES expressed interest in what the rate of
return was on the Ketchikan shipyard.
MR. RUARO replied that it was not high, and not much larger than
1-2 percent. He noted that there would be future meetings with
the shipyard to find solutions and increase the return,
business, and grow jobs at the same time. In response to
Stutes, he said that if the yard and rate of return cannot
improve, then selling it or finding a different operator are
options for the board to consider. He stated that an internal
review was underway.
REPRESENTATIVE STUTES noted the multitude of years that [the
yard] had been a loss to the state and said she was glad the
issue was being addressed.
1:19:31 PM
CHAIR MCCABE asked about the economic benefits of having the
shipyard [in Ketchikan] and whether transportation jobs were
being tracked.
MR. RUARO estimated there were between 80 and 120 jobs per year,
which were largely craftsman-type jobs and provided by the
shipyard. In addition, he noted that materials needed were
bought locally, which contributed to the economy.
CHAIR MCCABE commented on the idea of fishing boats and whether
it was something for which the community was asking.
MR. RUARO confirmed that the community leaders support getting
more business through the yard, and he noted a meeting coming up
with them. The goal, he said, is to try to improve the yard and
achieve a steady flow of work.
1:21:37 PM
MR. RUARO, continuing the discussion on the tools in AIDEA's
"toolbox," including the ability to finance renewable energy
projects under federal law at a positive match rate.
CHAIR MCCABE mentioned an amendment that was passed recently
giving AIDEA bonding authority. He related hearing from someone
who stated that "it was just an empty vessel." He asked Mr.
Ruaro to expound.
MR. RUARO said one of the federal programs active right now
includes credit and loan opportunities for projects that involve
rare earth minerals, and AIDEA can take advantage of the federal
funds but still must do its due diligence. He noted Alaska's
abundance of rare earths, which are a key element for defense,
as well.
1:25:49 PM
MR. RUARO moved to slide 6, titled "AIDEA-Financed Projects."
MR. BREFCZYNSKI added that slide 6 featured a list of the types
of projects around the state that AIDEA had financed or acquired
in the past.
1:26:34 PM
GEOFF JOHNS, Chief Investment Officer, Alaska Industrial
Development and Export Authority, joined the presentation on
slide 7, titled "Best-Fit AIDEA Projects," which featured a
graph of the evolution of basic investment projects. He
proceeded to slide 8, titled "AIDEA Project Finance," which read
as follows [original punctuation provided]:
• AS 44.88.172 - Economic Development Account (EDA)
• Establishes the EDA within AIDEA's Revolving Fund
• Monies within the EDA may be used to:
• Make loans
• Issue bonds
• Acquire assets
• Manage & operate development projects
• Currently, AIDEA has issued loans from the EDA, but
has outstanding bond obligations
• AS 44.88.800 Arctic Infrastructure Development
Fund
• Similar to the EDA, but with a geographical focus on
the Arctic
• Can finance 33% of an eligible project
• Loan guarantees up to $20 million
• AS 44.88.900 Definitions of "Plant," "Facility,"
and "Project"
• Generally, a plant or facility in connection with a
business enterprise
• Includes roads, buildings, machinery, and real
property
1:29:32 PM
CHAIR MCCABE expressed interest in talking about the railroad
and asked what category it would fit in pertaining to slide 8.
MR. JOHNS replied that under AIDEA's ability, within enhanced
bonding capacity, it could largely fit under a project revenue
type of bond as something of that size would be more suitable to
bonds.
MR. BREFCZYNSKI added that the bonding authority the committee
provided AIDEA for critical mineral projects could possibly be
used to enhance the Port MacKenzie railway.
CHAIR MCCABE gave an example of hauling antimony from Fairbanks
to Port MacKenzie and asked whether that was the "critical
mineral we are all talking about."
MR. RUARO confirmed that was correct and expressed his belief it
could fit under Title 17 programs. He offered to follow up with
a citation of the federal statute and some of the history.
1:33:38 PM
MARK DAVIS, Special Counsel, Alaska Industrial Development and
Export Authority, joined the presentation on slide 9, titled
"AIDEA Bonding Authority," which read as follows [original
punctuation provided]:
? AS 44.88.090 Bonds of the Authority
? AIDEA can finance infrastructure by issuing bonds
that are repaid from:
? Income derived from the project; and/or
? Income derived from AIDEA.
? AS 44.88.095 Bonding Limitations
? AIDEA can issue bonds up to $25 million without
legislative approval;
? AIDEA cannot have more than $400 million of
outstanding bonds in a 12-month period;
? Bonds cannot mature more than 40 years from the date
of issuance.
? AS 44.88.120 Nonliability on Bonds
? The State of Alaska is not financially responsible
for AIDEA's debts, nor can AIDEA make financial
commitments or enter into agreements on behalf of the
State.
? AS 44.88.130 Pledge of the State
? The State of Alaska pledges to respect AIDEA's
financial autonomy and not hinder AIDEA's ability to
work with private financial markets or fulfil contract
terms
1:35:52 PM
REPRESENTATIVE STUTES observed the point that AIDEA could issue
bonds up to $25 million without legislative approval and asked
whether the amount is affected by the $300 million authority
that the legislature had given AIDEA.
MR. DAVIS replied only for specific purposes. Slide 10 was
shown, titled "AIDEA Bonding Capacity," which read as follows
[original punctuation provided]:
? AIDEA's bonding capacity is subject to determination
by external credit rating agencies and their
evaluation of AIDEA's credit standing.
? Prior to 2019, AIDEA held long-term credit ratings
of AA+ by S&P and Aa3 by Moody's, based in large part
to AIDEA's capital reserves in place and AIDEA's
dividend program.
? In 2019, the Legislature appropriated $2 million
from AIDEA's Revolving Fund that was not part of the
AIDEA Dividend.
? As a result, Moody's downgraded AIDEA's Revolving
Fund bonds by two steps, referencing "the Revolving
Fund bonds' exposure to actions the state may take as
it seeks to adopt a revenue model less dependent on
North Slope oil production."
? AIDEA's capacity to provide financing opportunities
is directly related to the asset base available to
support those investments.
1:37:58 PM
MR. RUARO continued on slide 12, titled "AIDEA Infrastructure
Development Delong Mountain Transportation System," which read
as follows [original punctuation provided]:
? AIDEA-owned asset.
? In 1986, AIDEA funds mine, road, and port with $160
million.
? AIDEA saves mine in 1990's with funding $85 million
for expansion.
? Mine could continue to be successful with deposits
on state land.
? Project provides significant economic benefits.
? Project continues to yield significant dividends for
NANA (royalty of $255 million in 2021 and shares ~60%
of the royalty with other Regional Corporations).
? Future opportunities also exist (Aktigiruq prospect
could be one of the largest undeveloped zinc deposits
in the world).
MR. RUARO frequently mentioned the Red Dog mine and encouraged
committee members to visit as it is very focused on local hire.
1:41:42 PM
MR. RUARO proceeded to slide 13, titled "AIDEA Project Finance
FEDEX Aircraft Hangar," which he described as a significant
success. The airport was a major driver of jobs and economic
development in Anchorage, he said. He quickly moved through
slide 14, titled "Ketchikan Shipyard," where he highlighted
activities of the vessels; however, he stressed that AIDEA
needed larger customers, and he said they are working hard to
accomplish this.
1:42:52 PM
MR. BREFCZYNSKI continued to slide 15, titled "West Susitna
Access Project," which featured a map of AIDEA's project
location. He proceeded to slide 16, titled "Why is the West-Su
Access Project Important?" He said that it is "not a road to
nowhere" but a road to a tremendous amount of resources, land,
and recreational activities for Alaskans. He moved to slide 17,
titled "West-Susitna Access - AIDEA Project Update," which read
as follows [original punctuation provided]:
• 2024 field season planning underway
? Analyze data gaps in the following areas:
?LiDAR Acquisition and Mapping
?Alternatives Conceptual Engineering
?Cultural Resources Studies
?Wetlands Studies
?Fish Studies
?Visual Resource Studies Estimated 2024 Field Season
Cost:
? ~ $1.6 million
1:46:01 PM
MR. BREFCZYNSKI, in response to Chair McCabe, clarified that he
had said a 24-foot-wide road with 32-foot-wide bridges, and he
noted the alignment is designed in a way that the road could be
expanded in the future.
MR RUARO added that the road is also a utility corridor;
therefore, if the project were built, it would serve renewable
energy into the grid.
1:47:03 PM
REPRESENTATIVE VANCE asked where the rail would fall on the map
[on slide 15] if it were to be adopted.
MR. RUARO pointed out its location but explained that the map
would have to be expanded to show the rail. He offered to
provide a more encompassing map.
REPRESENTATIVE VANCE asked whether there had been conversations
about partnerships between the road and the rail.
MR. RUARO responded that AIDEA had looked at ways to partner
together and they are in discussions with the railroad.
REPRESENTATIVE VANCE inquired what AIDEA's process was.
MR. RUARO explained that their process was similar to what they
used on the Red Dog mine, in that they permit the road and get
it construction ready, and then negotiations with entities
occur. Bond payments would then be made by the private sector,
he said.
REPRESENTATIVE VANCE referred to the process of, for example,
Port MacKenzie rail coming to the legislature for a request.
She inquired into AIDEA's process in this type of partnership.
MR. RUARO answered that internally, AIDEA would get the project
permitted and then get the arrangements with the private sector
in place. Depending on the current status of the bonding
authority through the legislature, it would come for approval
and review the finance plan.
REPRESENTATIVE VANCE observed a gap in conversation with what is
needed in the private sector and viability. If AIDEA saw a
beneficial project, she asked whether it would wait for private
investors.
MR. RUARO replied that AIDEA would proactively outreach to
private sectors, but it is more common that they come to AIDEA
first.
1:53:45 PM
CHAIR MCCABE expressed interest in how an entity like the
Pacific NorthWest Economic Region (PNWER) and the Regional
Infrastructure Accelerator (RIA) loan program could fit in.
MR. RUARO responded that AIDEA's goal is always to find the
lowest cost financing so it puts the least burden on the private
sector and is therefore more likely to succeed. He added that a
combination of different things are looked into as well as due
diligence reviews.
1:55:21 PM
REPRESENTATIVE STUTES brought up an article that noted
questionable expenditures in the amount of approximately $54
million.
MR. RUARO said there was a complaint letter filed by an
environmental organization that stated AIDEA was not allowed to
spend or invest in projects without every decision being
approved by the legislature. He added that AIDEA is working on
a response to the Ombudsman on that issue.
REPRESENTATIVE STUTES asked whether it had anything to do with
the $25 million [bonding] authority.
MR. RUARO replied that it did not relate to AIDEA's bonding
authority, but to its authority in general to invest in
projects.
1:57:39 PM
REPRESENTATIVE MINA asked for an update regarding the online
checkbook, and whether there was a timeline.
MR. RUARO confirmed that AIDEA had recent discussions with
information technology (IT) about some lapses in communication,
but it is working on getting integrated as soon as possible. In
response to a follow-up question, he said there is no timeline
currently and he would check with IT.
1:58:52 PM
CHAIR MCCABE thanked the team for their presentation.
HB 233-RATES: MOTOR VEHICLE WARRANTY WORK
1:59:27 PM
CHAIR MCCABE announced that the final order of business would be
HOUSE BILL NO. 233, "An Act relating to rates and time
allowances for motor vehicle warranty work."
2:00:00 PM
DAVID GOFF, Staff, Representative Frank Tomaszewski, Alaska
State Legislature, introduced HB 233 on behalf of Representative
Tomaszewski, prime sponsor. He read from the sponsor statement
[included in the committee packet], which read as follows:
House Bill 233 makes a key change to the auto warranty
statute by adding time allowances to the schedule of
compensation for warranty work. Thousands of Alaskans
benefit from warranty work every year as part of their
agreement with auto manufacturers from whom they've
purchased their car. By agreeing to sell cars on
behalf of certain manufacturers, auto dealers assume
the responsibility of coordinating the time and labor
spent performing warranty repair work on their cars.
Warranty work differs from regular auto work in that
the manufacturer compensates the dealer directly.
Additionally, qualified dealers do not have the
ability to refuse the work. Auto manufacturers
compensate dealers for warranty work using rates and
time allowances that dictate the maximum amount of
time that the dealer may bill for different repairs.
The rates and time allowances that manufacturers use
to reimburse dealers for warranty work are often much
lower than the rates and time allowances that dealers
and independent mechanics bill customers for non-
warranty work. As a result, dealers are often forced
to pay their mechanics more than they are compensated
by the manufacturer or risk losing their mechanics to
independent auto shops. Across the nation, states have
taken varied approaches to addressing how to ensure
fair payment for dealers by manufacturers. Senate Bill
144 takes an approach used by states like Colorado,
Montana, and Illinois by requiring that manufacturers
compensate dealers for warranty work at the same rates
and time allowances that the dealer charges retail
customers for similar, non-warranty work.
2:03:11 PM
REPRESENTATIVE STUTES asked what prompted the bill.
MR. GOFF replied that staff had visited dealerships within
Fairbanks, and it was brought to their attention that this bill
was brought forward six years ago to the legislature but was
referred back to working with manufacturers and dealers to try
and get something worked out between them, but manufacturers
were not willing to negotiate; therefore, the bill was brought
back to try and achieve some resolution.
REPRESENTATIVE STUTES asked whether the manufacturers or dealers
had any communication about negotiating this situation.
MR. GOFF said he wished to defer to the dealers to respond.
2:04:19 PM
REPRESENTATIVE MCKAY related that he had friends on both sides
of the issue and shared his effort to understand the situation.
He asked whether all major U.S. car manufacturers were involved
in this.
MR. GOFF replied yes, they are all represented and available to
testify.
REPRESENTATIVE MCKAY gave an example of changing a transmission
under perfect conditions, that it takes 8 hours, and they get
paid hourly. In reality, he added, more things may need to
happen, and the job may take ten hours. He asked whether the
real debate was over the two hours.
MR. GOFF agreed that that was correct and confirmed that there
was a difference in the hours the manufacturer says it will take
and actual hours to complete a job.
2:07:34 PM
The committee took an at-ease from 2:07 p.m. to 2:08 p.m.
2:09:08 PM
LES NICHOLS, General Manager, Fairbanks Nissan, presented a
PowerPoint, titled "House Bill 233 Relating to Time Allowances
for Warranty Work" [hard copy included in the committee packet]
and gave a brief overview of the Alaska Auto Dealers Association
(AADA), on which he stated he is also serves as board member.
He proceeded to slide 4, titled "Why do all 50 States Need Auto
Dealer Franchise Protections?," which read as follows [original
punctuation provided]:
In 1978, the United States Supreme Court recognized
the need for motor vehicle dealer franchise laws:
Dealers are, with few exceptions, completely
dependent on the manufacturer for their supply of
cars. When the dealer has invested to the extent
required to secure a franchise, he becomes, in a real
sense, the economic captive of his manufacturer. The
substantial investment of his own personal funds by
the dealer in the business, the inability to convert
easily the facilities to other uses, the dependence
upon a single manufacturer for supply of automobiles,
and the difficulty of obtaining a franchise from
another manufacturer all contribute toward making the
dealer an easy prey for domination by the factory. On
the other hand, from the standpoint of the automobile
manufacturer, any single dealer is expendable. The
faults of the factory-dealer system are directly
attributable to the superior market position of the
manufacturer."
MR. NICHOLS expressed his gratitude for the resistance and
representatives getting involved in private contracts and he
opined it is the right thing to do.
2:14:20 PM
MR. NICHOLS continued speaking to negotiations, and he proceeded
to slide 5, titled "In 2018 the Alaska Legislature Found," which
read as follows [original punctuation provided]:
LEGISLATIVE FINDINGS AND INTENT.
(a) The legislature finds that
(1) the distribution and sale of motor vehicles in the
state affects the general economy of the state and the
interests and welfare of the residents of the state;
(2) providing warranty service for new motor vehicles
is a matter of substantial concern to the residents of
the state;
(3) the maintenance of fair competition among new
motor vehicle dealers is in the public interest;
(4) maintaining strong and sound new motor vehicle
dealerships in the state is essential to providing the
consuming public with continuing and reliable services
necessary for their motor vehicles; and
(5) strong and sound new motor vehicle dealerships
with active service departments will provide stable
employment opportunities to the residents of the
state.
(b) The legislature declares that this Act is
remedial, and, to the extent permitted by the
Constitution of the State of Alaska and the United
States Constitution, it is the intent of the
legislature that the provisions of this Act apply to
all franchise agreements between manufacturers and new
motor vehicle dealers.
2:16:31 PM
MR. NICHOLS continued on slide 6, titled "The Problem," which
read as follows [original punctuation provided]:
• Manufacturers help themselves to a massive self-
decided discount on the time they will pay dealers and
our employees for their warranty repairs.
• Automotive News February 27, 2023
• 'Mr. White previously worked as a field service
manager for Ford and stated that manufacturers
aggressively discount labor time estimates.'
• Technicians are avoiding working for dealerships
because they are paid for more hours for the same work
when they work for an independent repair facility.
• Their discounts shift the expense of warranty
repairs from the manufacturer, directly to Alaskan
consumers, employees, and businesses.
2:17:41 PM
CHAIR MCCABE offered his belief that the problem was that for
warranty work, mechanics are paid a flat rate, and essentially,
the mechanics suffer.
MR. NICHOLS concurred and said that he could provide a
breakdown.
CHAIR MCCABE observed that there were extra steps a mechanic
must take in doing a particular job that added to the time on
that job.
MR. NICHOLS agreed that that can be a factor but there are other
factors, and he gave examples.
2:20:05 PM
MR. NICHOLS continued the discussion while slide 7 was shown,
which featured a J.D. Power 2019 and 2023 U.S. Initial Quality
Study (IQS). Two line charts representing each year listed
multiple car manufactures and problems per 100 vehicles.
2:23:15 PM
REPRESENTATIVE MINA asked what the colors on the graphs signify.
MR. NICHOLS replied he was not sure but that the gray in the
middle was the average of the industry. He proceeded to slide
8, titled "Cost Shifting by Manufacturers to Alaskan Consumers."
The slide featured a 2020 Ram 1500 engine replacement job and
what the job cost Alaska customers versus what the manufacturer
warranty pays. He gave an analysis of the numbers listed on the
slide.
2:28:30 PM
MR. NICHOLS moved to slide 9, titled "Who Is Affected," which
read as follows [original punctuation provided]:
Automobile Manufacturers take these discounts out of
the hands of Alaskan employees, Alaskan businesses,
and the Alaskan economy to unfairly pad their bottom
line.
Alaskan Employees technicians are unable to bill
full hours for their work, resulting in lower pay for
them and their support staff, including service
writers and service managers.
Alaskan Businesses Fairbanks lost Buick, Cadillac,
Daewoo, Hyundai, Kia (twice), Mazda, Mercedes, and VW.
Juneau lost Chevy(once) Ford, Mazda, VW. Ketchikan
lost Subaru, Ford, and Chevrolet. Kenai lost
Chevrolet, Kodiak lost Ford. Anchorage lost Mitsubishi
and Volvo.
Alaskan Consumers The burden of manufactures'
discounts directly raise prices on the Alaskan
consumer.
2:30:20 PM
REPRESENTATIVE MINA asked what percentage of employees are
moving to independent facilities versus moving out of state.
MR. NICHOLS replied that there is some data he did not have, but
he related an example of a store shutting down and the impacts
it would cause. He noted that the oil and mining industries and
the Department of Transportation and Public Facilities (DOT&PF)
all desire mechanics, as mechanics are in high demand.
2:34:45 PM
MR. NICHOLS continued on slide 10, titled "Solution," which read
as follows [original punctuation provided]:
• This bill would require manufacturers to pay the
same number of hours for a repair that a customer
would be charged for non-warranty work by using an
industry-wide time guide rather than their discounted
time guide.
• This bill would provide protection to Alaskans by
requiring manufacturers to pay equal compensation for
doing warranty work versus non-warranty customer work.
• This bill would create a level playing field for the
Alaskan consumer by preventing the manufacturer from
inflating the cost of repairs on consumers by
discounting time from dealers and our service
employees.
MR. NICHOLS advanced to slide 11, titled "Important Points,"
which read as follows [original punctuation provided]:
• Manufacturers believe they deserve a discount for
volume work.
• They have very sophisticated methods to extract
discounts
• They are not our biggest customers, the Alaskan
consumers are.
• They claim this is a "money grab" by Dealers when we
try and level the playing field, but not so when they
are taking money from Alaskan workers, businesses, and
consumers.
• Manufacturers know that the contracts they offer are
contracts of adhesion where the parties are of such
disproportionate bargaining power that the party of
weaker bargaining power could not have negotiated for
variation in the terms of the contract.
• Manufacturers know their contracts have to be
addressed by State Legislatures in order to be
compliant with federal anti-trust laws. • They know
these protections can only be provided by state law.
2:39:12 PM
MR. NICHOLS concluded on slide 12, which read as follows
[original punctuation provided]:
"the simple fact is that auto manufacturers retain to
this day a massive economic power advantage over their
franchised dealers, resulting from market structure,
manufacturer behavior, and intrusion in the market by
the federal antitrust statutes. And manufacturers
often use this excess power to overreach and act
opportunistically in their relationships with their
dealers, to the detriment of dealers and ultimately
consumers.
The state franchise laws that have been enacted
operate to counteract these anomalies and to afford
the dealers a reasonable opportunity to negotiate
their economic relationships."
The National Automobile Dealers Association also
explained the compelling need for state franchise laws
in its recent comments to the FTC
MR. NICHOLS added that they are "descent negotiators" and want
their rights given back. He encouraged questions from committee
members.
2:42:41 PM
CHAIR MCCABE welcomed invited testifiers.
2:43:39 PM
SUSAN HICKS, Service Director, Fairbanks Chrysler, stated that
manufacturers' warranty repair times are not based on real world
scenarios, and she related contents of an article published in
relation to her statement. She gave examples of extra time a
repair job can take due to various reasons. Her dealership, she
said, has had major losses because the technicians could not
make a realistic living. She opined that passage of the bill
would make Alaska dealerships more competitive and could create
a substantial economic impact. She asked, "Could your family
survive if you worked eight hours a day but only got paid for
four?
2:47:57 PM
JOSH GEIER, Service Manager, Seekins Ford Lincoln, noted the
discrepancies with "these studies," and offered a case in point
of a repair job in relation to the actual time it takes to
accomplish it. He stressed that the standard times they are
pushing for are more realistic.
2:50:19 PM
ERIC CONNICK, General Manager, Lithia Kia of Anchorage, stated
that he spoke in support of his team and technicians and gave
examples of their day-to-day hardships. He pointed out some of
his manufacturer's warranty policies and that the only people
who would benefit from the bill are the dealers. He said that
the more technicians he hires, the better people he can employ
and retain. He gave an example of a customer purchasing a car
from him and what he brings in money-wise, and he reiterated how
much they need the legislature's help.
2:53:27 PM
JERRY HEADSTROM, Master Technician, Continental Honda, expressed
the need to get paid for fair labor, and he offered examples of
past repair jobs in relation to time and wages. He briefly read
through retail labor time requirements. He noted that the
retail labor guides are fair, and he offered to answer questions
from committee members.
2:58:04 PM
TODD NOVAK, Service Manager, Anchorage Chrysler, emphasized that
there was a significant technician supply deficit in Alaska, and
he gave examples of customers who attempted to get their
vehicles fixed but could not, due to lack of technicians. He
provided examples of possible technicians not wanting to work
for manufacturers due to the warranty times, and he opined that
the bill would eliminate that barrier.
3:00:16 PM
REPRESENTATIVE VANCE said she looked at other states' bills and
inquired about data of any changes in manufacturer markup on
vehicles and the economics of it. She asked for the "cause and
effect" and said she did not want to get in the middle of
contracts.
3:02:00 PM
CHAIR MCCABE noted the time and welcomed follow-ups or closing
comments.
3:02:20 PM
REPRESENTATIVE STUTES asked whether it was true that the
manufacturers also require actual building or remodeling of the
premises.
MR. NICHOLS agreed that was correct and a contributing factor.
He gave an example of a dealership being required to build a
whole new facility and the ramifications if it did not.
3:04:39 PM
CHAIR MCCABE announced that HB 233 was held over.
3:06:13 PM
ADJOURNMENT
There being no further business before the committee, the House
Transportation Standing Committee meeting was adjourned at 3:06
p.m.