MINUTES OF THE ASSEMBLY COMMITTEE ON TRANSPORTATION Sixty-eighth Session June 20, 1995 The Committee on Transportation was called to order at 1:15 p.m., on Tuesday, June 20, 1995, Chairman Thomas Batten 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. David Allard, Vice Chairman Mr. David Goldwater, Vice Chairman Mr. Bernie Anderson Mr. John Carpenter Mrs. Marcia de Braga Ms. Genie Ohrenschall Mr. Dennis Nolan Ms. Patricia Tripple GUEST LEGISLATORS PRESENT: Assemblywoman Joan Lambert, Assembly District 29 Senator Kathy Augustine, Senate District 7 STAFF MEMBERS PRESENT: Mr. Paul Mouritsen, Research Analyst OTHERS PRESENT: Stan Olsen, Las Vegas Metropolitan Police Daryl Capurro, Larry Stout, Nevada Department of Motor Vehicles Artie Valentine Rod Johnson, Nevada Department of Transportation Chairman Batten announced Rule 92 had been suspended. The hearing was opened on Assembly Bill 447. ASSEMBLY BILL 447 - Makes various changes to provisions governing sale of motor vehicles. Assemblyman Joan Lambert, Assembly District 29, explained interested parties had gotten together after the subcommittee hearing and agreed on a proposed amendment (Exhibit C). Mrs. Lambert discussed the various sections of the bill. Assemblyman Anderson referred to Section 5, Page 3 of (Exhibit C) and Section 11. He asked if brokers would not be allowed to be listed in the telephone directory as a new vehicle dealer or he cannot list himself as any type of vehicle dealer at all. Mrs. Lambert stated the intention was to not list as a new vehicle dealer. Brokers would be able to advertise themselves as brokers but not as franchise new vehicle dealers. Mr. Anderson referred to Page 2, Subsection 2 (b) of (Exhibit C). He asked if the conviction of a gross misdemeanor was consistent with expectations of a salesman. Mrs. Lambert stated it was her understanding the language paralleled that of used car dealer licensing. Mr. Larry Stout, Department of Motor Vehicles (DMV) stated the language paralleled the dealer licensure requirements. The requirements were higher than those for a salesman. Mr. Anderson felt all dealers should have to pay licensing fees. Mrs. Lambert noted if they had to pay the motor vehicle privilege tax, they would only have to pay for the portion of the year they have the car, a credit would be received for the difference. Mr. Anderson, referring to Page 6, Section 13, asked if the twelve vehicle limit would be limited to a yearly allotment of vehicles or limited to having twelve vehicles at one time. Mrs. Lambert stated the language in question was existing language for new and used car dealers. Brokers had been added. Mr. Stout explained each vehicle dealer gets twelve dealer special plates. Each plate can be rotated as often as necessary per year. Assemblyman Ohrenschall, referring to the bonding requirements on Page 3, Paragraph 2, noted the original bond was to be in the amount of $50,000. Paragraph 2 discussed the total aggregate liability, which Ms. Ohrenschall assumed was the $50,000. Paragraph 2 also indicates the judgement in an action on such a bond exceed the retail value of any vehicle. She asked if some cars could cost more than $50,000, thereby exceeding the amount of the bond. Mrs. Lambert indicated new and used car dealers were required to have the same bond. If the committee wished to raise the bonding requirement for all of them, she would be amenable. Mr. Stout agreed with Ms. Ohrenschall's observations. If claims exceed $50,000 there is no recourse other than court. Ms. Ohrenschall asked about the limitation being to the amount of the bond or the retail value of the car and privity of contract with the broker. Mr. Stout explained it was simply the liability of the bond. Claims in excess of the bond could be adjudicated in court and filed against the brokers other assets, just as in other businesses. Ms. Ohrenschall asked if the buyer should investigate the assets of the broker as opposed to the assets of a franchised dealer. She felt there were contradictions in areas of the bill. Mr. Stout reminded Ms. Ohrenschall that the $50,000 bond limitation was the same for new and used car dealers as well. He stated there are many cases where the bond is exceeded. Ms. Ohrenschall suggested the committee investigate the bonding issue while considering the legislation. Assemblyman John Carpenter, Assembly District 33, stated he felt the brokers needed to be regulated. He believes (Exhibit C) covered concerns including the lemon law, warranties, bonding, and trust accounts. It was felt the regulations were strict. Mr. Carpenter stated there was consumer protection offered in broker regulations. Ms. Ohrenschall asked which section covered the "lemon law". Mrs. Lambert stated it was Page 4, Section 8, Subsection 2 of (Exhibit C). Ms. Ohrenschall referred to Page 4, Section 8, Number 1. She asked if this included a statement of the manufacturer's policies. If not, Ms. Ohrenschall suggested adding it. Mrs. Lambert stated it could be done now or it could be covered at the top of Page 5 under Number 5 if, DMV felt it was information the consumer needed. She noted this would be done at a public hearing so the opportunity existed for much public input. Ms. Ohrenschall stated either would be acceptable. She referred to Section 8, Subparagraph 4, and asked since a broker did not keep an inventory, would all vehicles be special ordered. She felt the language might be needless. Mr. Carpenter said if a very specific automobile was ordered, the broker could ask for more than ten percent of the purchase price. This was the purpose of establishing trust accounts. Chairman Chowning asked if it was normal for a minimum amount of money to be in a trust account. (Section 6) Discussing the disclosures, Mrs. Chowning felt the amendment should say the disclosure had to be signed by both buyer and seller and kept for a certain length of time, for DMV to inspect if necessary. She also felt commissions should be referenced. It should be indicated if the broker is receiving a commission and from whom. Mrs. Chowning agreed with a subcommittee suggestion by Ms. Ohrenschall regarding brokers practicing business in a similar fashion to a real estate broker, there would be no need to purchase vehicles in their name. They would sell from a supply of vehicles, like real estate brokers sell from a supply of properties. Mrs. Lambert agreed with the idea of having both buyer and seller sign the disclosure, as well as retention of information for DMV inspection. Mrs. Lambert stated the reason for this was to retain consumer choice. Mrs. Chowning asked Mrs. Lambert's opinion on commission disclosure. Mrs. Lambert had no problem with commission disclosure. She felt this could be covered under Section 8, Subsection 5. Mrs. Chowning inquired of the minimum amount in the trust account. Mr. Carpenter explained a real estate brokers trust account must contain $100 to cover bank fees. The other money placed in the trust account is exactly as stated in Section 6. Assemblyman Goldwater noted the language concerning the trust account was similar to language in the insurance code and the trusts which are maintained. He asked if the director had the staff and expertise to audit those trusts. He noted brokers were exempt from paying the privilege tax on dealer plates and no time limit is established for brokers to get rid of dealer plates. He asked if 100% of the privilege tax is collected on a new vehicle, in a new graduated form, and if brokers were exempted from ever having to pay privilege taxes on their own personal vehicles. Mr. Stout said the dealer special plates could be used on personal vehicles and the privilege tax is never collected. He pointed out DMV is opposed to dealer special plates. Senate Bill 49 was submitted to repeal dealer special and was supported by the Franchise Auto Dealers Association. He said a vehicle purchased and registered under a dealer special will not pay the full privilege tax. If sold again as a used vehicle it will be taxed at 85% of the new vehicle rate. A potential for 15% of the privilege tax will be lost. Mr. Stout stated DMV did not have the staff or expertise to audit the trusts. Mr. Goldwater felt the three previous questions were three almost fatal flaws to the bill. Mrs. Chowning asked if the things mentioned by Mr. Goldwater were presently included in business practice statutes for used car dealers. Mr. Stout said the dealer special issue was current law. The other items would be new, if the legislation passed. Mrs. Chowning asked if brokers were licensed as used car dealers. Mr. Stout answered affirmatively. Mrs. Chowning asked what the difference was from what currently was happening. Mr. Stout said there was no change. He said brokers could do what they are doing now as used car dealers. Mrs. Chowning asked if the bill had a fiscal note. Mr. Stout said there was originally no fiscal note. With the recent amendments no fiscal note had been prepared. Mrs. Chowning asked if the bill would have to go to Ways and Means and if Mr. Stout had the staff to oversee and enact the legislation if passed with no additional fiscal impact. Mr. Stout reiterated Mr. Goldwater's question regarding staff and expertise. He said there are few brokers in the state. The staff would not be a problem. However the staff would have to be educated in trust accounts and it would be a new area of investigation and audit. Mrs. Chowning asked if DMV had the expertise for development of the disclosure form. Mr. Stout felt DMV had the necessary expertise. The hearing was closed on A.B. 447. The hearing was opened on Senate Bill 231. SENATE BILL 231 - Reduces period within which new resident is required to obtain driver's license and register his motor vehicle in Nevada. Senator Kathy Augustine, Senate District 7, testified on S.B. 231 from prepared testimony (Exhibit D) and discussed various aspects of the bill. She noted DMV was in support of the bill. Assemblyman Nolan, referring to Page 2, Line 5, asked if "shall" could be changed to "may". Senator Augustine noted it was existing language. Mrs. Chowning asked if the bill allowed people working in the state to have temporary reciprocity. Senator Augustine said current N.R.S. relating to residence requirements state as soon as someone is employed full time, they are considered a resident. She noted this has not been actively enforced. Mrs. Chowning asked if the vehicles of those people would have to have two license plates. Senator Augustine said this was technically true. Mrs. Chowning asked what registration requirements were in neighboring states. Senator Augustine explained California's registration requirements were ten days. She was unsure about Idaho and Arizona. She noted this was why the highway patrol had requested amendment of the bill in the 67th session to allow for additional troopers for enforcement. The bill was not passed due to the fiscal note. She noted the language in Section 1, Subsection 8 was added by Assemblyman Perkins to make the bill in compliance with current police procedures. Mr. Carpenter noted there was frequent avoidance of the tax in high growth areas. Often it is the only tax received from the people involved. He felt the idea was meritorious. Senator Augustine explained another bill had passed the Senate allowing a registration credit. Two newspaper articles were submitted by Senator Augustine for the record regarding S.B. 231 (Exhibit E) and (Exhibit F). The hearing was closed on S.B. 231. The hearing was opened on Senate Bill 378. SENATE BILL 378 - Prohibiting defacement, destruction or alteration of identification number of part of motor vehicle. Lt. Stan Olsen, Las Vegas Metropolitan Police Department, testified in support of S.B. 378. The bill would give police departments another tool in taking stolen vehicles into custody. He explained vehicles are stolen at a rate of 1,000 per month in Clark County. Those who steal vehicles call salvage yards for parts and remove the public vehicle identification number (VIN) from the dashboard and door stickers from the salvage yard vehicles. The dashboard VIN is then placed on the stolen car and the door sticker is removed from the door. The bill allows police departments to seize the vehicles until the private VIN numbers can be examined. These VIN numbers are hidden in various places throughout the vehicle. Mr. Larry Stout, Department of Motor Vehicles, stated DMV supported S.B. 378. Assemblyman Tripple asked if the stolen vehicle figures were unique to Clark County or if similar numbers of cars were being stolen in other counties. Mr. Stout explained it was a statewide issue. The hearing was closed on S.B. 378. The hearing on A.B. 447 was reopened. Mr. George Harris, explained S.B. 205 passed in the Senate and reconsideration was asked for on this date. The reconsideration lost by one vote. He discussed the proposed amendment to A.B. 447. Mr. Carpenter discussed the amendment and stated he felt it provided good regulation for auto brokers. Discussing payment of the privilege tax, Mr. Carpenter suggested limiting auto brokers to a smaller number of special plates. He felt the practice should be changed for all auto dealers. Mr. Harris expressed support for the amendments. He discussed the intents and goals of both A.B. 447 and A.B. 205. Mr. Harris felt the language in the amendment was substantial to broker regulation. Assemblyman Goldwater asked how A.B. 205 fit with A.B. 447. Mr. Harris said A.B. 447 does not fit in with A.B. 205. The committee was being asked to pass A.B. 447 to define a broker. As written, A.B. 205 will not be applicable to auto brokers because it will be new licensing, it will only effect used car dealers because of the definition of a used car. Mrs. Ohrenschall asked if the vehicles were taxed by the state on 100% value as though they are new or on less than 100% because they are being sold as a used vehicle. Mr. Stout said if a vehicle is registered under the dealer special, only the $33 fee is paid. If it is registered a second time as a used vehicle, it will be registered at a privilege tax of 85% of the new value. Ms. Ohrenschall noted the state would be losing money. Mr. Stout stated Ms. Ohrenschall was correct. She asked why brokers needed twelve privilege plates when they had no inventory. Mr. Harris explained the majority of brokers had an inventory of used cars. He noted the goal was not to impede anyone's ability to do business. Mr. Goldwater explained a bill was passed changing how the privilege tax was assessed. An amendment was included stating if a car had been registered with exempt plates, it did not count as registration. Once the car is registered for the first time, the 100% privilege tax is charged. Many new and used car dealers use the dealer plates on their personal vehicles and never pay a privilege tax. The bill would allow brokers to do the same thing. Mr. Carpenter noted the dealer plates had a purpose and were being abused by some. He suggested the legislature take action to deal with the problem. Assemblyman Tripple reminded the committee the dealer plate misuse was not the concern of A.B. 447. Mr. Harris agreed. Ms. Ohrenschall explained she had discussed using an idea parallel to what real estate brokers do. Those involved felt it would be tied into a territorial limitation on where inventories could be obtained. Her idea was the opposite, that is, to allow brokers to obtain vehicles wherever. Proponents felt this type of brokerage system, as used in California, would be acceptable. She asked if the idea had been discussed with Mr. Harris' members. Mr. Harris explained counsel had indicated the idea would not be prudent. There has been no problem with the way business has been done and no laws have been broken. He noted Nevada had the most frredom of the states. The idea is to give people the opportunity to run their businesses as they choose. Ms. Ohrenschall hoped Nevada was one of the more logical states. She discussed the advantage of negotiability offered by the brokers to buyers and sellers. Mr. Harris noted he felt the committee had the opportunity to do what was right and hoped the committee would consider the issue carefully. There being no further business to come before the committee, the meeting was adjourned at 3:50 p.m. RESPECTFULLY SUBMITTED: Barbara Prudic, Committee Secretary Assembly Committee on Transportation June 20, 1995 Page