Fiscal Note & Local Impact Statement
127 th General Assembly of Ohio
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BILL: |
DATE: |
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STATUS: |
SPONSOR: |
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LOCAL IMPACT
STATEMENT REQUIRED: |
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STATE FUND |
FY 2009 – FUTURE YEARS |
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General Revenue Fund (GRF) |
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Revenues |
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Expenditures |
Potential minimal annual
increase |
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Consumer Protection
Enforcement Fund (Fund 631) – Attorney General |
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Revenues |
Potential gain in civil
penalties, timing and magnitude uncertain |
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Expenditures |
Potential minimal annual
increase |
Note: The state
fiscal year is July 1 through June 30.
For example, FY 2009 is July 1, 2008 – June 30, 2009.
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Office of the Attorney General workload. This bill creates specific requirements and prohibitions
governing the conduct of home improvement contractors, the violations of which
would also be subject to the Consumer Sales Practices Act (CSPA). The administrative, investigative, and
enforcement duties assigned to the Office of the Attorney General under the
bill would most likely be performed by its Consumer Protection Section, whose
funding is split between the Consumer Protection Enforcement Fund (Fund 631)
and the General Revenue Fund (GRF).
Presumably, any additional annual operating expenses generated (which
are likely to be minimal) as a result of performing these administrative,
investigative, and enforcement duties might be offset by additional revenues
that could be collected and deposited in Fund 631, which is funded by
three-fourths of the amount of civil penalties ordered and paid pursuant to the
CSPA and all costs awarded to the Attorney General. The timing and magnitude of this potential revenue stream is
uncertain.
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LOCAL
GOVERNMENT |
FY 2008 – FUTURE YEARS |
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Counties and
Municipalities |
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Revenues |
(1)
Potential gain in court costs and fees, likely to be minimal at most
annually; (2) Potential gain in
civil penalties for county treasury, timing and magnitude uncertain |
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Expenditures |
Potential increase to
adjudicate civil actions, annual cost appears likely to be no more than
minimal |
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Note: For most local governments, the fiscal year is the calendar year. The school district fiscal year is July 1 through June 30.
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Attorney General-initiated civil actions. It appears unlikely that the bill will generate a costly new
burden for courts of common pleas, county courts, or municipal courts in the
form of a large number of additional civil cases requiring adjudication brought
about by the Office of the Attorney General's pursuit of civil remedies. Depending upon the civil remedy that the
Attorney General brings, a portion of the penalty that could be assessed
against a violator by the court might go to the treasury of the county where
the case took place. The timing and
magnitude of this potential revenue stream is uncertain.
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Consumer-initiated civil actions. It is uncertain as to the number of additional consumers that
will elect to pursue a civil remedy, but LSC fiscal staff's research to date
suggests that the number would be relatively small in the context of any given
court's total caseload. Assuming this
is true, then the annual fiscal effect on local revenues collected in the form
of court costs and fees and moneys expended will likely be no more than
minimal.
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Overview
Most notably for the
purposes of this fiscal analysis, the bill:
·
Prohibits
contractors from performing home improvements without first establishing a
contract with the homeowner that contains certain specified information.
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Requires
home improvement contractors to maintain adequate general liability insurance
coverage.
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Prohibits
home improvement contractors from engaging in certain specified practices.
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Provides
a homeowner with a civil remedy to recover damages and also makes a violation
of the provisions a violation of the existing Consumer Sales Practices Act
(CSPA).
State and local fiscal effects
As noted, the bill makes a violation of its prohibitions a violation of the Consumer Sales Practices Act. Under current law, the services of home improvement contractors are already subject to CSPA. The state Attorney General's staff reported to LSC fiscal staff that, in 2007, the office received nearly 2,000 complaints involving the delivery of home improvement type services around the state. The bill creates certain requirements that must be followed by home improvement contractors and establishes a list of prohibited conduct.
There are two civil remedies currently available for handling CSPA. The first such remedy is available to the Attorney General, which is authorized to investigate violations, seek a declaratory judgment, an injunction or other equitable relief, or organize and bring a class action. The second remedy permits a private individual to initiate a civil action. Based on a conversation with Attorney General staff familiar with this area of law, it does not appear, from LSC fiscal staff's perspective at least, that either of these remedies would be more frequently utilized likely as a result of the bill since it appears that the Attorney General can already successfully pursue CSPA cases involving home improvement contractors under current law and practice.
Attorney General-initiated
remedy
Under current practice, the
Attorney General's Consumer Protection Section handles the investigative and
legal work associated with CSPA. The
state's administrative, investigative, and enforcement duties relative to the
regulation of home improvement contractors would be assigned to the Consumer
Protection Section, whose funding is split between the Consumer Protection
Enforcement Fund (Fund 631) and the General Revenue Fund (GRF).
However, it seems likely
that the Attorney General would try to settle the issues surrounding violating
the prohibitions established in the bill prior to initiating any formal legal
action. For example, the violators
could simply agree to cease their conduct, and assuming they do so, the
Attorney General would stop incurring any related investigative and legal
expenses. Similar to the procedures
taken under the CSPA, the Attorney General would seek court action against a
person as a last resort if they perceive that the person is receiving a pattern
of consumer complaints. Assuming a less
formal negotiating strategy does not work, the Attorney General could request
that a court of common pleas issue a declaratory judgment, a temporary restraining
order, or an injunction in order to persuade violators to cease their offending
behavior. From LSC fiscal staff's
perspective, it appears that the bill may provide the Attorney General with an
additional enforcement tool relative to protecting consumers, but the
associated additional costs, if any, are likely to be no more than minimal
annually.
If, on the other hand, the Attorney General successfully pursues a civil remedy under CSPA, the court adjudicating the matter can award the Attorney General all costs and expenses associated with their investigation, in addition to reasonable attorney's fees. The court may also order civil penalties up to $25,000. Three-quarters of this civil penalty (as much as $18,750 if the maximum $25,000 possible fine is assessed), as well as the investigation costs and attorney's fees would be credited to the state's Consumer Protection Enforcement Fund (Fund 631). The remaining one-quarter of the civil penalty that violators could be ordered to pay would go to the treasury of the county where the case took place (as much as $6,250 if the $25,000 maximum possible fine is assessed). According to staff of the Attorney General, the collection of these penalties remains one of the more problematic areas in cases involving home improvement contractors. The timing and magnitude of this potential revenue stream is uncertain.
Consumer-initiated remedy
The bill essentially
provides a homeowner with two avenues for seeking damages stemming from a
contractor's actions as follows: (1) a
civil action brought under the Ohio Home Improvement Contractor Law, and (2) a
civil action brought under the existing CSPA.
Courts
If the bill's provisions are
violated, then additional civil actions may be filed by a homeowner or the
Attorney General in the appropriate common pleas, municipal, or county court
that might otherwise have been filed under CSPA. Such an outcome would presumably generate local revenues in the
form of fees and court costs and require the court to expend some amount of
time and effort to adjudicate the matter.
LSC fiscal staff's research to date suggests that the number of
additional civil actions likely to be filed in any affected court will be
relatively small in the context of that court's total caseload. Assuming this is true, then the annual fiscal
effect on local revenues collected and moneys expended will likely be no more
than minimal.
LSC fiscal staff: Joseph Rogers, Senior Budget Analyst