MINUTES OF THE
ASSEMBLY COMMITTEE ON TRANSPORTATION
Sixty-seventh Session
June 9, 1993
The Assembly Committee on Transportation was called to order by Chairman Larry L. Spitler, at 2:05 p.m., on Wednesday, June 9, 1993, in Room 331 of the Legislative Building, Carson City, Nevada. Exhibit A is the Meeting Agenda. Exhibit B is the Attendance Roster.
COMMITTEE MEMBERS PRESENT:
Mr. Larry L. Spitler, Chairman
Mr. Val Z. Garner, Vice Chairman
Mr. Bernie Anderson
Ms. Vonne Chowning
Mr. Tom Collins, Jr
Mr. William D. Gregory
Ms. Lynn Hettrick
Mr. James W. McGaughey
Mr. Louis A. Toomin
COMMITTEE MEMBERS ABSENT:
None
GUEST LEGISLATORS PRESENT:
Assemblyman Joseph E. Dini, District 38
Assemblyman Scott Scherer, District 2
STAFF MEMBERS PRESENT:
Kerry Caroll-Davis, Senior Research Analyst, Legislative Counsel Bureau
OTHERS PRESENT:
Dr. Bill Kolton, Storey County School District
Stephen Snyder, Lyon County
Henry Bland, Storey County Commissioner
Richard Bacus, Storey County Public Works
Ray Sparks, Department of Motor Vehicles and Public Safety
Daryl Capurro, Nevada Franchised Auto Dealers Association
Lewis Ewert, Reno Jeep Eagle
Ted Chapman, Chapman Dodge
Jim Shelton, Fletcher Jones Toyota
Allan Green, Pat Clark Chevrolet
Michael Lee, Lee Brother's Leasing
Dan Towbin, Towbin Automotive Enterprises
Paula Treat, Auto Brokers
Poonum Adams, Auto Brokers
Carol Hannigan, Hannigan,Inc.
Zane Sims, Sim's Auto Sales
Cliff Farley, Finley Oldsmobile
ASSEMBLY BILL NO. 608: Provides for designation of Six-Mile Canyon Road in Storey and Lyon counties as state highway. (BDR S-2054)
Chairman Spitler allowed those witnesses unable to attend the initial May 26, 1993 hearing an opportunity to testify on A.B. 608.
Assemblyman Joseph E. Dini, District 38 introduced representatives from Lyon and Storey County. He expressed his appreciation for the opportunity to speak further on the bill.
Dr. Bill Kolton, Superintendent, Storey County Schools, on behalf of the School Board of Trustees, staff, parents, and community, testified in support of the bill, He stated improvement of the road was of beneficial importance to the residents and school district as Storey County, percentage wise, was the second fastest growing school district in Nevada. Mr. Kolton explained locations of communities served by the school district who transported 70 percent of the students to school each day. Mr. Kolton stated improving the road would save $13,500 in school transportation funding with other potential benefits including: reductions in fuel consumption, reductions in vehicle emissions, and decreased time for the buses on the highways. He also stated potential education benefits included easier access to schools for parents, possible additional participation for students in extra curricular activities, and increased parental support for district programs and activities. He urged consideration for approval of the bill.
Steve Snyder, County Manager, Lyon County, testified in support of the bill. He stated the Lyon County Board of Commissioners fully supported the bill. He explained Lyon County's growth rate was fast; however, resources were limited and it was difficult for the counties to maintain the road.
Henry Bland, Commissioner, Storey County Board of Commissioners, testified in support of the bill. He stated a goal of Storey County was to unite county communities which were very isolated from each other. He felt making the Six Mile Canyon Road a state highway would provide a better route for communities to the county seat.
Richard Backus, Director, Public Works, Storey County, testified in support of the bill. He explained the difficulty involved in maintaining the road which was used by many vehicles.
Mr. McGaughey asked if the two counties would consider committing county funds to share with NDOT for costs involved in maintenance of the road. The county representatives indicated they would take the question back to the commission boards to address; however, they indicated the counties would be receptive to the ideas.
Mr. Anderson asked how the county's responsibility for the road would change as earlier testimony indicated the road might never reach the top of the priority list. Mr. Snyder stated they would obviously have to maintain the road and anticipated doing so for the next five years. He stated they were initially looking for capital improvement cost through a partnership.
MR. COLLINS MOVED TO DO PASS A.B. 608.
MR. ANDERSON SECONDED THE MOTION.
Mrs. Chowning asked if the process required the bill to be rereferred to Ways and Means. Chairman Spitler replied the bill would go straight to the Senate which would provide NDOT time to prepare a fiscal note.
Mr. McGaughey suggested the counties submit a decision from the board on whether or not the counties were willing to participate with the state before the Senate hearings.
MOTION CARRIED UNANIMOUSLY.
Chairman Spitler requested Mr. Collins handle the bill when it reached the floor. Mr. Collins concurred.
SENATE BILL NO. 29: 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.
Daryl Capurro, Executive Director, Nevada Franchised Auto Dealers Association, introduced Lewis Ewert, State Dealers Association/Reno Jeep Eagle. Mr. Capurro stated several franchised dealers were in attendance to voice support for S.B. 29. Mr. Capurro discussed a copy of "Franchised Dealership Operations and their Economic Contribution to the State of Nevada" (Exhibit C) conducted by AUS Consultants. He stated the study contained information which showed significant economic contributions franchised auto dealers made. Mr. Capurro briefly outlined a sheet differentiating new car dealers with used car dealers/brokers (Exhibit D). He stated the term "brokers" was an anomaly as a legal term for "broker" did not exist in Nevada. Mr. Capurro researched telephone books which advertised brokers as selling and procuring new cars. Unfortunately, Mr. Capurro indicated the ads were not true. He was concerned brokers did not equal investments made by new car franchise dealers which he described. Mr. Capurro distributed and explained the Department of Taxation's Combined Sales/Use Tax Statistical Report for January/February/March of 1993 (Exhibit E). Of interest, Mr. Capurro indicated most vehicles purchased by brokers were purchased out of state which resulted in a loss of economic impact to the community, for example, business tax loss, gross revenue reduction, etc. Mr. Capurro called attention to another handout which surveyed various other states regarding laws relative to brokers and how they defined new and used cars (Exhibit F). Mr. Capurro indicated major manufacturers had taken positions against auto brokers as manufacturers were becoming concerned with ongoing problem relating to auto brokers with respect to warranties, recall notices, etc. He called attention to letters from Chrysler Corporation (Exhibit G) and Ford Motor Company (Exhibit H) and explained certain disincentives for dealers who sold to auto brokers. With minimal investments made by auto brokers, Mr. Capurro explained how convenient it was for auto brokers to simply "pull up stakes" and disappear when trouble occurred. He stated auto brokers did not perform warranty service, recall services, nor had facilities, if interested, to perform warranty service. Mr. Capurro discussed newspaper articles from Seattle, Washington (Exhibit H), which he stated represented the essence of problems created by brokers for the consumer. He further expanded on the problems and pointed out manufacturers paid very close attention to customer service index. He stated angry customers aimed complaints at franchise dealers for warranty work needing to be done by the auto brokers. Using 1990 figures, Mr. Capurro expounded on a survey commissioned by the National Franchise Dealers which addressed warranty information throughout the United States. He stated the survey found, using 1990 figures, that warranty work, from a dollar point, was the loser as parts were not reimbursed at the same rate which resulted in subsidization of warranty work within dealerships by the retailer customer. He explained losses were seen by franchise dealers as they were not involved with sales, accessorial work, financing, etc; however, they were involved in the warranty work.
With respect to the bill, Mr. Capurro indicated they were asking brokers be licensed as "used vehicle dealers" just as DMV perceived them to be. He stated if auto brokers did not want to be used car dealers but wanted to sell new cars, they needed to make the same investments as franchise dealers in order to provide for the consumer those things necessary from the seller. He stated the bill proposed a new vehicle be classified as new until it had 2,500 miles at which point the vehicle could be sold by any licensed new or used car dealer. He urged consideration for approval of the bill.
Chairman Spitler noted many people were present to testify on S.B. 235 (scheduled to be heard later in the hearing) and indicated another hearing would be scheduled to allow proper testimony on S.B. 235. He did state he would be available to speak with those present who would be unable to attend the rescheduled hearing.
Answering a question from Mr. McGaughey, Mr. Capurro stated "long-term lessor" was already defined in statute. He stated any vehicles that were utilized for minimum mileage were required by law and DMV regulations to be sold as "new demo" if the car was not registered. Mr. Capurro stated the bill proposed a new car must either have less than 2,500 miles or have never been registered before. Mr. McGaughey asked where auto brokers purchased cars from. Mr. Capurro stated auto brokers were absolutely unable to purchase cars directly from a manufacturer and had to purchase from franchise dealers out of state. Mr. McGaughey pointed out every franchise dealer had to purchase cars from out of state as there were no automobile manufacturers in the state. Regarding servicing of cars, Mr. McGaughey commented franchise dealers had to be aware they were selling to auto brokers and getting paid for preparation of sale of the car. Mr. Capurro agreed. Mr. McGaughey stated preparation might have been sloppy; however, it was still the responsibility of the franchise dealer who sold the car and received payment for service that might not have been performed. Mr. Capurro agreed and pointed out most franchise dealers were out of state and Nevada would not have any impact on those states. Mr. Capurro explained processes involved with additional franchises being proposed.
Mr. McGaughey asked what incentives franchise dealers received for selling a large number of cars. Lewis Ewert explained incentive programs; however, he stated incentives did not rise with volume.
Mr. Capurro explained back charges or other forms of disincentives were issued to franchise dealers who sold to auto brokers when manufacturer auditors found cars were not sold to first time buyers. Mr. McGaughey commented legislation was probably not needed if manufacturers were going to address the problem. Mr. Capurro explained different processes involved with manufacturer's certificates of origin which went to the first customer, generally for registration purposes.
Due to the lateness of the meeting, Chairman Spitler stated he would allow witnesses to speak on S.B. 29 who had traveled from out of town; however, he did indicate his intent to place the bill in a subcommittee. Chairman Spitler appointed Mr. Garner to chair the subcommittee with Mr. Anderson and Mr. Hettrick as subcommittee members.
Lewis Ewert, Reno Jeep Eagle, briefly spoke in support of the bill. He relayed instances where consumers had been wronged by auto brokers and explained the experiences of some of the auto broker customers he had witnessed. He also explained processes involved in pre-delivery sales of franchise dealers which assured the vehicle arrived to the customer with no damage. Mr. Ewert emphasized the importance of the consumer service index and stated he had experienced many problems with broker's cars and was concerned, by not passing the bill, it would be the consumer who was hurt.
Mr. Anderson asked how vehicles, purchased in another state were handled by franchises in other states. Mr. Ewert stated most franchises honored the warranty.
Ted Chapman, Chapman Dodge, Las Vegas, testified in support of the bill. Mr. Chapman reiterated Chrysler Dodge's strong position in opposition to sales of new vehicles through auto brokers.
Jim Shelton, General Manager, Fletcher Jones Toyota, Las Vegas, testified in support of the bill. Referencing tax issues, Mr. Shelton stated it was mentioned earlier that sales taxes were offset by use taxes. He stated it was important to understand dealers in Nevada employed and contributed greatly to the economy of communities in business, taxes, advertising expenses, etc., whereas auto brokers did not contribute anything as they purchased out of state with Nevada not seeing any taxes.
Allen Green, Assistant Manager, Pat Clark Pontiac, Las Vegas, testified in support of the bill. He informed the committee Pat Clark was the oldest living dealer in Nevada, being in business for 52 years. Mr. Green emphasized Pat Clark had experienced the gas crunch, economy fluctuations, etc, but was still in business; however, he pointed out there were no "long-time" auto brokers as auto brokers came and went out of communities. He felt auto brokers misrepresented the cars they sold, and he stated the bill simply requested auto dealers accurately be labeled as used car dealers. Mr. Green stated auto dealers relinquished all responsibilities to the cars once they were sold, and consumers had to eventually see the franchised auto dealer to fix the vehicle they bought. He urged committee members to consider ramifications of consumers not receiving recall notices.
Michael Lee, President, Lee Brother's Leasing, testified in support of the bill. He stated support was based on testimony already given. His company prided themselves in a 95 percent return customer ratio. He stated they worked very hard to protect customers and relayed personal experiences of acquaintances who had purchased vehicles from auto brokers. Mr. Lee stated as a lifelong Nevadan, he was upset to see the state dealers lose revenue to out-of-state dealers.
Dan Towbin, Chairman, Towbin Automotive Enterprises, testified in support of the bill. He stated his company represented five new car franchises in Las Vegas. He stated with brokers being satisfied with a very short profit created a problem for franchise dealers to compete as franchise dealers had very large expenses. He expounded on expenses involved with a typical new car service department required by manufacturers which assured new franchise dealers provided good, adequate service.
Paula Treat, representing auto brokers, testified in opposition to the bill. Ms. Treat introduced Poonan Adams, an auto broker in Las Vegas, and Assemblyman Scott Scherer, a purchaser of a broker car. Noting the lateness of the meeting, Ms. Treat provided a synopsis of a few points concerning auto brokers. She read a portion of a letter received from Lee Brothers Leasing before leasing of vehicles was amended out of the bill which read, "the bill interferes with free enterprise and smacks of monopolistic practices and I fear Nevada consumers would ultimately pay the higher price because of the their inability to buy from whomever they choose...." In addition to the letter, Ms. Treat stated a variety of misconceptions were noted in earlier testimony. She stated auto brokers were small business people, and the bill was a free enterprise issue. She stated auto brokers belonged to chambers of commerce, paid taxes and paid bonds. Ms. Treat stated they had volume of information they would share with the subcommittee.
Ms. Poonam Adams testified in opposition to the bill. She stated the main reason for her opposition was it obviously would put her out of business. She stated her company met all the license requirements of the state. Ms. Adams indicated her business offered a service to consumers with a tremendous amount of repeat businesses with warranties and all items going directly in the customer's name always.
Answering a question from Mr. Anderson, Ms. Adams stated although she held a used car dealer license before January 3, 1993, the bill would still affect her as she did not have many of the requirements i.e. having 2,000 square feet of office space, service departments, etc., she did not have.
Ms. Treat stated a lot of discussion had been voiced on advertising. She stated DMV did regulate the industry and they indicated there were verbal complaints over the years on new and used car dealers and brokers; however, in the area of advertising, Ms. Treat stated there were no formal written complaints about how brokers advertised. She stated there was one verbal complaint which DMV was addressing. Ms. Treat stated abuses of advertising had been far overstated.
Assemblyman Scott Scherer, District 2, testified as a consumer in opposition to the bill. He indicated his purchases of vehicles from auto brokers were "good" experiences. After his review of the consumers reports, and unable to find the vehicle he desired in Las Vegas, Mr. Scherer said he had called the auto broker and they had found him exactly what he wanted. Regarding recall notices, Mr. Scherer presented the recall notice he had recently received at his residence on the vehicle he had purchased. He stated the option of having auto brokers available was a very positive option for consumers and it created greater competition in the marketplace. He pointed out auto brokers were great for individuals who were not the best negotiators and did not want to haggle prices with salesmen. Referencing investments, Mr. Scherer stated investments were good for the state as many new jobs were created by small businesses. Mr. Scherer believed a gap was increased between rich and poor people because government placed obstacles in the way of working class people who wanted to own their own business. He stated, as the proposed bill did, requiring a minimum investment which was unjustified by any regulatory or consumer protection purpose, simply placed obstacles in the way of upcoming, often already struggling, small businesses. He stated the philosophy behind the bill was contrary to what the country was supposed to be. He pointed out auto brokers contributed greatly to the economy as they hired people, they leased space, they printed material, used accountants, other professionals, etc. He reiterated auto brokers paid sales and property taxes, etc. He urged the committee to oppose the bill as it would put auto brokers out of business. Mr. Scherer pointed out several statute findings; however, with the lateness of the meeting, he stated he would share further interest with the subcommittee.
Carol Hannigan, Owner/Operator, Hannigan Sales and Leasing, testified in opposition to the bill. Although she was not an auto broker, Ms. Hannigan stated she was a long-term lessor, which the bill addressed. She was concerned with requirements (b), (c), and (d) of Section 1 of the proposed bill which she would be unable to meet. In reference to having a maintenance shop, Ms. Hannigan stated the national fleet manager called and stated he did not want lessors working on the cars as they were to be repaired in dealerships which they were reimbursed for.
Ms. Treat stated documentation was available from the Federal Trade Commission regarding the fact brokers were consumer services and asked states to review them before any consideration was given to banning them. She stated when the bill was in the Senate, Senator Brown worked for many hours on consumer advocate amendments which the auto brokers agreed with; however, they were not heard in the Senate.
Tom Porta, a consumer, stated he was present on behalf of Simm's Auto Sales. He stated Sim's would be put out of business with approval of the bill. He relayed his pleasure in dealing with Simm's Auto Sales as he had purchased four vehicles through him and never experienced any problems with recall notices, warranties, service, rebates, etc.
Cliff Finley, Finley Oldsmobile, Las Vegas, testified in support of the bill. He stated his policy was to stay in contact with customers to provide necessary information. He felt this was impossible through a third party.
With no further business, Chairman adjourned the meeting at 3:40 p.m.
RESPECTFULLY SUBMITTED:
Carolyn J. Harry
Committee Secretary
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Assembly Committee on Transportation
June 9, 1993
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