HB 290 - LICENSE PLATES: RANCHES, FARMS, AND DAIRY Number 2062 CHAIRMAN WILLIAMS stated the next order of business is HB 290, "An Act relating to motor vehicle license plates for ranchers, farmers, and dairymen," sponsored by Representative Green. Number 2075 JEFF LOGAN, Legislative Assistant to Representative Green, came before the committee. He said, HB 290 is a simple amendment to right an unintended consequence. In 1993, the Administration sponsored legislation that allowed state agencies more latitude in the area of user fees in HB 65. Section 57 of that Act requires vehicles registered under company or business names to pay commercial registration fees. MR. LOGAN pointed out HB 290 is sponsored by request. He indicated the requestor is a produce farmer in Representative Green's district. The constituent had previously registered his vehicles under AS 28.10.181 (h). That subsection provides for agricultural registration. Division of Motor Vehicles (DMV) was requiring him to register under the much more expensive commercial registration. Mr. Logan referenced a letter which is included in the committee members packets. Division of Motor Vehicles told him that if he registered as a corporation he had to pay commercial fees. However, if he registered under his own name he would qualify for the lower registration fees, the agricultural fees. Number 2212 MR. LOGAN said, "The sponsor believes that it is unfair for a state agency to demand of an Alaska businessman that he change form of ownership of his company that he had over the benefits of incorporation in order to get what he has already been getting for years. This is by way of saying Mr. Chairman, my intent here is not to criticize the department because we work with the department on a number of legislative issues, but rather to state that this was not Representative Green's intent when he voted on HB 65. So he has offered HB 290." MR. LOGAN pointed out the critical language is found on page 1, line 13. It defines a person as having the meaning given in Section 01.10.060 [Definitions]. He indicated he highlighted number 8 which is, "person includes a corporation, company, partnership, firm, association, organization, business trust, or society as well as a natural person." Under this language a person could mean a corporation, the constituent in question could maintain his corporate veil, register as a corporation and still receive the benefits that Representative Green intended him to have before the law was changed. Number 2387 MIKE MOSESIAN, Mosesian Farms, testified in support of HB 290 via teleconference. He indicated he has been a farmer in Alaska for more than 25 years and his market is exclusively Anchorage. He said, "The intent of the old law [HB 265], farmers used their vehicles for... [END OF TAPE]. TAPE 98-6, SIDE A Number 0001 MR. MOSESIAN continued, which are used to haul my tomatoes which are available from the first of May through October, and the rest of the year they are parked. And I think what the lawmakers in the past wanted to do was to fairly handle the situation so that farmers were not paying these high fees and parking their vehicles... A person could survive a long time without oil, but how long can he survive without food. They wanted to encourage agriculture in this state. One of the benefits was it was fair by providing him with lower fees. Without this bill it would penalize modern farmers from incorporating and taking advantage the protection under the law..." Mr. Mosesian mentioned farmers offset pollution by vehicles because plants consume carbon dioxide and put oxygen back into the atmosphere. He said he is very proud to see the license plate that says "Farmed". Number 0195 REPRESENTATIVE COWDERY asked if the people in the dairy business and the other industry do they enjoy the same. MR. MOSESIAN replied yes there are other farms that have farm plates. He mentioned plates are in the four thousand and five thousand series. And pointed out farm plates are common in other parts of America. REPRESENTATIVE COWDERY indicated he would bring the dog farm issue up with the Division of Motor Vehicles. MR. MOSESIAN concluded he derives 100 percent of his income from farming, he lives on the farm and only uses the vehicles to haul farm produce. He also has a family farm, he asked if there was concern with another large corporation that are also in the agriculture business. REPRESENTATIVE COWDERY replied no, he noted that he is only concerned with the small farmer and Mr. Mosesian is. Number 0345 JUANITA HENSLEY, Chief, Division of Motor Vehicles (DMV), Department of Administration, testified before the committee. Current statute reads an individual, owning a small farm, dairy or rancher is eligible for a farm plate and the fee is $68 for every two years. She said the corporation is required to pay the commercial vehicle registration rate which is anywhere from $100 to $440 biannually. Ms. Hensley indicated the DMV did not have a problem with including those individuals that are raising produce, plants and landscaping. MS. HENSLEY continued, "We have no idea, the number of vehicles that would fall into this category. We are looking at a reduction of state revenues. If all nurseries, and everyone is included in this, we have no problem with this bill, we just want to point out to the committee that there would be a loss of state revenues. We at this time have no idea how to calculate that loss because we have no idea how many vehicles that this farm has, how many vehicles that any of the other nurseries throughout the state would choose to register and use the farm plates. So we would have no idea of what the revenue reduction would be." Number 0504 REPRESENTATIVE HUDSON asked does the price of these registrations relate to the cost of administering that program. Is there a net surplus to the general fund? Number 0532 MS. HENSLEY replied the DMV is one of the revenue generators for the state in the fact that the registration fees and license fees bring in more than $42 million to the state revenues every year, the division operates with a budget $8.9 million. She indicated the cost for operating this program does not cost the state $68 biannual per vehicle. Nor does it cost the $100 per vehicle. HB 361 would reduce the general fund take overall. REPRESENTATIVE HUDSON presumed, if you lose revenue in one place, we would have to make it up through the general fund, or you would have to make it up by increased registration fees for all other types of vehicles. MS. HENSLEY responded, "If you wanted to hold the state revenue general, neutral, yes then you would have to increase the fees in other areas to hold it harmless. There is a fixed cost, and I have those but I don't have them with me right now, transactional cost to register a vehicle and what it costs to do that." She indicated she could provide that. REPRESENTATIVE HUDSON replied that was not necessary, she conceptually answered the question he had. He asked, "Is there any other type of occupational use that we favor to this extent, for example timber harvesting or transporting fish from a setnet sight where the vehicle is principally used to say move fish from the setnet sight to the marketplace or the processor or wherever they ultimately move those commodities. Do we offer any other kind of reduced, favorite type of fair reduction for those people, or are they charged the commercial rate?" Number 0712 MS. HENSLEY replied right now those types are not licensed under the farm exemption. If it is registered as a company name or business name, they do pay the commercial fees. It depends on what definition you use whether you use the agriculture definition from the Department of Natural Resources or you use just the farm exemption that is defined in Alaska statutes dealing with motor vehicle laws. She indicated it has a far reaching, more effective, reducing state revenues. REPRESENTATIVE ELTON said, in the case that is in front of them, he has no problem with making an exemption. He believed HB 290 goes further than that because it removes the restriction that that person resides all time. This means a gentleman farmer living in Spenard could also use the exemption because there is no longer a requirement that this person live on the farm. Representative Elton said, "It seems to me that, instead of opening the door a crack, were taking out a restriction that can fling the door wide open and that restriction being the restriction right now that requires the person live on the farm." Number 0819 MS. HENSLEY stated the current statue does require that the person reside on the farm. This would take that out of statute so you are not having the person that lives in Matanuska-Susitna Valley, who is raising those potatoes, living on that farm and taking his produce to and from Anchorage. You have the nurseries in Anchorage or in Juneau who are living elsewhere in the community, but running their business say in south Anchorage. They would be eligible for the farm plates because of the type of produce that they are growing. REPRESENTATIVE ELTON said, until hearing the discussion, he did not believe a nursery would qualify. He believed agricultural business is more of a tradition type of thing, as food producing. He asked if there are other business other than nurseries that might be considered extraordinary when it comes to farm, or ranch, or dairy that are also covered. MS. HENSLEY responded, "Actually, if you look at adopting the definition of agricultural operations, under the Department of Natural Resources (DNR), that would mean any agriculture and farming activity such as the cultivation (indisc.) soil, dairy, operation of greenhouses, the production cultivation growing and harvesting of agriculture, (indisc.) cultural horticultural commodities, raising of livestock (indisc.), furbearing animals and poultry, forestry or timber harvesting operations and any practice conducted in agricultural operation." Number 0933 REPRESENTATIVE ELTON said, "We aren't doing that are we. Does this adopt the DNR definition?" MS. HENSLEY replied it does not, however, someone could argue the point to adopt the DNR. Number 0952 REPRESENTATIVE COWDERY asked if HB 290 would allow rental properties. MS. HENSLEY read AS 28.10.181(h). Vehicles owned by ranches, farmers, and dairymen. A vehicle not exceeding an unladen total gross weight of 16,000 pounds, owned by a person deriving the person's primary source of livelihood from the operation of a ranch, farm, or dairy where the person resides full-time, [did not read: or at the principal place of business,] and which a vehicle is used exclusively to transport the person's own ranch, farm, or dairy products to and from the market or to transport supplies, commodities, or equipment to be used on the person's ranch, farm, or dairy, may be registered under this subsection and may be issued registration plates of a distinctive design or system of numbering REPRESENTATIVE COWDERY said if you were in this business in south Anchorage and decided you wanted to put a greenhouse in another location that would be the same company, doing the same thing. MS. HENSLEY pointed out HB 290 deletes where the person resides full-time. It also deletes the word livelihood and primary source of income. Number 1103 REPRESENTATIVE KOOKESH said if they wanted a plate, impact to the state general fund would be minimal, including the departments income. If it was fishermen, he would be a little concerned because there are more fishermen in the state than there are (indisc.) ranchers, dairymen or farmers. MS. HENSLEY said DMV does not oppose this concept at all. She reiterated there are a lot of nurseries or companies now that register their vehicles as commercial vehicles and they pay anywhere from $100 to $440 in registration fees. This bill has the potential only of having them pay $68, that is the difference in revenue. CHAIRMAN WILLIAMS indicated HB 290 would be held until Monday.