SB 127-VEHICLE TRANSACTION AGENTS  9:42:54 AM SENATOR DYSON announced that the next item of business would be SB 127. 9:43:19 AM FORREST WOLFE, Staff for Senator Cathy Giessel, Alaska State Legislature, Juneau, Alaska, explained SB 127 on behalf of the sponsor. He said SB 127 aims to reduce the Division of Motor Vehicle's (DMV) work, thereby increasing its efficiency and making customer lines shorter through the use of Advanced Business Partnerships (ABPs) contracted to perform certain transactions statutorily mandated to the DMV. It would outsource certain services to the private sector. Currently, businesses that offer these services are paying the fees for these transactions. He said SB 127 allows businesses to retain administrative costs for transactions they are already conducting. This is necessary in the interest of fairness because private businesses should not be footing the bill for assisting the state by providing the services. By allowing businesses to retain these costs, there is an increased incentive for businesses to provide the services more frequently or to begin offering the services. He pointed out that this is not a new concept in Alaska. It is already being used by the Department of Fish and Game in allowing private businesses to sell and issue hunting and fishing licenses. He continued to say, in the face of budget shortfalls, strategies like SB 127 are an effective way to reduce government through innovative use of the private sector. He concluded it is good for the government, for businesses, and for the public. He urged support of SB 127. 9:45:32 AM SENATOR WIELECHOWSKI understood that businesses have been providing this service for many years. MR. WOLFE said that was correct. SENATOR WIELECHOWSKI inquired how much the service fee is now. MR. WOLFE said that is left up to the businesses. SENATOR WIELECHOWSKI inquired if SB 127 would result in a loss to the state of $1.2 million per year. MR. WOLFE said yes. SENATOR WIELECHOWSKI noted that the bill does not have a Senate Finance Committee referral. MR. WOLFE agreed that it did not. SENATOR WIELECHOWSKI summarized that the state is giving $1.2 million to businesses for doing work that they have already been doing for years. MR. WOLFE agreed. He added that it is more of a fairness issue to the private sector. 9:46:58 AM SENATOR WIELECHOWSKI pointed out that the businesses were already charging a service fee. He maintained that the state is transferring $1.2 million of the people's money to companies for doing work they have been doing for years and were getting nothing in return. MR. WOLFE indicated that the bill would help save the state labor costs at DMV and would assist the public's not having to wait in line at DMV. SENATOR WIELECHOWSKI asked for evidence of personnel savings to the state in the fiscal note. MR. WOLFE said that is not reflected in the fiscal note. 9:48:28 AM SENATOR GIESSEL explained that approximately 25 percent of DMV's work load is performed by businesses that have been facilitating licenses and footing the administrative cost. She noted letters of support for SB 127. CHAIR DYSON noted that in a diverse state such as Alaska, there are a lot of small communities that might open a boutique registration shop within another business as a service to clients. CHAIR DYSON opened public testimony. 9:49:46 AM MELISSA CUCULLU, General Manager, Alaska Tags and Titles, Palmer, Alaska, testified in support of SB 127. She related that her business has four convenient locations in high traffic areas for ease of service in Anchorage, Wasilla, and Fairbanks. She said she was approached in the summer of 2004 to open a privatized DMV office in Wasilla to meet a need the state could not. Between September of 2004 and December of 2013, agents processed 341,000 transactions generating over $30 million in state revenue, saving Alaskans a minimum of 20 years waiting in line. She explained that on a daily basis, branches receive 100 to 400 phone calls, the majority of which pertain to drivers' licenses, required documents, and DMV hours and locations. The calls do not correlate to income for the firm. With the increase in phone calls, the firm needed an upgraded phone system and a dedicated employee whose function is to answer customer questions and navigate the state website. She concluded that the bill will assist the company with credit card processing fees, the required technology and equipment, and overhead costs, allowing for expansion to better meet customer needs. She thanked the committee for its time and consideration of SB 127. 9:51:52 AM SENATOR WIELECHOWSKI asked Ms. Cucullu if she charges a service fee. MS. CUCULLU replied that they charge a service fee based on the transaction; $20 for a registration renewal, $25 for a transfer of title, and $30 for commercial fees. SENATOR WIELECHOWSKI assumed that the company received at least a $20-to-$30 service fee for the 300,000 transactions. MS. CUCULLU said that was correct. SENATOR WIELECHOWSKI asked if those are standard rates and if the business is limited by what it can charge. MS. CUCULLU replied that the state does not dictate fees to be charged. The fees are standard amongst businesses. SENATOR WIELECHOWSKI inquired if SB 127 would allow the business to collect 15 percent. He asked how much the fees total. MS. CUCULLU remarked that the fees are based on the transaction. For a duplicate registration, the fee is $2, a duplicate tag or plate is $5, a registration for transfer of title would be $115, and a commercial transaction is based on the weight of the vehicle. CHAIR DYSON said this is eye-opening. 9:54:29 AM AVES THOMPSON, Executive Director, Alaska Trucking Association (ATA), Anchorage, Alaska, testified in support of SB 127. He related his company's involvement as DMV partners that facilitate the handling of DMV transactions. He maintained that in order to continue to provide that service, ATA must generate more revenue to maintain and grow the business. Each day since 2006 ATA has processed transactions with no compensation other than nominal service fees. He said DMV provides some supplies, such as title, registration forms, tag and plates. In order to meet the demands of DMV services, ATA provides personnel and time. Compensation became an issue when the business started to grow and more income was needed. He said ATA has had to borrow money to make DMV payment schedules, and has not missed a deadline since 2006. He related that in 2013 ATA processed more than 11,000 transactions and generated more than $1.6 million in fees and local taxes, of which, $1.1 million in fee revenue went to DMV. He said he would like to see the commission rate in line 13, on page 1, be the same for all partners and be memorialized in statute. He concluded that it is a matter of fairness to share the revenues with DMV's partners. 9:58:20 AM AMY ERICKSON, Director, Division of Motor Vehicles, Anchorage, Alaska, answered questions related to SB 127. She expressed appreciation for the sponsor's desire to codify the business relationships DMV has been participating in since 1995 with the first emissions testing service. That service acted as a DMV agent and provided registration renewal services. She spoke of DMV's relationship with Alaska Tags and Titles and other services. In early 2000 DMV opened its document processing program to dealerships, financial institutions, and stores. The partnerships no longer include emissions testing services, but allow businesses to administer other DMV services. She concluded that this legislation would make official DMV's practices of partnering with private business to conduct its title and registration services and should positively impact existing and future business partnerships. CHAIR DYSON asked Ms. Erickson to respond to Senator Wielechowski's concern about loss of revenue to DMV. MS. ERICKSON responded that DMV does not have a position on the 15 percent charge. It would mean a loss of $1.2 million to the general fund - to all of Alaskans. She noted that DMV is receipt supported. 10:00:58 AM SENATOR WIELECHOWSKI asked if there are parameters related to business partner service fees and what the general range of fees is. MS. ERICKSON replied that DMV puts no guidelines on the fees businesses can charge. She said she did request a list of fees each of the for-profit partners' charges. She said transactions for registration fees range from $12 to $20, plus $20 to the state for registration. SENATOR WIELECHOWSKI asked about a chart that shows DMV revenue sources from 1997 to 2007. He pointed out that 57.8 percent of the revenue was generated from DMV offices in 1997. That number peaked at 61 percent and then dropped to 45.8 percent in 2007. In that same period of time, the business partners' source of revenue increased from 10.8 percent to 28.3 percent. He suggested that more people are going to the business partners. He concluded that those companies do not need a monetary incentive to provide DMV services because they are making money from service fees. MS. ERICKSON commented that the document was not provided by DMV and she could not speak to it. 10:03:36 AM SENATOR GIESSEL indicated it is noteworthy that the public is choosing the more convenient location being provided by the public sector. CHAIR DYSON asked if the public is aware of the comparative prices when weighing convenience against a higher cost at a business provider. SENATOR GIESSEL speculated that the cost is on the renewal form, yet the public is choosing to go to the small businesses. 10:04:45 AM DUANE BANNOCK, Former Director, Department of Motor Vehicles (DMV), Department of Administration, Kenai, Alaska; testified in support of SB 127. He stated that the goal of DMV, at the time he was director, was to decrease the amount of time the public spent in line at DMV. He said a solution was to expand the DMV business partnership program. He referred to the chart, saying Senator Wielechowski is correct that in 2007, there was a decrease of revenue in DMV offices and an increase in business partner revenue. He opined that the program was doing exactly what it was designed to do. He shared a personal story about his use of a business partner. He testified in support of SB 127 and said the concept is not new. 10:07:15 AM CHAIR DYSON set aside SB 127 temporarily. SB 127-VEHICLE TRANSACTION AGENTS  [Due to technical difficulties, the recording began again at 10:14.] CHAIR DYSON returned to SB 127 and public testimony. He described his positive experiences with DMV. 10:14:32 AM CHAIR DYSON suspected DMV business partners gain business from DMV-related traffic. SENATOR COGHILL asked if DMV has a good working relationship with the vendors. MS. ERICKSON said it was a cordial relationship. 10:16:18 AM CHAIR DYSON closed public testimony. 10:16:30 AM SENATOR COGHILL brought up the delta to the cash flow of the state. He inquired about the value of this service to Alaskans, aside from convenience. SENATOR GIESSEL noted that letters of support for SB 127 provide evidence of a qualitative benefit, rather than a quantitative benefit. A variety of users, such as cab companies, trucking organizations, and others, appreciate the convenience and use private vendors a lot. SENATOR COGHILL agreed that DMV has improved the convenience of their services, but there are still many in-person requirements. In Fairbanks, the DMV office is 18 miles away, whereas, a vendor is only 6 miles away. He agreed with Chair Dyson that it is about serving Alaskans better. He spoke in support of the bill. CHAIR DYSON said snowmobile dealers allow registration. Dealers largely provide for a service that is related to their business. 10:19:10 AM SENATOR COGHILL moved to report SB 127 from committee with individual recommendations and attached fiscal notes. SENATOR WIELECHOWSKI agreed that vendors are convenient for consumers. He voiced concern that the businesses are already getting money for transactions and should not be paid more. He did not think it was fiscally prudent for the state to pay $1.2 million to businesses for DMV services. He suggested that the bill have a Senate Finance Committee referral. He said he will vote "do not pass" on SB 127, as it is currently written. SENATOR GIESSEL countered that the bill provides an opportunity to reduce the size of government and encourages the private sector to take on more pieces of government; it provides revenue to and convenience for, the community. CHAIR DYSON shared some of Senator Wielechowski's concern. He opined that businesses will not raise fees due to competition, so they are asking for a cut from DMV to subsidize business, instead. He noted that several businesses reported on a need to upgrade their equipment and technology in order to continue to provide services. 10:22:19 AM SENATOR GIESSEL remarked that it is a quality issue of convenience. The public is willing to pay a few more dollars for the convenience. She opined that the loss of $1.2 million to DMV has actually been a gain to DMV all this time because companies have been providing the service all along. CHAIR DYSON asked Ms. Erickson if DMV endorses SB 127. MS. ERICKSON replied that DMV is neutral on the bill. She appreciated that it would codify what DMV is already doing in practice. CHAIR DYSON asked if the administration is comfortable with the net loss to the general fund. MS. ERICKSON said she has not had any conversations with the Department of Revenue or the commissioner about that. SENATOR WIELECHOWSKI asked Ms. Erickson if she stated SB 127 would codify what DMV does in practice. MS. ERICKSON said agreements are in place with business partners and the bill would make them official. SENATOR WIELECHOWSKI asked if DMV is compensating businesses for 15 percent of the proceeds now. MS. ERICKSON said DMV does not currently compensate businesses. 10:25:20 AM CHAIR DYSON asked if the fees businesses charge for service are currently codified. MS. ERICKSON said fees are not codified. She apologized for making the previous blanket statement. SENATOR WIELECHOWSKI summarized that, currently, companies are allowed to charge a service fee. The bill allows that to continue, plus companies will be allowed 15 percent of the proceeds. MS. ERICKSON agreed. 10:26:22 AM CHAIR DYSON announced that the committee would stand at ease. 10:27:30 AM SENATOR COGHILL withdrew the motion to report SB 127 out of committee. CHAIR DYSON announced that SB 127 would be held in committee.