Legislature(2013 - 2014)HOUSE FINANCE 519
04/14/2014 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB108 | |
| SB127 | |
| SB169 | |
| HB287 | |
| HB316 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 64 | TELECONFERENCED | |
| + | SB 108 | TELECONFERENCED | |
| + | SB 178 | TELECONFERENCED | |
| + | SB 129 | TELECONFERENCED | |
| + | SB 127 | TELECONFERENCED | |
| + | SB 169 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 316 | TELECONFERENCED | |
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."
3:17:48 PM
Co-Chair Stoltze discussed his intent to hear the bill
presentation and public testimony.
FORREST WOLFE, STAFF, SENATOR CATHY GIESSEL, discussed the
bill. He spoke to long lines and high wait times at the
Division of Motor Vehicles (DMV). He stated that limited
hours caused people to sacrifice time out of their workday.
SENATOR CATHY GIESSEL, SPONSOR, communicated that the bill
supported a strong existing public/private partnership that
had been in place for over 10 years. The partnership
provided available, convenient, and responsive services
from DMV. She detailed that about 10 years earlier the
advanced business partnerships began to do contract work
for DMV; contractors provided vehicle titles and renewals,
registration renewals, duplicate registrations, lost
licenses, etc. There were approximately 37 car dealerships
and 11 private companies providing the service statewide.
She relayed that the template was also used by the
Department of Fish and Game (DFG) for hunting and fishing
licenses; however, DFG allowed its business partners to
retain a small portion of the fee to cover administrative
services, whereas DMV did not. She shared that auto dealers
and business partners were presently performing more than
25 percent of the DMV workload. She discussed a graph
showing DMV services; DMV services were shown in orange and
the business partners were shown in yellow (copy not on
file). She reiterated that the business partners were
currently doing 25 percent of the DMV workload; however,
none of the costs for facilities, utilities, printers,
credit card systems, credit card fees, and personnel were
reimbursed by DMV. She relayed that a major part of the
contractor services were conducted over the phone when
people were unable to get through to the DMV.
Senator Giessel communicated that the bill would allow
business partners to retain 15 percent of the DMV fee to
cover overhead costs. Currently business partners were
charging an additional administrative fee in an effort to
cover costs. She noted that out of convenience, citizens
were still choosing to utilize the businesses despite the
fee. She asked why citizens and the private sector should
be funding a state agency's work. She added that DMV
charged a $10 administrative fee for services rendered in
person. Additionally, DMV collected local taxes for 16
communities around the state including Juneau, Anchorage,
Kenai, Bristol Bay, Bethel, and others; DMV retained 8
percent of the taxes to cover its administrative costs. The
workload for private vendors amounted to 336,527
transactions annually. The fiscal note estimated that costs
would be just under $2 million to allow the business
partners to retain 15 percent. She spoke to potential costs
that would occur if the business partnerships went away.
She detailed that DMV would be required to pick up the
transactions that had previously been handled by the
business partners. She pointed to an estimate that 23
additional state employees would be needed; if the
employees were a range 10 on the state pay schedule, the
cost would be slightly under $2 million. She stated that
the fiscal note was essentially zero.
Senator Giessel relayed that the calculations did not
include the additional office space and the three state
employee managers that would be required to supervise the
new employees. She summarized that DMV took in an 8 percent
administrative fee to cover tax collection for local
governments and charged a $10 fee for services rendered in
its office locations. She was compelled by testimony that
DMV had taken in $48 million in surplus revenues the prior
year. She believed $2 million of the figure belonged to the
private sector. She stated that the bill was basically
fiscally neutral, provided convenient government services,
and was a small step towards reducing the size of state
government.
3:25:10 PM
Representative Munoz asked if businesses had the ability to
charge a fee for walk-ins. Senator Giessel replied in the
affirmative. She elaborated that the 11 private companies
currently charged a walk-in fee; however, the auto dealers
did not. She added that the dealers were considering
dropping the service as it was costing them significantly.
Co-Chair Stoltze remarked that the DMV was required by
statute (passed in the 1990s) to charge a fee. Senator
Giessel agreed; AS 28.10.421 related to the $10 service fee
and AS 28.10.431(e) pertained to the retention of 8 percent
from local governments' taxes.
Representative Munoz asked if the auto businesses could
collect the $10 fee. Senator Giessel replied in the
affirmative. She recommended speaking to the auto dealers
about the subject as well. She noted that auto dealers
faced "grumbling" about additional fees that were tacked on
when purchasing a car, which made them reluctant to charge
for the service.
Co-Chair Stoltze remarked that the business was just the
agent. Senator Giessel agreed and added that $10 would not
cover the cost.
Representative Thompson did not see the comparison between
fishing licenses and the one at hand. He elaborated that a
vendor such as Fred Meyer did not receive any additional
money above the cost of a [fishing or hunting] license. He
noted that the state would refund a portion of the fee back
to Fred Meyers. He discussed that he used the vendors to
avoid standing in line for vehicle license renewals. He
paid the extra fees and believed the vendors provided a
great service; however, the vendors charged an extra fee
for convenience. He surmised that the vendors would not be
providing the service if they were not making a profit. He
wondered why they should be given an additional $2 million
out of state funds that could be used for something else.
He questioned why the vendors should receive additional
money when they were already charging close to what the
state was charging. He did not understand the purpose of
the bill and why it would be beneficial to the public.
3:28:35 PM
Senator Giessel replied that the private sector was doing
the work of a government agency at no cost. She stated that
it was a question of fairness. She expounded that DFG
allowed vendors (e.g. Fred Meyer) to keep a portion of the
fee to cover personnel costs. She stressed that work done
by DMV vendors was more complex and abundant. Additionally,
the fee charged by vendors did not cover the work done. She
restated that it was a question of fairness.
Representative Thompson believed the vendors would close
their doors immediately if they were not making a profit.
He felt uncomfortable with the bill.
Representative Holmes was concerned by the $2 million loss
in revenue. She spoke about the various types of vendors
providing the service including auto dealers that had the
ability to charge more, groups providing the service to
members, and vendors operating the service as a business.
She wondered how the 15 percent figure had been determined
in the bill. She noted that Representative Thompson had
relayed that DFG provided vendors with 5 percent [of the
license cost]. She wondered what other states did.
Senator Giessel did not know what other states did. She
recommended asking the Alaska Trucker's Association and the
auto dealers. She stressed that DMV was collecting from the
private sector (what was analogous to a tax) for doing work
for DMV. The cost was being passed on by some of the
businesses as a user fee to citizens. She stated that it
was truly a question of fairness and of being consumer
friendly to Alaska's citizens. She questioned how the
agency was able to bring in a surplus of $48 million and
stated that part of the reason was because 25 percent of
its workload was being done by citizens.
3:33:13 PM
MELISSA CUCULLU, GENERAL MANAGER, ALASKA TAGS AND TITLES,
ANCHORAGE (via teleconference), testified in support of the
legislation. She read from a prepared statement:
The private sector provides the staffing, the
facilities, required technology, and office supplies
to process the transactions that create millions in
revenue for the State of Alaska. This legislation
allows Alaskan owned businesses to hire additional
employees, open new facilities, provide extended
hours, and create more options for Alaskan residents.
Senate Bill 127 is about fairness and is a win for
Alaskan residents, a win for the private sector, and a
win for the state government by reducing overhead
costs while still generating income. I'd like to thank
you for your time and consideration of Senate Bill
127.
3:34:19 PM
AVES THOMPSON, EXECUTIVE DIRECTOR, ALASKA TRUCKING
ASSOCIATION (ATA), ANCHORAGE (via teleconference), spoke in
favor of the bill. He read from a prepared statement:
ATA was approached in late December 2006 to see if the
association was interested in becoming a DMV business
partner and as we evaluated the proposal the ATA felt
that this could be a good member benefit for our
trucking members to facilitate the handling of our
members' DMV transactions. Our members have benefited
from our partnership as has the general public that
walks into our office each and every day. Our
customers are about half commercial vehicle operators
and half are walk-in personal vehicle operators. Our
association member companies enjoy the prompt service
that we can give them. Our walk-in customers are a
cross section of the Anchorage population. Our service
is generally prompt, friendly, supportive, and
helpful. Our customers appreciate the extra effort we
put into these transactions to make the DMV experience
a little more user friendly.
In order for the ATA to better serve its customers we
feel that a modest 15 percent commission on the work
done for the state DMV is a small price to pay for the
work that is currently being done by these business
partners. Every workday since 2006 we have processed
transactions for the State of Alaska with no
compensation other than the nominal service fee that
we charge our customers. DMV provides some supplies
such as title and registration forms, tags for the
license plates, and the license plates themselves. It
has been our business partner responsibility to
provide and pay for personnel, reception space, secure
office space, dedicated computer systems and related
technical support, copiers, paper, postage, and credit
card fees. In 2013 we processed more than 11,000
transactions for the State of Alaska and generated
revenue of more than $1.6 million in fees and local
taxes. The local taxes as you've heard are passed
through DMV to the local governments. So not only do
we generate revenue for the State of Alaska, we are a
tax collector for local governments. Our calculations
indicate that of the $1.6 million, we generated a
total of more than $1.1 million in fee revenue for
DMV.
The changes made in the committee substitute in House
State Affairs allows the DMV to honor these current
agreements during the time it takes for the department
to promulgate and adopt regulations covering the
agreement prerequisites and provisions set out in the
statute. It will allow the department to begin the 15
percent retained commissions at the effective date of
the bill. The bill language is clear in that all
proceeds with the exception of municipal taxes are
eligible for the 15 percent retained commissions and
these changes also provide the 15 percent retained
commission rather than the sliding scale from zero to
15 percent. We believe that the business partners are
providing a valuable service that supplements DMV
capabilities without increasing DMV's operating costs.
We also believe that as a matter of fairness DMV
business partners should be compensated for the
service that they provide for the state. It boils down
to sharing the revenue with the partners that generate
the revenue. Business partners have become a way of
delivering DMV services and the partners need to share
in the revenue for the work that is being done to
enable the partners to grow their business and improve
service to our fellow citizens. We urge the committee
to look favorably on Senate Bill 127.
3:38:41 PM
Representative Guttenberg asked what the current service
fee was. Mr. Thompson replied that transaction fees
involving a title were $15 and fees for other items were
$12.
Representative Guttenberg asked for verification that the
cost exceeded the cost of a title. Mr. Thompson replied in
the affirmative. Representative Guttenberg remarked that
the Alaska Trucking Association had conducted 11,000 of the
transactions.
Mr. Thompson replied that the association collected the
registration fees and the local taxes according to the
schedule provided by DMV. The association remitted the
money to the DMV on the following business day to the DMV.
He reiterated that the association's service fees were
between $12 and $15.
Representative Thompson asked how many locations the
business operated. Mr. Thompson answered that the
association operated one location in Anchorage.
Representative Thompson asked for verification that the
business was not losing money. Mr. Thompson replied that
the business was not losing money given that it owned its
facility. He relayed that the association made a small
amount on the services annually, but it was hoping for
increased revenues to add additional staff and expand
business hours.
Representative Thompson asked if there was a maximum fee
the business could charge above state costs. Mr. Thompson
replied in the negative.
Representative Wilson asked if any of the savings would be
passed on to the people of Alaska. Mr. Thompson replied
that fees would not be increased.
Representative Wilson asked how much additional money the
association would receive if the bill passed. Mr. Thompson
replied that in 2013 the association had turned over
slightly over $1 million to DMV; 15 percent of the total
equaled approximately $150,000.
3:42:49 PM
STEVEN ALLWINE, ALASKA AUTO DEALERS ASSOCIATION, JUNEAU,
spoke in support of the legislation. He communicated that
for over a decade a number of auto dealers in Alaska
provided licensing for customer's vehicles. The association
had taken on the responsibility to ease the load for DMV.
He detailed that the association had taken on the
responsibility because the titling had not been getting
done promptly. He furthered that a number of dealers in
Alaska provided the service free-of-charge. The dealers had
absorbed the associated costs (e.g. paper, credit card
fees, computers, and other). He was no longer willing to
provide the service without a fee because of its
cumbersome, expensive, and complicated nature. He stressed
that making a mistake on DMV related services had negative
consequences. He pointed to items such as mileage and VIN
numbers and explained that the work was an exact science;
therefore, it was necessary to have employees who were
qualified and proficient at the work. He added that in
larger stores the work required a full-time position. He
explained that the dealerships had never charged customers
for the service beyond the license fee; the cost was
absorbed as a cost of doing business. He relayed that the
bill would provide some income to offset a portion of the
expense. He would consider hiring an employee to provide
the service within his store if the bill passed. He
believed the tool could be wonderful for DMV if it was used
in locations with high demand for services. He discussed
that DMV services in Washington State were either provided
online or by a non-governmental agency. He reiterated his
support for the legislation.
3:46:26 PM
Representative Gara asked for verification that the service
to customers was voluntary. Mr. Allwine answered in the
affirmative.
Representative Gara surmised that dealerships were able to
pass on any absorbed costs to consumers. He referred to an
Alaska dealer price markup. He asked for verification that
the big three American auto manufacturers charged all
dealers the price for a vehicle regardless of the state.
Mr. Allwine replied that auto manufacturers charged all car
dealers the same price. He relayed that there were some
slight differences in destination charges for import
models. He stressed that the freight charge for a Chrysler
was the same anywhere in the United States (including
Alaska). He communicated that a dealer could choose to
charge more for a vehicle; however, he and many other
association members did not conduct business that way.
3:48:10 PM
Representative Guttenberg used the purchase of a new car as
an example and asked why providing a vehicle registration
required anything beyond the standard use of a warranty
clerk and financing officer. He observed that accuracy was
critical for basic services associated with the purchase of
a car.
Mr. Allwine answered that the fields were unrelated. He
explained that the finance officer was essentially a
banker, responsible for handling all of the financial
paperwork after an automotive transaction was completed. He
detailed that the finance officer was primarily responsible
for the completion of all legal documents (e.g. financing
contracts, trade-in documents, payoffs, or other). A
warranty clerk had nothing to do with the sale of a new
vehicle. The clerk was involved with the processing of
warranty repairs and for bringing in payment (like an
insurance clerk in a doctor's office). The business finance
officer provided the initial paperwork for DMV. He did not
participate in DMV's program; therefore, the paperwork was
delivered to DMV every three days. The titling of the
vehicle was specialized and was done by DMV.
Representative Guttenberg pointed out that the finance and
warranty employees handled difficult work where accuracy
was required. He had used a vendor to renew his vehicle
registration and had been amazed at the quick turnaround
time. He did not believe the difficulty or technical aspect
of the work was problematic.
Mr. Allwine noted that Representative Guttenberg was
referring to the renewal a currently owned vehicle. He
agreed that the transaction was relatively simple and did
not include a transfer of ownership, verification of VIN
numbers, or other. He was specifically discussing paperwork
related to new vehicles including the VIN, proper titling,
and other items. For used out-of-state vehicles the
dealership had to do extensive paperwork to create an in-
state title. Additionally, paperwork became more
complicated when a transaction involved two lien holders.
He provided other examples of various paperwork required in
different transactions.
Representative Guttenberg remarked that he had three
dealerships in his family. He shared that he received all
of the paperwork when he made a transaction.
3:52:28 PM
Representative Munoz wondered if the dealership could
charge a $10 fee for providing DMV related services in
person (similar to the $10 fee charged for in person DMV
services). Mr. Allwine replied in the negative.
Representative Munoz wondered if the 15 percent would cover
employee costs. Mr. Allwine believed the number was
reasonable and fair.
Vice-Chair Neuman referred to language in the bill that
would require a new business to wait one year before
entering into a vendor agreement with the department [DMV].
He wondered if the provision created an unfair business
practice.
Mr. Allwine did not believe so. He commented on the
importance of discretion and ensuring a business had a
positive track record. He thought that at least one year
was a good idea.
Vice-Chair Neuman remarked on the State of Alaska offering
an advantage to one company over another. Mr. Allwine
opined that discretion was required. He did not believe it
was a question of fairness. He noted that too often
businesses "set up shop and leave." He believed caution was
not necessarily a bad thing.
Representative Thompson expressed confusion on the issue.
He had been in two business locations where registration
renewals were the sole service. The one-year requirement
shut out others from entering into the business. He
compared it to telling a business they could have a license
to sell cars, but limiting them to selling only Fords. He
stressed that the provision restricted a person from going
into business. He believed it constituted an unfair
business practice.
Mr. Allwine deferred the question to the bill sponsor. He
felt that the issue was outside his purview.
3:56:42 PM
AMY ERICKSON, DIRECTOR, DIVISION OF MOTOR VEHICLES,
DEPARTMENT OF ADMINISTRATION, shared that the DMV had been
in partnerships with businesses since early 2000. The DMV
provided all supplies businesses needed to conduct
registrations, title transactions, license plates, tabs,
forms, motorcycle manuals, and placards free of charge.
Additionally, the DMV trained business partners on how to
conduct transactions and provided free access to its
database. She communicated that while the business partners
accounted for 26 percent of DMV's revenues, DMV still
touched each transaction conducted by the partners.
Information gathered by the partners was sent to DMV each
night for reconciliation to ensure all documentation and
auditing was done and that transactions were completed
accurately.
Representative Thompson wondered if there was a set fee
that a vendor could charge above the cost of a renewal or
title change. Ms. Erickson replied that the DMV did not
regulate any fees charged by partners. She added that auto
dealerships could charge a fee, but did not currently do
so.
Representative Thompson asked for verification that a
dealership could charge a fee. Ms. Erickson answered in the
affirmative.
Representative Thompson was troubled by the bill's
requirement that a business could not enter into an
agreement with the department until they had been in
business for a minimum of one year. He noted that vendors
were required to receive training from DMV prior to
offering the services. He thought the requirement was
unfair and would shut out any new vendors from entering the
business.
Ms. Erickson could not speak to the sponsor's intent
related to the bill provision.
Representative Costello asked if the department or division
had a position on the bill. Ms. Erickson replied in the
negative.
Co-Chair Austerman asked if the division agreed with the
$1.9 million fiscal note. Ms. Erickson agreed that paying
15 percent to business partners would mean [a reduction in
revenue to the division] in the amount listed on the fiscal
note.
Co-Chair Austerman wondered how valuable the service
provided by vendors was to the division. Ms. Erickson
replied that she could not quantify the service with a
number, but it was a great service to customers and kept
the lines at DMV locations shorter.
Representative Munoz asked about the annual surplus
generated by the division. Ms. Erickson answered that the
division collected approximately $70 million in revenue;
its own budget was approximately $17 million.
Representative Munoz asked if the excess revenues were
deposited into the general fund. Ms. Erickson replied in
the affirmative. Representative Munoz surmised that a
reduction of $2 million would not impact DMV. Ms. Erickson
hoped that the loss would not impact DMV. She noted that
the funds were deposited into the state general fund.
Representative Wilson asked if the DMV could choose to
discontinue partnership with vendors to prevent the loss of
revenue. Ms. Erickson replied in the affirmative. The DMV
could choose to end a contract within 30 days.
Representative Wilson asked if DMV was forcing vendors to
do the work. Ms. Erickson answered that dealerships had
opted into the program to provide a service to customers.
She detailed that many dealerships did not participate. The
division had a specific dealer unit in Anchorage that
processed paperwork dropped off by vendors.
Representative Wilson asked if dealerships could charge a
fee to customers.
4:03:21 PM
Ms. Erickson replied that there was nothing preventing
dealerships from charging a fee.
Senator Giessel addressed the bill's one-year requirement
for business partners. She stated that there were 11
private business partners and 37 auto dealers providing the
services. Many of the companies provided more than one DMV
service. She agreed that DMV trained business partner
employees funded by the business partners. She stressed
that the primary emphasis of the bill was fairness. She
stated that the companies were conducting over 25 percent
of DMV's work and were receiving no compensation. She
believed it was another form of tax. The bill's purpose was
to support the private sector and the convenience provided
to the state's citizens.
Co-Chair Austerman CLOSED public testimony.
SB 127 was HEARD and HELD in committee for further
consideration.