Call to Order and Roll Call
The 2nd meeting of the Interim Joint Committee on Transportation was held on<Day> Monday, July 22, 2013, at 1:00 PM, in Room 171 of the Capitol Annex. Senator Ernie Harris, Chair, called the meeting to order, and the secretary called the roll. A quorum was present, and the June 4, 2013 meeting minutes were approved.
Present were:
Members: Senator Ernie Harris, Co-Chair; Representative Hubert Collins, Co-Chair; Senators Chris Girdler, Jimmy Higdon, Paul Hornback, Ray S. Jones II, Bob Leeper (via videoconference), Morgan McGarvey, Dorsey Ridley (via videoconference), Albert Robinson, John Schickel, Johnny Ray Turner, and Whitney Westerfield; Representatives Denver Butler, Leslie Combs, Tim Couch, Jim DeCesare, Keith Hall, Richard Henderson, Kenny Imes, Jimmie Lee, Donna Mayfield, Charles Miller, Terry Mills, Rick G. Nelson, Tanya Pullin, Marie Rader, Steve Riggs, John Short, Diane St. Onge, John Will Stacy, Fitz Steele, Jim Stewart III, Tommy Turner, and Addia Wuchner.
Legislative Guests: Representatives Rocky Adkins and Michael Meredith.
Guests: Doug Hendrix, Attorney, Office of General Counsel, Department of Revenue; Garry Morris, Policy Advisor, Office of the Commissioner, Department of Revenue; Tammy Watts, Director, Division of Collections, Department of Revenue, Corey Kline, Office of Policy and Audit, Finance and Administration Cabinet; Christine Siksa, Director of Government Relations, Recreation Vehicle Industry Association (RVIA); Kim Nelson, Legislative Agent, RVIA; Brian Nelson, Legislative Agent, RVIA; Nevelle Skaggs, Kentucky RV Dealer Association; Jay Huber, State President, Kentucky Motorcycle Association; Keith Roberts, Vice President of Legislative Affairs, Kentucky Motorcycle Association.
LRC Staff: John Snyder, Brandon White, and Christina Williams.
Discussion of House Bill 440
Tammy Watts, Director, Division of Collections for the Department of Revenue, discussed House Bill 440 and the steps that are taken before a delinquent tax payer’s professional and/or driver’s license is revoked for non-payment of taxes. She stated 95 percent of Kentuckians file and pay their taxes in a timely manner, and that it is only with the remaining 5 percent that the collection process is utilized.
Director Watts stated the taxes covered by the license revocation program are administered by the Department of Revenue, including the state portion of property taxes. Property taxes administered at the local level are excluded. Other debt that the Department of Revenue collects, such as a sub-set of child support, is not included in the revocation process because the statute refers revocation for non-payment of only state taxes.
The current collection tools that the department utilizes include a call center to manage outbound telephone calls to taxpayers regarding delinquent tax debt, and several collection letters that are sent out at various times throughout the process. Other collection tools are levies are issued after the taxpayer was sent a formal notice by certified mail. Both bank and wage levies are a possibility for the delinquent taxpayer. State tax liens that encumber property owned by the delinquent taxpayer and offsets, which are the ability to capture any refunds or monies due to the taxpayer from federal government or any other state agency, are also collection tools.
Prior to the passage of HB 440, the department had the authority to revoke several licenses including: liquor licenses through the Alcohol Beverage Control Board, mine licenses, and lottery sales licenses. The department can request the court in Franklin County to close a business by injunction if there is no evidence of cooperation and all other collection actions have failed.
A flow chart was provided to show the typical collection process. The process begins with a notice of tax due and a 45 day protest period. The next step in the process is initial collection, actions that include multiple telephone calls and letters. If that step has failed, administrative collections actions are taken that include additional phone calls, letters, levies, and liens. If the above three actions have failed, the late stage collection actions are taken which include injunctions, judgments, seizures, revocations of licenses (after a 20 day notice via certified mail), and other legal actions that may be necessary. At any point during this process, if the delinquent taxpayer were to contact the department, a negotiation could be made to proceed without more serious collection actions.
Director Watts stated taxpayers that will not be affected by HB 440 include those who receive a bill and are still within the 45 day protest period, taxpayers who file the timely protest and are working with someone in the department to resolve their debt, taxpayers who have filed bankruptcy, and taxpayers who are making payments under an approved payment agreement plan or judgment. No individual or business that does not have a legal tie to the incurred debt will be in danger of legal action or of losing a license. Only the person or business that incurred the debt will be affected.
The department has been working closely with the Transportation Cabinet and county and circuit clerks implement HB 440. The Department of Revenue and the Transportation Cabinet have made system modifications, and the department is developing an application to handle the process in-house. Information cards have been printed that will be available in county official offices for the taxpayers’ use that include a telephone number and the steps to take to resolve the debt.
The department has obtained a list of approximately 125 professional licenses and is developing a process to generate specific letters for the loss of professional licenses.
Other agencies have already had suspension and revocation authority. Child support enforcement has the authority to suspend, deny, or revoke professional licenses, driver’s licenses, and vehicle registrations. The Kentucky Higher Education Assistance Authority (KHEAA) has the authority to deny or revoke professional licenses. Various agencies, boards, and commissions have the ability to revoke a license for internal reasons.
Chairman Harris stated that his initial response was that he was unsure if implementing HB 440 would create a type of debtors’ prison, but since more information has been provided about the process leading up to the implementation of HB 440, he believes that is not the case, and that the process gives the taxpayer ample opportunity to set a course of action to resolve the debt.
Chairman Collins raised concerns about suspending licenses of delinquent taxpayers due to the possibility that they may still drive without a license, which becomes an issue of the taxpayer driving without automobile insurance due to a suspended license.
Chairman Collins stated there are tax amnesty programs where taxes are forgiven or significantly reduced, which is unfair to the taxpayers who pay on time without a debt reduction of forgiveness.
In response to a question asked by Chairman Collins, Director Watts stated the collection of child support is primarily a county attorney’s responsibility, but the department does collect a sub-set of child support if the county attorney has not had the ability to collect.
Chairman Collins stated he does not feel a significant effort is made to collect taxes beyond sending letters or making telephone calls, and an active effort should be made to physically collect taxes owed.
Discussion of the Recreation Vehicle Franchise Law
Christine Siksa, Director of Government Relations, Recreation Vehicle Industry Association (RVIA), discussed a proposal for the recreation vehicle franchise law and provided background information on the recreation vehicle (RV) industry and how RVs may fit into the franchise law.
Director Siksa stated the people in attendance to represent the RV industry would like to propose a fair and reasonable RV-specific franchise law that can address the unique business model followed by RV dealers and their manufacturers. She described the different types of RVs and stated that the only type that is covered under the car franchise law in Kentucky is a motorized RV.
She compared the RV industry to the car industry within the state of Kentucky. There are approximately 261 car dealers in Kentucky compared to 28 RV dealers. There are three car manufacturers and no RV manufactures. Approximately 11,400 people are employed in new-vehicle dealerships compared to 420 employees in RV dealerships. There are 1,025,000 light vehicles manufactured in Kentucky and 2,356 RVs are shipped to Kentucky out of an approximate 285,749 RVs for the entire industry. There are car sales of approximately $7.2 billion in the state. The retail value of RV shipments to the state is approximately $79.6 million.
Franchise laws evolved to protect car dealers in the dealer-manufacturer relationship and laws are structured for the car industry business model, whereas the RV industry has a different business model, so the proposal of a different franchise law based on the RV industry is needed. She stated RV dealerships offer items from several brands and manufactures and new car dealers will typically deal with one manufacturer. There are approximately 130 RV manufacturers competing for space on a dealer’s lot, which is not the case in the auto industry. Director Siksa gave four key provisions of the proposal: (1) territory, which indicates where a dealer is allowed to sell RVs and who is allowed to sell in that area; (2) transfer, or how the dealerships are transferred from one owner to another; (3) termination, which allows the manufacturer and dealers to terminate with or without cause; and (4) warranty, which involves parts manufacturers to be under the franchise and warranty obligations of the proposed law. Parts manufacturers would be responsible for paying the dealer mark up for repairs, handling the warranty claim, assuring that the warranty repairs are made in a timely fashion, and assuring that the consumer has good access to warranty service.
Also included in the proposed bill are definitions specific to the RV industry. There will be a provision that requires mediation prior to moving into any kind of injunction, court system, or any other type of more serious dispute resolution systems. The experience in the RV industry has been that disputes between manufacturers and dealers can generally be settled out of court with the use of a mediator. Another provision is reciprocity, meaning the dealer can do whatever the manufacturer can do and vice versa. The proposal would also be more inclusive by including travel trailers and non-motorized RVs under the law.
If an RV-specific franchise law is passed, several stakeholder benefits would occur. It would benefit consumers because it places travel trailer dealers under a franchise law, providing better protection for consumers. For RV dealers, the franchise law would protect travel trailer dealers the same as motor home dealers, and it would also protect dealers’ warranty claims to warrantors other than the RV manufacturer. A benefit for RV manufacturers would include consistency on how things are done and a clear law that applies directly to the RV industry. A benefit for the state would be if RV-specific provisions would be administered by the same agencies as for motor homes. This is not a proposal to change the state’s licensing, registration, taxation, or consumer protection laws and regulations, or civil procedure.
In response to a question asked by Chairman Collins, Director Siksa stated creating a separate KRS Chapter altogether would be ideal, but being in a separate section of KRS Chapter 190 to establish the difference between the car franchise law and the RV franchise law would also be suitable.
Mr. Lee Searcy, President of the Kentucky Auto Dealers Association, stated that separating RVs from the motor vehicle franchise statutes seems to make sense, and they will collaborate with the RV industry to make that happen. He indicated he would inform the committee if a situation arises that does not work in KRS Chapter 190. Mr. Searcy stated anything he can do to make the committee feel comfortable with a new RV franchise law he will do, and he will also notify the committee if he feels uncomfortable with any part of the process.
In response to a question asked by Chairman Collins, Mr. Nevelle Skaggs, Kentucky RV Dealer Association, stated most RV dealers are referred to as “mom and pop” operations because they have never been franchised. As opposed to motor vehicle franchises, when the time comes to sell his RV dealership, there is no value in the business name other than the longevity of the business itself and the structure of the building.
Chairman Collins stated some auto dealers have had their dealerships taken away after a franchise has been implemented and cautioned the RV industry to evaluate if they would be better off if they did not have a franchise so that this does not happen to them. Mr. Skaggs stated there are so many different brands that, when one brand goes out of business, there are several other brands that the dealership can depend on. Some of those brands are referred to as anchor brands.
In response to a question asked by Chairman Collins, Mr. Skaggs stated that in Texas, which has what is considered a model RV franchise law, it does not appear that dealers have been forced to sell a particular brand. A dealer was forced to take a particular brand by the manufacturer, but that did give the dealer warranty protections. One aspect of being an RV dealer is sometimes having a hard time collecting warranties. If an owner brings a motor home to his dealership for warranty work, the owner signs the paperwork and drives away, and the dealership must battle with the manufacturer to collect the warranty money. Sometimes the manufacturer will pay the warranty and other times it will not, in which case the dealer is left paying for the loss. A franchise agreement specifies who pays how it will be paid.
In response to a question asked by Chairman Collins, Mr. Skaggs stated the dealers have to approach individual companies who make RV parts (Coleman etc.,) to recover the money from the warranty. In the auto industry, the car owner expects the dealership of the brand of car to fix and pay for the repairs covered under the warranty, not the brand of the part that is being replaced. In the RV industry, a Winnebago customer expects Winnebago to pay for the replacement of a refrigerator that has gone bad, when the customer may have to be told that the brand of the refrigerator will not be covering the warranty and the customer becomes unhappy. Mr. Skaggs stated the RV franchise law would make a more seamless warranty process for the consumer.
Chairman Harris stated the RV franchise law would also make it easier for the dealer to be able to contact the manufacturer to cover the warranty and places the responsibility back on the RV manufacturer.
In response to a question asked by Chairman Collins, Director Siksa stated that, to be an RV dealer, the state requires that dealer to have at least a gravel paved lot, a facility to conduct business and keep files, and a restroom. Manufacturers do not require anything additional.
In response to a question asked by Chairman Collins, Director Siksa stated the RV franchise law does not discuss the manufacturers requiring something of the RV dealers.
Senator Hornback stated he understands the dilemma the RV dealers face from a warranty standpoint, but he is unsure why they would want to be under more control from a franchise. The control the franchise may gain over a period of time by making the dealer a vendor of only one product for one thing takes away from the variety and choice that is available at each individual RV dealership. Senator Hornback cautioned the RV industry representatives to be careful what they ask for because there may be unintended consequences, including a loss of freedom that is often times enjoyed by “mom and pop” types of businesses.
In response to a question asked by Representative Imes, Mr. Skaggs stated that Texas has experienced a manufacturer franchising with a large dealer or trying to take a small dealer’s franchise away and give it to that dealer. It may be because of the nature of the business because GM has everything under the GM umbrella whereas Forest River has so many different brands that it has not been forceful in making RV dealers sign for additional products. That has not been the case in Texas, where the law seems to be working pretty well.
In response to a question asked by Representative Henderson, Director Siksa stated there is no cost associated with the franchise law. She stated when the RV dealers sign a dealer-manufacturer agreement, they pay nothing. The agreement will outline which lines of vehicles to be carried from that manufacturer. Representative Henderson stated the car industry and RV industry are different types of businesses.
In response to a question asked by Chairman Collins, Director Siksa stated big and small dealers are treated equally in the RV industry.
Chairman Collins cautioned that if an RV franchise law is passed that allows the manufacturer to govern the RV industry, there is a possibility that small dealers could be squeezed out of the industry. Director Siksa stated that she and the other representatives do not envision that happening. They are drafting language to help ensure that does not occur.
In response to a question asked by Chairman Collins, Director Siksa stated there was a monologue several years ago involving RV dealers, suppliers, and manufacturers. That monologue is the basis of what the work. RVIA tailors the monologue to the dealers in the state, but the manufacturers are happy with most of the decisions. RVIA wants to create consistency among the states and fix the warranty problems in the RV business, and the RV franchise law does that to some extent.
Chairman Collins stated he understands the warranty problems as well, but he also echoes the other legislators’ comments of “be careful what you ask for.” He stated the committee will have to look over the proposal very carefully to ensure there are no loopholes that could cause any RV dealers unintended problems.
Discussion of Legislative Issues Pertaining to Motorcycles
Jay Huber, State President, Kentucky Motorcycle Association, discussed legislative issues pertaining to motorcycles. He discussed three bills that the association was collaborating with legislative sponsors on in the previous session
Mr. Huber stated the first bill is what is referred to as the parking garage bill, introduced by Representative Linder in the 2013 session as HB 420. Motorcyclists have had issues concerning motorcycles being banned in parking garages. These parking garages are typically municipal garages, city owned garages, or university garages. Typically, motorcyclists have been able to individually address the situation with various parking garage structures. The main reason for the ban is fear that the arm of the gate will come down and hit someone’s head as they go through the gates. Mr. Huber said he is an electrician who has experience working on motor control and that an electronic eye, similar to what is installed at the bottom of a garage door, can resolve this situation for $30 to $40 per gate. The garage at Newport on the Levee has an entirely automated system, and there is no ban on any type of motorcycles at the facilities. There have previously been agreements made between motorcyclists and various parking garages that the garages will allow motorcycles, but the signs prohibiting motorcycles will be left in place for liability purposes. From an economic standpoint, parking garages could gain four entry fees on eight people if they were to arrive on motorcycles versus one or two entry fees if the same number of people were to arrive in cars or trucks.
The second proposed bill that has been discussed is a bill that has been sponsored by Representative Meredith concerning red lights not sensing motorcycles (HB 437 of the 2013 session). Mr. Huber stated one of the ways that some motorcyclists deal with the issue is to buy a magnet to place on the underside of the motorcycle. Some but not all intersections have been fixed. Other things that may help are have flashing yellow turn lights or round-a-bouts. Some states have passed similar legislation. Some states have implemented a law stating that, if the light has passed through two cycles, 60 seconds, or 90 seconds, a person can proceed left with caution at a red light that fails to operate properly. Representative Meredith stated the bill is ready to be prefiled again for the upcoming 2014 session, and he welcomed feedback. When comparing similar legislation of other states, there have been differences in the amount of time that states mandate waiting at the red light before proceeding with caution. States mandate from 60 to 220 seconds. His proposed bill is not exclusive to motorcycles and includes motor vehicles as well. Technology does not always function properly, and there needs to be a way out of situations like these for motorists.
Mr. Huber stated Representative Flood had sponsored a vulnerable users’ bill during the previous session that addresses right-of-way violations (HB 137 of the 2013 session). Right-of-way issues are an extremely prevalent problem within the motorcycle community. The proposed bill addresses motorcycles, bicycles, mopeds, scooters, in-line skates, roller-skates, and motorized wheelchairs. Mr. Huber and other members of the Kentucky Motorcycle Association have seen what happens when people pull in front of them. One instance was when a member of the association had a woman pull in front of him a couple of years ago while he was riding his motorcycle, which caused him to T-bone the vehicle. The woman had four children in the car, no license, no insurance, and did $10,000 worth of damage to his motorcycle. He was off of work for 10 weeks, and the only penalty she was assessed was a $50 fine. Mr. Huber said the association sees similar instances all the time. Penalties and fines have been increased if someone is speeding or negligent in the areas of construction workers, and the association would like to see something similar happen in a right-of-way bill.
In response to a question asked by Representative Riggs, Mr. Huber stated that convertibles are still allowed in the garages, suggesting that a person who owns a convertible with the top down could potentially have the same problem of getting hit on the head with the gate and yet not be banned. Representative Riggs stated in that sense the motorcyclists are discriminated against.
Representative Lee stated the greatest enemy of any motorcyclist or automobile driver is the cellular telephone. Until the use of cellular phones while driving is outlawed, there will be a great risk of danger on the road. Mr. Huber stated one of the unintended consequences of passing the no texting while driving bill has been that, instead of people texting and driving where the road is still in view, they hold their phones lower and text, resulting in the driver not being able to look at the road at all.
Representative Mills stated he is working on texting legislation that might help. He added that he has never seen a person on a motorcycle texting.
Senator Schickel thanked the Kentucky Motorcycle Association, Jay Huber, and his constituent, Keith Roberts, who is a legislative affairs agent. He expressed appreciation that they work other jobs but remain active advocates during the interim.
Representative Henderson suggested researching a way to implement a user friendly pass, or a reduced rate for motorcycles on toll bridges, as they have little impact on the surface of the roads. Mr. Huber stated some other states have either have a reduced rate or no rate at all. Some states base toll rates on the number of tires on the ground. Most motorcycles are 1,000 pounds or less, and therefore the impact that they have on wear and tear of the road is minimal.
Representative St. Onge thanked Jay Huber, Keith Roberts, and the Kentucky Motorcycle Association for the discussion regarding the disparity of the motorcycle users and the penalties or lack thereof applied during certain right-of-way situations.
With no further business before the committee, the meeting adjourned at 2:27 P.M.