Effects Vary Between Contractors. The impact of this rule may vary considerably between individual contractors within a business sector. License fees and assessments may be affected by a number of variables, including contractor size, contractor financial strength, contractor risk practices and commodity prices.
For many contractors, this rule will slow the rate at which the contractor's fees and fund assessments would otherwise decline. Some contractors (especially grain warehouse keepers) may have increased fees and fund assessments. For a few contractors, this rule will actually speed the reduction of fees and fund assessments. Many contractors (especially milk contractors) will be unaffected by this rule.
Federal regulations
There is no federal producer security program related to milk. The United States department of agriculture (USDA) administers a producer security program for federally licensed grain warehouses that store grain for producers. Grain warehouses may choose whether to be licensed under state or federal law. Federally-licensed warehouses are exempt from state warehouse licensing and security requirements. State-licensed warehouses are likewise exempt from federal requirements.
The federal grain warehouse program provides little or no protection against financial defaults by grain dealers. Grain dealers are persons who buy and sell grain. Sometimes, grain dealers also operate grain warehouses. DATCP currently licenses grain dealers. Licensed warehouse keepers must also hold a state grain dealer license if they engage in grain dealing.
USDA has informally proposed to regulate grain dealer activities (grain “merchandising") by federally licensed warehouse keepers, to the exclusion of state regulation. But USDA has not yet officially introduced its proposed regulations. In any case, the federal regulations would not apply to state-licensed grain warehouses, or to grain dealers who do not operate a warehouse.
There is a federal security program for vegetables. That security program is mainly limited to fresh market vegetables, and consists of a priority lien against vegetable-related assets. Wisconsin's vegetable security program applies only to processing vegetables (not fresh market vegetables covered by federal regulations). Wisconsin's program uses an indemnity fund, rather than a priority lien-type program. Unlike the federal priority lien program, a state priority lien program would not work because it would be preempted by federal bankruptcy law.
There may be some limited overlap between the Wisconsin and federal programs, but that overlap is justified because the scope of federal coverage is not entirely clear. Overlap was reduced by recent Wisconsin legislation, which permits certain potato buyers covered under the federal program to opt out of most of the state program.
Surrounding states regulations
In Minnesota, contractors must be licensed to procure grain, milk or processing vegetables from producers, or to operate grain warehouses. Regulated contractors must file bonds as security against default. The program is financed through industry fees and general tax revenues.
Neither Iowa nor Illinois have producer security programs for milk or vegetables. However, both states maintain indemnity funds to protect grain producers. Fund assessments are based solely on grain volume. In Wisconsin, by contrast, fund assessments are based on grain volume and financial condition. Iowa and Illinois finance their programs through industry fees and general tax revenues.
Michigan has the following producer security programs:
• Potato dealers must be licensed, and must post bonds as security against defaults. (Wisconsin's vegetable security program includes, but is not limited to, potatoes.)
• Dairy plants that fail to meet minimum financial standards must file security or pay cash for milk.
• Grain producers have the option of paying premiums into a state fund. In the event of a grain default, the fund reimburses participating producers.
• These programs are financed through industry fees and general tax revenues.
Fiscal Estimate
Under the agricultural producer security law:
• Licensed contractors must pay license fees to fund DATCP administration of the agricultural producer security program. Administration includes grain warehouse inspections, review of contractor financial statements, license administration, and response to contractor financial defaults and law violations.
• Most contractors (“contributing contractors") must pay fund assessments to finance the agricultural producer security fund. The fund is held in trust, for the benefit of producers. If a contractor defaults on payments to agricultural producers, DATCP may reimburse producers from the fund.
Prior to 2003, DATCP administrative costs were paid by a combination of general tax revenue (“GPR") and contractor license fees. However, as part of the GPR reductions in Act 33, the 2003-2005 Biennial Budget, 2.9 FTE positions and support costs were converted from GPR to the Agricultural Producer Security SEG fund. Partly as a result of that change, current license fee funding is no longer adequate to cover administrative costs. There has been a gradual growth in administrative costs, due to factors (such as statewide union contracts for accountants and auditors) that are outside DATCP control.
Funding shortfalls are especially severe in the grain dealer and grain warehouse keeper programs. Administrative costs now annually exceed license fee revenues by over $200,000 in each of those programs, and each program has a negative cash balance of more than $336,000. In the vegetable contractor program, administrative costs now annually exceed license fee revenues by over $20,000.
Deficits in the grain and vegetable administration sub accounts affect the total cash balance in Agriculture Producer Security Fund. This unfairly affects milk contractors since the total fund balance is incorporated into the formula that calculates their required security amounts and also affects the total funds available to pay a default.
This rule increases annual license fees for grain dealers, grain warehouse keepers and vegetable contractors, to remedy current inequities and provide minimally adequate funding for program administration (the fee increases for vegetable contractors will be largely offset by fee credits built into the producer security law). This rule also adjusts fund assessments, especially for grain warehouse keepers (for whom an adjustment is required by law).
Notwithstanding this rule, total revenue derived from contractor payments under the producer security program (license fees plus fund assessments) will actually decline over the next few years, because of fee credits and declining formula rates that are built into the producer security law itself. This rule will slow, but not reverse, that overall decline.
License Fee Revenues. The following table shows actual license fee revenues for FY 2005-06, compared to
projected license fee revenue in FY 2009-10 (
with and
without this rule):
Total License Fee Revenues (Net of Contractor Credits)
|
|
FY 2005-06
|
FY 2009-10*
Without this rule
|
FY 2009-10*
With this rule
|
Grain Dealers
|
$160,000
|
$155,000
|
$405,000
|
Grain Warehouse Keepers
|
$159,000
|
$149,000
|
$393,000
|
Milk Contractors
|
$363,000
|
$159,000
|
$159,000
|
Vegetable
Contractors
|
$16,000
|
$5,000
|
$8,000
|
TOTAL
|
$698,000
|
$468,000
|
$965,000
|
* Projection assumes constant procurement volumes, commodity price levels and contractor financial strength.
Projected milk and vegetable contractor license fee revenues for FY 2009-10 are affected, to a very considerable degree, by license fee credits built into the producer security law itself. When the producer security fund balance attributable to an industry sector (such as milk or vegetables) reaches a specified statutory “trigger" amount, a portion of the balance is returned to contributing contractors in that sector (as a credit on their license fees).
Contributing vegetable contractors are already enjoying credits that significantly reduce their license fees, and milk contractors began receiving credits in May, 2007. Grain dealers and grain warehouse keepers do not yet qualify for these credits, because their fund contributions have not yet attained the required level (nor are they likely to do so prior to FY 2009-10).
Increased annual license fee revenues will be adequate to cover annual DATCP administrative costs. To the extent that annual license fee revenues exceed annual administrative costs, the additional revenues will offset the deficit in the administrative sub account.
Producer Security Fund; Assessment Revenues
The agricultural producer security fund currently has a balance of approximately $7,493,000. No more than 60% of the fund balance can be paid out in any individual contractor default. The current fund balance is adequate to cover defaults by most, but not all, individual contractors. Continued fund growth will improve protection for producers, and minimize the need for supplementary security from contractors.
Contributing contractors pay fund assessments to finance the agricultural producer security fund. Annual assessment revenues will decline over the next few years (with or without this rule), because of fee credits and declining formula rates built into the producer security law. Annual assessment revenues will decline across all business sectors. This rule will slow (but not reverse) the projected decline of annual assessment revenues.
The following table shows actual fund assessment revenues for FY 2005-06, and
projected assessment revenues for FY 2009-10 (
with and
without this rule):
Total Fund Assessment Revenues
|
|
FY 2005-06
|
FY 2009-10*
Without this rule
|
FY 2009-10*
With this rule
|
Grain Dealers
|
$512,000
|
$240,000
|
$269,000
|
Grain Warehouse Keepers
|
$51,000
|
$20,000
|
$35,000
|
Milk Contractors
|
$909,000
|
$859,000
|
$868,000
|
Vegetable
Contractors
|
$122,000
|
$37,000
|
$40,000
|
TOTAL
|
$1,594,000
|
$1,156,000
|
$1,212,000
|
* Projection assumes constant procurement volumes, commodity price levels and contractor financial strength.
Cash in the assessment sub account currently covers the negative cash balances in the grain and vegetable administration sub accounts. That is slowing the rate of growth in the assessment sub account, and reducing the fund coverage for all producers (grain, milk, and vegetable). By correcting current grain and vegetable license fee revenue shortfalls, this rule will eliminate the current drain on the producer security fund. That, combined with the adjustment of fund assessment rates, will cause the fund balance to grow at a faster rate. Faster growth will increase protection for producers, and reduce supplementary security demands on contractors.
Without this rule, DATCP projects that the fund balance will grow to $8,332,000 at the end of FY 2009-10. With this rule, DATCP projects that the fund balance will grow to $9,425,000 by the end of FY 2009-10. Under this rule, the fund balance amount attributable to grain warehouse keeper assessments will build over several years toward the required statutory minimum (it currently falls short of the required minimum).
Notice of Hearing
Commerce
(Licenses, Certifications, etc., Ch.
Comm 5)
NOTICE IS HEREBY GIVEN that pursuant to ss.
101.63 and
101.645, Stats., as affected by
2005 Wisconsin Act 200 the Department of Commerce will hold a public hearing on rules affecting chs.
Comm 5 and
82, relating to administrative forfeitures for plumbing licensing violations, tracer wire for non metallic plumbing piping, and affecting small businesses.
Hearing Information
The public hearing will be held as follows:
Date and Time:
|
Location:
|
August 14, 2007
Tuesday
at 10:30 a.m.
|
Conference Room 3C
Thompson Commerce Center
201 West Washington Avenue
Madison
|
Interested persons are invited to appear at the hearing and present comments on the proposed rules. Persons making oral presentations are requested to submit their comments in writing. Persons submitting comments will not receive individual responses. The hearing record on this proposed rulemaking will remain open until August 27, 2007, to permit submittal of written comments from persons who are unable to attend the hearing or who wish to supplement testimony offered at the hearing. Written comments should be submitted to James Quast, at the Department of Commerce, P.O. Box 2689, Madison, WI 53701-2689, or Email at
jim.quast@wisconsin.gov.
This hearing is held in an accessible facility. If you have special needs or circumstances that may make communication or accessibility difficult at the hearing, please call (608) 266-8741 or (608) 264-8777 (TTY) at least 10 days prior to the hearing date. Accommodations such as interpreters, English translators, or materials in audio tape format will, to the fullest extent possible, be made available upon a request from a person with a disability.
Analysis Prepared by Department of Commerce
Statutes interpreted
Statutory authority
Related statute or rule
Agency authority
Section
145.02, Stats., grants the Department of Commerce general authority for protecting the health, safety and welfare of the public by establishing reasonable and effective standards for plumbing including the licensing of individuals to install plumbing. Section
145.06, Stats., specifies when and what types of plumbing licenses are needed for various plumbing activities. Section
145.12 (5), Stats., as affected by
2005 Wisconsin Act 182, allows the Department to directly assess forfeitures to individuals who violate the licensing provisions of s.
145.06, Stats. Section
182.0715 (2r), Stats., as affected by
2005 Wisconsin Act 425 requires the installation of tracer wire or some equally-effective means of locating non-metallic underground sewer and water laterals.
Summary of proposed rules
The proposed rules under chapter Comm 5 delineate the procedures for implementing the forfeiture assessments for plumbing licensing violations as allowed by
2005 Wisconsin Act 182. The proposed rules established a schedule for forfeitures based upon various situations and/or activities. The rules delineate a process for appealing a forfeiture assessment.
The proposed rules under chapter Comm 82 prescribe the requirements for installing tracer wire in order to locate non-metallic building sewers, private interceptor main sewers, water services and private water mains.
Federal regulation
There are no known federal regulations or proposed federal regulations that could be compared to the direct forfeiture provision. There are no known federal regulations or proposed federal regulations for the installation of the tracer wire installation provisions.
Surrounding states regulation
In Minnesota in addition to statutory fines and/or imprisonment, the laws allow the Minnesota Department of Health to administratively impose a penalty of up to $10,000.00 for violation of its various licensing laws in that state. The state of Illinois in addition to other statutory penalties allows the Department of Public Health to assess administratively a civil penalty up to $5,000 for unlicensed plumbing activity. Iowa has state registration for plumbing contractors, but only local licensing. Michigan has a penalty of $1,000.00 per day with a maximum fine of $5,000.00 for violations of its plumbing licensing regulations which may be pursued by the attorney general, local prosecuting attorney or an attorney representing the enforcing agency.
The state of Minnesota has a law requiring cities to create ordinances that include requirements for the installation of tracer wire or an equally-effective means of locating sewer and water laterals. The Minnesota tracer wire law requires that all nonconductive laterals installed after January 1, 2006 be accompanied by tracer wire. Illinois and Iowa have no known state-wide requirements for tracer wire. Michigan has adopted the International Plumbing Code which does not require any tracer wire installation.
The comparisons were completed via a web-search.
Factual data and analytical methodologies
The Department utilizes advisory councils in analyzing and developing proposed revisions to the Wisconsin Uniform Plumbing Code. The councils involved in the review of the proposed rules were the Plumbing Licensing Council and the Wisconsin Plumbing Code Advisory Council. These councils involve a variety of organizations whose memberships include small businesses and municipal staff. The Department utilizes these councils to gather information on potential impacts in complying with the administrative requirements of this proposal. A responsibility of council members is to bring forth concerns their respective organizations may have with the requirements, including concerns regarding economic impacts. (Copies of the council meetings summaries are on file in the Safety and Building Division.)
An economic impact report has not been required pursuant to s.
227.137, Stats.
Analysis and supporting documents used to determine effect on small business
The requirements relating to direct forfeiture under the credentialing code impact businesses of all sizes. The rules are intended to clarify and implement the s.145.12 (5), Stats.
The forfeiture could affect illegal plumbing businesses by the utilization of another enforcement tool to maintain code-compliant installations and therefore, public health and safety and the waters of the state.
The tracer wire rules will not significantly raise the cost of water and sewer installations.
Council members and representation
The proposed rules were developed with the assistance of the following Advisory Councils:
Plumbers Licensing Council:
Dave Jones, Master Plumber
Scott Hamilton, Journeyman Plumber
Lynita Docken, Department of Commerce
Plumbing Advisory Code Council:
Arthur J. Biesek, League of Wisconsin Municipalities
Thomas Boehnen, Chair, American Society of Plumbing Engineers
Patrick Casey, Wisconsin State AFL-CIO
Hallet Jenkins, City of Milwaukee
Dave Jones, Plumbing Contractor
Gary Kowalke, PHCC/MPA Wisconsin
Jeff Kuhn, Plumbing, Mechanical and Sheet Metal Contractors Alliance
Rudolf Petrowitsch, American Society of Sanitary Engineering
Gene Shumann, Plumbing Designer
