Fiscal Note & Local Impact Statement
127 th General Assembly of Ohio
BILL: |
DATE: |
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STATUS: |
SPONSOR: |
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LOCAL IMPACT
STATEMENT REQUIRED: |
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STATE FUND |
FY 2008 |
FY 2009 |
FUTURE YEARS |
General Revenue Fund |
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Revenues |
- 0 - |
Potential negligible gain
from state court costs |
Potential negligible gain
from state court costs |
Expenditures |
- 0 - |
- 0 - |
- 0 - |
Security or Life-Safety
Systems Fund (New Fund) – Department of Commerce |
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Revenues |
- 0 - |
Gain of approximately
$164,360 from license fees |
Gain of approximately
$130,700 annually from license fees |
Expenditures |
- 0 - |
Increase in the hundreds
of thousands of dollars, up to available revenues |
Increase in the hundreds
of thousands of dollars, up to available revenues |
General Reimbursement Fund
(Fund 106) – Attorney General |
|||
Revenues |
- 0 - |
Gain of up to $100,000
from background check fees |
Potential minimal gain
from background check fees |
Expenditures |
- 0 - |
Corresponding increase to
conduct additional background checks |
Corresponding increase to
conduct additional background checks |
Victims of
Crime/Reparations Fund (Fund 402) – Attorney General |
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Revenues |
- 0 - |
Potential negligible gain
from state court costs |
Potential negligible gain
from state court costs |
Expenditures |
- 0 - |
- 0 - |
- 0 - |
Note: The state
fiscal year is July 1 through June 30.
For example, FY 2008 is July 1, 2007 – June 30, 2008.
·
Short-term funding. The bill creates the Security or
Life-Safety Systems Fund to pay for the costs associated with the licensing
requirements of the bill and to receive revenue derived from license fees. There would not be any license fee revenue
in the short term, as the bill provides that the licensing provisions take
effect 480 days after its effective date.
From all appearances, the practical effect of the bill's effective dates
is that, until licensing and regulatory activities commence, there will likely
be no revenue generated for deposit in the Security or Life-Safety Systems Fund
for developing and implementing the bill's various provisions. It is unclear how the Department of
Commerce’s State Fire Marshal’s Office will finance the program's development
and implementation.
·
Initial and ongoing license fee revenue. Once licensing activities begin, assuming that all estimated companies
and individual technicians, operators, or salespersons become licensed shortly
after the license requirements take effect, the Security or Life-Safety Systems
Fund could gain approximately $164,360 in revenue the first year of licensing. In subsequent years, the Fund would likely
receive less revenue, as the renewal fee amount for companies would be less
than the initial license fee. Based on
this calculation, ongoing revenue could amount to approximately $130,700
annually.
·
State Fire Marshal expenses. There would be a number of start-up costs associated with
performing the duties and responsibilities required by the bill. Start-up costs for such things as a system
to track licensees and applicants; equipment such as computers, phones, and
other office overhead; initial payroll costs; and maintenance, travel, and
other miscellaneous expenses may be in the hundreds of thousands of dollars.
·
Ongoing
expenses for payroll and maintenance costs may be in the hundreds of thousands
of dollars annually, but, presumably, would be limited to available
revenues. At the outset of regulatory
activities and with the estimated available revenue, the State Fire Marshal may
be able to employ two or three additional employees to assist with
administrative duties, examinations, investigations, continuing education
requirements, and so forth as needed.
·
State court cost revenue. The bill creates a penalty for security or life-safety systems
companies and individuals that operate for a profit without being licensed by the
State Fire Marshal. This creates the
possibility that the GRF and the Victims of Crime/Reparations Fund (Fund 402)
may gain a negligible amount of state court cost revenue.
LOCAL
GOVERNMENT |
FY 2008 |
FY 2009 |
FUTURE YEARS |
|
Counties |
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Revenues |
- 0 - |
Potential minimal gain
from court cost and fine revenue |
Potential minimal gain
from court cost and fine revenue |
|
Expenditures |
- 0 - |
Potential minimal increase
for adjudication costs |
Potential minimal increase
for adjudication costs |
|
Municipalities and
Townships |
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Revenues |
- 0 - |
Potential loss of
licensing or registration fee revenue |
Potential loss of
licensing or registration fee revenue |
|
Expenditures |
- 0 - |
Potential decrease in
licensing and regulatory costs; potential minimal increase for adjudication
costs |
Potential decrease in
licensing and regulatory costs; potential minimal increase for adjudication
costs |
|
Note: For most local governments, the fiscal year is the calendar year. The school district fiscal year is July 1 through June 30.
·
Preemption of local licensing authority. Currently, many municipalities and townships require alarm
businesses and/or their employees to be licensed or registered. This bill generally prevents political
subdivisions from requiring the licensure or registration of such
companies. Since license and
registration fees should relate at least loosely to the cost of licensing and
regulation, if a municipality were to lose the authority to license or register
alarm businesses and their associated employees, the municipality's costs
should also be reduced. This indicates
that there may be only a minimal loss of revenue for municipalities and
townships beginning in local FY 2009 as a result of the bill's effective dates.
·
New criminal penalty. The bill
creates a penalty (misdemeanor of the third degree) for security or life-safety
systems companies and employees that operate for a profit without being
licensed by the State Fire Marshal. The
new penalty may increase local criminal justice expenditures relating to
investigating, prosecuting, adjudicating, and sanctioning offenders resulting
from any new cases. It is uncertain how
many new cases will result from the penalty, but it is likely that any new
costs would be minimal as the bill also creates the potential for additional
court cost and fine revenue to be collected by counties that would help to
offset any new costs.
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This
bill: (1) generally requires security
and life-safety systems companies and individual technicians, salespersons, or
operators and locksmith companies and individuals to be licensed by the State
Fire Marshal in the Department of Commerce.
Security and life safety systems include burglar alarm detection
systems, fire alarm and detection systems, access control systems, and closed
circuit television. The bill also (2)
creates the seven-member Security or Life-Safety Systems Advisory Board within
the State Fire Marshal's Office and requires the Board to adopt rules governing
the licensing and operations of security and life-safety systems companies and
their registered employees as well as the procedures of the Board, (3)
generally prohibits local authorities from enacting any ordinance that
conflicts with the bill, and (4) creates the Security or Life-Safety Systems
Fund and requires the money in the fund to be used to pay the costs the State
Fire Marshal and the Board incur in administering the bill.
According to the 2002
Economic Census, there are 206 security system services establishments in this
state. The 2002 Economic Census also
indicated 100 locksmith establishments, but this number may be higher than the
number of companies licensed since it includes safe and vault establishments,
which the bill exempts from licensure.
May 2006 data from the Bureau of Labor Statistics' Occupational
Employment Statistics (OES) survey estimated 1,590 security and fire alarm
systems installers (which include individuals installing, programming,
maintaining and repairing such systems) and 530 locksmiths and safe repairers
(safe repairers are exempt from licensure unless they are otherwise engaged in
an activity requiring licensure) working in the state.
State fiscal effects
License fee revenue
As noted above, the bill
creates the Security or Life-Safety Systems Fund in order to pay the costs
associated with the regulatory requirements of the bill, as well as to receive
license fees and any other related revenue.
The bill sets the fees as follows:
$260 for the initial licensure for a security or life-safety systems
company, $150 for the annual renewal of a company license, and $40 for initial
licensure and renewal as a technician, operator, or salesperson. The bill also requires the Security or
Life-Safety Systems Advisory Board to adopt rules to (1) establish fees to
cover the cost of each examination that an applicant for licensure as a
technician, salesperson, or operator must successfully pass and (2) to
establish reduced fees that a licensee must pay to obtain licensure in multiple
specialties or to obtain multiple licenses as a technician, salesperson, or
operator. The Board may, subject to
Controlling Board approval, increase fees if the cost associated with
administering and enforcing the bill increases, provided that the fees do not
increase by more than 50%.
While the bill designates
the Security or Life-Safety Systems Fund to receive operating revenue for the
State Fire Marshal in administering the licensing program, there would not be
any revenue in the short term. This is
because the bill provides that the licensing provisions take effect 480 days
after its effective date. From all
appearances, the practical effect of the bill's various effective dates is
that, until licensing and regulatory activities commence, there will likely be
no revenues generated for deposit in the Security or Life-Safety Systems Fund
for the purpose of developing and implementing the bill's various
provisions. Assuming that were true,
then it is unclear how the Department of Commerce will finance the program's
development and implementation. It may
be that the State Fire Marshal's Office would pay for any of the program's
initial activities through other resources.
However, once licensing
activities commence, the Security or Life-Safety Systems Fund may gain
approximately $164,360 in revenue the first year of licensing (as of this
writing, the licensing requirements would become effective approximately midway
through FY 2009, which may have a limiting effect on revenue in that year). In subsequent years, the Fund would likely
receive less revenue because the renewal fee for companies is less than the
initial license fee. Ongoing revenue
would be approximately $130,700 annually if the number of licensees remained
relatively constant. The table below
summarizes these estimates. There may
also be some additional revenue generated through reciprocal license fees, the
amount of which is uncertain.
Security or
Life-Safety Systems Fund Initial and Ongoing Revenue Estimates |
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License Category |
Estimated
Licensees |
Initial Fee |
Estimated
Initial Revenue |
Renewal Fee |
Estimated Annual
Revenue |
Security
or Life-Safety System Companies |
206 |
$260 |
$53,560 |
$150 |
$30,900 |
Locksmith
Companies |
100 |
$260 |
$26,000 |
$150 |
$15,000 |
Security
or Life-Safety System Individuals |
1,590 |
$40 |
$63,600 |
$40 |
$63,600 |
Locksmith
Individuals |
530 |
$40 |
$21,200 |
$40 |
$21,200 |
Totals |
2,426 |
|
$164,360 |
|
$130,700 |
Source: 2002
Economic Census (U.S. Census Bureau), May 2006 Occupational Employment Survey
(U.S. Bureau of Labor Statistics)
Data assumptions and
limitations
The company estimates above
use data obtained from the 2002 Economic Census, conducted by the U.S. Census
Bureau. However, in testimony on this
bill, the Ohio Electronic Life Safety and Security Association (OELSSA), a
nonprofit security professional association, reported that there are
approximately 500 alarm dealers operating in the state. If so, there may be more company licenses
issued, which would increase license fee revenue accordingly. The estimates above assume that all companies
and individual technicians, operators, or salespersons become licensed shortly
after the license requirements take effect.
The estimates also assume that each technician, salesperson, or operator
would receive a license in only one category or specialty. If individuals were to seek licensure in
multiple categories or specialties, revenue to the Security or Life-Safety
Systems Fund will be higher.
As noted above, the number
of locksmith companies and individuals may be higher than the number of
companies licensed since those categories include safe and vault establishments
and safesmiths, which are exempt from licensure. It is uncertain how many companies and individuals exclusively
work with safes and vaults. However,
the company estimates from the Economic Census count those companies
"primarily engaged" in security system or locksmith services, which
may leave out companies that perform other functions but would still need to be
licensed.
Regulatory costs
State Fire Marshal start-up
costs
There
would be a number of start-up costs associated with performing the duties and
responsibilities required by the bill.
Start-up costs for such things as a registry to track licensees and
applicants; equipment such as computers, phones, and other office overhead;
initial payroll costs; and maintenance, travel, and other miscellaneous
expenses may be in the hundreds of thousands of dollars. As noted above, the bill provides that the
licensing provisions take effect 480 days after its effective date, so it may
be that the State Fire Marshal's Office would pay for the program's development
and implementation through other sources than license fee revenue.
Ongoing regulatory costs –
personnel and maintenance
The bill allows the State
Fire Marshal to employ administrative staff and field investigators as
necessary to carry out licensing and regulatory activities for security or
life-safety systems companies and their licensed employees. It is uncertain how many personnel would be
needed to help carry out the bill's licensing and regulatory requirements, but
it is likely that the Testing and Registration Bureau within the State Fire
Marshal's Office would house the additional employees needed. The Testing and Registration Bureau
currently has nine employees. Ongoing
expenses for payroll, hearing officers, and maintenance costs may be in the
hundreds of thousands annually, but, presumably, would be limited to available
revenues. At the outset of regulatory
activities and with the estimated available revenue, the State Fire Marshal may
be able to employ two or three additional employees to assist with
administrative duties, examinations, investigations, continuing education
requirements, and so forth as needed.
In addition to these
personnel expenses, the State Fire Marshal may incur ongoing maintenance
expenses for supplies as well as charges for network access, telephone, fax,
and other information technology services.
Such maintenance expenses may be several thousand dollars or so
annually. There may also be costs to
administer license examinations.
However, the Board is authorized to establish fees to cover these costs.
Background checks
The bill requires criminal
background checks to be conducted for each applicant for any type of license
and requires the Security or Life-Safety Systems Advisory Board to establish
procedures to have criminal background checks conducted for all
applicants. Presumably, the rules
adopted would require the applicant to pay for the criminal background
checks. However, this would be an added
cost if the State Fire Marshal were required to pay for the checks. The Ohio Attorney General's Bureau of
Criminal Identification and Investigation (BCII) ordinarily charges a $15 fee to
do a search of the state's criminal records database and $24 for a search of
the FBI's national databases.
If both state and national
checks were conducted, such checks may add to the State Fire Marshal's expenses
in carrying out the functions of the bill by approximately $100,000 in the first
year or so of licensing activities if most companies and their employees were
to apply for licensure. In subsequent
years, costs for the background checks would likely decrease significantly as
background checks would be conducted only on applicants for initial licensure.
All of the criminal records
check moneys would be deposited into the General Reimbursement Fund (Fund 106)
in the Attorney General's Office, which is to be used to fund the ongoing costs
of operating BCII's criminal records check system. The General Reimbursement Fund would experience a gain in revenue
of up to $100,000, but the actual amount may be less than this, as some local
governments may currently require background checks as part of their licensure
or registration requirements for alarm businesses or their employees.
Security or Life-Safety
Systems Advisory Board expenses
The bill creates the
seven-member Security or Life-Safety Systems Advisory Board within the State
Fire Marshal's Office in the Department of Commerce. The Board will be responsible for adopting the rules governing
the licensing and activities of security systems companies and their licensed
employees. Board members will not be
compensated, but are eligible for the reimbursement of actual expenses incurred
in the performance of their duties, however, the bill does not specify how
often board meetings are to take place.
Such reimbursements may only cost the state several thousand dollars or
so annually.
State court cost revenue
The bill creates a penalty for
security or life-safety systems companies and employees that operate for a
profit without being licensed by the State Fire Marshal: a misdemeanor of the third degree. This creates the possibility that the GRF
and the Victims of Crime/Reparations Fund (Fund 402) may gain a negligible
amount of state court cost revenue. For
each misdemeanor, the GRF receives $15 per case and the Victims of
Crime/Reparations Fund (Fund 402) receives $9 per case.
Local fiscal effects
Preemption
of local licensing authority
Currently, many
municipalities and townships require alarm businesses and/or their employees to
be licensed or registered. The
regulatory authority in charge of such licensing or registration at the local
level varies. For some communities,
police or fire departments perform this function and for others it may be the
local building department or some other agency. This bill generally prevents political subdivisions from
requiring the licensure or registration of such companies.
Presumably, current license
and registration fees assessed by local governments must relate at least
loosely to the cost of licensing and regulating an activity. Therefore, if a municipality were to lose
the authority to license or register alarm businesses or their associated
employees, the municipality's costs should also be reduced at the same general
level as revenue. The local governments
most impacted by the loss of this regulatory authority would be those that have
the largest number of licensees and would likely reduce expenses in an effort
to offset the revenue lost. For
example, the City of Cincinnati, which registers 165 alarm businesses annually,
noted that there would be a reduction in expenditures to negate any loss of
revenue. LSC fiscal staff makes this
assessment from results obtained from an informal survey of municipalities by
the Ohio Municipal League. Smaller
communities that license and register a relatively small amount of companies
annually would also likely experience only a minimal loss in revenue.
New
criminal penalty
As noted above, the bill
creates a third degree misdemeanor penalty for security or life-safety systems
companies and employees that operate without being licensed by the State Fire
Marshal, which carries a maximum sentence of 60 days and a maximum fine of
$500. Some persons who may not have
been prosecuted and convicted under existing law could be prosecuted and
sanctioned under the bill. These effects
could in turn increase local criminal justice expenditures relating to investigating,
prosecuting, adjudicating, and sanctioning offenders who violate the bill's
prohibition. It is uncertain how many
new cases will result from the penalty.
The severity of the sentence in a case involving a misdemeanor is
entirely up to the judge's discretion, as several factors, such as available
bed space, severity of the crime, the presence of a repeat offender, and the
judge's attitudes about the crime in question, can influence the decision.
With new criminal cases,
there could be additional court cost and fine revenue to be collected by county
and municipal courts that would mitigate any new costs brought about by the new
penalty. As such, it is likely that any
new costs for county and municipal criminal justice systems are likely to be minimal
as a result of the bill.
LSC fiscal staff: Jason Phillips, Budget Analyst