MINUTES OF THE ASSEMBLY COMMITTEE ON TRANSPORTATION Sixty-eighth Session March 16 , 1995 The Committee on Transportation was called to order at 1:15 p.m., on Thursday, March 16, 1995, Vice Chairman David Goldwater presiding in Room 331 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Mr. Thomas Batten, Chairman Mrs. Vonne Chowning, Chairman Mr. Dennis L. Allard, Vice Chairman Mr. David Goldwater, Vice Chairman Mr. Bernie Anderson Mr. John C. Carpenter Mrs. Marcia de Braga Mr. Dennis Nolan Ms. Genie Ohrenschall Ms. Patricia A. Tripple GUEST LEGISLATORS PRESENT: Assemblyman Larry Spitler STAFF MEMBERS PRESENT: Paul Mouritsen, Research Staff Jackie Valley, Committee Secretary OTHERS PRESENT: Daryl Capurro, Bob McDonald, Paula Treat, Zane Sims, Donna Wadey, Howard Henning, Patricia Henning, Devone Halgrenson, Ben Scott, Michael Hohl, Bob McDonald, Don Hellwinkel, Terry Petersen and Don Weir. ASSEMBLY BILL 205 Expands certain definitions for purposes of sale and registration of motor vehicles and establishes restrictions for sale of certain vehicles by certain long-term lessors. Assemblyman Larry Spitler, District 41, announced it is a real pleasure to sit before this committee as a prime sponsor of A.B. 205. In 1991 and 1993, A.B. 205 was brought to the attention of the Committee on Transportation. Mr. Spitler commented the A.B. 205 concept has been around since 1991 and continues to be an unresolved issue legislatively. Mr. Spitler communicated in the world of business competition becomes a part of what businesses thrive on. He articulated that we have brought back an issue this legislative session that in many ways keeps competition and helps business in the state of Nevada. A number of items are listed in support of A.B. 205 as follows: (1) The warranty frequently applies to the first owner of the vehicles when purchased. (2) Recall notices may not be mailed out. (3) Brokers do not have the expense of maintaining the show rooms or repair facility. (4) Items that are required of other businesses. (5) Dealers make very significant contributions to the economy and to the community in which they live. In some states the brokers have taken money from consumers and not delivered the products. In some cases an opponent will reveal that a broker provides an important service and consumers find it hard to bargain for a good price with new car dealers and theoretically the brokers will get them the best price. Dealerships in the state of Nevada offer limited choices. Dealers get their franchise when the population centers explode. Most of the franchises are granted when they are small. Mr. Spitler read a paragraph from the N.R.S. 482.318. "The legislature finds and declares that the distribution of sales of motor vehicles in the state of Nevada vitally effects the general economy of the state and the public interest and public welfare, and in the exercise of its police powers, it is necessary to regulate and to license motor vehicles' manufacturers, distributors, new and used vehicle dealers, rebuilders, leasing companies, salesmen, and their representatives doing business in the state of Nevada in order to prevent frauds, impositions and other abuse upon its citizens." Mr. Daryl Capurro, Executive Director of Nevada Franchise Auto Dealers Association, NFADA Trade Association and representing 85 franchised new car dealers spoke. Mr. Capurro indicated that new car dealers represent the second largest producer of sales and use taxes in the state of Nevada, and directly employ over 5,500 people in the state. In addition the new car dealerships represent a 1.2% of total retail establishments, and produce 20.5% of total retail sales in Nevada. The dealerships also represent 4.4% of the total retail employment in this state, the dealerships payroll represent over 13% of total retail payrolls. He stated they are in total support of A.B. 205. A.B. 205 is a bill which essentially clarifies the respective rolls of franchised new car and truck dealers and used car dealers who act as auto brokers. He further commented that A.B. 205 would simply require used car dealers to stick to selling used cars not -0- mileage "used cars", which are purchased from out-of-state dealers and sold to customers as used cars after registering cars and trucks to themselves. (Exhibit C) New car dealers pay vast amounts of real and personal property taxes on their investments, as well as the sales and use tax collected. And, the vast majority of new vehicles purchased by auto brokers (used car dealers) are purchased out of state, resulting in economic loss in terms of employment and spending in the local market areas. Vehicles sold by auto brokers are used vehicles; most brokers, if not all, have been violating federal law by not applying for the federally-mandated Used Car Buyers Guide window sticker on all used vehicles they sell. A.B. 205 indicates that a new vehicle means a vehicle with 2,500 or less miles on the odometer. A used vehicle is defined in A.B. 205 as a vehicle with over 2,500 miles on the odometer. (Exhibit C) Assemblyman Carpenter asked what is the layman term definition of licensed long- term lessor. Mr. Capurro responded that term started in statute under Chapter 42. Mr. Capurro further explained there are two type of lessors (1.) Short term lessors and (2) long term lessors. The definition of long term lessor is anything over 30 days. A short term lessor is anything less than 30 days. Mr. Spitler thanked the committee for their time and consideration. Mr. Dan Towbin, Chairman of Towbin Automotive Enterprises, Las Vegas, Nevada, stated their companies represent 6 new car and truck franchises and have plans to expand an additional 2-3 dealerships within the next few years. He further commented that brokers continue to be a problem for their organizations. He stated that brokers purchase their new cars and trucks from neighboring states such as Arizona, Utah, Colorado, and California dealers for 100-200 dollars over new dealer cost and resell them to Nevada residents for an additional 1-5 hundred dollars profit. New car dealers provide costly services to customers that brokers do not, such as quality service. Servicing today's vehicles is very technical, and complex, and requires expensive equipment, trained technicians and safe working conditions. Most services are not reimbursed by factory or manufacturer, except for the warranty repair. Recall notices for defects are sent to dealers. Brokers receive recall notices and do not send these important notices to the customer. There is perception that new car dealers are making gainful profits. Brokers presently have unfair advantage. Brokers are considered used car dealers and should be required to remain used car dealers. New car dealers provide thousand of jobs and hundreds of million of dollars in revenue in the state of Nevada. In order to become a new car dealer, the manufacturer does a background check on all dealer candidates. A background check includes: Character, possible criminal background, pending litigations, previous business dealings, experience as a new car dealer in the past, financial net worth, commitment to service, equipment, training, and quality personnel. DMV also does a background check through the DMV Bureau of Law Enforcement in the state of Nevada. Dan Towbin is in support of A.B. 205 and requested the passage of this bill. (Exhibit D) Assemblyman Batten asked for clarification on the terminology of 0-mileage on used cars. Dan Towbin explained 0-mileage would be a new car with 0-12 miles. A demo car with 2,400 miles is also considered a new car. Assemblyman Allard questioned if 2,500 miles is considered high and would this allow the dealers to use the demos and sell them as new cars. Mr. Towbin stated a research has been performed within their organization and felt that 2,500 miles is a fair amount of miles on demo cars. Mr. Allard asked if the demos would be sold as new or used cars. Mr. Towbin replied that according to the law a demo car is considered a new car and it is sold at a lesser price. Mr. Tim Cashman, President of Cashman Cadillacs, Las Vegas, stated Cashman Cadillacs employs 160 people in Las Vegas, with an annual payroll in excess of 5.5 million dollars. He further added that the company collected for the state of Nevada sales and use taxes totalling one million six hunderd eighty three thousand dollars. The Nevada Revised Statute was written in the 1960s to define the difference between new and used car dealers. A new car dealer is required to have a franchise and required to provide full support for service parts. A new car dealer has an obligation to their customers. A few auto brokers are utilizing a loophole in the law and registering themselves as used car dealers and then purchasing new cars. A 0 mileage used car would have to be registered in the state according to the statute. A new car can be sold with 10,000 miles on it, never having been registered with DMV and yet remain with the manufacturer's statement of origin. Auto brokers do not have the same investment as a new car dealer. An auto broker is a used car dealer and should be allowed to sell used cars under the terms of their license. Auto brokers should not be allowed to sell new cars without guarantees and safeguards of N.R.S and franchise regulations. Mr. Cashman requested the support and passage of A.B. 205. Vice Chairman Goldwater asked if there were any questions or comments, there were none. Bob McDonald, Desert Buick GMC Automotive Group, Las Vegas, Nevada, presented a Las Vegas yellow pages telephone directory of new and used car dealers. He stated auto brokers are listed as new car dealers. (Exhibit E). He pointed out that auto brokers are not listed in the yellow pages as used car dealers. He also presented pictures of used cars on display at credit unions in Las Vegas for sale. He mentioned that consumers are cheated out of low or no interest finance rates offered by manufacturers or other financing companies. Car dealers/brokers do not pass on rebates to customers. Rebates are offered to the original purchaser of the vehicle. He further communicated when a vehicle is purchased from an auto broker or used car dealer the buyer is the second purchaser. Sales of new vehicles by brokers cause customers dissatisfaction and confusion, and create the potential for inaccurate sales data, sales data which is required to be kept by federal law (Exhibit F). When a dealer sells a car to a used car dealer/broker that warranty starts at that point. The warranty belongs to the first purchaser of the vehicle which is the broker. The broker's customer becomes the second owner of the vehicle. Mr. Carpenter inquired why would the Ford Company allow sales of these vehicles to brokers. Mr. McDonald responded that is when the Federal Trade Law comes into effect. Mr. Capurro responded that if the brokers are caught in the act, strong sanctions would be taken. Most of the brokers are outside the franchise areas and are very difficult to locate. Daryl Capurro communicated that manufacturers will be notified of dealers doing business with brokers. Assemblyman Ohrenschall commented whenever you run into territorial allocation of markets that are nationwide you are dealing with the Sherman Patton & Robertson trust laws. Paula Treat and Zane Sims, representing Auto Brokers, stated this issue has been ongoing for some time. Ms. Treat further explained that she has spoken to Mr. Spitler regarding this bill. She communicated she did not believe that Mr. Spitler's intention was to put auto brokers out of business, but to resolve these problems. Last session they offered amendment for regulation, offered to work with DMV, and new car dealers. She further added that new car dealers are seeking to put auto brokers out of business. In speaking with law enforcement, attorney general's office, consumer affairs division and judges, there have been no major complaints against auto brokers. Auto brokers are run by the consumers and word of mouth competitors. She expounded that telemarketing was not outlawed but regulated. Auto brokers have requested their own regulations and other guidelines for brokers. Because of those who have purchased cars through auto brokers and are satisfied, the auto broker dealers have survived. Ms. Treat believed there should be rules and regulations for auto brokers to abide by. Assemblyman de Braga inquired what is the difference between auto brokers and used cars dealers, and how would a broker be put out of business if limited to selling used cars. Zane Sims, owner of Sims Auto Sales, responded to Assemblyman de Braga's question by stating the 2500 miles would only be cars we could purchase and only new car dealers could purchase cars with less than 2500 miles. He further commented that his rental car business would be affected by the passage of A.B. 205. Assemblyman Batten inquired if Sims Auto Sales participated in a background check. Mr. Sims responded yes. He further added that the state of Nevada has the highest bonding system for used car dealers. Mr. Batten inquired how much revenue taxes are converted back to the local economy. Mr. Sims replied approximately $25,000-$30,000 are paid in taxes every month. Mr. Carpenter asked where Mr. Sims purchases his cars. Mr. Sims replied he purchases his cars from various dealers in Nevada, Arizona and California. Mr. Batten requested documents from Sims Auto Brokers in relation to the purchase of vehicles from local dealers and vice versa. Assemblyman Ohrenschall asked if within Sims Auto Sales there is a log kept of complaints from consumers. Ms. Treat responded the business is very new. For the record Vice Chairman Goldwater read a letter from Dale White Motors. (Exhibit G) Mr. Allard reported on the Subcommittee regarding the proposed split of DMV/PS, and there was no conclusion. He responded on highlighted areas of testimony. (1) The argument for the proposed split of DMV/PS which would allow each agency to concentrate on their respective duties. The argument against would be costly and nothing to enhance customer service. Other topics discussed were DMV has a 5 point plan to enhance customer services included in the CIP: 1. Reorganization 2a. New service facility in Henderson 2b. Remodeling of the existing East Sahara office after full service of the new facility on Flamingo is in operation. 2c. Full remodeling of the Carson City full service facility to allow for one stop service. 2d. Reno full service facility will be completely remodeled and operational as of September 21, 1995. 3a. The Infrastructure - to conduct business process and reengineering (BPR projects) to restructure the work process under the proposed reorganization and identify the necessary technology to support the new processes. 3b. Upon completion of the business process reengineering conduct a complete rewrite of registrations, driver's licenses, and revenue accounting system for one stop services. 4a. Staffing - Completion of an initial pilot project for cross training phase by March, 1995 in Las Vegas for one stop service. 4b. Newly hired staff to be cross trained on an ongoing basis. 4c. Upon completion of cross training in Las Vegas begin cross training in Reno and Carson City. 4d. Gradual conversion from dumb terminals to PC terminals at counters to allow for dual functionality and maximum use of technology. 5a. Level II staffing model which would provide for 12 hour service Monday through Friday, 8 hour service on Saturdays and full service offices in Reno and Las Vegas. 5b. Windows open 80 percent of the time. 5c. No more than an hour wait for customers. 5d. Level II funding model to provide for the use of credit cards, or renewal by phone; this will provide optium services for Nevada driver's license and registrations. To provide document imaging system in 25 statewide offices for immediate titles, driver's license and registration and document retrieval for customer services. DMV/PS has proposed to maintain the 6 percent privilege tax which is currently being transferred to the highway funds, according to N.R.S.482.180 which states "only 22 percent can be spend on Administrative." If the department is able to maintain the 6 percent privilege tax, the department would have enough funds to implement the above mentioned plans. There being no further business the meeting adjourned at 2:15 p.m. RESPECTFULLY SUBMITTED: Jackie Valley, Committee Secretary APPROVED BY: Assemblyman Thomas Batten, Chairman Assemblyman Vonne Chowning, Chairman Assembly Committee on Transportation March 16 , 1995 Page