HOUSE BILL NO. 81 "An Act relating to an exemption from the regulation of construction contractors." 10:30:21 AM Co-Chair Neuman MOVED to ADOPT the proposed committee substitute for HB 81, Work Draft 29-LS0346\P (Bruce, 4/12/16). There being NO OBJECTION, it was so ordered. JANE PIERSON, STAFF, REPRESENTATIVE STEVE THOMPSON, explained the changes in the Committee Substitute and read from a prepared statement: HB 81 Version P differs from CSHB 81 (L&C), HB 81 Version H, in three ways: 1. Deletes "in order" from the legislative intent language from page 1, line 6, of HB 81 Version H because the words are not needed, as many grammarians often say. 2. Adds a new section 2 (page 1, lines 8 through 14) that adds a new subsection to AS 08.18.116 to require the Alaska Department of Commerce, Community, and Economic Development or the Alaska Department of Labor and Workforce Development to investigate and take appropriate action if an owner-builder tries to sell a structure while not licensed as a contractor during the time of constructing the building or two years after construction begins. See "begins" on line 11. 3. Replaces language in section 3 (page 3, lines 2 through 6) to require an owner-builder to notify the Alaska Department of Commerce, Community, and Economic Development on a form provided by the agency when advertising or selling a home built if an owner- builder tries to sell it while not licensed as a contractor during the time of constructing the building or two years after construction begins. See "begins" on line 4. The previous versions of the bill would have required the owner-builder to get permission from the department to sell a building. HB 81 Version N changes this to require disclosure. Representative Wilson asked for clarification regarding the two year provision. Ms. Pierson answered that the two year provision was consistent with current law. Representative Wilson asked when the two year period began. Ms. Pierson deferred the question to the sponsor. REPRESENTATIVE CATHY TILTON, SPONSOR, replied that the question had been asked the prior session and was something the sponsors struggled with over the interim and extensively researched. The two year period began at the start of construction because the start was the point that defined the permitting process. She discussed the legislation. She relayed that HB 81 provided stronger protection to homebuyers that required an unlicensed builder to disclose the fact that the building was constructed by an unlicensed builder. The intent was to allow individuals to continue to construct their own homes. Unfortunately, there were people who built with the intent to sell and avoided attaining the required licensures. She stated that contractor law had been on the books in Alaska since 1968. She detailed that the current homeowner/builder exemption was enacted in 1982 and modified in 2006. The current law provided an exemption allowing a person to build their own home or commercial building every two years without a license. A growing number of individuals were exploiting the provision to build and operate construction businesses without attaining required licensure. Homeowners who purchase a home from the unlicensed builder had no recourse in the law if the home had issues and was not built properly. She declared that the bill provided for transparency and disclosure. Co-Chair Thompson OPENED public testimony. RICHARD CARR, OWNER, BEMA CONSTRUCTION (via teleconference), spoke in support of the bill. He relayed that he specialized in restoration and remodeling. He had received many "frantic calls from insurance agents and homeowners" with serious issue due to faulty work. He shared personal experience with customers who had no financial recourse because the builder did not have a "performance bond." The bill would protect the consumers of Alaska from "unscrupulous builders" that "hide behind the two year allowance." ANDRE SPINELLI, PRESIDENT, ALASKA HOME BUILDERS ASSOCIATION (via teleconference), stated his strong support of the bill. He shared that the association worked on the issue for many years. PATRICK DALTON, CONTRACTOR, DELTA JUNCTION (via teleconference), testified against Section 11 of the current version of the bill. He felt that the provision was extreme and "interfered with the right of private property." He agreed with the regulations for organized boroughs. He proposed an exemption for unorganized boroughs. He believed the provision protected a professional group at the expense of rural homebuilders. 10:42:27 AM JAMES SQUYRES, SELF, RURAL DELTANA (via teleconference), testified against the bill. He believed the bill had unintended consequences for rural residents. He stressed that "the contractor lobby was tenacious and was terrorizing" regular Alaskans. He opposed the provision that required the owner/builder to fill out a form and provide proof to the Department of Labor and Workforce Development (DOL) and Department of Commerce, Community and Economic Development (DCCED) in order to sell their owner- built home. He opined that the provision increased the agencies bureaucratic functions and impinged on individual freedoms. TERRY DUSYNSKI, MEMBER, ALASKA STATE HOMEBUILDER'S ASSOCIATION (via teleconference), testified in support of the bill. He shared that he was a home inspector since 1978 and had seen many owner-built homes. He voiced that the exemption in the bill allowed people to build their own homes. He explained that the bill merely required a person building a house and selling it before the two year period to notify the department and explain why the individual was selling the house. He emphasized that the bill did not prohibit constructing an owner built home. Co-Chair Thompson CLOSED public testimony. Representative Wilson asked who would enforce the issue - DOL or DCCED. CHRISTOPHER CLARK, STAFF, REPRESENTATIVE CATHY TILTON, replied that the provision in Section 2 of the bill was enforced by both DCCED and DOL. He added that the provision in Section 3 was enforced by DCCED. Representative Wilson wanted to know how the bill would be enforced. 10:48:12 AM AL NAGEL, DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT (via teleconference), answered that the details had not yet been worked out between the departments; the regulations would be written after the bill was adopted. He delineated that both departments had investigators that were dedicated to license enforcement. Representative Wilson wondered whether the bill was necessary. She asked how the bill changed what was supposed to currently be done. Mr. Nagel replied that he was not sure what the department was not doing now. He stated that the bill offered more structure about when a two-year exemption period started. He emphasized that the department was seriously enforcing the existing statute. Representative Wilson asked what paper work would be required to prove the starting date of the two year construction period. Mr. Nagel answered that the statute would require notice that the homeowner was divesting herself of a property; not for a business reason. The department would investigate and determine whether the activity was unlicensed. Representative Wilson asked whether updated fiscal notes were forthcoming. Co-Chair Neuman spoke to the fiscal notes. He noted that the Division of Corporations, Businesses, and Professional Licensing (DCBPL) submitted a zero note (FN 1 CED). He detailed that the division noted that the licensing costs covered the regulatory costs. He noted the Department of Labor and Workforce Development zero fiscal note (FN 2 DOL). 10:52:25 AM Representative Wilson spoke to the fiscal notes. She believed the bill carried fiscal impacts to the agencies. Co-Chair Neuman stated that according to the fiscal notes the department determined that its fees and staff were sufficient to enforce the legislation. Co-Chair Thompson reminded the committee that investigations were presently happening on a regular basis. Co-Chair Neuman MOVED to report CSHB 81(FIN) out of committee with individual recommendations and the accompanying fiscal notes. Representative Wilson OBJECTED. She was concerned over how the regulations would be written and believed that the bill impacted personal property rights. She WITHDREW her OBJECTION. CSHB 81(FIN) was REPORTED out of committee with a "do pass" recommendation and with one new zero fiscal note from the House Finance Committee for the Department of Commerce, Community and Economic Development and one new zero fiscal note from the Department of Labor and Workforce Development.