Legislature(2017 - 2018)SENATE FINANCE 532

04/07/2017 09:00 AM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
Heard & Held
+ Bills Previously Heard/Scheduled: TELECONFERENCED
Moved CSSB 6(JUD) Out of Committee
Moved SCS HB 16(FIN) Out of Committee
SENATE BILL NO. 45                                                                                                            
     "An Act relating to an exemption from the regulation                                                                       
     of construction contractors."                                                                                              
9:41:28 AM                                                                                                                    
SENATOR MIA COSTELLO, SPONSOR, provided context for the                                                                         
bill, and discussed the economy and job losses in the                                                                           
state. She presented her sponsor statement:                                                                                     
     Senate Bill 45 provides better protections for                                                                             
     consumers purchasing a home from an unlicensed                                                                             
     Following the housing market crash of the 1980                                                                             
     Alaska State Legislature raised the standards for                                                                          
     homebuilders. Residential contractors were required to                                                                     
    obtain a state-license, a residential endorsement,                                                                          
     bonding, and insurance. In addition, programs on                                                                           
     energy ratings and efficiency were established through                                                                     
     the Alaska Housing Finance Corporation. These efforts                                                                      
    helped Alaska develop a home construction industry                                                                          
     that offers quality options for home buyers that are                                                                       
     efficient and affordable.                                                                                                  
     Currently state law provides an exemption that allows                                                                      
     individuals to build structures without a contractor                                                                       
     license. Alaska law AS 08.18.161 allows anyone to                                                                          
     build one structure every two years without a license.                                                                     
     While the exemption was intended to allow Alaskans to                                                                      
     build their own home, the industry is seeing a growing                                                                     
     number of individuals using the exemption to operate                                                                       
     construction businesses.                                                                                                   
     In 2013, the Mat-Su Home Building Association                                                                              
     estimated that almost one-half of all new construction                                                                     
     home sales in their area were from unlicensed                                                                              
     construction companies. Without a construction                                                                             
     contractor license, unlicensed builders avoid                                                                              
     requirements for bonding and insurance that apply to                                                                       
     licensed builders. The wording of the exemption                                                                            
     creates enforcement problems and allows for potential                                                                      
     abuse by those who would seek to build homes for sale                                                                      
    without the required state license. Senate Bill 45                                                                          
     helps prevent abuse of this exemption. The bill would                                                                      
     require anyone who builds and sells a home without a                                                                       
     contractor license to disclose the fact that they do                                                                       
    not have a license to the state within two years of                                                                         
     completing construction.                                                                                                   
     Senate Bill 45 does not prohibit owner-builder                                                                             
     construction or require any form of state approval, it                                                                     
     simply calls for disclosure to the Department of                                                                           
     Commerce, Community & Economic Development for                                                                             
     builders selling structures without a license.                                                                             
     SB 45 is supported by the Alaska State Home Building                                                                       
9:43:28 AM                                                                                                                    
45 was a  consumer protection bill that  addressed issues of                                                                    
individuals using  an exemption  in state  law to  operate a                                                                    
business  that  would  otherwise   require  a  license.  She                                                                    
relayed  that AS  08.18.116 provided  that individuals  were                                                                    
allowed to  build a structure  without a license,  every two                                                                    
years; the  intent of  the statue was  to allow  Alaskans to                                                                    
build and  live in  their own homes.  She stated  that there                                                                    
was a  growing trend of  individuals using the  exemption to                                                                    
operate   a  construction   business   while  avoiding   the                                                                    
licensure  insurance and  bonding that  licensed contractors                                                                    
are required  to obtain. She  noted that in 2013  the Mat-Su                                                                    
Homebuilding Association had indicated  that one-half of all                                                                    
new construction home sales in  the area were being built by                                                                    
unlicensed contractors. She relayed  that the bill addressed                                                                    
consumer protection against  the future cost of  a home that                                                                    
has structural  problems. She  reiterated the  sentiments of                                                                    
the sponsor statement.                                                                                                          
9:46:06 AM                                                                                                                    
Ms. Melin read from the Sectional Analysis (copy on file):                                                                      
     Section 1. Adds a new  section of statue specifying the                                                                  
     Legislature's   intent  to   support  an   individual's                                                                    
     freedom  and ability  to construct  and sell  their own                                                                    
     Section  2.  Amends  AS  08.18.116   by  adding  a  new                                                                  
     subsection   specifying  when   the  Department   shall                                                                    
     investigate and take  action when it is  found an owner                                                                    
     is operating  a business  that would  otherwise require                                                                    
     contractor licensing.                                                                                                      
     Section   3.   Amends   08.18.161   (Exemptions)   with                                                                  
     conforming changes  including numbering  and clarifying                                                                    
     language.  It  adds  new language  requiring  an  owner                                                                    
     using  the owner-builder  to file  with the  department                                                                    
     indicating they are not engaged  in illegal business in                                                                    
     selling or  advertising the  structure for  sale within                                                                    
     two years after the beginning of construction.                                                                             
     Section   4.  Adds   a  new   section  of   statute  on                                                                  
     applicability defining the  "beginning of construction"                                                                    
     as  either the  time at  which construction  began, or,                                                                    
     when an agreement for labor  or the supply of materials                                                                    
     is  made between  an owner  and  subcontractor for  the                                                                    
     building of the structure.                                                                                                 
9:47:47 AM                                                                                                                    
Co-Chair  MacKinnon  asked  whether   a  loophole  could  be                                                                    
created if the  build occurred over two  seasons without the                                                                    
structure  being put  on the  market. She  expressed concern                                                                    
that a  builder could begin  two separate projects  and hold                                                                    
their capital for the second year, bypassing compliance.                                                                        
Ms.  Melin relayed  that the  language  defined "within  two                                                                    
years from  the beginning  of construction." She  added that                                                                    
if  a sale  was made,  or advertised,  within the  two years                                                                    
then it would be a violation of the law.                                                                                        
9:49:25 AM                                                                                                                    
Co-Chair MacKinnon OPENED public testimony.                                                                                     
9:49:45 AM                                                                                                                    
AARON  WELERTON,  ALASKA   STATE  HOMEBUILDERS  ASSOCIATION,                                                                    
FAIRBANKS (via teleconference), testified  in support of the                                                                    
bill. He believed that the  disclosure forms required by the                                                                    
bill would  help with the promotion  of quality construction                                                                    
and  fair practices.  He believed  that  industry and  other                                                                    
stakeholders  would  need to  work  to  make the  disclosure                                                                    
system a success. He said that  the bill was small but would                                                                    
help immensely.                                                                                                                 
9:51:18 AM                                                                                                                    
KEVIN  SAIKI, MATSU  HOME BUILDERS  ASSOCIATION, MATSU  (via                                                                    
teleconference),   spoke  in   support  of   the  bill.   He                                                                    
appreciated  the independence  and  freedom  allowed in  the                                                                    
state for  private home  construction. He  said that  he had                                                                    
been   witness  to   both   responsible  and   irresponsible                                                                    
construction.  He   believed  that  the  bill   would  offer                                                                    
consumer protection. He shared  that he had witnessed people                                                                    
under the guise of  an Owner/Builder operating illegally and                                                                    
providing a  substandard product. He believed  that the bill                                                                    
would help to protect  legally operating contractors and the                                                                    
investments of consumers.                                                                                                       
9:53:19 AM                                                                                                                    
DAVID  OWENS, OWENS  INSPECTION  SERVICES  LLC, PALMER  (via                                                                    
teleconference),  testified in  support of  the legislation.                                                                    
He  stressed  the  importance  of  protecting  Owner/Builder                                                                    
rights. He  felt that the  bill balanced the  protections of                                                                    
the public, the Owner/Builder, and the contractors.                                                                             
9:54:41 AM                                                                                                                    
PATRICK DALTON,  SELF, DELTA JUNCTION  (via teleconference),                                                                    
testified  in  opposition  to  the  bill.  He  thought  that                                                                    
unorganized areas  of the state needed  the legislation more                                                                    
than  the  organized areas.  He  lamented  that the  sponsor                                                                    
statement failed  to mention  that the  legislation targeted                                                                    
rural areas of  the state. He referred to the  letter he had                                                                    
sent to  the committee  (copy on file).  He did  not believe                                                                    
that it was in the best  interest of unorganized areas to be                                                                    
Co-Chair  MacKinnon  understood  that   the  caller  was  in                                                                    
opposition  to  the  bill.  She   wondered  what  about  the                                                                    
process, proposed  by the  legislation, was  not appropriate                                                                    
for rural areas of the state.                                                                                                   
10:00:32 AM                                                                                                                   
DEBORAH  BROLLINI,  SELF,  ANCHORAGE  (via  teleconference),                                                                    
spoke  in  opposition  of  the  legislation.  She  expressed                                                                    
concern with the disclosure process.                                                                                            
10:01:19 AM                                                                                                                   
Co-Chair MacKinnon CLOSED public testimony.                                                                                     
Co-Chair  MacKinnon directed  the  committee  to review  Mr.                                                                    
Dalton's written testimony.                                                                                                     
10:02:19 AM                                                                                                                   
Senator Micciche asked about the  exemption contained in the                                                                    
bill and  wondered what limited  the owner to  building only                                                                    
one  structure   every  two  years.  He   wondered  how  the                                                                    
department would be  able to track the  number of structures                                                                    
JANEY   HOVENDEN,   DIRECTOR,  DIVISION   OF   CORPORATIONS,                                                                    
BUSINESS   AND   PROFESSIONAL   LICENSING,   DEPARTMENT   OF                                                                    
COMMERCE,  COMMUNITY AND  ECONOMIC DEVELOPMENT,  stated that                                                                    
the   department's   investigative   unit  was   driven   by                                                                    
complaints. She  informed that anytime that  a complaint was                                                                    
received  it  would  be investigated.  She  added  that  the                                                                    
department contracted  with the Department of  Labor to save                                                                    
costs   and   when   inspecting  construction   sites,   the                                                                    
investigators  also  checked  for fulfillment  of  licensing                                                                    
Senator  Micciche   wondered  whether  the   department  was                                                                    
limited  to  knowledge  of   construction  sites  that  were                                                                    
permitted  for construction.  He  suggested  that the  rules                                                                    
could be broken more easily in an unorganized borough.                                                                          
Ms. Hovenden  was unsure how  far, or often,  the Department                                                                    
of Labor traveled into the unorganized boroughs.                                                                                
10:05:00 AM                                                                                                                   
Senator   von  Imhof   thought  then   when  a   buyer  used                                                                    
conventional financing, the bank  would require an occupancy                                                                    
Ms. Hovenden  concurred, and stated that  under conventional                                                                    
home loans, inspections would be  required by the department                                                                    
and the bank.                                                                                                                   
Senator von Imhof asked whether  the loan could be an avenue                                                                    
by which  to gather  information to track  homebuilders that                                                                    
were regularly building and selling houses.                                                                                     
Ms. Hovenden answered in the affirmative.                                                                                       
10:06:42 AM                                                                                                                   
Senator von  Imhof queried whether  banks cared  whether the                                                                    
house  to be  built  would  be located  in  an organized  or                                                                    
unorganized   borough  and   whether   there  were   uniform                                                                    
requirements. She  pondered if the bank's  requirements were                                                                    
uniform,  a sort  of certificate  of  occupancy, or  related                                                                    
document,  would be  necessary and  could be  used to  track                                                                    
10:07:23 AM                                                                                                                   
Co-Chair MacKinnon  understood that  the bill was  trying to                                                                    
address  the  problem in  some  communities  of labor  being                                                                    
brought in  from out-of-state and  building homes  then sold                                                                    
for  cash,  avoiding the  banking  system  and selling  sub-                                                                    
standard housing.  She recognized that unorganized  areas of                                                                    
the  state  took issue  with  the  legislation because  they                                                                    
lacked  resources   to  perform  the   logistical  paperwork                                                                    
Co-Chair MacKinnon  relayed that amendments would  be due on                                                                    
Monday at 5 PM.                                                                                                                 
10:09:14 AM                                                                                                                   
Vice-Chair Bishop  discussed the  fiscal notes. There  was a                                                                    
previously published  zero fiscal  note from  the Department                                                                    
of Commerce, Community and Economic Development.                                                                                
SB  45  was   HEARD  and  HELD  in   committee  for  further                                                                    
10:09:53 AM                                                                                                                   
AT EASE                                                                                                                         
10:16:47 AM                                                                                                                   

Document Name Date/Time Subjects
SB 45 - Sponsor Statement.pdf SFIN 4/7/2017 9:00:00 AM
SB 45
SB 45 Public Testimony Porter.pdf SFIN 4/7/2017 9:00:00 AM
SB 45
SB 45- Sectional Summary.pdf SFIN 4/7/2017 9:00:00 AM
SB 45
SB 45 Snodgrass Testimony.pdf SFIN 4/7/2017 9:00:00 AM
SB 45
SB 45 Support Letter SBS.pdf SFIN 4/7/2017 9:00:00 AM
SB 45
SB 45- Support Letters.pdf SFIN 4/7/2017 9:00:00 AM
SB 45
Sectional Summary of SB78 (2).pdf SFIN 4/7/2017 9:00:00 AM
SB 78
Sponsor Statement Alaska Permanent Fund Education Lottery - final.pdf SFIN 4/7/2017 9:00:00 AM
SB 78
Summery of Changes by CS SB78.pdf SFIN 4/7/2017 9:00:00 AM
SB 78
Supporting Doc. Dividend Summary.PDF SFIN 4/7/2017 9:00:00 AM
SB 78
Supporting Doc. Gaming report.PDF SFIN 4/7/2017 9:00:00 AM
SB 78
Supporting Doc. Pick,Click,Give.PDF SFIN 4/7/2017 9:00:00 AM
SB 78
Supporting Doc. Statutes Reference SB78.pdf SFIN 4/7/2017 9:00:00 AM
SB 78
Supporting Doc.Alaska Permanent Fund Education Lotter2.pdf SFIN 4/7/2017 9:00:00 AM
SB 78
Supporting DOC.Games of Chance listed in Section.pdf SFIN 4/7/2017 9:00:00 AM
SB 78
Supporting Doc.SB78 Final chart.pdf SFIN 4/7/2017 9:00:00 AM
SB 78
SB78 Supporting doc PFD charts.PDF SFIN 4/7/2017 9:00:00 AM
SB 78
Supporting Doc.Statutes Reference SB78.pdf SFIN 4/7/2017 9:00:00 AM
SB 78
HB 16 Work Draft version J.pdf SFIN 4/7/2017 9:00:00 AM
HB 16
HB 16 Work Draft version J Summary of Changes.pdf SFIN 4/7/2017 9:00:00 AM
HB 16
SB 45 - Sponsor Statement Version D.pdf SFIN 4/7/2017 9:00:00 AM
SB 45
SB 45 Testimony Dalton.pdf SFIN 4/7/2017 9:00:00 AM
SB 45
SB 45 Wrok Draft CS SB 45 FIN v. O.pdf SFIN 4/7/2017 9:00:00 AM
SB 45
SB 45 CS SB 45 FIN v. O Explanation.pdf SFIN 4/7/2017 9:00:00 AM
SB 45