Legislature(2017 - 2018)BARNES 124

01/29/2018 03:15 PM LABOR & COMMERCE

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Heard & Held
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        HB 278-EXTEND:CERT. REAL ESTATE APPRAISERS BOARD                                                                    
3:24:20 PM                                                                                                                    
CHAIR KITO announced  the first order of business  would be HOUSE                                                               
BILL  NO. 278,  "An Act  extending  the termination  date of  the                                                               
Board of Certified  Real Estate Appraisers; and  providing for an                                                               
effective date."                                                                                                                
3:24:41 PM                                                                                                                    
MEGAN  HOLLAND,  Staff,  Representative  Andy  Josephson,  Alaska                                                               
State Legislature, presented HB 278  on behalf of Rep. Josephson,                                                               
prime sponsor.   She stated  that the proposed bill  would extend                                                               
the  termination date  for the  Certified Real  Estate Appraisers                                                               
Board by eight  years.  She stated the  extension was recommended                                                               
by the Legislative  Budget and Audit Division (LB&A).   After the                                                               
housing market  crash in the  2000s, there was a  federal mandate                                                               
to regulate  real estate appraisers.   The state board  serves to                                                               
fulfill  that  federal requirement.    She  stated the  board  is                                                               
responsible  for licensing,  license  enforcement, training,  and                                                               
regulating real  estate appraisers.  The  board currently manages                                                               
261 licensees.                                                                                                                  
3:26:30 PM                                                                                                                    
KRIS  CURTIS, Legislative  Auditor,  Legislative Audit  Division,                                                               
Legislative  Agencies  and Offices,  reported  on  HB 278.    She                                                               
reminded that  the purpose of  the sunset audit was  to determine                                                               
whether the board  was serving the public interest  and should be                                                               
MS.  CURTIS  gave  background   information,  explaining  that  a                                                               
regulatory  oversight structure  for the  appraisal industry  had                                                               
been  established  by  the federal  government.    The  framework                                                               
includes  private  entities  that  set  appraisal  standards  and                                                               
qualification criteria for licensing;  the state licensing boards                                                               
that certify;  and federal entities  that regulate  the industry.                                                               
The federal appraisal subcommittee  is responsible for monitoring                                                               
the state  licensing boards and  ensuring they keep in  line with                                                               
standards.    She  highlighted  that  the  board  is  subject  to                                                               
external oversight outside of the  sunset process, which factored                                                               
into the division's  recommended term of extension.   The federal                                                               
oversight includes  on site  compliance reviews  of the  board as                                                               
well as  the Division of Corporations,  Business and Professional                                                               
Licensing (DCBPL).  She stated  the conclusion that the board was                                                               
serving  the   public  interest  by  efficiently   licensing  and                                                               
regulating certificate holders and licensees.                                                                                   
MS. CURTIS  read from  a document entitled,  "A Sunset  Review of                                                               
the Department of Commerce,  Community, and Economic Development,                                                               
Board of  Certified Real Estate Appraisers  (board)" [included in                                                               
the committee packet], as follows:                                                                                              
     Overall, the  audit concludes the board  is serving the                                                                    
     public's  interest  by  certifying and  licensing  real                                                                    
     estate                                      appraisers.                                                                    
     The board  monitored certificate holders  and licensees                                                                    
     and worked  to ensure  only qualified  individuals were                                                                    
     issued   certificates    and   licenses    in   Alaska.                                                                    
     Furthermore,   the   board    developed   and   adopted                                                                    
     regulations  to   comply  with   federal  requirements,                                                                    
     improve the real estate  appraisal industry, and better                                                                    
     protect the public.                                                                                                        
3:28:09 PM                                                                                                                    
MS.  CURTIS gave  the  audit's two  recommendations.   The  first                                                               
recommendation was  that the DCBPL  director continue  to improve                                                               
administrative support to  the board.  She pointed to  page 16 of                                                               
the audit document as follows:                                                                                                  
     The  audit  found  inadequate board  support  by  DCBPL                                                                    
     staff in the following areas:                                                                                              
     1. Due to general  oversight, three certificate holders                                                                    
     were    incorrectly   reported    in   the    Appraisal                                                                    
     Subcommittee   (ASC)   national  registry,   which   is                                                                    
     required   by   federal   and   state   laws.      Upon                                                                    
     identification  by auditors,  the errors  were promptly                                                                    
     corrected  by  DCBPL  staff. Incorrect  status  in  the                                                                    
     registry   may   result   in   financial   institutions                                                                    
     rejecting    qualified    appraisers    or    selecting                                                                    
     unqualified  appraisers.   Additionally,  noncompliance                                                                    
     with  federal requirements  puts the  board at  risk of                                                                    
     more  frequent  ASC  reviews that  may  increase  board                                                                    
     administrative costs.                                                                                                      
     2. Auditors reviewed five  investigative cases over 180                                                                    
     days old,  and identified  three cases with  periods of                                                                    
     inactivity  without justification  ranging from  130 to                                                                    
     203 days.  Management reported that  investigators have                                                                    
     varying caseloads, priorities,  and case management and                                                                    
     investigative  skills  that  affected  timeline  goals.                                                                    
     Alaska    Statute    08.01.050(a)(19)   requires    the                                                                    
     department  to  provide  inspection,  enforcement,  and                                                                    
     investigative services  to the  boards. Cases  that are                                                                    
     not   actively  investigated   increase  the   risk  of                                                                    
     incompetent  or unlawful  licensees providing  services                                                                    
     to consumers.                                                                                                              
     3. Due  to staff  turnover, DCBPL management  could not                                                                    
     provide evidence  that three of 11  board meetings held                                                                    
     between July 1,  2014, and March 31,  2017, were public                                                                    
     noticed.  Alaska  Statute 44.62.310(e)  requires  board                                                                    
     meetings  be publicly  noticed  and AS  08.01.050(a)(6)                                                                    
     requires the  department to provide  administrative and                                                                    
     budgetary  services   to  the  board,   which  includes                                                                    
     noticing board  meetings.   Failure to  publish meeting                                                                    
     dates   may  limit   public   participation  in   board                                                                    
MS.  CURTIS stated  the second  recommendation was  that the                                                                    
director work with  the board to reduce fees  to address the                                                                    
surplus of  over $165,000 at the  end of March [2017].   The                                                                    
board had requested  a fee analysis, but it  was not carried                                                                    
out.   The licensees paid a  higher than justified fee  as a                                                                    
MS.  CURTIS listed  the  audit  findings in  the  analysis.   The                                                               
report  noted that  the board  planned to  move forward  with the                                                               
regulation  of appraisal  management  companies (AMC),  expanding                                                               
the  board's   duties  for   the  future.     The   division  was                                                               
recommending  an eight-year  extension  in  recognition that  the                                                               
board is subject  to external oversight by  the federal appraisal                                                               
subcommittee.   These  reviews are  done on  site at  least every                                                               
other year.                                                                                                                     
3:30:25 PM                                                                                                                    
MS. CURTIS  turned to  the responses  to the  audit.   She stated                                                               
that   the  department   did  concur   with   the  findings   and                                                               
recommendations.   The  board chair  noted in  his response  that                                                               
they had  received an attorney  general's opinion  that concluded                                                               
that  a statutory  change would  be needed  in order  to regulate                                                               
AMCs.  She  underlined that the division did not  agree with that                                                               
interpretation   and   offered  additional   comments   outlining                                                               
specific  federal and  state laws  that allow  the regulation  of                                                               
3:31:10 PM                                                                                                                    
REPRESENTATIVE JOSEPHSON cited a  letter from LB&A that describes                                                               
the state's  authority to  regulate AMCs.   He asked  whether, if                                                               
there were clearer express authority,  there would be any harm in                                                               
MS.  CURTIS  stated that  there  is  no  harm in  clarifying  the                                                               
3:31:32 PM                                                                                                                    
REPRESENTATIVE   SULLIVAN-LEONARD   asked  whether,   since   the                                                               
Certified  Real Estate  Appraisers Board  had excess  funding, it                                                               
would consider refunding some of  the appraisers' money that they                                                               
[paid in fees] the past years.                                                                                                  
MS. CURTIS deferred to the department.                                                                                          
REPRESENTATIVE  SULLIVAN-LEONARD  queried whether  the  Certified                                                               
Real Estate  Appraisers Board "is charging  so much and all  of a                                                               
sudden  there   was  such  a   surplus,  maybe  there   could  be                                                               
consideration, especially if there's  a particular complaint from                                                               
appraisers that they are paying a significant amount of money."                                                                 
MS. CURTIS answered  that most of the 11 boards  they had audited                                                               
in  the  current year  have  maintained  a  surplus.   The  DCCED                                                               
response  to LB&A  is  that  maintaining a  surplus  of a  year's                                                               
expenses will help  prevent the spiking of fees.   She added that                                                               
technically the statutes do not  provide for that and instead say                                                               
that fees should be set to cover the cost of the occupation.                                                                    
3:32:52 PM                                                                                                                    
CHAIR  KITO stated  that "if  the  department is  doing that,  it                                                               
doesn't seem  like they have  the statutory authority to  be able                                                               
to do that.   Whether or not it's a good idea,   it seems like it                                                               
would require some legislative action."                                                                                         
3:33:08 PM                                                                                                                    
REPRESENTATIVE  KNOPP  asked  Ms.  Curtis  to  confirm  the  fund                                                               
balance of $165,000.                                                                                                            
MS. CURTIS confirmed that at the  end of March 2017 the board had                                                               
a balance of $165,609.                                                                                                          
REPRESENTATIVE  KNOPP referred  to a  letter he  received in  the                                                               
prior year  from board  member  David  Derry indicating  that the                                                               
board  had a  balance of  around $415,000.   He  asked about  the                                                               
discrepancy between the board numbers and the audit numbers.                                                                    
MS. CURTIS answered that the numbers  were as of March.  She said                                                               
she guessed  the renewal period was  at the end of  summer, as FY                                                               
15 revenues  were $279,000 through  March 31,  and in [FY]  17 it                                                               
was $35,000.  She  stated at the end of fiscal  year 2017 (FY 17)                                                               
it could be  a much higher amount.  She  suggested the department                                                               
may have current surplus amounts.                                                                                               
3:34:37 PM                                                                                                                    
REPRESENTATIVE KNOPP asked if the board had reduced its fees.                                                                   
MS. CURTIS  stated she did  not have  an answer.   She reiterated                                                               
the report was dated Summer 2017.                                                                                               
REPRESENTATIVE  WOOL pointed  out that  the FY  14 revenues  were                                                               
$57,050, then went  up to $279,000 and back down  to $49,000.  He                                                               
asked whether  that was  because the board  had raised  its rates                                                               
and lowered them back down again.                                                                                               
MS.  CURTIS  answered that  every  board  had biennial  licensing                                                               
meaning  that every  other year  the members  pay a  renewal fee.                                                               
She added that in the off  years there would also be revenue from                                                               
new applicants,  so the boards did  have revenue in the  off year                                                               
but most revenue would be seen every other year.                                                                                
REPRESENTATIVE WOOL surmised that in  2017 the revenue would jump                                                               
up again.   He cited the audit and suggested  the board had extra                                                               
cash  and an  adjustment of  rate "could  be tapered  out over  a                                                               
3:36:22 PM                                                                                                                    
DAVID DERRY,  Chair, Board of  Certified Real  Estate Appraisers,                                                               
testified in  support of  HB 278.   He pointed  to his  letter on                                                               
page 29  of the audit  that addressed the recommendations  by the                                                               
legislative audit  committee.  He spoke  to recommendation number                                                               
2 about  reducing fees.  He  explained the board was  on a 2-year                                                               
cycle  for registering  appraisers and  recertification fees  and                                                               
was not  able to  get the fees  reduced in 2017.   He  added that                                                               
based  on the  accounting dated  on  November 3,  2017, the  fund                                                               
balance  for  the  board  in  the first  quarter  of  FY  18  was                                                               
$378,297.  The surplus was due to not adjusting fees.                                                                           
3:38:10 PM                                                                                                                    
MR. DERRY clarified that the fees,  as high as they were, carried                                                               
over  from  a  court  action  that  had  occurred  several  years                                                               
previously  due  to  legal  action brought  against  one  of  the                                                               
certified appraisers, which ended up  going to the Alaska Supreme                                                               
Court.   That had  resulted in increased  fees for  all certified                                                               
appraisers for  the state to pay  for that cost.   The costs were                                                               
paid but unfortunately  the fees were not  analyzed and adjusted.                                                               
The board  had a meeting  in September  2017 at which  the board,                                                               
with the director of the division,  was able to adjust fees.  The                                                               
fees effective for the 2019  recertifications would be reduced to                                                               
$350.  That had been conveyed to the board.                                                                                     
MR. DERRY  added that regarding  the refunds, the board  had been                                                               
told  by the  division that  under  state statutes  it could  not                                                               
extend the refund  to anyone, so the balance  surplus would carry                                                               
forward until it was used up.                                                                                                   
MR. DERRY addressed  the issue of AMC regulations.   Although the                                                               
audit staff  and some members  of the  board thought it  did have                                                               
the authority  "to do AMC  legislation," the board had  been told                                                               
by the Attorney General's office that  it did not.  The board was                                                               
currently  working  with  Representative  Josephson  and  Senator                                                               
Meyer on AMC  legislation and hoped to get it  through during the                                                               
current legislative session.                                                                                                    
3:40:18 PM                                                                                                                    
REPRESENTATIVE   STUTES  asked   if  [the   board]  had   a  full                                                               
MR. DERRY answered in the affirmative.                                                                                          
3:40:34 PM                                                                                                                    
REPRESENTATIVE  WOOL  drew  attention  to  the  form  before  the                                                               
committee  and stated  it  did  not list  total  revenue in  2017                                                               
because the  date of the  audit was March 31.   He added  in 2015                                                               
that figure  was $279,000.   He asked if  Mr. Derry had  a number                                                               
for the 2017 revenue.                                                                                                           
MR. DERRY  answered that the  accounting dated November  3, 2017,                                                               
showed total revenue for FY 17 as $278,417.                                                                                     
3:41:34 PM                                                                                                                    
WILLIAM  "BILL" BARNES,  President,  Appraisal Institute,  Alaska                                                               
Chapter,  testified in  support  of  HB 278.    He  gave a  brief                                                               
history of the  Appraisal Institute (AI), founded  in 1932 during                                                               
the depths  of the  Depression to  enact appraisal  standards and                                                               
ethics.    He noted  it  was  the  largest and  oldest  appraisal                                                               
institute  in  the United  States  and  was  also located  in  60                                                               
countries, with 90  chapters.  Alaska had 111 members  of the 261                                                               
certified appraisers, for 43 percent  capture rate of membership.                                                               
He  continued  that the  AI  writes  almost all  the  [appraiser]                                                               
textbooks.    He  stated  the  AI  believes  that  the  board  of                                                               
appraisal in the  state of Alaska is serving  the public interest                                                               
as intended  and had been  since 1991.  The  institute recommends                                                               
that HB 278  pass as intended and extend the  board of appraisers                                                               
for another eight years.                                                                                                        
3:43:33 PM                                                                                                                    
CHAIR KITO  opened public testimony  HB 278.   After ascertaining                                                               
that  no one  wished to  testify, advised  that public  testimony                                                               
would remain open.                                                                                                              
CHAIR KITO held HB 278 over.                                                                                                    

Document Name Date/Time Subjects
HB278 Sponsor Statement 1.25.18.pdf HL&C 1/29/2018 3:15:00 PM
HB 278
HB278 Fiscal Note DCCED CBPL 1.25.18.pdf HL&C 1/29/2018 3:15:00 PM
HB 278
HB0278 Version D.PDF HL&C 1/29/2018 3:15:00 PM
HB 278
HB278 2017 Audit 1.25.18.pdf HL&C 1/29/2018 3:15:00 PM
HB 278
HB279 2017 Audit 1.25.18.pdf HL&C 1/29/2018 3:15:00 PM
HB 279
HB279 Fiscal Note DCCED CBPL 1.25.18.pdf HL&C 1/29/2018 3:15:00 PM
HB 279
HB0279A Version D.PDF HL&C 1/29/2018 3:15:00 PM
HB 279
HB279 Sponsor Statement 1.25.18.pdf HL&C 1/29/2018 3:15:00 PM
HB 279
HB280 2017 Audit 1.25.18.pdf HL&C 1/29/2018 3:15:00 PM
HB 280
HB280 Fiscal Note DCCED CBPL 1.25.18.pdf HL&C 1/29/2018 3:15:00 PM
HB 280
HB280 Sponsor Statement 1.25.18.pdf HL&C 1/29/2018 3:15:00 PM
HB 280
HB0280 Version D.PDF HL&C 1/29/2018 3:15:00 PM
HB 280