Legislature(2005 - 2006)CAPITOL 106
02/16/2006 08:00 AM STATE AFFAIRS
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* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 344-VEHICLE TRANSACTION AGENTS 8:48:05 AM CHAIR SEATON announced that the next order of business was HOUSE BILL NO. 344, "An Act relating to the commissioner of administration's appointing agents to perform for compensation certain transactions related to vehicles; and providing for an effective date." 8:48:15 AM REPRESENTATIVE VIC KOHRING, Alaska State Legislature, as one of the prime sponsors of HB 344, said the bill would improve the service the Division of Motor Vehicles (DMV) provides to the public by allowing the [advanced business partnerships (ABPs)] already doing contract work for DMV to keep a portion of the revenue generated from the transactions they conduct. The point of using ABPs is to lessen the workload of DMV, thereby improving customer service. He related that the Alaska Department of Fish & Game (ADF&G) contracted with private entities to issue its fishing licenses. He said currently the bill provides that the ABPs be paid 15 percent; however, he suggested that amount could be lowered to 7.5 percent. Representative Kohring described the bill concept as a win-win situation, because it would benefit DMV, the ABPs, and the public. 8:51:42 AM REPRESENTATIVE KOHRING directed attention to the fiscal note, which shows a $491,000 [change in revenues], and he noted that no general fund monies would be involved. He brought attention to letters of support from Capital Chevrolet - an ABP - and the Alaska Auto Dealers Association (AADA). He said AADA noted it would support the change from 15 to 7.5 percent. 8:53:03 AM REPRESENTATIVE GATTO moved to adopt the proposed committee substitute, Version 24-LS1082\Y, Bannister, 1/30/06, as a work draft. There being no objection, Version Y was before the committee. 8:53:36 AM REPRESENTATIVE GATTO noted that there is a letter in the committee packet from an individual concerned that "the money will simply be reflected in additional markup." He asked, "Is there anything in the legislation that ... keeps this separate from the markup?" 8:53:56 AM REPRESENTATIVE KOHRING answered no. He said the amount of a surcharge would be left to the ABP's discretion. He surmised that if the customer decides that the amount charged is too high, then he/she would simply go elsewhere, for example, to the DMV office or to another ABP. 8:54:30 AM CHAIR SEATON asked Representative Kohring to confirm that there is no requirement that a person must use an ABP; he/she could choose to go the DMV. 8:55:00 AM REPRESENTATIVE KOHRING answered that's right. 8:55:08 AM REPRESENTATIVE GATTO asked, "[Excluding] taxes and fees, what's left in a DMV registration?" 8:55:15 AM REPRESENTATIVE KOHRING said that would be a question for the director of DMV, Duane Bannock. 8:55:32 AM REPRESENTATIVE GARDNER said she has bought only one new car, and she said it was convenient to have the dealer do the paperwork. She said she cannot remember whether or not she paid a fee at the time. She stated her understanding that there is paperwork related to the title, perhaps, that runs approximately $199. She asked Representative Kohring, "Do you know ... what that fee would ... [cover] besides title processing? Are there other documents that are covered by a fee like that?" REPRESENTATIVE KOHRING responded, "Not that I'm aware of." In response to a request for clarification from Chair Seaton, he confirmed that he is not aware of any restriction that charges made for paperwork processing can be made only for DMV paperwork. 8:56:57 AM REPRESENTATIVE RAMRAS said he bought a used car recently and paid a document fee of $199, which he was told was "an arbitrary charge that dealerships just tend to include." He indicated that that is a separate issue that the legislature may want to address in the future. He revealed that he paid a registration fee of $15, and he figured that 7.5 percent of that fee would be about "one dollar and some cents," which would go to [the ABP] instead of to the DMV. He stated, "Although it's a negative fiscal note, I think we will learn from the director of DMV that the [Division] of Motor Vehicles generates about $63 million to the State of Alaska in fees, and this will certainly maintain some of the efficiency at the DMV." 8:58:42 AM REPRESENTATIVE KOHRING, in response to a series of questions from Representative Ramras, said he thinks people despise going to the DMV because of the long lines involved, they don't like going more than necessary, and they probably don't like going during their lunch or dinner hour. He shared that his experience at an ABP was a pleasant one. He emphasized that he is not criticizing the fine DMV staff, only the laborious process. 9:00:25 AM CHAIR SEATON asked if the advanced business partners will be able to do everything that the DMV does, other than issuing a driver's test and a driver's license. 9:01:59 AM REPRESENTATIVE KOHRING said he thinks the answer to that is yes, but he would like the director of DMV to verify that is true. 9:02:22 AM CHAIR SEATON directed attention to [the second paragraph of] the third page of [a three-page document attached to the sponsor statement, entitled "History of the DMV Business Partnership Program"], which read as follows [original punctuation provided]: We propose that after completion of one year of good standing in the departments [sic] discretion, the ABP's [sic] be allowed to retain seven and one half percent (7.5%) of all state revenue collected, excluding MVRT and, of course, any surcharge of their own. CHAIR SEATON asked if that means someone would have to be a business partner for a year before he/she could become an ABP. 9:02:52 AM REPRESENTATIVE KOHRING said that is old information in the committee packet and is not part of current proposed legislation. 9:03:24 AM REPRESENTATIVE GARDNER, regarding the aforementioned comparison between this proposed legislation and ADF&G's contracting out of fishing license services, pointed out that contractors that issue fishing licenses are not allowed to charge any fee above and beyond the percentage made on the sale, while the ABP could practice "double dipping." She asked if that is correct. 9:04:30 AM REPRESENTATIVE KOHRING answered yes. In response to a follow-up question from Representative Gardner, he explained that the idea for HB 344 was brought to his attention by the director of DMV. 9:05:09 AM CHAIR SEATON said it seems like an ABP is similar to a contract agent. He asked if that is true, and if ABPs will be able to offer road permits, as well. 9:05:50 AM REPRESENTATIVE KOHRING said he doesn't think the answer is yes to that question, because the service that ABPs provide is restrictive. 9:06:46 AM REPRESENTATIVE KOHRING, in response to a question from Representative Gatto, said he is not aware of any restriction in state statute regarding the amount of surcharge that a dealer can exact. 9:06:56 AM REPRESENTATIVE GATTO opined, "They don't need to be asking for any other money if they can simply adjust the surcharge to make it comfortable for themselves." 9:07:35 AM REPRESENTATIVE KOHRING said, "I think this legislation would enable the consumer to continue to pay essentially the same rates, without those rates having to go up." 9:08:26 AM REPRESENTATIVE GRUENBERG asked Representative Kohring if when Mr. Bannock suggested the need for this legislation, he indicated that the car dealers in Alaska are in trouble and need the extra help from the state. 9:08:38 AM REPRESENTATIVE KOHRING answered no. 9:08:42 AM DUANE BANNOCK, Director, Director's Office, Division of Motor Vehicles, Department of Administration, relayed that his boss, Commissioner Nordstrand, has described him as entrepreneur. Mr. Bannock said his single goal in coming to the division was and is to shorten the wait line at DMV. He stated that HB 344 would create "a better free-market ability as it pertains to the services of the DMV." 9:11:12 AM MR. BANNOCK said the bill is design with two main functions: one, to reinforce the ABP program as a strategy to shorten wait times at the DMV; and two, to provide fundamental fairness to those agents who are performing the statutory obligations of the DMV. He stated, "It's important to remember that today there is no alternative for the recovery of any of these fees, other than that process." Mr. Bannock said another bill, HB 383, has been filed, which addresses the subject of document "doc" fees, and he asked that the committee keep the issue of doc fees separate from the issue addressed through HB 344. MR. BANNOCK, regarding Representative Gardner's previous mention of buying a new car, explained that it is important to remember that the rules for someone who buys a car are different, depending on whether the car is bought from a neighbor or a dealer. He noted that AS 28.10.291 requires the dealer to process paperwork, a law that Mr. Bannock said is a good one. If it did not exist, then customers could say they will do the work and then forget to do it. 9:14:36 AM MR. BANNOCK said one of his goals has been to "expand the ability of what the business partners can do." In 2003, ABPs could only carry out a transaction for a title on a new car sale. He said the division has since trained the ABPs to execute used car titles and out-of-state titles. He said the number of ABPs has expanded. He directed attention to a chart in the committee packet showing the expansion in responsibilities and participation, and he said it correlates with a decreasing wait time for the public at the DMV offices. MR. BANNOCK, regarding the issue of the surcharge, confirmed that there is nothing in HB 344 that prevents, attempts to limit, or even addresses a surcharge. Notwithstanding that, he stated that, based on his opinion of the free market, if an [ABP] continues to raise its surcharge to the point that it is no longer generating any revenue, [the program] "will implode ...." 9:17:10 AM MR. BANNOCK stated that a large portion of the DMV's revenue is called, "Motor Vehicle Registration Tax (MVRT)." He described MVRT as "local government's best friend." Some municipalities in Alaska have adopted an MVRT, while others have not. Mr. Bannock said HB 344 "does not pay the 7.5 percent on local government fees." He said the typical customer in Alaska pays $100 every two years for vehicle registration. He continued: Sounds to me like the vehicle that Representative Ramras purchased still had valid registration on it, thus, the only fee that the dealership collected was $15. It's important to note, however, that the work that the dealership does in processing that $15 transaction is the same amount of work that they would [do] if he was paying full fees of $115. 9:19:23 AM CHAIR SEATON noted for the record that Representative Ramras is the other prime sponsor of the bill. 9:20:14 AM REPRESENTATIVE RAMRAS told Representative Gardner that for her benefit he asked his staff to include a copy of the aforementioned HB 383, sponsored by Representative Les Gara. He said HB 383 addresses the issues of doc fees, and he reiterated that that issue, although valid, is totally separate from the issue of HB 344. 9:21:08 AM REPRESENTATIVE GARDNER said after hearing Mr. Bannock speak, she looked up AS 28.10.291 and now understands the issue of vehicle dealers being required to process title and registration documents. She asked if there is any reason to think that the amount those dealers are currently charging doesn't cover their costs. 9:21:58 AM MR. BANNOCK responded that he is not qualified to answer that question. Notwithstanding that, he offered a philosophical view that there surely is a limit to what they charge, and that limit is a direct correlation to how much a customer is willing to pay. He said the aforementioned statute "is probably the genesis of the business partnership program." He said dealers are not only under statutory obligation to get the paperwork done, they are also under a statutory timeline to do so. 9:23:53 AM REPRESENTATIVE GARDNER asked if it would be reasonable to say that the DMV is much more efficient and those who are submitting the paperwork are no longer in any danger of being in default because of slowness. 9:24:04 AM MR. BANNOCK replied that there are still issues on the horizon that will create work for the DMV and, thus, could slow its process down. For that reason, he said, the division cannot afford a preemptive strike of the ABPs, which would result in the work now being done by them to be sent back to the DMV. Mr. Bannock emphasized the value he places on the ABPs. 9:25:19 AM MR. BANNOCK, in response to a question from Representative Gardner, said almost 100 percent of the vehicle registrations and titles are conducted through a computer, with the exception that the DMV provides support and the necessary documents to the ABPs. 9:26:29 AM MR. BANNOCK, in response to a question from Representative Lynn, reiterated that the surcharge limit is a market-based one, not one set in statute. 9:27:05 AM REPRESENTATIVE LYNN mentioned fees added on at the end of a vehicle transaction. 9:27:52 AM CHAIR SEATON asked that the discussion focus on the fees for title and registration, not the doc fees that are addressed in HB 383. 9:28:47 AM MR. BANNOCK confirmed [the issue of doc fees] is not addressed in HB 344, and he said it should not be. 9:29:18 AM REPRESENTATIVE GATTO questioned why there would be any reason for HB 344, if the dealer should have already included all documentation costs in the doc fee. 9:30:21 AM MR. BANNOCK said the committee will hear from at least one dealer that does not charge a doc fee. He told Representative Gatto that 7.5 percent of the average $100 registration is $7.50, which is "a long ways away from whatever the dealers may decide that they need to charge for a documentation fee." He opined that attempting to compare [the money made on a registration fee] with [the documentation fee] is like comparing apples and oranges. 9:31:16 AM CHAIR SEATON asked for clarification of the following terms: [commission] agents, business partners, and advanced business partners. 9:31:49 AM MR. BANNOCK said commission agents have the same authority as state-operated DMVs, but where they differ is in funding; they are based on contracts. Generally, he noted, the majority of Alaska's 17 commission agents are with local governments. They receive compensation at a minimum of 30 percent of the transaction up to 100 percent. In addition to the aforementioned supplies provided to the ABPs, the DMV also provides commission agents with the hardware. MR. BANNOCK said the next step down is the advanced business partners. They are designed to perform every motor vehicle transaction that the DMV can do, and are doing more now than they were three years ago. A business partner that is not advanced is not involved in ownership changes, title transactions, or anything that is a "liability greater than only the vehicle registration." Of the millions of transactions that the DMV performs each year, the vehicle renewal is the simplest. 9:35:19 AM CHAIR SEATON returned to his previous question related to the history provided in the committee packet, regarding completing one year in good standing, and he asked Mr. Bannock if that is a policy for ABPs. 9:35:38 AM MR. BANNOCK pointed to a sentence in Version I, on page 1, [beginning on line 10], which read as follows: The regulations must require, at a minimum, that the agent be bonded, have an Alaska business license under AS 43.70, and have been in existence for a minimum of one year before entering into the agreement with the commissioner. MR. BANNOCK said that one-year requirement would not be retroactive. In response to a follow-up question from Chair Seaton, he stated his intent is that the agent be a business partner for one year, not just be in any business for one year. He said he thinks that should be clarified in regulations. 9:37:26 AM CHAIR SEATON asked Mr. Bannock if, over time, the same number of commission agents would be used, or if ABPs would take over. 9:37:59 AM MR. BANNOCK said he thinks the same commission agents will be exactly the same five years from now as they are today. He said he bases that prediction on the fact that the commission agents today are in far-flung areas not conducive to private, stand- alone business partnership operations or large car dealerships. 9:38:42 AM CARROL LYBERGER, Lyberger's Car & Truck Sales, LLC ("Lyberger's"), testified that she is "a partnership" with DMV. She listed the qualities and benefits of the program as follows: one, it is voluntary; two, the partners are well trained; three, the transactions are processed faster; and four, service to customers is expedited and, thus, improved. Ms. Lyberger reviewed how the process used to be done before the business partner program began, emphasizing the extended time that was taken for documentation. She related that there is a cost to the dealer who is in partnership with DMV, and she stated that any compensation for that cost would be appreciated. She articulated that any fees charged as doc fees are not payment for any work done in the business partnership program; the fees collected on behalf of the DMV are paid to the state. Ms. Lyberger revealed that Lyberger's does not charge doc fees, but if it did it would show up on a separate line [on the sales contract], and would be clearly labeled as a doc fee, while the DMV fees would be clearly marked on a separate line. She offered further details and mentioned disclosure laws. 9:42:34 AM CHAIR SEATON said the committee is trying to figure out how significant the 7.5 percent would be, and whether or not Lyberger's would discontinue the service it provides as a business partner with DMV if the 7.5 percent fee were not adopted. 9:43:13 AM MS. LYBERGER replied by illustrating the commitment she has made to the program, both in staff paid and special equipment bought and maintained, such as a printer that takes special, expensive ink. In response to the second half of Chair Seaton's question, she said she would not drop the partnership if the legislature does not pass the bill providing the 7.5 percent payback on state fees collected, because the service Lyberger's offers as a partner is a value to its customers. She indicated, however, that she would appreciate whatever percentage the legislature decides upon in order to offset her costs. 9:44:12 AM JIM ARPINO, Affordable Used Cars, Fairbanks and Anchorage; Board member, Alaska Automotive Dealers Association, characterized Ms. Lyberger's testimony as "very accurate." He stated that the fees that a customer would be charged [for registration and title] at DMV are the same fees that are charged by [dealers who are ABPs]. He said the proposed 7.5 percent would help to cover the costs of data entry. In response to a question from Chair Seaton, he said he currently is an ABP, but he may no longer offer that service if the bill does not pass. He said being involved in the program is time-consuming. In response to a follow-up question from Chair Seaton, he said Affordable Used Cars does charge a documentation fee. 9:47:21 AM CHAIR SEATON asked Mr. Arpino for an estimate of the total that Affordable Used Cars would make after a year of charging 7.5 percent on the state fee for titles and registrations. 9:47:37 AM MR. ARPINO responded, "The transactions are all over the map," thus, the exact amount would be hard to pinpoint. He estimated that the 7.5 percent would cover about 50 percent of his time involved in the program. The amount originally proposed was 15 percent, which Mr. Arpino said would more closely cover his costs. 9:48:24 AM CHAIR SEATON asked if being a dealership that is also an ABP gives that dealership a competitive edge over a dealership that is not an ABP. 9:49:02 AM MR. ARPINO replied that he would not describe it as a competitive edge, but he said he can see a slight advantage to having a business partnership, "more after the sale than before the sale." 9:49:26 AM DEANNA SLACK, General Manager, Cal Worthington Ford, said she agrees with all comments made thus far. She indicated that Cal Worthington Ford has been a business partner for approximately four years, having taken on the cost of providing this service to its customers "automatically." She said customers are happy to get their license plates and registration earlier than they often received them through DMV. She stated, "We feel that our cost [in providing this service], ... based on the selling volume, is in excess of approximately $50-55,000 a year." She said Cal Worthington Ford hires two full-time and one part-time employees to handle the partnership duties, and it covers the costs of a computer, special printer, software, and telephone line. She said the proposed 7.5 percent would not begin to cover that cost. In response to Chair Seaton, she said Cal Worthington Ford charges a documentation fee, but she emphasized that the doc fee is for other services, not for DMV-related services. 9:52:07 AM REPRESENTATIVE GARDNER asked what doc fees cover. 9:52:16 AM MS. SLACK answered that the doc fee covers "several other services" relating to a car deal and is disclosed on its own line. 9:52:42 AM REPRESENTATIVE GARDNER asked Ms. Slack what a typical explanation to a customer would be regarding the doc fee. 9:52:56 AM MS. SLACK indicated that the customer would be told that the doc fee covers other services provided, including paperwork and delivering the documentation to the lien holder. 9:53:15 AM REPRESENTATIVE GARDNER said when she bought her car, there was no lien, and she paid cash. She said she would like to know the purpose of the $199 fee she paid. 9:53:27 AM MS. SLACK said there is paperwork and documentation to be done. In response to a follow-up question from Representative Gardner, she said doc fees cover "a numerous amount of things," each one is different. It is one charge that shows on one line of an application, "separate [from] everything else." She said if she were to look at Representative Gardner's transaction, she could explain her doc fee to her. In response to a request by Chair Seaton, she agreed to send examples of a transaction showing a doc fee to the committee. 9:55:24 AM MS. SLACK, in response to a question from Representative Gatto, reiterated that Cal Worthington Ford does not exact a surcharge and, thus, does not make money "as far as collecting for the DMV section." 9:56:14 AM CHAIR SEATON asked Representative Kohring to get back to the committee regarding the use of the word "surcharge," and whether or not it means the same thing as doc fee. 9:56:19 AM REPRESENTATIVE KOHRING said he would wait to answer the question regarding surcharge. He stated his desire that the committee "stay on course with the main thrust of this legislation," which is to provide compensation for services currently being provided at no charge by authorized auto dealers. He said statute requires that auto dealers that sell new or used cars provide title and registration service. He opined, "If we're going to require that statute, in my mind it seems fair that we provide them with a limited compensation to cover those costs." 9:57:15 AM REPRESENTATIVE ELKINS said he thinks the committee is way of [course] and could have moved the bill 30 minutes ago if it had stayed on track. 9:57:41 AM JOHN IMMEL, Past Co-Owner, Gene's Chrysler, testified that Gene's Chrysler was one of two dealerships to become ABPs in Alaska. He stated that 8-10 years ago, there used to be long wait times for titles and registrations, and he pointed out that temporary licenses are only good for two months. Banks were upset with the slowness of the system before the ABP program was started. He stated that if the legislature does not grant the 7.5 percent, the new owners of Gene's Chrysler would never end the program, because it is one of the best customer services available from the car dealership. He concluded, "It's a great benefit, and I just want to see it continue." 9:59:53 AM REPRESENTATIVE RAMRAS reiterated that two issues have been discussed: the doc fee and [the ABP program]. The latter, he said is a good example of entrepreneurial spirit, and helps cut down the wait times at the DMV, which in turn helps alleviate the dislike consumers have towards government. 10:00:32 AM MR. EMIL reemphasized how bad the wait time was before the program began. He said he was responsible for convincing Mr. Arpino to get involved in the program. He acknowledged that Mr. Arpino is unhappy regarding the high costs of running the program, but he reiterated the benefits of the program to customers. 10:01:18 AM CHAIR SEATON announced that HB 344 was heard and held.