Fiscal Note & Local Impact Statement
127 th General Assembly of Ohio
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BILL: |
DATE: |
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LOCAL IMPACT
STATEMENT REQUIRED: |
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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 certain unlicensed home improvement contractors, the
violations of which would also be subject to the Consumer Sales Practices Act
(CSPA). The Attorney General is also
authorized to initiate criminal proceedings for prosecution of the bill's criminal
penalties. The administrative, investigative, enforcement, and prosecutorial
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.
·
Department of Commerce. Department
of Commerce staff has indicated to LSC fiscal staff that its new licensing and
related regulatory duties can be absorbed within its current manner of doing
business, and that any additional operating expenses can be drawn, as
necessary, from its Industrial
Compliance Fund (Fund 556). The fees to
be collected in connection with the licensing of home improvement contractors
would presumably offset, or at least defray, any additional annual
operating expenses.
·
Court cost revenues. As a result
of violations of the bill's new
misdemeanor prohibitions, it is possible that some persons whose conduct
may not have been criminal under current state law will be arrested and
successfully prosecuted. This creates
the possibility that the state may gain locally collected court cost revenues
that are deposited in the state treasury to the credit of the GRF and the
Victims of Crime/Reparations Fund (Fund 402).
As the number of persons that would potentially be affected in this
manner annually statewide appears to be relatively small, the amount of court
cost revenues that those state funds may gain annually is likely to be no more
than negligible. For the purposes of this
fiscal analysis, "negligible" means an estimated revenue gain of less
than $1,000 for either state fund per year.
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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 cost, fine, and filing fee revenues; (2) Potential gain in civil
penalties and criminal forfeitures for county treasury, timing and magnitude
uncertain |
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Expenditures |
Potential increase to
adjudicate civil, criminal, and forfeiture actions, ongoing 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 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.
·
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.
·
Local criminal justice system expenditures. Based on LSC fiscal staff's research to date, the number of additional
misdemeanor cases that may be generated by violations of the bill's criminal
prohibitions in any affected local jurisdiction appears likely to be relatively
small, especially in the context of the criminal justice system's total caseload,
and that any resulting increase in county and municipal expenditures would
likely be minimal at most annually. For
the purposes of this fiscal analysis, a "minimal" expenditure
increase means an estimated cost of no more than $5,000 for any affected county
or municipality per year.
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Local court cost and fine revenues. If, as LSC fiscal staff assumes, the number of additional criminal
cases and successful prosecutions that will be created exclusively by
violations of the bill's new misdemeanor prohibitions is relatively small in
any affected local jurisdiction, then the potential amount of court cost and
fine revenues that might be generated for that local jurisdiction is likely to
be no more than minimal annually. For
the purposes of this fiscal analysis, a "minimal" revenue gain means
an estimated increase of no more than $5,000 for any affected county or
municipality per year.
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Criminal forfeiture actions. As a result of the bill, a local prosecutor may file, and the
appropriate local court would then be required to adjudicate, additional
criminal forfeiture actions. The
associated prosecution and adjudication expenses for any affected local
jurisdiction are uncertain, but presumably the filing of such actions will be
relatively infrequent in comparison to the ongoing and relatively large
criminal caseload generated by individuals who commit drug, robbery, sex,
burglary, and assault offenses.
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Overview
Most notably for the
purposes of this fiscal analysis, the bill:
·
Creates
requirements and prohibitions applicable to both home improvement and new
residential construction contractors, home improvement contractors only, and
new residential construction contractors only.
·
Allows
an owner to initiate a civil action in a court of common pleas for damages due
to any breach of contract or for breach of any duty the bill imposes.
·
Allows
the Attorney General to prosecute contractors for violations of the bill or any
other criminal law for claims related to, or arising out of, a construction
project.
·
Provides criminal
penalties and remedies for certain violations of the bill.
·
Removes several
transactions from the definition of "consumer transaction" under the
state's existing Consumer Sales Practices Act.
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Allows, but does not
require, home improvement contractors to obtain a license from the existing
Ohio Construction Industry Licensing Board to engage in a home improvement or
new residential construction.
Department of Commerce
The bill permits, but does
require, any home improvement contractor to apply for a license with the Ohio
Construction Industry Licensing Board (OCILB), a board associated with the
Department of Commerce that issues
licenses to qualified electrical, heating, ventilating, and air conditioning
(HVAC), plumbing, hydronics, and refrigeration contractors who successfully
pass the International Code Council (ICC) licensing examination. A home improvement contractor licensed in this manner
would be exempt from the state's existing Consumer Sales Practices Act (CSPA). The CSPA would continue to be applicable to
a home improvement contractor not licensed with the OCILB.
The bill additionally
requires the OCILB to adopt certain rules, including, but not limited to, fees
for license issuance and renewal, continuing education requirements, a code of
ethics, standards for minimal best practices, and disciplinary procedures. Additionally, pursuant to continuing law,
the OCILB would have the power to discipline and investigate a licensee who
violates the bill.
Department of Commerce staff has indicated to LSC fiscal staff that these new duties can be absorbed within its current manner of doing business, and that any additional operating expenses can be drawn, as necessary, from its Industrial Compliance Fund (Fund 556). The fees to be collected in connection with the licensing of home improvement contractors would presumably offset, or at least defray, any additional annual operating expenses.
Attorney General
The bill makes a violation of its prohibitions, by a contractor not licensed by the OCILB, a violation of the CSPA. Under current law, the services of home improvement contractors are already subject to the CSPA. The 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 violations of the CSPA. The first such remedy is available to the Attorney General, who 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 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 the 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 any
alleged violations of the bill's prohibitions prior to initiating any formal
legal action. For example, a contractor
could simply agree to cease their conduct, and assuming they did 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
contractor as a last resort if they perceive that the contractor 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
the contractor 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 the 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 investigative 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.
The bill also allows the Attorney General to initiate criminal proceedings for prosecution of the bill's criminal penalties, or any other section of the Revised Code for claims related to or arising out of a construction project by presenting evidence of criminal violations to the prosecuting attorney of the county in which the alleged offense may be prosecuted. After reviewing this evidence, if the prosecuting attorney chooses not to prosecute the alleged violations, or upon the specific request of the prosecuting attorney, the Attorney General may proceed with the prosecution under his or her own authority. Presumably, these additional duties relative to the prosecution of home improvement contractors for violations of the bill's misdemeanor provisions 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).
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 of common pleas
If the bill's provisions are
violated, then a homeowner or the Attorney General may file additional civil
actions in the appropriate court of common pleas that might otherwise have been
filed under the 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.
Criminal provisions
The bill creates three criminal offenses, as noted
below.
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Any contractor performing
any construction project the cost of which equals or exceeds $1,000 must first
enter into a written contract, containing certain specified provisions, with
the homeowner. Failure to do so is a
misdemeanor of the fourth degree.
·
Any contractor who
knowingly engages in a pattern of misrepresentation to consumers or knowingly
and improperly represents quality, timeliness, or quantity of work that was or
is to be performed for a construction project is guilty of a misdemeanor of the
first degree.
·
Any person who previously
held a home improvement contractor license and had that license subsequently
revoked by the OCILB
is prohibited from engaging in construction projects. A violation of this
provision is a misdemeanor of the first degree.
County and municipal
criminal justice system expenditures
It seems virtually certain
that violations of the bill's criminal prohibitions will occur and that
additional misdemeanor cases will be generated for county and municipal
criminal justice systems to resolve. If
this were to happen, then, theoretically at least, local criminal justice
system expenditures related to investigating, prosecuting, adjudicating,
defending (if the offender is indigent), and sanctioning offenders would
increase in any affected county or municipality.
Based on LSC fiscal staff's
research to date, however, the number of cases in any affected local
jurisdiction appears likely to be relatively small, especially in the context
of the criminal justice system's total caseload, and that any resulting
increase in county and municipal expenditures would likely be minimal at most
annually. For the purposes of this fiscal
analysis, a "minimal" expenditure increase means an estimated cost of
no more than $5,000 for any affected county or municipality per year.
County and municipal
revenues
If, as assumed above, the
number of additional criminal cases and successful prosecutions that will be
created exclusively by violations of the bill's new misdemeanor prohibitions is
relatively small in any affected local jurisdiction, then the potential amount
of court cost and fine revenues that might be generated for that local
jurisdiction is likely to be no more than minimal annually. For the purposes of this fiscal analysis, a
"minimal" revenue gain means an estimated increase of no more than
$5,000 for any affected county or municipality per year.
State court cost revenues
The court is generally
required to impose state court costs totaling $24 on any offender convicted of,
or pleading guilty to, a misdemeanor.
Of that amount, $15 is directed to the GRF and $9 is directed to the
Victims of Crime/Reparations Fund (Fund 402).
If, as assumed above, the number of additional criminal cases and
successful prosecutions that will be created exclusively by violations of the
bill's new misdemeanor prohibitions is relatively small, then the potential
amount of court cost revenues that might be generated for either state fund per
year is likely to be negligible at most.
For the purposes of this fiscal analysis, a "negligible"
revenue gain means an estimated increase of less than $1,000 for either state
fund per year.
Criminal forfeiture
The bill specifies that any
contractor convicted of an offense in connection with a construction project is
subject to the forfeiture provisions of the Criminal Forfeiture Law. This provision may or may not produce some
increase in the number of criminal forfeiture actions brought before the court
in cases where contractors have violated the newly created criminal
provisions. It is difficult to
determine the precise magnitude of any such increase, or ascribe a specific
cost to such potential increases in courtroom-related activities. Prosecutors and local law enforcement
agencies may also realize some additional gain in revenues and/or other
property resulting from successful forfeiture actions stemming from the bill.
LSC fiscal staff: Joseph Rogers, Senior Budget Analyst