SB 189-EXEMPTION: LICENSING OF CONTRACTORS  2:43:01 PM CHAIR DUNLEAVY announced the consideration of SB 189. "An Act relating to an exemption from the regulation of construction contractors." This was the first hearing. 2:43:33 PM STEVE RICCI, Aide, Senate Labor and Commerce Standing Committee, stated that SB 189 resolves an issue with AS 08.18.161 that defines the qualifications for an exemption from contractor licensing. He explained that the issue is that a growing number of people are abusing the "owner-builder" exemption that is designed to allow people to build their own home, duplex, triplex, or four-plex or a commercial building without obtaining a contractor's license. These owner-builders are in the building business without the benefit of licensure, insurance, or bonding so consumers have little protection against potentially substandard work. Section 1, paragraph (12), on page 2, adds language that limits the use of the exemption when the homes are intended to be sold. This will prevent the current situation where someone can post For Sale signs on a row of homes they're building while claiming the exemption. He said this will protect consumers because their recourse is limited if the builder isn't a licensed contractor. He noted that the bill is the priority of the Alaska State Homebuilders Association. 2:45:57 PM SENATOR OLSON asked if there was opposition to the bill. MR. RICCI said the packet contains one letter of opposition from a masonry company in Fairbanks; it makes reference to the monopolistic nature of contractors. SENATOR OLSON asked if the intent of the bill was to help the Alaska Homebuilders Association become a monopoly. MR. RICCI clarified that the bill tries to close the loophole to ensure that the intent of the current statute is followed. SENATOR OLSON asked how often a builder has built a home for multiple family members. MR. RICCI suggested that the Department of Labor and Workforce Development (DOLWD) could speak to the statistics and abuses that have occurred. 2:47:56 PM AL NAGEL, Mechanical Inspection Manager, Department of Labor and Workforce Development (DOLWD), Anchorage, Alaska, offered to answer questions. SENATOR OLSON said that he and four others built a hanger at the Barrow airport and he finds it reprehensible that the Alaska Homebuilders Association is trying to get a law passed that may adversely affect him as an owner-builder. He questioned how he might allay the concerns of people who see this as a monopolistic move by protected membership organizations. MR. NAGEL replied that example would not be affected by the bill. His reading of the bill was that it's more a matter of preventing someone from doing that on a regular basis. SENATOR OLSON asked if that means he couldn't build another hanger for himself on a regular basis or add on to the existing hanger in Barrow. MR. NAGEL clarified that the department didn't propose the language. He said his reading was that the first hanger wouldn't be a problem, but an owner-builder would be limited for two years to building just that one structure. Remodeling the hanger wouldn't be affected by the bill. SENATOR OLSON asked where the language came from. MR. RICCI said the sponsor worked with the homebuilders association to develop language that would allow DOLWD to decipher intent. He reiterated that the focus of the legislation was to allow reasonable exemptions for owner-builders but close the unintended loophole. SENATOR OLSON commented that deciphering intent reminded him of the thought police, so he had reservations about some of the language in the bill. 2:52:39 PM GREY MITCHELL, Assistant Commissioner, Department of Labor and Workforce Development (DOLWD), Juneau, Alaska, offered to answer questions related to SB 189. SENATOR OLSON asked if the department was in favor of the bill. MR. MITCHELL replied DOLWD was neutral on the bill. SENATOR OLSON asked why they hadn't taken a position one way or the other. MR. MITCHELL replied they may develop a position as comments come in and the bill proceeds. SENATOR OLSON asked if he understood the concern he was raising that some large membership organizations could push statutory requirements and regulations that would hamstring independently minded people who don't have access to a contractor in rural Alaska. MR. MITCHELL said he didn't believe the intent was to hamstring a true owner-builder. It's intended to separate the true owner- builder from the people that are trying to use the exemption of an owner-builder when they're actually acting as a contractor, he said. SENATOR OLSON asked how often he's seen examples of this problem. MR. MITCHELL deferred to Mr. Nagel who deals specifically with enforcement, but anecdotally he knows that it happens regularly. SENATOR OLSON commented on the cost to a private person who is acting legitimately but has to defend himself. 2:56:33 PM CHAIR DUNLEAVY offered his understanding that the purpose of the bill is to limit the shadow type business whose purpose is to churn out homes without having to adhere to the licensing, bonding, and insurance requirements imposed on legitimate contractors. The bill is not intended to prevent a private person from building their own home, duplex, triplex, four-plex, or commercial building. He asked Mr. Nagel if he had anything to add. MR. NAGEL reiterated that the existing language protects the rights of a person to build his/her own home. The intent is to protect against people acting as a general contractor when they haven't assumed the responsibility of insurance, bonding, and licensure. Responding to Senator Olson's question about numbers, he said he didn't have that information, but the department has found that in certain areas of the state individuals do routinely build primarily residential structures without holding licensure or insurance. "They hold themselves out to be an owner-builder when the For Sale sign oftentimes beats the paint drying," he said. Responding to a further question from Senator Olson, he offered to follow up with information about the number of unlicensed contractors that DOLWD has taken enforcement action against. He warned that owner-builders aren't tracked in a separate category. SENATOR OLSON asked how many times the state has prevailed when it has taken enforcement action. MR. NAGEL explained that on a first or second offense the department generally issues an administrative fine and a civil cease-and-desist order. The criminal penalties of the current statute are considered on a third or subsequent offense. SENATOR OLSON commented that defending oneself from a fine oftentimes is more expensive than paying the fine. 3:02:00 PM At ease 3:02:18 PM CHAIR DUNLEAVY reconvened the meeting. SENATOR MICCICHE summarized that the essence of the bill is that somebody who is in the building business should become a building contractor. It doesn't change a thing for the people who want to build their own home. CHAIR DUNLEAVY held SB 189 for further consideration.