JOINT STANDING COMMITTEE HEARINGS
GENERAL LAW PART 2 342 - 713
2009 00031*2
;§>taf 0 of GENERAL LAW COMMITTEE ROOM 3500 LEGISLATIVE OFFICE BUILDING HARTFORD, CONNECTICUT 06106 (203) 240-0470 General Law Committee PUBLIC HEARING AGENDA Friday, February 13, 2009 10:00 AM in Room 1E of the LOB COMMITTEE BILLS FOR REVIEW 1. Proposed S.B. No. 309 AN ACT PROHIBITING THE EXPIRATION OF "POINTS" TOWARDS REDUCED GASOLINE PRICES OFFERED BY RETAIL " ESTABLISHMENTS. 2. Proposed S.B. No. 313 AN ACT CONCERNING THE LIQUOR CONTROL ACT AND LOCAL OPTIONS CONCERNING PACKAGE AND GROCERY STORE BEER SALES. 3. Proposed S.B. No. 318 AN ACT CONCERNING THE MINIMUM DELIVERY CAP FOR HEATING FUEL. 4. Proposed S.B. No. 324 AN ACT CONCERNING THE MANDATORY LICENSING AND OVERSIGHT OF TRASH HAULERS. 5. Proposed S.B. No. 671 AN ACT TO REQUIRE THE USE OF FUEL ADDITIVES IN DIESEL FUEL SOLD FOR THE OPERATION OF MOTOR VEHICLES OR POWER PLANTS. 6. S.B. No. 778 (RAISED) AN ACT AMENDING THE WORKERS' COMPENSATION ACT. 7. S.B. No. 779 (RAISED) AN ACT PROVIDING CONSUMER PROTECTIONS TO PURCHASERS OF OUTDOOR WOOD-BURNING FURNACES. 8. S.B. No. 780 (RAISED) AN ACT CONCERNING THE SOLICITATION OF CHARITABLE FUNDS ACT. Printed on recycled paper 00031*3 9. SB. No. 785 (RAISED) AN ACT CONCERNING CONSTRUCTION CHANGE ORDERS. 10. Proposed H.B. No. 5225 AN ACT PROHIBITING THE USE, SALE OR MARKETING OF MEXICAN SALVIA. 11 .Proposed H.B. No. 5390 AN ACT STREAMLINING THE STATE'S PERMITTING AND PROFESSIONAL CERTIFICATION PROCESSES. 12. Proposed H.B. No. 5391 AN ACT CONCERNING CREDIT CARD NUMBERS AND CREDIT CARD RECEIPTS. 13. Proposed H.B. No. 5398 AN ACT ALLOWING THE INSTALLATION OF SOLAR ENERGY SYSTEMS BY LICENSED ELECTRICIANS. 14. Proposed H.B. No. 5399 AN ACT CONCERNING PHARMACY AND PHARMACIST LICENSE FEES. 15. Proposed H.B. No. 5401 AN ACT CONCERNING TIME SHARE REFERRALS. 16. Proposed H.B. No. 5406 AN ACT CONCERNING PUBLIC ACCESS TO INFORMATION REGARDING PHARMACY AND PHARMACIST PRESCRIPTION ERRORS. 17. Proposed H.B. No. 5947 AN ACT CONCERNING EXTENDED WARRANTIES. 18. H.B. No. 6301 (RAISED) AN ACT CONCERNING THE PRACTICE OF PHARMACY AND ELECTRONIC PRESCRIPTIONS. 0003W of (flatmBctitat GENERAL ASSEMBLY GENERAL LAW COMMITTEE ROOM 3500 LEGISLATIVE OFFICE BUILDING HARTFORD, CONNECTICUT 06106 (203) 240-0470 PUBLIC HEARING ATTENDANCE Date: February 13, 2009 Time: 10:00 AM Room: IE Present Absent Altobello, Buddy X Aman, Bill X Bacchiochi, Penny X Colapietro, Tom X D'Amelio, Tony X Esposito, Louis X Gomes, Edwin X Kissel, John X Maynard, Andrew X Mazurek, Corky X Musto, Anthony X Nafis, Sandy X Nicastro, Frank X Reed, Lonnie X Robles, Hector X Shapiro, Jim X Taborsak, Joseph X Tong, William X Witkos, Kevin X Signed ^ Printed en recycled piper 00031*5 Law 2009 MEMBERSHIP LIST Chairs: Sen. Tom Colapietro (D) Rep. Jim Shapiro (D) Vice Chairs: Sen. Andrew Maynard (D) Rep. Joseph Taborsak (D) Ranking Members: Sen. Kevin Witkos (R) Rep. Penny Bacchiochi (R) Members: Rep. Buddy Altobello (D) Rep. Bill Aman (R) Rep. Tony D'Amelio (R) Rep. Louis Esposito (D) Sen. Edwin Gomes (D) Sen. John Kissel (R) Rep. Corky Mazurek (D) Sen. Anthony Musto (D) Rep. Sandy Nafis (D) Rep. Frank Nicastro (D) Rep. Lonnie Reed (D) Rep. Hector Robles (D) Rep. William Tong (D) CONNECTICUT GENERAL ASSEMBLY GENERAL LAW COMMITTEE PUBLIC HEARING SPEAKER REGISTRATION LEGISLATORS, AGENCY HEADS, AND MUNICIPAL OFFICIALS Room: \ Date:jSjjj^OSL Time: ^ COAAA PLEASE PRINT Representing Pro/ Written No. Speaker BUI Number(s)/Subject(s) (self, organization, agency...) 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X SIBit ^APLA/0 -7&G BILU fW/u/u CSA -.MO flU)M£KJO A6C/C6A 73 f V- AUEhM MA&HAO- ^myu'ms Jft* JbEWtWO 1S5 yi ^ki^lbWA-v . SW o I Coo^ A/o o • 1 ^ ' tf sit Oo^CCJAPII; P.-o y at X West tMU CT (oil Tcfrt >c , C1AVN5 U1\ C4V> X! o/3«* //S X Fw 31 vM ITICKJTJFO C&AJ <> IBilBHS'ilVHMHBI V — iJ /,v w/r/- QII/JT-HYEYT y 1/ , FTBLUNI) - I Qg iJ A^MfdvdL TcPA FRO 31 R^ J —- 32 33 34 35 MEMBERS OF THE PUBLIC AND LOBBYISTS PAGE OF 1 February 13, 2 009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. CHAIRMEN: Senator Colapietro Representative Shapiro VICE CHAIRMEN: Senator Maynard MEMBERS PRESENT: SENATORS: Gomes, Kissel, Witkos REPRESENTATIVES: Altobello, Bacchiochi, Mazurek, Nafis, Nicastro, Reed, Robles, Tong SENATOR COLAPIETRO: -- we'll be able to go home. I'm calling the meeting to order and I would ask Kirsten, our clerk, to read the -- the rules of standing out of the doorway so that our people can get out in case of fire. Kirsten. THE CLERK: In the interest of safety, I would ask you to note the location of and access to the exits in this hearing room. The two doors through which you entered the room are the emergency exits and are marked with exit signs. In an emergency, the door behind the Legislators can also be used. In the event of an emergency, please walk quickly to the nearest exit. After exiting the room, go to your left and exit the building by the main entrance or follow the exit signs to one of the other exits. Please quickly exit the building and follow any instructions from the Capitol police. Do not delay and do not return unless, and until you are advised that it is safe to do so. In the event of a lockdown announcement, please remain in the hearing room and stay 2 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. away from the exit doors until an all clear announcement is heard. SENATOR COLAPIETRO: Thank you. I just want you to know that there's not everybody here because of a few reasons. Some have already got meetings, some have gotten -- they're afraid of Friday the 13th and some people just plain couldn't make it here today for one reason or other, so don't take it personal. We just ' want to get the meeting here, and I'm sure that the committee members that are here will be anxious to hear what your testimony is. A VOICE: (Inaudible.) SENATOR COLAPIETRO: Yeah, go ahead. A VOICE: And just prior to beginning the public hearing, I wanted to mention for the Democratic members of the committee, we have our next committee meeting on Tuesday at 1:00 and prior thereto, at 12:30 we'll have a Democratic caucus. It's the first time we're going to vote on some bills, hopefully, and just to set the tenor for the rest of the session, so 12:30 on Tuesday in the Caucus Room prior to the meeting. Actually, do we have it prior to the meeting? A VOICE: (Inaudible.) A VOICE: You know what, actually, let's do it in the Public Safety Committee Room next to General Law. SENATOR COLAPIETRO: Okay. And with that, we would like to start testimony. We will begin with department heads and Legislators, which is actually a short list, so members of the public will be testifying soon, and we'd like 3 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. to start with Commissioner Farrell, if you please, followed by Representative Sawyer. JERRY FARRELL: Good morning, Representative Shapiro, Senator Colapietro, the members of the General Law Committee. It's good to be back in front of General Law, this legislative session. You have my written testimony on a number of bills that are being advanced by the department, namely Senate Bill 778. which deals with the work comp statute; 779, which deals with wood burning fireplaces, furnaces; 780, which deals with the Charitable Funds Act, and 6301 that deals with e-Pharmacy. Now I think most of these topics that members of the General Law Committee are quite familiar with. The one that is a little different for you, and maybe if I can explain and spend a couple minutes clarifying why it's before you, would be the amendments to the work comp statute contained in 778. As you know, Department of Consumer Protection does a ton of occupational licensing. There is, I believe, 180 different categories of licenses that we give out. Now one of the requirements that's presently in statute is that we collect a certificate, a physical certificate, of Workmens' Compensation Insurance for those getting a license from the department. For many years the department has not necessarily enforced this statute that, as you can imagine, with 221,000 licensees, there was a time for a couple months, I believe back in the early nineties, where the department attempted to do this and it became overwhelming, so at some point it was just set to the side. However, in the past three audits that the State Auditors have done of 4 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. our department, this issue has been noted all three times and we have said to the auditors in their most recent visit to the department that we're very committed to solving this by finding an alternative means to meet this requirement. We're proposing that the statute be amended so that we do not necessarily have to collect a physical certificate, but so we collect the information that in the application that the licensee makes or the renewal of license that they make in subsequent years, that they would be required to say under oath, if indeed they have Workmens' Compensation insurance, what the policy number is, who the carrier is, and what the relevant dates of insurance are. Approximately 32 percent of our licensees, current licensees, renew their licenses on line. So this information can be fairly easily captured as part of that electronic process with no further cost, no further fuss or muss to the state. So, I believe by amending the statute to say not necessarily the physical certificate, but the information under oath would solve the issue and, if I understand correctly, the true purpose of that statute to begin with was so that if the second injury fund had a need to go after certain contractors that that information would be there. So, at the end of the day, the second injury fund would still -- would actually have information that they're not presently having access to right now. So I would appreciate that most specifically. It's a little outside of the normal things that we talk about so I wanted to highlight that. REP. SHAPIRO: Thank you, Commissioner. One follow-up question. With respect to records 5 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. retention, you can retain these electronic documents in the same manner that you were required to were physical documents? JERRY FARRELL: Yes, I mean anything that we have that's electronic is going to have the same FOI requirements that a paper document would have. I actually envision that, in the grand scheme of things, it's easier to keep all these thing electronically that -- I mean you'd be amazed that -- we've done record retention recently of 30, 4 0 years worth of documents out of our basement. I think the building is, you know, has this sigh of relief that all of these documents got properly dealt with. Whereas, on the computer, you know, it can be kept indefinitely. You would have to buy some increased memory, but otherwise, I don't perceive a problem. REP. SHAPIRO: Terrific. Thank you. Do we have questions from the members? Representative Aman. REP. AMAN: Yes, thank you, Commissioner. I guess I have two questions on it. One, what does the department do or do they monitor someone's policy that's either expired or been cancelled for lack of payment? And the other one ties into your last remarks about using the records. Has anybody every asked, or who asks for using these records, that you're asking the applicant to supply and maintaining? JERRY FARRELL: Well presently the records aren't kept at all. That as I said, after the requirement was initially passed sometime in the early nineties, there was a brief period of several months that the records were kept and after that, long before I ever became the Commissioner, you know, there was a decision 6 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. made that we weren't going to do this. But yet, the statute remains on the books and the auditors look at compliance with the statutes So, no one's coming and looking at records right now because there's no records that exist. Arguably, it would be the second injury fund where there's a claim that the state is going to have pay that would be interested in these documents. That's my understanding. We work with the Work Comp Commission to make sure that they believe this conforms with the requirements on that side of the street. REP. AMAN: I guess it ties into my question of: If we stop the requirement completely, forget saying hard copy and electronic copy, would anybody notice or care? JERRY FARRELL: I think, you know, that there's a good- rationale that if the second injury fund feels that it's necessary to have this information and that they can pursue dollars that the state is presently paying out that should come from private pockets, we're happy to collect that information, especially where we can do it in a way that, you know, if it's going on the form, whether it's a paper form or an electronic form, as long as we're not collecting a physical certificate, there's really no cost to the state in doing that. REP. AMAN: Thank you. To the Chairman, I request that somebody -- that the committee ask the Second Injury Fund what their feelings are on this before we go ahead and decide on the bill. REP. SHAPIRO: Make it duly noted. Do we have further for the Commissioner? 7 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. If not, Senator Colapietro. Senator Witkos. SENATOR WITKOS: Thank you, Mr. Chairman. Good morning, Commissioner. i JERRY FARRELL: Good morning. SENATOR WITKOS: I was just going ahead to fienat-.g Bill 779 regarding the Open Wood-Burning Furnaces. JERRY FARRELL: Yeah. SENATOR WITKOS: And my question would be that the way the bill is written it would require notification to be sent by certified or registered United States mail to the seller, and I'm curious as to why we wouldn't just allow a delivering of that agreement upon delivery of the actual furnace, so that the owner does not incur additional costs. JERRY FARRELL: I believe we're going to give you some changed language on the notice requirement so that it can be a little simplified and that there would not be this record-keeping requirement that's in there that, you know, from our perspective, the two key things in there are that the consumer gets the packet and that they have the days of recision, you know, once they've read the packet to figure that they no longer want to go forward. So I believe that's going to be addressed in some change language that we're giving you. SENATOR WITKOS: In the changed language that you're going to provide, is there anything in there that restricts a homeowner's rights to 8 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. purchase a wood stove, outdoor wood-burning stove? JERRY FARRELL: No, I mean, I don't perceive any part of the proposed legislation as restricting the ability to purchase. It's strictly that someone who's contemplating this kind of purchase get all the -- the information that they need. We do know that the DEP has taken in 400 complaints over the last couple of years regarding these stoves. And the difficult sort of catch 22 position that a lot of people who have these stoves get into is, it's there; it's installed; it's operating, but yet, due diligence was not done in figuring out that it doesn't conform with zoning. It's too close to a neighbor in terms of, you know, zoning and other local public health requirements. So the idea behind this is to make sure that somebody who's thinking of this purchase thinks through all of those angles before it's already there and they've bought themselves what amounts to a problem. So nothing restricts purchase. It's more to make sure that it's an informed purchase. SENATOR WITKOS: Thank you. I thank you Mr. Chairman. REP. SHAPIRO: Representative Altobello. REP. ALTOBELLO: Thank you Mr. Chairman. Commissioner, you're using the term "wood-burning furnace," I assume that you mean or want to mean, wood or other things like corn cob furnaces and maybe switch grass in the future and biomass and stuff like that there? JERRY FARRELL: Right now as I understand them, 9 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. they are wood burning. You know it could be that the technology changes over time. But right now it's a wood-burning furnace. It's, you know, not just a simple little fireplace that's out in someone's yard. It's a pretty big mechanism. It's a piece of machinery. REP. ALTOBELLO: So you like the definition as it is now? JERRY FARRELL: Sure. I mean if -- REP. ALTOBELLO: Okay. And, secondly, then there's a question about -- well, let's see, cancellation shall be without liability on the part of the buyer except for the fair market value of services actually received by the buyer. That seems pretty broad language and I'm just wondering what you think "fair market value of services actually received by the buyer means." JERRY FARRELL: You know, there could have been some prep work that got done at some point before the purchaser goes to cancel that I think that that's what it's trying to quantify. You know, if somebody does some minimal amount of land engineering work to figure where on the property this can get sited, just from a physical standpoint, that it would compensate the company for that. You know, at the end of the day, fair market value is going to be in the eyes of either DCP, if there's you know some type of complaint or if the consumer wants to go outside the administrative process, it would be in the eyes of a judge. So, you know, someone would have to quantify, you know, okay, I put X hours into this. This is what I believe it's worth, and this is why I should be entitled to at least this part of 10 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. compensation. REP. ALTOBELLO: Thank you. Thank you, Mr. Chairman. REP. SHAPIRO: Representative Nicastro. REP. NICASTRO: Thank you, Mr. Chairman. Commissioner, regarding -- good morning to you, sir. Regarding House Bill 6301, could you walk us through that just a teeny little bit? I realize what you're saying about using, you know, electronic prescriptions and things like that, and we've had people come before us before and talk about errors that have created serious hardships for families and almost caused, you know, fatal accidents and things like that, but computers and things like that are not perfect either. JERRY FARRELL: I know. REP. NICASTRO: They can shut down; they can-, you know, go down, yet, you know, you can lose power and you're saying just using that as a backup, I mean, that's why I'd like to have you come out a little bit more on that because all you're saying is use that computer, nothing else. You don't feel you that they should keep records besides that just on the computer? JERRY"FARRELL: Well, we feel that they should be allowed to retain records electronically. That, you know, if you look at what's going on within the industry, putting aside the laws as they exist, but what's going on within the industry, I mean certainly amongst pharmacies there's an enormous amount of information that 11 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. gets transmitted electronically and gets stored electronically. The problem becomes when our department goes out there and has some need for that information, you know, right now largely it's required to be kept on paper. You know, you look at some of the vary large drugstore chains, you know, part of -- sometimes the convenience of dealing with that kind of chain is that you can go into almost any one of their facilities no matter where it is and your records can come up electronically. So in terms of the information that we need, we're happy with it being electronic. But, as -- as it stands right now, the law largely requires paper copies and probably that just is antiquated at this point. The other piece of this that, you know, there are Schedule 2 drugs that physicians would be enabled to prescribe and transmit electronically to pharmacies. So, it takes into account the fact that right now those Scheduled 2 drugs could not move between the doctor and the pharmacy electronically. So I mean I think many people desire the convenience. You know, on the accuracy cuts both ways, that computers can be fallible; doctors' handwriting can be fallible. So, it goes both ways. At the end of the day, perhaps the doctor is going to look more carefully at what goes on the computer, rather than writing something and figuring, well everybody understands my handwriting, don't they? REP. NICASTRO: Thank you, Commissioner. Thank you, Mr. Chairman. REP. SHAPIRO: Thank you, Representative. 12 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. Any further questions for the Commissioner? If not, thank you for your testimony, sir. Is Representative Sawyer in the room? There we go, followed by Senator Caligiuri. REP. SAWYER: Good morning, Mr. Chairman, ranking members, members of the committee. We've all had constituent calls placed in our -- to our office of people who are panicked who are worried because they have not received their certifications that they had sent their paperwork into get. So this is my testimony regarding Proposed House Bill 53 90, and it's in response to that. And it's not just one agency and it sort of landed in your lap, I think, because of the more directed nature that I worded it originally, but you know we've heard of it across different agencies. Not only has it been Department Consumer Protection, it's been State Department of State Ed, it's been the Connecticut Department of Public Health, when it comes to licensing say day cares; when it comes to teachers coming in from out of state trying to get their licenses, that it's taking months after months after months. And, committee members, right now in today's economy that sort of tired expression of tough times, this is time that we should be breaking our backs as service people within the state government aiding those people that want, need, and must have professional certifications. They must have them in their hands as quickly as possible. So I am more than willing, Mr. Chairman and Members of the Committee, to change the language so it's within available appropriations, but I think it's paramount that our state agencies, as 13 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. people who are responsive to the public, doing our bidding, because we require they require that they have their professional certifications, that we get them out to them as soon as possible. I don't want to take any more of the Committee's time because we can also talk at a future time. I see that you have a very large audience sitting behind you. REP. SHAPIRO: Thank you, Representative. One question to you. I see that your bill as proposed would require cross-training and reports to be given, and I applaud what you're trying to do, but I'm not sure how we do it without receiving a fiscal note on this. I'm sure you've given that some consideration. Can you -- can you enlighten me on your process there? REP. SAWYER: And that's something that I think we need to work out. Within the different agencies, we need to bring them in to talk to them as well as well to find out if there are ways to do it. We certainly have union contracts. It's going to be an issue as well. But, if we don't start talking about it now, I don't know when we're going to get to that tough issue. But, perhaps we drop to -- within available appropriations for this particular year. REP. SHAPIRO: Thank you. Any questions from the Committee? No. Thank you very much for your testimony, Representative. REP. SAWYER: Thank you, sir. 14 February 13, 2 009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. REP. SHAPIRO: Senator Caligiuri. SENATOR CALIGIURI: Good morning Chairman Shapiro, Chairman ,Colapietro, Ranking Member Witkos and Members of the General Law Committee. For the record, my name is Sam Caligiuri. I'm a State Senator from the 16th Senatorial District and I'm here this morning to speak in favor of Senate Bill 324, An Act Concerning the Mandatory Licensing an Oversight of Trash Haulers. And let me begin by thanking you very much for taking the time to raise for the hearing. I appreciate very much the opportunity to have an exchange of ideas on what I think is a very important issue for consumers in the State of Connecticut. I believe that we need this bill in order to protect the public and consumers from the small minority of haulers in this industry who are engaged in illegal practices. We know from various law enforcement sources that organized crime has infiltrated certain segments of this industry, and that this element has encouraged practices that are anti-competitive, which ultimately hurts consumers. I believe that an appropriate system of oversight would make it much more difficult for this type of illegal activity to occur. Therefore, I would recommend the following: First, that the Department of Consumer Protection license every trash hauler. Number two, that every applicant for a license would have to provide background"information on its officers, directors, shareholders and other owners of that applicant company. Three, that 15 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. the Department of Consumer Protection would conduct background checks on these individuals. Four, trash haulers would be required to submit annual financial statements to the Department of Consumer Protection. For larger companies, these financial statements would have to be audited. For smaller companies, they would have to be accompanied by an affidavit as to their accuracy, completeness and truthfulness. Trash haulers, finally, would be required to certify to the areas, geographic areas that are served by their companies. In my opinion, this regulatory scheme would help eliminate the problems that we've seen in a number of different ways. First, the licensing and background check process would help us to identify key players or prospective players in the trash hauling industry who, by virtue of their background, should not be permitted to participate in this marketplace in Connecticut. For, example, we know that two individuals convicted in related schemes over the last several years were owners or partners in as many as 25 different trash hauling companies. The requirement that haulers submit certified financial statements will help create greater transparency and, hopefully, deter the illegal practices that we've learned of. May I continue briefly? REP. SHAPIRO: Please do so, but summarize. Thank you. SENATOR CALIGIURI: Yes, thank you. Briefly, we know from law enforcement that payments were made by companies to individuals 16 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. associated with organized crime. We also know that providing financial statements would help us to identify evidence of so called property rights system, pursuant to which participating haulers agreed to divide stops, fix prices and .rig contract bids. The requirement that haulers describe the areas served would also make it easier for us to identify a potential property rights scheme in place. I know that opponents will tell you that this law isn't required because the industry is already regulated at the local level, I would contend that what we know has already occurred illegally as evidence that the oversight is inadequate. And finally, I know that opponents will tell you that this will place an undue burden on the industry. And my contention to the Chairs and to the Committee is that the benefit to consumers would greatly outweigh what I think is a relatively small additional burden that companies in this line of work would have to incur. So for those reasons, I thank you again for hearing the bill, and I'd be delighted to take any questions that you might have. SENATOR COLAPIETRO: Good morning, Senator. I just have one question. It's nothing to do with the bill. I think the bill is well intentioned for sure. I just wanted to know, have you talked to the Commissioner of DCP, Department of Consumer Protection, on the cost of this; what it' would cost us to do that as a state? SENATOR CALIGIURI: I haven't talked with the Commissioner this year. His staff and I had brief conversations about it last year, which, 17 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. as you'll recall Senator Colapietro, was the first year that this bill was heard. My suggestion would be to make the fees charged at a level that would the program to be self-sustaining so that the impact to the state would be fiscally neutral. SENATOR COLAPIETRO: Thank you. SENATOR CALIGIURI: Thanks. SENATOR COLAPIETRO: Thank you, Mr. Chairman. REP. SHAPIRO: Representative Reed. REP. REED: Thank you, Mr. Chairman. It feels as if, I'm talking about a fiscal note. I mean, this -- this feels like a really good thing to purge the industry of these kinds of influence -- influences, but it feels like it will take quite a team to really do the thorough kind of background check, silent partners, old deals, you know, outside the state kinds of ownership. Have you thought this through on those terms? SENATOR CALIGIURI: Representative, that's an excellent question. And, yes, I have thought of it. And I will tell you that what I'm describing is not any concept that's new. In a totally different industry segment, insurance, exactly these types of practices take place. In fact, there are even private companies that exist that insurance departments around the country will send background check requests to. So the infrastructure is already in place. We aren't reinventing the wheel. We're really borrowing from concepts that are already working successfully in other industry 18 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. sectors, and I believe that we can do this in a way that's fiscally neutral to the state, and I would hope beneficial to consumers. Representative, I hope that's answered your question. REP. REED: Yes, and just one quick other question. Won't the fees be passed onto consumer? SENATOR CALIGIURI: Yes, probably. And I think that that's part of the cost-benefit analysis that we, as policymakers, have to make. What I would contend, Representative, is that the cost of the illegal activity that we know have taken place are also being passed onto consumers. I would suggest that the cost of this regulatory scheme would ultimately save consumers money, if we're able to reach into the very small minority within this industry that's engaging in illegal practices and stop it from happening because we know that that is costing consumers' money. REP. REED: Thank you. SENATOR CALIGIURI: You're welcome. REP. SHAPIRO: Representative Taborsak. REP. TABORSAK: Thank you, Mr. Chairman. Thank you, Senator. Good to see you. SENATOR CALIGIURI: Likewise. REP. TABORSAK: Just a few questions so that I can get a better understanding of what you intend under this bill. My first question would be on the issue of the language that speaks to criminal background checks. I guess I'm trying to get a better understanding of what your thoughts were. It doesn't, the bill doesn't mention where we would draw the 19 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. threshold or where the Department of Consumer Protection would draw the threshold of, you know, what is an acceptable criminal background in order to obtain an license. Is that a question that you would want to leave to the Department of Consumer Protection or is that something that you think that we should, you know, debate in this Committee and have in the bill itself? SENATOR CALIGIURI: Thank you for that question, Representative. Let me suggest, again, that I think an answer to the question may reside in the way insurance companies are regulated currently. There's language in the insurance statutes which gives the authority to the Commissioner to reject individuals to participate as directors, officers, owners of insurance companies in Connecticut who do not possess the fitness or the experience to be constructive, positive members of the industry in Connecticut. So, I think that standards like that are already in place; they're already being utilized, and I think we can borrow from those standards in a case like this and, again, not have to reinvent the wheel. I think we can use language statutorily that's similar to what we see in the insurance code and use that as a starting point. I'm not sure out to a point that we want to micromanage. I think we want to give the Commissioner authority to use his discretion in this case to look at the totality of the facts and circumstances to make a decision as to whether someone is an appropriate entrant into this market. But I do think that we can provide some general standards, and I would suggest that that's already taken place on the insurance side of the equation. 20 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. REP. TABORSAK: Okay. Thank you. I've got one more question. It kind of dovetails with that thinking and that's, as far as kind of along the same lines, and maybe -- maybe this to give the Commissioner some sense of where this might go and also just to help me better understand this. How far, in your mind, if you had your druthers, do think that we would need to kind of cast the net, as far as when we talk about scrutinizing the owners of these companies, the principals, we all know that, you know, if through forming corporations and other entities like that and LLCs, a person, a stockholder could have a lot of involvement in a company without being the, you know, quote/unquote, owner or principal of that company. Is it your thinking that, you know, we would go so far as to look at stockholders of corporations that, you know, individual stockholders and subject them to the same standards of the main principal. I guess I'm trying to get a better understanding of that. SENATOR CALIGIURI: Sure. The concept would be being able to scrutinize anyone who has, quote, a control relationship over the enterprise. Control, in other segments of the law, is defined as the ability to direct the policies and management of a person. So we already have law that gives us a sense of that. I think control exists among directors, among senior officers, and we could say, again, as we do in the insurance segment, that control is presumed to exist when you have 10 percent or more stock ownership. But I think the idea would be to have scrutiny of anyone who is deemed to be a, quote, controlling person, and I would suggest that control be defined a the ability to direct the policies and management of the applicant company. 21 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. REP. TABORSAK: Okay. Thank you. SENATOR CALIGIURI: You're welcome. REP. SHAPIRO: Senator Witkos, followed by Representatives Altobello and Nicastro, on double-deck. SENATOR WITKOS: Thank you, Mr. Chairman. Good morning, Senator. SENATOR CALIGIURI: Good morning, Senator. SENATOR WITKOS: Do you have any idea of how many independent trash haulers there are in the state of Connecticut? SENATOR CALIGIURI: I do not, Senator. SENATOR WITKOS: Okay. Thank you. That was my only question, Mr. Chairman. Thank you. REP. SHAPIRO: Since Altobello is not here oh -- Representative Nicastro. REP. NICASTRO: Thank you, Mr. Chairman. Good morning, Senator. SENATOR CALIGIURI: Good morning, Representative. REP. NICASTRO: You know, looking at this, I understand what's trying to be done here and I truly appreciate what's trying to be done here. But I'm also looking at the other side here as an example, like the Bristol Resource Recovery operation. That's comprised of -- composed of 22 cities and towns like Bristol, Meriden, New Britain, Plainville, Southington, Wolcott, just to name a few. And they're -- 22 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. all those Mayors and everybody who sits on that, that they have these committees and they're very strict in everything they do. And while they support -- and they have submitted testimony, they support, basically they support legislation, you know, ensures the integrity of hauling and dehauling industry and we need that, there's no question about that. But" they're against legislation that does not have, you know, broad municipality governmental exemption because they're already part of it and they have these committees. And I'm just wondering how you feel about that? SENATOR CALIGIURI: Representative, that's an excellent question and I appreciate the chance to answer it. If your question is, is it my intention to sweep in municipal entities that may be engaging in this process, the answer is no, because I think that municipal entities are already subject to a different level of scrutiny. This would apply to private industry engaged in this -- in this business. REP. NICASTRO: Thank you very much, Senator. SENATOR COLAPIETRO: Does that answer your questions, Representative.? REP. NICASTRO: "Yes. Yes, it does. Thank you, Senator. Thank you, Mr. Chairman. REP. SHAPIRO: Representative Aman followed by Representative Altobello, as he makes his way. REP. AMAN: Thank you, Mr. Chairman. Probably tying into one of the previous 23 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. questions about exempting municipal, is the term "trash haulers" defined anywhere that you know of in our legislation? SENATOR CALIGIURI: I believe it may be -- it may be defined already under the Department of Environmental Protection statutes, which is why I believe the Attorney General has pushed separately to have this regulation occur by the DEP, and we could talk about why I think it's better done under Consumer Protection. I don't know for sure, Representative, but I believe the term may already be defined under our Environmental Protection statutes. REP. AMAN: Okay. The thing I'm getting to is not only is there a problem with the municipalities, because I think everybody knows what you're trying to accomplish. I'm also thinking of people on the opposite end of the spectrum, the small guy that is handling cleaning out garages and everything else, and if we don't do something to exempt either with a dollar amount of work per year or some other sort of standard, we're going to drag a whole lot of people in to be -- give this information and it's going to divert any attention away from the people that I think you're trying to regulate. So as the committee goes forward, I think we have to look at exactly what we're defining as a trash hauler, and if it is already defined, maybe come up with a different term or something for it. And so, hopefully, you'll be working on that also. SENATOR CALIGIURI: Representative thank you. I think you raise an excellent point. That's not who I'm trying to reach. That's not who I think, as a matter of policy, we ought to be trying to reach. So I would love it if there was enough interest at the Committee that we 24 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. could actually get to the point where we're working together to properly define the scope of who this would reach, Representative. REP. SHAPIRO: Thank you. Representative Altobello. REP. ALTOBELLO: Thank you, Mr. Chairman. Senator, what depth of -- the bill talks about periodic financial statements being submitted and audits being submitted to the state. What -- for a large corporation that may not be a problem, especially a stock corporation that may be on the New York Stock Exchange or some publicly traded entity. For a mom and pop that would be, I think, a major -- a large expense. And I was just wondering to what level you're really seeking this sort of audit, which wouldn't generally be done in a closely held business, if you would. SENATOR CALIGIURI: Absolutely Representative. I agree with that, and that's why think that we could set a size threshold, and a company over a certain size would be required to submit audited financial statements. A company under a certain size would be required to submit financial statements;, they wouldn't have to be audited./ And we could, by regulation, for example, give the Consumer Protection Commissioner the authority to define exactly what type of financial statements we would want to get from a company that's on the smaller side. But I do think that if they're not audited that we ought to include a certification by the person submitting them that they are accurate, complete and truthful -- not an uncommon practice -- as a way of reaching the same kind of goal that having an audit would get. And I think there's a way to split that difference, 25 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. Representative, so that we're not unduly burdening the smaller companies. REP. ALTOBELLO: And so -- and how does all this -- how would that help territorial price fixing for instance? • I mean, once we have this license, we know how much the person makes or, at least on paper, knows how much the person makes. How does all this help the underlying problem, which I believe is what I just stated? SENATOR CALIGIURI: Well, part of -- well, yes, the so-called Property Rights Schemes where haulers are colluding to divide up territory, fix prices and the like. The question, Representative, is how can we be in a better position to do two things. Identify those things when they occur and deter them from occurring. Let me suggest to you that the requirement that they have to submit financial statements; and, I don't know if you were in the room when I gave this part of my testimony, I also think companies should be required to identify the areas that they're serving. And the reason is because if you take those two bits of information, we might put the department and the regulator in a better position to identify evidence of collusion or the Property Rights Scheme. It's not going to be a perfect system, but it'll be a better one than we have in place right now. And let me also suggest to you that someone engaging in this practice now, I suggest, will be thinking twice about continuing it if all of a sudden they have to disclose this information to get a license to the department. So I think that there would be a deterrent effect as well, Representative. REP. ALTOBELLO: Thank you, Senator. Thank you, 26 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. Mr. Chairman. REP. SHAPIRO: Any further questions from the Committee? If not, thank you very much for your testimony, Senator. SENATOR CALIGIURI: Thank you. Thank you all very much. REP. SHAPIRO: All right. That concludes the agency head and elected official portion of the public hearing. We are now moving into the schedule for the regular public. For those of you who have not testified before any committee of the Legislature, you have heard a bell ring. It gives you three minutes to testify. When it goes off, if you have not finished, I would ask you to please summarize quickly. We will give you a little rope, but not too much to hang yourself with, and then wrap it up. So to begin, we have Ray Allen, I believe it's Bergman and followed by Tom Wood. RAY ALLEN BERGMAN: Senator Colapietro, Representative Shapiro and members of the General Law Committee, thank you for the opportunity to speak to you today in support of the Bill 5225. My name is Ray Allen Bergman and I am the prevention coordinator for the Southeastern Region Action Council. Salvia divinorum is becoming more widely known and used in modern culture. The National Survey on Drug Use and Health, sponsored by the SAMHSA for 2006 estimated about 1.8 million persons ages 12 and older had used Salvia divinorum in their lifetime. Of approximately 750,000 of those had done so in the last year. Youth ages 18 to 25 are three times more likely to use salvia within a 27 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. 12-month period. Salvia is recreationally used by individuals to induce hallucinations. The effects are described by its users to be similar to those induced by LSD and Ecstasy. Salvia is being widely marketed on Internet sites aimed at young adults and adolescents eager to experiment with these types of dangerous substances. Over 5,000 videos are available on YouTube sharing Salvia Experience. With little restriction, Salvia is already being shipped into Connecticut and being sold in Connecticut specialty stops -- shops. Salvia divinorum leaves are most often smoked, chewed or mixed with a tea for a longer lasting high. When the untreated leaves are chewed and mixed, the high is less intense which has led to more concentrated preparation or extracts. When smoked, the high is quick and very intense, lasting approximately 15 to 20 minutes. These extracts are the main psychoactive ingredient Salvinorin A, which is accountable for about 96 percent of the effect in Salvinorin B. An ounce of salvia leaves sells for around $30 on the Internet and specialty stores. The liquid extract from the plant, Salvinorin A, are sold in various strengths 5X to 180X. A gram of 5X, about the weight of a plastic pen cap, is about $12 while 60X is priced at around $65. By isolating these extracts, recreational users have also experimented in combination with various other drugs. Once these drugs are consumed, a number of physical and psychological effects occur. Here are a few: Loss of physical coordination, visions, a dream-like state, sense of total confusion or madness, sense of 28 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. flying, twisting, floating, turning and tunnel vision. It is important to share with you how this drug has impacted Southeastern, Connecticut, and our work in the Regional Action Council. The RACs are where the community turns to for help in combating and preventing substance abuse that threaten our children and health and safety of our citizens. We have numerous inquiries into Salvia. We know anecdotally that this drug is being used in college campuses, with Military personnel, young adults 22 to 28, and is quickly gaining momentum throughout other population and communities. We also know this drug is being sold at local specialty shops in our area. We have incorporated Salvia awareness and education into all of our current drug trend workshops and materials. Through our efforts, school resource officers, high school, college health staff, college resident assistants and directors and youth service providers have already been educated on the growing dangerous trend. At this point, we know that other states have prohibited Salvia growth, sales, importation and extracts of the plant. We strongly support that Connecticut follow in these footsteps. Thank you. SENATOR COLAPIETRO: Before we go into the Committee questions, I have a couple of questions. This is an interesting subject and I thank you for bringing it forward. It's sort of like marijuana, but a little stronger. But we, up here, us old timers are the ones 29 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. that want to know about this, I think. The younger generation all know about it already, but I didn't even know it existed 'til I talked to some of the younger folks. But the rumors are up here that it's being laced with LSD and stuff, is that true or not true? RAY ALLEN BERGMAN: We haven't heard that it's laced, but the extracts are strong enough to almost double the effect of LSD or Ecstasy or mushrooms. SENATOR COLAPIETRO: I was reading that in the testimony. That's the way it sounded in the testimony the way it is, is that it's got the effect of LSD, but we were told, and some people think that it's actually laced with .chemicals to make it stronger than it really is. RAY ALLEN BERGMAN: The extract is put right into it. So they'll take the extract out of the plant and add it on top of that or into other drugs too, so it could be laced or in combination. SENATOR COLAPIETRO: So this is a flower, correct? RAY ALLEN BERGMAN: It's piant-based, yeah. So, the leaf is crushed up. SENATOR COLAPIETRO: Thank you. Thank you, Mr. Chairman. REP. SHAPIRO: Yes. Thank you very much for testifying on this. Currently, Mexican salvia is no,t a controlled substance as defined by the federal government, correct? RAY ALLEN BERGMAN: Yes. 30 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. REP. SHAPIRO: Can you tell me why? Is it in the pipeline? Are they studying this? MICHELE DIVINE: The DEA has been studying it -- REP. SHAPIRO: I'm sorry, can you identify yourself for the" record, please. MICHELE DIVINE: Oh, yes. My name is Michele Divine. I'm the Executive Director of the Southeastern Regional Action Council. Our intent here is we are a prevention organization and we are trying to prevent drugs from coming into our community and educating and awareness, so our -- our research is for prevention purposes. But right now, Salvia has been studied by the DEA across the country. There are -- even in the research we've done, there are not a lot of studies research on how it affects the body and how it affects the brain, so I believe that it is -- that's what's being done through the DEA but, you know, at that point -- at this point it's not confirmed exactly. REP. SHAPIRO: Okay. A more mundane question, Salvia is more commonly known as Sage, correct? RAY ALLEN BERGMAN: Yeah. REP. SHAPIRO: Okay. RAY ALLEN BERGMAN: That's the name for it. REP. SHAPRIO: Now, if we pass this law is the Greenwich Garden Club going to find out that its perennial garden is actually a cash crop? Is this commonly grown in Connecticut? 31 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. RAY ALLEN BERGMAN: There's a different type, but Salvia divinorum, which grows specifically out of Mexico is a different type of plant. It's a mint leaf. MICHELE DIVINE: Than your regular garden salvia. REP. SHAPIRO: Okay, so you wouldn't find it typically in gardens here. It would have to be grown indoors with lights and things like that? RAY ALLEN BERGMAN: The environment is -- yeah. It's very difficult to grow it, so it's produced specifically out of Mexico and flown up. REP. SHAPIRO: Okay. Thank you very much. Do we have questions from Committee members? If not, thank you very much for your testimony. TOM WOOD: Morning. Senator Colapietro, Representative Shapiro and the other members of the Committee, my name is Tom Wood. I'm a Certified Public Accountant and I am Secretary of the 6,000 member Connecticut's Society of Certified Public Accounts. I here to testify in favor of Raised Bill Number 7 80r An Act Concerning the Solicitation of Charitable Funds Act, as it pertains to raising the audit threshold. This bill would raise the audit threshold for charitable organizations from the law's current level of those receiving $200,000 in gross revenue per year to those receiving $500,000 in gross revenue. The Connecticut Society of Certified Public 32 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. Accountants supports this bill for several reasons. The current $200,000 level was adopted in the year 2000 and through inflation and rising costs, this is an example of a cost-benefit equation that has rapidly become obsolete. The smaller the charitable organization, the more difficult it becomes to absorb increased costs. These increased costs come from not only inflationary pressures in areas such as health care, but also in the very rules that govern the CPA profession. Auditing standards, the requirements Certified Public Accountants must follow, in planning and performing audits have expanded greatly in recent years. The additional time and cost to conduct an audit under these increased requirements, effectively priced an audit out of reach for many of the smaller charitable organizations.' While considering the increased audit threshold, the Connecticut Society of CPAs was cognizant of the need to balance protection for charitable organization funds with the best use of a charity's limited funds. The Internal Revenue Service has provided a governance backstop in the form of a Revised Form 990, return of organization exempt from income tax. According to IRS Commissioner, Doug Shulman, the revised 990 form will give the IRS and the public a much better view of how exempt organizations operate. The improved transparency provided by these changes will also benefit the tax exempt community. The CSCPA believes that Raised Bill Number 780 is a common sense approach to assisting smaller charities, combat their diminished purchasing power while -- 33 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. SENATOR COLAPIETRO: Excuse me. Your three minutes were up. Could you just wrap that up, please? TOM WOOD: I'm wrapping it. SENATOR COLAPIETRO: Thank you. TOM WOOD: -- while at the same time protecting the public, the government, and the benefactors and beneficiaries of Connecticut's nonprofit community. Thank you. SENATOR COLAPIETRO: Thank you. Any questions from the Committee members? Thank you for your testimony, sir. Appreciate it. TOM WOOD: Thank you. SENATOR COLAPIETRO: Mike Paine and Carroll Hughes followed by Marghie Gulliano. CARROLL HUGHES: Thank you Senator Colapietro, Representative Shapiro, members of the Committee. My name is Carroll Hughes. I'm here representing the National Solid Waste Management Association. I have with me Michael Paine from Paine's Refuse Removal, who is also the chapter chairman of the National Solid Waste Management Association. I have to tell you, I've heard some of this testimony here and these companies that I represent, there's 500 of them in the state, somebody asked that question. There are everybody from one- and two-truck operators to some people who have 35, 4 0 trucks. They have been in the business -- I'VE been representing them for 33 years. I've dealt with the fathers. Mike is the son. I used to deal with his father 2 0 years ago. There's many of them here in the audience today that the sons have taken over the company. They're all 34 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. Connecticut-based people. They are not owned or stock or owned by anybody outside the State of Connecticut. They are -- a lot of them started in the pig business. They used to feed the pigs the garbage, then they had to cook it; and they don't do that any more. These are all Connecticut people that you all know. We had one problem about two years ago. He's now in the correctional facility. He came in from outside the state. He had 55 companies at one point, some of them were one- and two-truck companies that he actually bought over a period of time in the greater Danbury area. All of the people associated with him are now suitably dealt with in certain ways, and we don't have any problems in the State of Connecticut. This is a solution for a problem that doesn't exist. We are licensed. All of the Connecticut companies are licensed by the municipalities. Solid waste has always been a home rule solid waste function. They have ordinances, they have licenses, and they're regulated by agreements and procedures at all of the resource recovery facilities by contract and otherwise. The only -- the only people that don't regulate them are their own customers, which they provide either recycling or residential and commercial research recovery services to. This bill is probably a $500,000 item and it's going to fall on all of these companies. And you can't let one or two people out. You can't do that in the business. Either everybody's in or nobody is in. And the municipalities have accepted that themselves. Everybody is regulated at the local level. We've been in here before you in the past, 35 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. we've said the only thing that could be done better with what we do, and it helps us as well as maybe helps you, is to have a regional licensing system of some kind. The Housatonic Valley Resource Recovery Region and Greater Danbury responded to the issue of Greater Danbury where the problem was and created a regional system where they basically regulate by bonding, insurance and other requirements. We think that's a viable solution to things, but these are not insurance companies; they are not people that many people in the office. These are fundamental people who run the small business in Connecticut and we think they -- they are adequately regulated right now, except for the aforementioned thing that I just mentioned. Mike. MICHAEL PAINE: Sure. Thank you, Senator. SENATOR COLAPIETRO: Could you -- if you just •could, speed it up and finalize it, because the bell did go off. MICHAEL PAINE: I'll wrap it up really quick. Thank you. I agree with Carroll. ffouse Bill 324 really gets to, the problem that I believe has already been addressed, as Carroll pointed out. The individual did' have a number of companies that, if you used the four truck minimum that they talked about, a number of his companies would have been exempt. It would also exempt many of the junk dealers under that criteria and also people that haul trash. You really -- I like the fact that we were compared to the insurance company with the 36 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. directors and all of that. Our standards were a little different. We, our board room table was the dining room table, and now we moved it to the lunch room table. But we are local businesses, and I'm very proudly the third generation to be involved in this business. And, as Carroll pointed out, we did start out picking up garbage and feeding it to our pigs and cooking it and all that fun stuff. SENATOR COLAPIETRO: Sanitation engineers now, that's what they are. MICHAEL PAINE: Well, that -- that was a couple of years ago. Now we're environmental sanitation engineers, but you're correct. It also will significantly raise the cost to our customers. This would easily cost my company in excess of $75,000 and my customers, I don't think, will be better served, and I'll stop there-. Thank you very much. SENATOR COLAPIETRO: Well, thank you for your testimony. I think Senator Witkos has a question. MICHAEL PAINE: Sure. SENATOR WITKOS: Thank you, Mr. Chairman. And actually, Mike, you just addressed one of my concerns. The question I'm going to have is what kind of a financial impact would this have upon your business, and you said about 75,000. Do we not currently have in our state, whether it be through the AG's office or the Department of Consumer Protection, a place where an individual or consumer can file a complaint if they feel they're being wronged by a trash hauler facility that can be 37 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. investigated? CARROLL HUGHES: They filed them -- people have filed them with the Attorney General, in the past. The Attorney General has become involved on numerous occasions, like he does in every other business in Connecticut, asking questions, finding out what -- what took place on a given situation. If we lose our license at the local level, you can't haul in that municipality. You're just -- you're out of business. MICHAEL PAINE: Yeah, for instance, a simple example is, if I do something in the town of Canton where I have to have a permit to pick up or the.town of Simsbury, the complaint typically will go that town or end up at that town, whether it's a disposal facility that calls them and then they call me on the carpet. So you have that -- that local contact and good news or bad news, they have my cell phone number so there is no escaping when an issue comes up that we need to explain to them. SENATOR WITKOS: I just wanted to make it perfectly clear that there are different levels of checks and balances where if somebody has a complaint that it's not as deceivious as it was portrayed in the press, which we're all very aware of the case in the Senator's district, that it could be addressed at the local, as well as the state level, through the Attorney General's office. And if there is oversight now where somebody can file a complaint to deal with any problems that they may perceive with the industry. MICHAEL PAINE: Absolutely. CARROLL HUGHES: The contract with the disposal 38 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. facilities like CRRA, you cannot do anything with the refuse if you're shut off from a facility. In other words, we have to have bonding, they regulate you filing bank statements all the time. If you don't pay CRRA, you are out of business. You can't pick up for anybody. And I should point out that most of the haulers have municipal contracts. I mean, sure, there are some like commercial -- Mike has West Hartford, he has a half dozen. Almost every single town sets a contract up with the hauler, in addition to the regulation of their vehicles, their trucks, and their company. I mean there may be things you'd want to put into that but, you know, we'd look at those individually. But beyond that, you should build on the tree that's there, not to plant a new one. That's our suggestion. SENATOR WITKOS: That you gentlemen for your interest. Thank you, Mr. Chair. SENATOR COLAPIETRO: I think my cochair wants to ask a question. REP. SHAPIRO: Thank you. Thank you guys for testifying. You had mentioned that currently you were relying on a municipal permitting system to balance the trash hauling industry. What sort of variations do you see in the permitting system from town to town? Now I know, you know, Stamford deals with some things one way and Suffield could deal with it in a very different way. Is there uniformity? Are they wildly different from each other? What kind of standards are we setting here at the municipal level? 39 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. CARROLL HUGHES: There's some that are unsophisticated and some that are more sophisticated. What they did in Danbury, is they come out with the ordinance for the 14 towns over there and put them on a chart and decided what they did for each of the towns and also what they charged. And then they tried to get agreement to add in some of the better ones from other towns and they came up with one type of ordinance or one type of licensing and they charged an amount which didn't have any other town losing money. In other words, they charged like $200, something like that, and it basically so they could pay the money back to the municipalities, because they created an ordinance of one type that the HRRA -- I don't know all the details. But, I mean, I -- we would have put other things in there because it's also protective of haulers, if somebody has to have insurance, they have to have bonding, they have to have a watertight truck, they can't store garbage in it overnight, they have to basically take care of their containers so the bonds are not falling out or that they close, there's tops on them. That's what a lot of the types of ordinances are out there, so they regulate. Mike, maybe you could add more to it. MICHAEL PAINE: They actually standardized. Instead of having to get any insurance certificate for 14 towns, you get one now. It simplifies that. And -- and there are small haulers. And for them, they're literally doing the route all day and then they come home at night, do the bills, and try to deal with the paperwork and your insurance agent typically isn't there at night. So it streamlined a lot of things there and actually helped the entire marketplace. 40 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. Another thing that it does by having the facilities, there was a mention of haulers needing to clear the area that they're collecting from. That's actually done through the disposal facilities where you have to declare vand get approval for the towns that haul from. So a number of the things that have been raised are already addressed in other areas. REP. SHAPIRO: Okay. But you're discussing one system in a state filled with 169 cities and towns. MICHAEL PAINE: Right. REP. SHAPIRO: So there is a variance among -- MICHAEL PAINE: There's a significant variance from town to town or area to area, yes. REP. SHAPIRO: Okay. Thank you very much. SENATOR COLAPIETRO: Representative Taborsak. REP. TABORSAK: Thank you, Mr. Chairman. Mike, thanks for coming again and testifying here. Carroll, thank you for your testimony. Just a question to a comment that you made about what this would cost trash haulers and how that cost would be passed back to the consumer. None of us run, you know, trash hauling businesses, so maybe you can help us understand a little bit better. You mentioned $75,000 of possible increase to your business. Looking at Senator Caligiuri's bill, the only language that I see in the bill that puts some sort of a requirement on trash haulers, and this is where your insight would come in handy for us, it says that to require 41 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. all such haulers to submit regular, periodic financial statements and audits to the state. A skilled bookkeeper, using QuickBooks, can create PFSs. Not -- this bill doesn't even say, you know, CPA produced or anything like that. I guess I'm at a loss as to how it would cost haulers that much. Granted, there's no mention of what the licensing fee would be. I understand that you have to factor to in there, and that's not in the bill. Can you try to help us understand how you come to $75,000? Thank you. MICHAEL PAINE: Sure. What has -- where I got to that was they mentioned periodic financial statements and audits to the state. I'm reading that as audited financial statements. They are at a significantly higher level than a standard financial statement and literally a CPA, my CPA gave me that figure and said he'd be happy to come in and begin to work on all of my things. They literally have to verify every expense and take a piece of paper and prove that I actually spent -- I bought dumpster lids or paint or stickers or any of the other multitude of things that are standard business expenses. They have to prove every single expense, where the money went that people were actually on the payroll, all of those things. You would also have to -- excuse me -- all of my management, every manager and supervisor, because they direct my people in the different towns, they would need to fall into the scope of this, and, you know, on one hand I don't necessarily have a problems with that, but at the same point there is an expense to all of those things, the truck registrations and all of these additional costs. And I'll be very honest, in this business 42 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. climate, I mean every day we are going through, I was here last week talking about our contracts. I've probably had 20 calls this week about our contracts because people are downsizing their service, and that -- that change necessitates a new contract. It's part of the ongoing business. And you've got the fingerprinting of all those items, whatever standard that is, and there's going to be some kind of license fee, and if this is revenue neutral, which I.understand is a new sign of the economy, it really means that a dollar comes in and a dollar goes out, or something pretty close to that. It means that I have to charge my customers more to get that dollar and my fees are going to have to go up. These are new fees, new charges. CARROLL HUGHES: What they really want here, which is the major burden, is that they want customer lists, what you're charging. They want 5,000 customer lists updated periodically. It isn't in here, but you can't do what they're proposing to do without having that. And that's what this is, taking proprietary information and providing it to some source where it can be FOI'd and people will know everything that's going on inside the company. You've heard the territories, where you operate, what sections you're in. I heard territory. Territories mean your customers, because .you can't have territories and find the find the information without knowing who you serve in those given areas. So that isn't said here, but that probably is a huge, huge portion of this overregulation for something that's unnecessary. Thank you. SENATOR COLAPIETRO: Representative Reed. 43 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. REP. REED: Thank you, Mr. Chairman. I'm just wondering if given the Danbury experience, there isn't some heightened awareness among trash haulers who might recognize when there's something fishy going on with a competitor in a region, and whether that kind of self-policing aspect might be helpful going forward. MICHAEL PAINE: I'm sure people are more than aware of it. We've all heard the jokes, and I think people are very aware as are customers and I'm not so naive to think that frankly there aren't bad people in a multiple of different lines of work. Whether it's in insurance, as we've heard talked about, or something else, or banking. So, yes, I think there's a~ very heightened awareness and the fact that a number of people are spending some time in federal and state institutions shows that we already have checks and balances in there that work. CARROLL HUGHES: You know what the biggest problem is in the business consistently for the 33 years I've been representing, is that people come into the business; it's highly, highly competitive. You can go down and buy a used packer truck. Mike has to pay $220,000 for his truck. The packer truck, a roll-up truck is probably about 175. And you can go down and buy one for about 40, $50,000; something he turned in that the trucker has, and you're in business tomorrow morning, and you can go into the stops and you can go in, which typically the person does, and says, hey, how much are you paying now? I'll do it for half. And we don't know where he's going with the refuse, because the bigger you get and the more sophisticated you get, the more you have to do things the right way because you've got 44 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. everything at stake. Your employees are not coconspirators ever with the company. It defies reality, to bring a driver in that is not your relative, and your brother -- or even your bother or father and bring them in the business. So the biggest problem we have is one- and two-truck operators that constantly come in and out of the business, and they do things with the , refuse sometimes that frustrates us. We -- we -- actually, most of the haulers will file complaints on those people. They'll file with CRRA, they'll file with the Attorney General, they'll file with the municipality. So to that extent, yes, they do -- they do provide information. REP. REED: Thank you. Thank you, Mr. Chairman. REP. SHAPIRO: -- testimony? I don't -- I don't think there's any other questions from the committee. With that, I'll call Margie Gulliano. Any relation to our Gulliano here? No? Marilyn, that's close. MARGHIE GIULIANO: Good morning Senator Colapietro and Representative Shapiro. My name is Marghie Giuliano and I'm the executive vice president of the Connecticut Pharmacists' Association. The Connecticut Pharmacists' Association is a professional organization representing approximately 1,000 pharmacists in the State of Connecticut, and I'm here today to speak to you in opposition to H.R. - And Act Concerning Public Access to Information Regarding Pharmacist's Prescription Errors. 45 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. As pharmacists we do take an oath to provide the best care for our patients and we strive for perfection in what we do, and one error is one too many. We've worked tirelessly as a profession and as an industry to implement technologies and processes that will minimize the probability of an error. And we're good; we're perfect about 99.9 percent of the time, but sometimes our systems do fail us. We've dealt with increased prescription volume, shortages in staffing, mandates from insurers and government to handle issues that are not relevant to patient care. All of these distractions, as well as the continued decrease in reimbursements from state.and private payers have contributed to difficult environments to practice in. And I'm not trying to make excuses, I'm just trying to explain to you the frustrations that our pharmacists deal with on a day-to-day basis. Adequate reimbursing is critical in being able to protect the public. We need to be able to staff our pharmacies properly and to provide them with the tools and technologies available to dispense medication safely. When an error occurs, it's devastating to a patient. It's also devastating to the pharmacist. We recognize the responsibility we have to our patients when we fulfill prescriptions. As health care providers we know that it's important to be checking for dosages, looking for drug interactions and evaluating patients' medication profiles for any related problems. And we catch errors every day from other members of the health care team. That's our responsibility. E-prescribing is great tool which will help to remove the issue of poor handwriting for prescriptions. But with these new 46 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. technologies there's a whole host of new errors that we, as pharmacists, really have to be vigilant about. And these sorts of interventions where errors are prevented go virtually unrecognized. In 2 005 the federal government passed the Patient Safety and Quality Improvement Act, which was enacted in response to the growing concern about patient safety in the United States. It's administered by the Agency for Health Care Research and Quality and it provides for the creation of patient safety organizations. These organizations allow health care providers the ability to report errors without fear of discovery in case of potential litigation. But by providing the identified error data, we can actually identify areas on our systems that need to be improved. And we can also report not only errors, but near misses, and this is when we catch errors before they get to a patient. And that's where we can really focus on how to improve systems. So what we want to do is really make sure that we can continue this free flow of information, because that's how we're really going to improve processes and provide a safer environment to practice in. I will wrap up. The Department of Consumer Protection and the Commission of Pharmacy have always been dealing with prescription errors responsibly. They have pharmacists complete a course on quality assurance to provide them with tools to use in their daily practice. And the department also tracks the pharmacists and the pharmacies that errors occur in to see if there's any pattern, and if a person wants to 47 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. know if a pharmacist has any action against their license, they can do so under the Freedom of Information Request. So there is a process in place to find that information out. And just as a wrap up, I just hope that patients will work with us to become partners in providing safe practice environment. REP. SHAPIRO: Thank you for your testimony. Any members of the committee got any questions? That you. Oh, I have one. I have one question. Can you take us through the process from stem to stern what happens when an error occurs. MARGHIE GIULIANO: Certainly. From the -- from when an error occurs, it really depends on a patient complaint. So it's actually if a patient complains to the department, the department send out -- the Department of Consumer Protection sends out a drug control agent to do an investigation. They meet with not only the pharmacist, but certainly the patient and they gather facts and once they determine whether an actual error has occurred, it goes forward through the system where a pharmacy commissioner steps down on - the case and reviews the information, and it's all done -- it's protected information so nobody knows the name of the -- of the pharmacist at that time. So a pharmacy commissioner will step down and review the information. And typically, if it's a first-time error, they will recommend that the pharmacist goes through the educational training. And if the pharmacist successfully finishes that training, then the case would be 48 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. dismissed. REP. SHAPIRO: Okay, now for that first time error, as you said, it's anonymous at that point. How would a harmed consumer find out this information through Freedom of Information if it's anonymous? What would they be finding out? MARGHIE GIULIANO: I -- again, because no formal action was taken against the license -- licensee with a first-time error, there would probably be no information. REP. SHAPIRO: Okay. And in the event of a second time, what would occur? MARGHIE GIULIANO: The way the department -- the department has been very consistent in how they handle the error. So if the second error is -- occurs within a three-year period, then the Pharmacy Commission will typically have them again go through the training. I believe they've now instituted a fining system and they may also give them a formal letter of reprimand. And once formal action is taken then that would be something that, if a person was looking for action against the licensee, it would be available. REP. SHAPIRO: Thank you very much. SENATOR COLAPIETRO: Thank you for your testimony. Tim Calnen followed by Adam Cohen. TIM CALNEN: Good morning, Senator Colapietro, Representative Shapiro and members of General Law Committee, my name is Tim Calnen. I'm vice president of government affairs for the Connecticut Association of Realtors. We have approximately 18,000 members in Connecticut, all of whom are licensed by the Connecticut 49 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. Real Estate Commission and the Department of Consumer Protection, either as licensed brokers or licensed salesmen, and that's not registered, that's licensing, quite a -- quite a difference. And I'm here to testify in opposition to Proposed Bill 5401, An Act Concerning Time Share Referrals, which sounds harmless enough in its one sentence that says we should let people make referrals for time sharing plans, let them get promotional rewards. The problem is, it's a precedent for allowing people to engage in the real estate business without a license. Because, by definition, if you're working on somebody else's behalf and getting paid to help another time share owner or maybe a developer of a resort and you're getting paid by that person to promote their -- their project or their facilities, in effect, you're engaging in the real estate business and we've got rulings from the Department of Consumer Protection already on that. Now the bill says it wouldn't give you cash, but promotional rewards for referring people to time sharing plans. These promotional rewards could possibly be points for a vacation or something like that. Well, the license law in Connecticut says you cannot be paid a compensation or anything of value, consideration of value, so that would include nonmonetary gifts too. Last year a similar bill passed the House, was defeated in the Senate and instead of using promotional rewards, the proponents said, let these people get nonmonetary gifts or promotions. There's -- it may sound harmless because a few people might say, oh, we just want to let our relatives know there's a nice vacation spot in 50 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. North Carolina and what's wrong with me getting paid $2 00 for that or maybe a free trip to the Caribbean. But problem is somebody can abuse this quite easily and could be repeatedly paid for that. And the victim has no recourse because that person is not licensed. Unlike real estate brokers and salesmen, the victim has recourse by going to the Connecticut Real Estate Commission. I've run out of time, and I'd be happy to answer any questions. SENATOR COLAPIETRO: Thank you, Tim. Any members of the committee? Any questions? There's one down here. REP. MAZUREK: Thank you,' Mr. Chairman. And thank you Mr. Calnen for testifying today on this bill. The term "compensation," to receive promotional rewards, is that defined anywhere in statute? TIM CALNEN: In section 20-311, I'm not sure they use the word "compensation," but they point out that engaging in the real estate business means acting for another for a valuable consideration or a fee. And valuable consideration is to include words like compensation, I'm sure. I don't know if compensation per se is defined in the real estate license law, but they do use the word "fee," "commission," anything of value. If a person is being paid that and acting on behalf of another, then they should be licensed as a real estate broker or sales person. REP. MAZUREK: I understand and I actually agree with you on this. I'm just curious whether 51 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. the terminology promotional rewards was defined any where in our statutes. A couple of years ago I took a trip, a vacation to Mexico and we were hammered coming out of the airport by the number of people trying to induce us to go take a look at a time share. And it literally started at customs and security and worked its way through the entire airport right to a hamburger stand, a car rental agency, grocery store. I mean, it was quite obvious that there some fairly significant promotional awards in Mexico for people hawking time shares down there. I certainly don't want to see the state of Connecticut moving in that direction. I guess I'm just very concerned when we start talking about promotional awards -- rewards on there. They could include anything and they could, in fact, include something that's fairly significant, some type of fairly significant compensation, so -- TIM CALNEN: You're absolutely right, and the bill has no limitation whatsoever in the word -- in Representative Klarides' bill which, last year, a similar bill was introduced by Representative Gentile, there was no limitation until the bill got to the Senate and then we raised questions. I mean is it a $1,000 a promotional reward or compensation? Is it a full week in the Caribbean? And you could easily see that a person could repeatedly get, even on something of nominal value, maybe just $200 value repeatedly for referring friends and relatives to a time share developer and, in effect, be engaging in a business without being licensed. REP. MAZUREK: Absolutely, and certainly could easily approach 6 percent of whatever the sales price was of a -- of a time share, which 52 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. is kind of -- I think 6 percent is kind of the standard real estate fee these days in Connecticut. TIM CALNEN: Well, there's no -- there's no standard real estate commission rate. That's negotiated between the seller and the broker and that notice has to be in all listing agreements. REP. MAZUREK: In it, all right. Well, very good. Thank you, Tim. Appreciate you coming by. Thank you, Mr. Chairman. TIM CALNEN: Thank you. REP. SHAPIRO: Thank you, Representative Mazurek. We have one more question, I think, from Senator Gomes. SENATOR GOMES: Is it true that Connecticut is one in only two states in the nation that has the laws that prevent people from enjoying this practice here? TIM CALNEN: Senator Gomes, I'm not -- I don't know. I can tell you this, that next week there's a larger time sharing bill that will be giving here --be given a hearing and the American Resort Development Association, which includes people like from Marriott and elsewhere, have a agreed not to put that kind of language in Connecticut's law. SENATOR GOMES: I'm reading from Representative Themis Klarides' testimony here. She wasn't able to be here today. It says, Connecticut is one of only two states in the nation with real estate law C.G.S. Section 20-323 -- 322(3) and 20-325a and regulations Connecticut 53 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. Agency Regulations Section 20-328a(c) which state that only real estate agents are permitted to receive rewards or benefits from referring a friend, relative or acquaintance to buy into a time share vacation opportunity. The penalty for violating this law includes $1,000 fine and up to six months in prison. And it states here that we1 re only one of only two states in the nation that has this law. TIM CALNEN: Well, I think sometimes being only one of two s/tates in the nation that protects consumers more vigorously is something to be proud of. SENATOR GOMES: If it protects consumers. TIM CALNEN: If it protects consumers. SENATOR GOMES: Thank you. REP. SHAPIRO: Thank you. We have one more. REP. ESPOSITO: Tim, I have time share properties. Over here, Tim. TIM CALNEN: Oh, I'm sorry. REP. ESPOSITO: I have time share properties and I've sent my friends and relatives down with the full disclosure that if they take the time to at least take the tour, the time share property will either give me a free dinner or a free night's stay, and if they buy, I may get up to free maintenance for the year. I've always told people this, and if they go down and if they like the place, some of them have bought, and they, in turn, have referred it to other people. When this happens, I don't think we've cut out any real estater from getting his 6 percent 54 • February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. fee on it because it's in another state usually. But even if it happens here, who monitors this? I mean we don't have -- have real estate boards that are looking at every transaction and saying, Well, Lou Esposito got a free night's stay because he sent his aunt down and she bought a place or looked at a place. So, I mean, how do they monitor it now, Tim, there's nothing in place? TIM CALNEN: Well, I think the fact that there's already a law in the book, at least gives recourse to consumers. They may not know about it in all instances, but I'll give you another example. The Water's Edge in Westbrook, there's a licensed real estate broker who handles those transfers of time share units and she provides for the disclosures that are required. It's deeded property, and she subscribes to the license law and frankly, she was supposed to be here this morning to testify. But, I think allowing this and by passing a law like this that, in effect, would encourage this kind of practice, I think you're opening the flood gates to numerous ways of circumventing a license law that was intended in 1953 to protect the public. And granted, it doesn't always do that, but the intent is there to provide the public disclosures about a property, to make sure that the people spreading the word about the time share have actually been there and haven't just been exchanging one unit after another after never living in their own unit and getting a referral fee. And given the agreed consumer access to Commissioner Farrell's department, if there's a wrongdoing by a licensed real estate agent through the real estate guarantee fund. 55 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. REP. ESPOSITO: Tim, but as a follow up, even if I referred you to a specific time share, there's no obligation on your part to, you know, buy. You've gone down and they will usually give you an enticement to come down to tour the time share, either by offering you one or two nights' stay to look at their properties, and it's at that point that it's your option to say, thank you very much, I really enjoyed staying here, but, no, thank you, I'm not going to buy. TIM CALNEN: No, you wouldn't do it, but if you were referring a person to that time share, they had no obligation to buy, but if you knew you were going to get paid something or given something of value, would it not be in your interest to entice that person and play up the good qualities of the time share unit down in North Carolina, even -- and maybe not mention that there's a high" maintenance fee in addition to the initial purchase price. There's an additional recreation fee. That's the kind of concern we have. REP. ESPOSITO: Using your model here for your agent over at Water's Edge. When someone is referred to her to show Water's Edge as a time share property, does it not become her responsibility at that point to tell them what the maintenance fees are -- TIM CALNEN: Yes. REP. ESPOSITO: -- and all the other hidden fees? TIM CALNEN: Yes. REP. ESPOSITO: And I don't think it's the referrals or the referee's obligation to tell the person, you know, that there's a $450 a year or a $650 a year maintenance fee. I've 56 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. done it, and told people that, you know, there's a maintenance fee, but you have to offset the maintenance fee with the cost of staying at an area hotel or motel. So, you know, I think we're kind of, you know, looking for a problem here that I don't really think exists, other than letting it be legal to refer you to a time share. And then it's the person's own obligation. TIM CALNEN: You could be referred to it, but be paid for it, for the referral, why be paid for it without being licensed? REP. ESPOSITO: I think that's the way our whole system works that everyone gives you something for a referral. Whether it's right or wrong, that's up to the individual and I think that it's got to be taken care of somewhere down the line. TIM CALNEN: I just would add that I know our people cannot receive compensation for referring people to attorneys or from referring people to mortgage brokers. There's some serious laws on the Connecticut statutes that make it punishable for a real estate licensee to do that for a fee. REP. SHAPIRO: Senator Gomes. I believe you had a question? SENATOR GOMES: I was handed an OLR report, research report and the two states that, for your clarification, that allow this is Connecticut and Oregon and no neighboring states around Connecticut. I just -- maybe you'd want that. TIM CALNEN: Thank you, Senator. 57 February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. REP. SHAPIRO: Any further questions from the Committee members? No further questions. Thank you for your testimony. These next two, Adam Cohen and I think it's Priya Morgenstern. Am I saying that correct? A VOICE: No. REP. SHAPIRO: You're both testifying on the same bill. Would you mind coming up both of you? Thank you. ADAM COHEN: Good morning, Senator Colapietro, Representative Shapiro, members of the General Law Committee. My name is Adam Cohen. I am a CPA practicing in West Hartford. I appreciate the opportunity to submit testimony to this committee in favor of Senate Bill 780. An Act Concerning the Solicitation of Charitable Funds. The bill would increase the threshold for audits of small not-for-profits to $500,000 in gross receipts. The limit -- the threshold right now is $200,000. I believe actually the bill only changes one word in the statute, two is five. I've served or advised hundreds of not-for-profit organizations in my professional practice over the past 30 years, and also as a volunteer serving on boards or even just advising pro bono. I serve on the Connecticut Society of CPAs' not-for-profit committee and I'm also on the American Institute of CPAs' National Not-for-Profit Conference Planning Committee. Today, I don't -- I don't represent the CSCPA. 58 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. Tom Wood has already spoken on their behalf in favor of the bill. This legislation benefits small charities that are audited solely to satisfy the Charitable Solicitation Act. The Connecticut Single Audit Act is not in question here. That still will apply to any organization that receives $100,000 or more in state funds during its fiscal year. Most of the organizations that have under $500,000 in gross receipts do not receive more than a $100,000 in state grants. However, if they do, they will be still subject to that, that audit requirement. The issue really has come up because CPAs follow a generally accepted auditing standards and they interestingly were developed beginning in 1939, and there's some symmetry there today. But in 1986 when the statue, I believe, was first instituted to require the audits, auditing standards were much simpler. There were 4 9 standards, they call them SASs. We're now at number 116. I just got an e-mail yesterday that that has been passed. But what's really happened is because -- because of well-publicized situations mainly in the public securities' markets, in 2002 the Sarbanes-Oxley Act was passed and SOXs has raised audit expectations, drives auditing standards, even for nonpublic entities like little not-for-profits. So the public has those expectations. There's a cost-benefit assessment. The same auditing standards that apply to the American National Red Cross apply to a $200,000 not-for-profit.' So consequently what I would like to do then is to recommend that the committee favorably pass on the bill, and you can refer to my written testimony. I'll be 59 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. happy to take questions. I'll turn it over to Priya Morganstern. SENATOR COLAPIETRO: Thank you. I was just going to say,, you're supposed to elbow him once and say you're taking my time. PRIYA MORGANSTERN: I didn't have a watch and I'm wearing hells for that purposes, but I -- All right. Do you have questions for Adam? SENATOR COLAPIETRO: Any questions? Yes, Senator Kissel. SENATOR KISSEL: Thank you very much, Mr. Chairman. Ms. Morgenstern -- PRIYA MORGANSTERN: Yes. SENATOR KISSEL: -- it is great to see you. I know all the good works that you do and appreciate it very much. Are you here speaking in favor of this bill for your own organization or because of the organizations that you assist with various and sundry duties, such as incorporation and all the other sort of legal work that they have to do? And the second part of my question is, given the pressures financially that have befallen the legal aid societies in the geographical areas where you serve, have you seen a concomitant increase in the workload that you have which would make this even more important for us to pass. PRIYA MORGANSTERN: Yes and yes. 60 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. SENATOR KISSEL: Those answers -- Senator Colapietro loved those answers. PRIYA MORGANSTERN: Should I proceed? SENATOR COLAPIETRO: Please. Please. PRIYA MORGANSTERN: Okay. Thank you. Representative Shapiro and Senator Colapietro and members of the committee, thank you for this opportunity to speak in favor of Senate Bill 780. My name is Priya Morganstern, and I consider myself to be one of the luckiest attorneys around because I work almost exclusively with nonprofit organizations in my capacity as local director of the Pro Bono Partnership. The partnership- is a 501(c)(3) organization that provides free legal assistance to nonprofit organizations that serve low-income populations or otherwise serve the public interest, and which cannot afford to hire attorneys. Because I work primarily with the organizations that can't afford counsel, I'm seeing the kind of struggles that the smaller nonprofits have, and I see how they struggle to make ends meet. I see how they conserve every penny, and I see how every dollar is precious. I see how every hour of staff time is critical. We've heard already that audits are very expensive and the cost of an audit is disproportionately hard on a smaller organization and the staff time that's involved and the energy involved hits those smaller organizations disproportionately and partially as well. 61 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. By raising the threshold from $200,000 to $500,000, you're giving at least some small group of nonprofit organizations a break and allowing them to devote their hard-earned dollars and staff energy to their charitable mission and their activities. The Department of Consumer Protection estimates that this not such minor change will affect 500 nonprofits across the state, and will free up approximately $3 million for those nonprofits to devote directly to the clients they serve, rather than paying accountants, such as Adam, no hard feelings, and for administrative overhead. Of my clients, just my clients right now that we're serving here in the Hartford area, the kind of organizations that would benefit directly and immediately are organizations that provide transportation to the elderly and the infirm, organizations that do reading for the sight impaired, organizations that allow teen mothers to stay in high schools, groups that provide cultural activities for kids in the north' end, and organizations that provide financial literacy training. Imagine if the state could reduce the burden on these organizations by giving them a well deserved financial break at no cost to the state. ^Senate Bill 780 does just that. And when we help these organizations, we help the kids and the people they serve. We have support of just about every other group, organization and agency that has an interest in this. The AG's office, the Department of Consumer Protection, the Connecticut Society of CPAs, the Connecticut Association of NonProfits, the Connecticut Council on Philanthropy and many others. So this is really extraordinarily broad-based 62 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. support. I urge you all to please support this bill, especially in these dire financial times. This is an opportunity for you to give a gift to the nonprofit community. Thank you. SENATOR KISSEL: And if I could just -- I appreciate that testimony and I think it was good to get that on the record, because as we grapple this legislative session with ways to address our own budget crisis, finding a way that we can maybe alleviate some of the administrative burden on the nonprofits that sort of shore us up in the delivery of social services to people in need, that's a huge plus. PRIYA MORGANSTERN: That's right. SENATOR KISSEL: The concern that I initially brought to the issue that without these audits, that perhaps there wouldn't be sufficient oversight, if the Attorney General's office and Department of Consumer Protection, which we would turn to ,as our watchdogs, have signed off on this, then I feel comfortable signing off on it as well. And clearly with the caveat that if the state has given $100,000 to these organizations, that there still would be an audit required I think protects the public treasury and the public trust. And so, this seems to me something that we could do quite easily and allow you to fulfill your mission in all the organizations. As someone who serves on the Select Community on Aging, if we can help with senior transportation and all those other initiatives, that's a tremendous plus as well. 63 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. So, I really appreciate all you do. I've seen you in action for a number of years. We've worked closely on a couple of issues. Thank you for coming here this after -- this morning, rather, and I think the initiative is well taken and well timed. Thank you very much, Mr. Chairman. PRIYA MORGANSTERN: Thank you. REP. SHAPIRO: Any further questions? Thank you, Senator Kissel. Representative Taborsak. REPRESENTATIVE TABORSAK: Thank you, Mr. Chairman. Thank you for testifying today. Just a quick question. I was wondering if this a trend that's going on in any other states, or if there are any examples of similar legislation in other states that have accomplished the same thing and, if so, could you just provide me with an example or two and how -- how that's worked out there. PRIYA MORGANSTERN: I believe that it is a trend and by way of example, although way at the other end of the spectrum, California has a threshold of $5 million which is way high, and we're certainly not seeking anything like that. I don't know offhand. I believe some of the local states nearby we see a range of 300,000, 500,000. I certainly would be happy to provide that information to you after we leave, if you're interested. But I do think we are seeing this trend. It's a little thing that a state government can do to try to make it a little bit easier on the nonprofits that are struggling to do more with less, and so it 64 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. is a trend that we're seeing. SENATOR KISSEL: Thank you. That information will be helpful, appreciate it. ADAM COHEN: Rhode Island and Massachusetts are at 500,000 per audits. New Hampshire actually is at a million dollars, which I think after California is the highest in the country. Other states are lagging, but this is a good thing. We will be losing the revenues. It's very gratifying, you have all the support and really the opposition you would think would come from the CPAs who are going to lose the revenue. But we think it's very important that we charge for services that are valuable and in this case we think that it really is a big help for the not-for-profits not to do it. REP. TABORSAK: Thank you. SENATOR COLAPIETRO: Thank you, Representative Taborsak, and thank you for your testimony. I appreciate it. Thank you. Oh, we have one more. I didn't see -- she snuck in on me. REP. BACCHIOCHI: Thank you, Mr. Chairman. I just am curious, are the audits that are being required now, are those the yellow book audits? ADAM COHEN: This is not the yellow book. The state single audit is derivative from the federal single audit, which is the yellow book audit. So that's the $100,000 threshold where state expenditures were from the year. So that's going to be an overriding requirement. So the answer is -- 65 February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. A VOICE: The answer is no. ADAM COHEN: If anyone needs to get a yellow book audit, will still have to get a yellow book audit. REP. BACCHIOCHI: That wasn't re -- that wasn't the -- that's not the current requirement? You answered, you said, no. ADAM COHEN: No, the current requirement is, if you have to register under the bill, which there's a number of exemptions, but the basic one is $50,000 or more in contributions normally in a year is the first step. Then you have to register. The second step is once you have to register, if you have over $200,000 in gross receipts, excluding government grants and excluding certain income from bank trusts, then you have to get an audit and really what happens is $'200,000 is not a whole lot of revenue. One -- one golf tournament and raise some money from a bunch of people and you're over $200,000, even with having no staff, no employees, it can be very quickly over 200. REP. BACCHIOCHI: I'm wondering, when we're drafting this bill, if we should decide to look at other ways to offer some relief to the nonprofits what your feeling is aboutichanging the audit to a review. PRIYA MORGANSTERN: Reviews are another way to provide some level of oversight. At this point after consultation with the AG's office and the Department of Consumer Protection, we decided to propose simply changing the threshold for the audit; at higher levels it may make sense to ask for review. And also, don't forget, what's required by the state is 66 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. not necessarily what an organization will do. It may decide to go above and beyond and engage in a review or an audit even it doesn't have to. Certain funders may require that it do so, for example. The state does. That's one example. And I'm very gratified by the support we have from the Connecticut Council on Philanthropy about this because that is the funding community, and they feel comfortable with this too. And, if I can take just a minute, I just wanted to introduce -- we do have some other colleagues here. Nancy Roberts is the president of the Connecticut Council on Philanthropy and she's here representing the funding community. And we have Bob Kettle who's an executive director of Connecticut Appleseed, which is an organization that would be very directly impacted here. And then we have Ron Crutara who, of course you know, of the Connecticut Association of NonProfits. ADAM COHEN: In answer to your question about a review, this ad-hoc group did talk about a review. I can tell you from my personal experience, I've had several where they've kind of gone over the 200,000 then back under. A good practice and highly recommended at these levels is to get a review. We just didn't feel that the state needed to mandate it. And, interestingly, the new Form 990, which is for 2008 and beyond, I think it's the first major revision since 1973 has specific questions. One question: Were the organization's financial statements audited, reviewed or compiled by an independent accountant? That information will now be posted on the Internet. You've got to answer yes or no. Describe whether and how the organization 67 ' February 13, 2009 0O8M5 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. makes its governing documents, conflict of interest policy and financial statements available to the public. You have to answer that question. So really, the accessibility through the Internet, through an organization called Guide Star that puts on the Internet virtually every Form 990 filed in the country, hundreds of thousands of them. This information now is available at your fingertips. You can go in and they will have to say, yes, our financial statements are on our website. You can go look at them, or no, financial statements are provided upon request. So, we think it's kind of moving to the point of transparency is to be in that competitive world, that you're really competing for dollars and'contributions you're going to have to do what's best practices and it may not be as critical as it was in 1986 when you really couldn't get that information unless you wrote a letter and waited a few weeks or months to get it. Now it's literally on your fingertips. REP. BACCHIOCHI: Thank you. SENATOR COLAPIETRO: Thank you, Representative Bacchiochi. Any other questions from the committee? Thank you for your testimony; appreciate it. PRIYA MORGANSTERN: Thank you very much. SENATOR COLAPIETRO: And correct me if I'm wrong, this next name, Cesar Mejia. Did I get that right? CESAR MEJIA: Close enough. Close enough. 68 February 13, 2 009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. SENATOR COLAPIETRO: Close? No cigar though. No cigar? CESAR MEJIA: Close enough. SENATOR COLAPIETRO: Followed by Diane Henderson. CESAR MEJIA: Senator Colapietro, Representative Shapiro, distinguished committee members, good morning. I am hear supporting Bill 785, An Act on Concerning Construction Change Orders. Again, my name is Cesar Mejia, and I am the executive'director of the Minority Construction Council here in Hartford, also known as the MCC. We represent minority contractors from all four corners of the state and our mission is to promote the overall health and viability of the state minority contracting community. Our members buy materials, equipment, goods and services, provide opportunities to the unemployed, provide training to those who need it, create commerce and build bridges between both the private and public sector to create a better Connecticut. We have over 150 members and independently our members are very engaged in the political process that affects their business, personal and professional lives. I am here today to speak on their behalf. / The MCC is in support of this legislation for two basic reasons. First, it is our belief that this legislation will help the state of Connecticut decrease its spending -- decrease its spending in the construction area. Within construction projects there are issues that can and should be solved as quickly as they develop that are being postponed to a later date. The state incurs additional costs due 69 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. to delays, claims that are derived from conflictings in interest accumulated. Secondly, the individuals -- individuals that are presently funding -- financing the projects are the subcontractors. They have to -- they have to pay for material, labor, et cetera, before they get paid. This practice is unfair, compounded by the fact the change orders and/or payment issues are not solved in a timely manner. They are also mandated to proceed in performing work. Who and how this particular work is supposed to get paid have not been resolved. In conclusion, we, the MCC of Connecticut engage you to keep supporting this legislation as it will save the Connecticut -- the State of Connecticut millions of dollars and the subcontractor will get a fair deal. Thank you for your time. At this time, I was supposed to say, are there any questions? » In regards to the haulers -- in regards to the haulers issue which has just come to, everybody had a little time, so let me get mine too. In regards to the haulers issue, this issue is humongous. This is a big problem out there out there. I am not prepared to say that I'm in favor or against it because I haven't read the -- the literature, but it is a big issue in regards to the smaller minority contractors. Thank you. Are there any questions? SENATOR COLAPIETRO: Any questions from the committee members? 70 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. Representative -- I mean, Senator Gomes. SENATOR GOMES: I don't -- I don't really have a question, but I wholly agree with you. Before becoming a Senator, I was a chairman of a school building committee in Bridgeport where we built schools. And, as a chairman, I used to have to go through change orders and there was quite a few that would come through on the projects, and -- and as you said, the subcontractors and the small business people were the ones that got hurt because these -- there weren't inordinate amounts of money, not in the hundreds of thousands of dollars, but at 20,000 here, 30,000 there, and some of the minority contractors and the subcontractors theirselves had to wait for payment and it became a problem for them. I recognize what you1 re talking about. SENATOR COLAPIETRO: Thank you, Senator Gomes. Representative Shapiro. REP. SHAPIRO: Thank you. And thank you for coming to testify, Mr. Mejia. You said that currently you're experiencing delays in the projects because of the dysfunctional nature of the relationship between subcontractor/contractor and ultimate owner of the particular project. Can you tell me where that breakdown now lies? Why -- why aren't the change orders being communicated up to the owner and why are they not paying on time? CESAR MEJIA: That is a complex -- that requires a complex answer. But I'm going to -- REP. SHAPIRO: I can listen to it. 71 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. CESAR MEJIA: But I'm -- but I'm just going to say that it has to basically do with who is going to pay for what. When you've got the general contractor signing a contract, when you got the subcontractor or prime contractor signing another contract, and you've got the sub to that sub to that sub signing all the contracts, at some point in time there is an issue having to do with work performed and who pays for it. Right there, this legislation would serve to put a halt to that. Let's solve it right now. Not, you know, two or three years down the road or when the -- the -- the -- now we got to go to arbitration or got to go to litigation, let's solve it now. What are issues? What are the problems? So, I don't think I've answered your question to the best of -- there would be others coming before me that you can ask that question that will have a better answer for me. REP. SHAPIRO: Okay. Thank you very much for your time. SENATOR COLAPIETRO: Oh, hold on. Thank you for your testimony. Diane Henderson followed by Tim Phelan. DIANE HENDERSON: Thank you Senator Colapietro, Representative Shapiro, my name is Diane Henderson, and I'm here to testify in support of ,HB 54 06, An Act Concerning Public Access to Information Regarding Pharmacy and Pharmacists' Prescription Errors. As you may recall, I appeared last week to testify in support of SB 325. I'm extremely fortunate and very grateful that both Senator Looney and Representative Sharkey have introduced legislation on this important topic. 72 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. My daughter was the victim of two pharmacy errors. In one a medication intended for use in her ear was mislabeled with instructions that it be placed in her eye. In the second, she was give a completely wrong medication. Both errors occurred at the same time at the same pharmacy. I contacted the Department of Consumer Protection Drug Control Division and followed through in every way. Since that time, I have done everything humanly possible to get information about pharmacy errors and I have discovered that the state of Connecticut offers no transparency, accountability or checks and balances. There is no way to make an educated decision about where to have my family's prescriptions filled. There is no way to choose a safe pharmacy, even it is located next door to a dangerous one. I'm asking you to make information about pharmacy errors public so that consumers have the ability to make informed decisions about such an important part of our health care. To be clean, I am not asking the state of Connecticut to break new ground. A simple internet search of pharmacy board minutes around the nation showed that many other states already release identifying information. And I am circulating examples of how nine or ten other states are addressing the issue of pharmacy errors. By comparison, it appears that our Department of Consumer Protection is doing very little to actually protect the consumer. Openness should lead to increased vigilance in preventing errors, as well as greater efforts to identify and correct the problems1 which allowed them to occur. Pharmacists are respected professionals and holding them to an appropriate standard of 73 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. professional conduct should not translate to fear, embarrassment or refusal to cooperate in appropriately protecting their patients. The closed system currently in place leads to a cavalier attitude that comes from knowing that there will little, if any, consequences for their actions. When we contacted the pharmacy about the first error, a technician actually laughed and said, Oh, that happens all the time. When we contacted them again about the second error, the pharmacist said that she had found my daughter's correct bottle of medication, labeled with her name, but she made no efforts to contact us to warn us about the error. Drug Control indicated that vast majority of patients who experience errors return the medications to the pharmacy. This makes it extremely difficult to document the errors, even if they are reported. Perhaps if pharmacists and pharmacy technicians were considered mandated reporters, all errors could be adequately and appropriately addressed. As the system currently exists, the Department of Consumer Protection seems to be protecting the pharmacy industry at the expense of protecting the consumer. Better information going into the system and a more open policy for documenting errors will consumers better protected and in a better position to make effective choices about our health care. My daughter was already a victim twice. Please give me the tools that I need to make a better choice of where to fill her prescriptions in the future so that I can minimize the risk of her being the next victim of a pharmacy with a history of preventable 74 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. errors. Thank you. REP. SHAPIRO: Perfect timing, again. Do we have questions from the committee? Thank you again, for your -- oh, sorry. Representative Bacchiochi. REP. BACCHIOCHI: Thank you. We've talked a little bit about this bill, and I just want to clarify from your point of view, because you've been the one really doing a lot of homework on it. Exactly the three things that you think we need to change to make the system better would be the mandating reporting from pharmacists and pharmacy technicians. That's one. DIANE HENDERSON: Well, I came up with that idea actually just recently after reading the response that a pharmacy lobbyist submitted last week where she said that making an open system is going to lead her pharmacist to hide errors. So I don't have a pharmacy background but it seems to me, you know what, teachers and day care providers have to report suspected child abuse. If I'm going to hand you back my bottle and tell you there's an error on it and you have the possibility that your own lobby is saying you're likely to then hide or bury the error, it came to me why can't I ask you to mandate that they report them? REP. BACCHIOCHI: So that's one of your ideas. DIANE HENDERSON: I think that would be great. REP. BACCHIOCHI: And the other is to make available the number of errors that a specific 75 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. pharmacy has had; to make that information publicly available? DIANE HENDERSON: My dream, Representative, would be if I could just plug into the Internet in my home town and get a list of the pharmacies so that I could choose which one to go to, that would be great. REP. BACCHIOCHI: The information provided to you would be a number of errors per year. DIANE HENDERSON: Well, if you look at -- I attached to the back of my written statement information from two states, as well as Connecticut in order to compare what we're doing, and what I'm circulating here, you see nine or ten, and there's a big range. Some of them will give you just the pharmacist's name and what the finding is, and some go into great detail. And the one -- the one's that I found the most helpful to me as a consumer are where the pharmacist comes in and on the record provides testimony about how the error occurred and what has done to correct it. And some of those corrections are ridiculously simply, like verifying somebody's street address instead of just their name so you don't give them the wrong prescription. Rearranging things in the pharmacy so frequently confused medications aren't next to each other. So, as a consumer, I would love the latter, but frankly at this point we have nothing. So anything you're willing to give me I would gratefully accept. REP. BACCHIOCHI: Okay, thank you. SENATOR COLAPIETRO: Thank you for your testimony. I see no further questions. I made a mistake on this. This hasn't 76 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. anything to do with you -- DIANE HENDERSON: Okay. Thank you. SENATOR COLAPIETRO: I just made a mistake, and there's some scribbling here but there's Paul Dinto and there should be followed by David Boomer. Paul Dinto. PAUL DINTO: Good morning, Senator Colapietro and Representative Shapiro, and the committee. My name is Paul Dinto. I'm President and CEO of Paul Dinto Electrical Contractors in Middlebury, Connecticut, and I'm in favor of Bill 785. I've been in the construction industry for 46 years, and 24 years with a large electrical contractor and then as an owner for 23 years. We employ approximately 150 to 250 people on a yearly basis and we consumed 454,000 manhours last year. I am before you today to request the passage of this bill to help the contractors get paid for their work in a reasonable amount of time. There is a sickness within our industry that must be addressed. I have approximately $698,000 worth of change orders on 11 projects that is at least three months old and they haven't been approved, yet we've been directed to proceed, and many of them are completed already. We can't bill them before then. There1s a proceed with the work clause in almost every contract that is signed in the state of Connecticut today. But they will not let us bill these until the executed change orders are in our hands. It takes months, and as the other Representative said before, sometimes as much as a half a year to a year. It's a pathetic situation. It's been going on for a long time and it has to stop. 77 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. We have one large T&M contract change order for $150,000, but it was all T&M, given to the owners and everything. We waited six months for it. It's totally absurd. We have -- I'm sorry. We had on another project over a million dollars in change orders that was held back from us until the end of the project and then they wanted negotiate, -plus they were holding our retainage of $500,000. There are some unethical contractors out there that use this as a profit center to hold and use our money, and also owners that do the same thing. There was also a delay in payment till the end of the job and then they try to negotiate you down. We had to chase one contractor for a year and a half, and it was ridiculous, and finally he paid us at a discounted rate just to get us to leave him alone. We finally said that we would never work with that contractor again. When the legislature reduced the retainers to 7 and a half percent, I commend ypu all because that helped us considerably. If things are put into law, we can use that as a -- as a -- for a good purpose. I want to thank you all for this opportunity. Do you have any questions? REP. SHAPIRO: Thank you for coming \o testify. And I guess I do have a question that I had asked previously, but you seem like the kind of guy who could give the complex answer to it. The hold up between subcontractor, contractor and owner, is it one of communication; is it one of miscommunication; is it one of they're trying to extend the payments as long as they 78 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. can because everyone wants to hold their money. What's causing what you see as payment delays? PAUL DINTO: I say yes to all that you spoke. First of all, the way it operates is that you're given a request for price for a change order, but when you're given the request for price, you're given a proceed that you -- REP. SHAPIRO: I'm sorry. You're the contractor or you're the subcontractor? PAUL DINTO: Subcontractor. REP. SHAPIRO: Okay. PAUL DINTO: Or contractor. It doesn't make any difference because that would come from up above. Contractors work for construction managers, too. REP. SHAPIRO: Well, it makes a difference in the communication chain which we'll come to. PAUL DINTO: I apologize. You're given this request for change and you're told to proceed on it, and you're given a set of drawings and specifications to do this. You start and you proceed with the work. Now you send your construction change into the owner or to the construction manager or the contractor and he reviews it and then he sends it to the architect and/or owner or owner's representative and then it is approved with all the parties and comes flowing back down through. That's the way the system is supposed to work. It breaks down on multilevels. And it's sad to say that you have some unscrupulous 79 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. contractors out there that hold these and then negotiate with the owner themselves and then beat you up or in plain English come down the pike. Other times, it's just they haven't got enough clerks, the clerical work, clerical people to handle this. On the larger projects, you have multi change orders. I was on one project where there were over 800 change orders in a year and a half. I mean, it's significant and sometimes it's because the owner changes his mind and changes his scope, or the architect has to move things or engineer or so on right down the line. As an electrical contractor, I can tell you that we're involved in almost every change because whether it's architectural, structural or even carpentry, we're involved somehow or another. REP. SHAPIRO: Okay. And so you noted that sometimes this happens because of poor communication and sometimes they're unscrupulous contractors or perhaps even owners in the -- in play. Now, if you see the unscrupulous contractor or owner situation, I would think, as you mentioned earlier, you have at least one if not two forms of recourse. You said, you know, there are certain people you don't-the work with any more and you also have recourse in the legal system. Why do you need this if you have the ability to not work with those folks and if you haven't been paid for work that's been performed and agreed upon, you can avail yourself of the courts. PAUL DINTO: You can't always avail yourself to the courts. I've been in the business for 46 80 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. years and I've never gone into arbitration or never seeked a legal decision. Fortunately, we negotiated out. I don't work for unscrupulous contractors. I try not to. Sometimes the owners hire these people and we are very friendly with the owners and we have an existing stake there because we do their work. It's relatively a small amount of unscrupulous contractors that I would work for, and if I know they're unscrupulous, I don't bid it out. And yes, you can go to the courts, but the problem with the courts is that it costs you money. It costs you a lot of money and time, and they lock up your retainers, they lock up your requisitions, and it could be a horrendous task and lot of money. REP. SHAPIRO: And the Legislature is free. PAUL DINTO: I beg your pardon. REP. SHAPIRO: And the Legislature is free. PAUL DINTO: Well now, the Legislature isn't free. I'm a taxpayer too. But it is a good recourse and it is a good bill. REP. SHAPIRO: Okay. Part of the bill that seems quite useful is the requirement to include a statement with every monthly payment that goes to the subcontractor and up to the owner. Is this not common practice now in the industry? I mean it seems to me like a well-managed project would have this in every case. PAUL DINTO: It does not. And when you turn around and you try to bill the -- the extras on the job, they refuse to accept it and they'll knock down your entire requisition in some 81 February 13, 2 009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. cases. Other cases, they'll just cross it out and just pay you what they deem is -- is fair. REP. SHAPIRO: Okay. But if it were required by law, then they would do it. PAUL DINTO: They would have to do it, yes. REP. SHAPIRO: Okay. One final question. And I didn't hear you say this, but perhaps you could respond. Mr. Mejia had said that this payment issue is causing delays in projects. Is that your opinion as well? PAUL DINTO: It's a delay in recourse. It's a delay in cooperation. It's also a delay in coordination, and it costs more money to go back and do it after the fact. So, yes, there are delays because of this. REP. SHAPIRO: Okay. But one of the primary recourses you're seeking in this legislation is to further delay these projects, by if you're not getting paid, then you don't have to perform more work which slows down the project. PAUL DINTO: No, it actually would -- it would propel the project forward because, if you refuse to do that under law, they would be demanded to sit down and negotiate the decision, and to turn around and give you your money when it was due. REP. SHAPIRO: Do you do most of your work on the nongovernment side or the government side, or a bit of both? PAUL DINTO: I do about 75 percent to 80 percent of my business is in the private sector and 2 0 percent to 25 percent of it is in the public sector. As a matter of fact, I was low bidder 82 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. yesterday in the Mary M. Hooker School in Hartford. REP. SHAPIRO: Okay, because we did request information from the public sector, the Department of Public Works and University of Connecticut, both of whom do a variety and multitude of building projects. Not all of them are on time, as it is and as you mentioned, delays make it more expensive. And both of them opposed this provision under the belief that it would cause them further delay and then incur and then incur greater expense. Do you have a response to that? PAUL DINTO: I believe it would expedite the project and it would be fair where everybody got paid on time, including all of•the subs and the vendors that providing the material and labor. REP. SHAPIRO: Okay, thank you very much. SENATOR COLAPIETRO: Just to add, I think, talk about delays, I mean that is a concern for everybody I think. And I think one of the delays would be if you had to order another 10,000 feet of electrical wire or something and you're at the mercy of the supplier and if the supplier says I don't have it yet and I'll get if for you, that could possibly delay the project as it is and no fault of yours or the construction manager. PAUL DINTO: I agree with the specialty equipment more than the conduit wire. But the specialty equipment, if it's a change, whatever, has a time limit on it, and usually it could slow down a project, absolutely. REP. SHAPIRO: Thank you. Any questions? 000UI 83 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. Representative Taborsak. REP. TABORSAK: Thank you, Mr. Chairman. Thank you for your testimony. I'm a little bit foreign to this subject matter. Maybe you can help me out with this. Why is it that the subcontractor can't protect himself during contract negotiation with -- from these issues? Can you kind of just elaborate on that and take that wherever it goes? PAUL DINTO: In the contract it specifically would say that you will proceed when given the order to proceed, subject to your price and approval. So you're actually at a legal downturn by -- in breach of contract if you refuse to proceed. This bill allows that once the change orders become over $50,000 or 5 percent of the contract, you can refuse if they haven't sat down and resolved those matters. And what it does, it just draws attention and everybody knows we're serious about this, let's get this on the road. REP. TABORSAK: You said in the contract. Why is -- explain to me, if you could, why that's nonnegotiable. PAUL DINTO: If you refuse to accept that, they'll strike you out and go to another bidder. You're in -- and especially in the contracts with the state of Connecticut and with the public -- public forum, it's a nonresponsive bid if you cross out anything. REP. TABORSAK: Okay, and in the private forum, is it just -- PAUL DINTO: It's just the same. It's pretty much the same. You -- you -- 84 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. REP. TABORSAK: It's the accepted standard, and if you try to deviate from the standard, they'll just move on to the next bidder. PAUL DINTO: That is correct. REP. TABORSAK: Okay. PAUL DINTO: That is correct. REP. TABORSAK: Thank you. REP. SHAPIRO: Representative Nafis. REP. NAFIS: Hi. Thank you for coming. I -- I just -- this is really about just providing .you with some teeth, so that you, in fact, are not having to finance work prior to being able to get payment, is that -- PAUL DINTO: You just said the magic word. We are financing the projects, and on top of it they are holding a retainage with that. REP. NAFIS: Right. PAUL DINTO: And a payment of performance bond on public work, by the way. REP. NAFIS: So it sounds to me as though this is really about, you know, a fairness issue to smaller contractors who truly are carrying a lot of debt to, in fact, move forward some of these larger projects both in the private and the public sector. PAUL DINTO: Smaller and larger contractors. As I stated, 454,000 manhours; those people got paid every week. REP. NAFIS: Okay. I just wanted to make -- 85 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. PAU. DINTO: It's a burden. It's a burden on all of us no matter what side you are on. REP. NAFIS: Right. I -- it seems it's really a fairness issue. PAUL DINTO: That's exactly right. REP. NAFIS: And.that would be the way I would view it. Thank you. REP. SHAPIRO: If there are no further questions, thank you so much for your testimony. PAUL DINTO: Thank you very much. REP. SHAPIRO: Next would be David Boomer. DAVID BOOMER: Senator Colapietro, Representative Shapiro and members of the committee, my name is David Boomer. I'm with the Kowalski Group, LLC, here in Hartford. We represent Central Boiler, Incorporated, which is a manufacturer of outdoor wood furnaces based in Greenbush, Minnesota. They make sales here in the state of Connecticut and have sales operations here. On behalf of the company, I'd like to offer comments very briefly on Senate Bill 779. An Act Providing Consumer Protections to Purchasers of Outdoor Wood-Burning Furnaces. As you heard earlier this morning when Commissioner Farrell testified, this bill would provide customer purchasers with an ability to cancel a contract within three days, if they have second thoughts on the purchase of an outdoor wood furnace. Our company can accept that provision. We believe most of the customers have done the research needed as far as how the payback will be on 86 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. these because there is an initial up front investment, as you know, and then they save money because they don't have to buy oil or et cetera. But if someone has had a second thought, our company has no problem implementing a three-day right of rescission. The only caveat I would point to this is that, as you know, there's some other -- other industries that have like dating services, health clubs that have a three-day right of rescission on a contract. If you look at those requirements and then you look at this bill, there are some elements here that go beyond that. And we just think it's overkill, deals with an information sheet requirement and record retention and something that the Commissioner, I heard him say that they may have some new language on that. So, overall Mr. Chairman, on behalf of our client, we support the bill. We would ask for some modifications and we outlined that in our testimony. Thank you. REP. SHAPIRO: Thank you very much. Do we have questions from the committee? If not, thank you. Next on the list we have Tim Phelan. TIM PHELAN: Good afternoon Representative Shapiro, Senator Colapietro, Senator Witkos and Representative Bacchiochi. This is my first time before the committee this year, so it's very nice to be here. It's nice to see Senator Kissel back again and also some very friendly faces in the General Law Committee. 87 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. As you know, my name is Tim Phelan. I'm the president of the Connecticut Retail Merchants' Association. CRMA is a statewide trade association representing some of the world's largest retailers in the state's main street merchants. I'm here today to testify on House Bill 5391, An Act Concerning Credit Card Numbers and Credit Card Receipts. This bill would prohibit merchants' copies of credit card receipts from displaying the last four digits of a credit card number. We understand from speaking with Representative Jutila, the privacy concerns that has given rise for this bill to be before you today. I just wanted to inform the committee of a couple of things as it relates to the printing and displaying of credit card numbers by retailers. First of all, under the Fair Credit Reporting Act, retailers are prohibited from displaying all but the la'st four digits of a credit card number that's given to a customer. Most, if not all retailers are now in compliance of the act, which took effect in 2005, with the completion date of December of 2007. If a retailer is not in compliance, they're subject to severe penalties by the Federal Trade Commission and by the State's Attorney General. Retailers understand that support this provision of the federal act that provides necessary privacy protections for our customers, which is one of our highest priorities. However, this bill would prohibit the merchant from viewing all but the last four digits of the Social Security number as well. This is problematic for retailers due to the fact that if there are any challenges to a purchase by a 88 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. bank or by the customer, the retailer needs that completed credit card number in order to review the transaction and settle the dispute. They are further obligated under Visa/MasterCard rules to hold onto that information for at least two billing cycles. If they're denied that right by the passage of this bill, the retailer would have to pay the challenge or disputed bill. The Fair Credit Reporting Act recognized the importance to the retailer of this information and did not include this provision in the Act or any amendments that have been made to the Act. So therefore we would not support any effort on the state level to limit what information a retailer can view for that very reason. Again, we understand Representative Jutila's is concerned about privacy issues and we are too, but we feel the existing protections in the Fair Credit Reporting Act, as well as the rules in which retailers are obligated to comply with under Visa, MasterCard, are sufficient to deal with this issue. I thank you for your time and I'd be happy to answer any other questions. But, I would also ask the Chairs, if I could, before I answered questions on that bill, there is one other bill before your committee today, a Proposed Bill Number 5947, An Act Concerning Extended Warrantees. The reading of this bill is so vague that we are not sure whether or not the companies that we represent that issue extended warrantees would be covered under this, so we'd just like the committee to go on record as noting that we would like to be included as any further developments on how this bill proceeds. It may or may not impact us. We're not sure -- not sure where the sponsor is intended or 89 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. where committee is intended to go with this. Thank you. REP. SHAPIRO: Thank you and you're duly noted on the extended warranty issue. We are currently talking with Representative Spallone about the language that he is seeking and we will keep you apprised. TIM PHELAN: Thank you. REP. SHAPIRO: With respect to the credit card issue, I understand that the reasons for requiring retention of the entire credit card number. , What happens with those documents that are retained? And I think that is part of what this bill is trying to get at is, okay, you have to retain this document, but can it sit out on counter for anyone to see? Does it go into a box that's, you know, locked away safely-somewhere? What happens to that piece of paper with your credit card number on it after it goes back with your server? TIM PHELAN: Right. It's a very, very good question Representative Shapiro, and I'll try not to -- try not to do my -- try my best not to confuse anybody or myself on trying to give this answer. The simple answer is, the retailer is obligated to keep that information under lock and key, for a better phrase. If -- in two instances, number one, if they have the hard copy which they keep, they have to keep that in secure location. If that is compromised in any way, they can be fined by Visa/MasterCard, their ability to process credit cards with Visa/MasterCard could be taken away. They would be in violation of the Fair Credit Reporting Act and they could be fined by the 90 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. Federal Trade Commission. That's number one. That's if they keep the hard copy, which they have to keep in order for proof of purchase if somebody should challenge a purchase. If they keep the information in a computer or a point of sale system, which the majority of them do, there are -- there are additional requirements that they have in storing that information. Again, most of the rules of storage of credit card information is run by Visa/MasterCard, not by -- there's a small portion, the truncation of the numbers, is dictated under the Fair Credit Reporting Act. But the storing of the information and the -- and the retrieval of the information, how you do that, how you store it, is governed under rules that the retailer enters into when he agrees to accept the Visa/MasterCard. So, on the point of sale system, in their computers there are standards of -- software standards that the retailer has to cqnstantly update to stay in compliance with. And again, if they do not, they're subject to fine and the ability to not play with Visa/MasterCard by Visa/MasterCard. REP. SHAPIRO: Thank you very much. Do we have other questions from committee members? Representative "Taborsak. REP. TABORSAK: Thank you, Mr. Chairman. Just a question so that I understand this. The bill that we're considering, PropospH Rill 5391, requires -- or, I'm sorry, it says the 91 February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. statutes be amended to prohibit merchant copies of credit card receipts from displaying more than the last four digits -- more than the last four digits of the credit card number. What is it that these receipts display? I guess I'm a little confused. TIM PHELAN: Yeah, you know what Representative Taborsak, I would suggest that you go to the Legislative Office Building cafeteria, and when you -- the next time you make a purchase, you'll see it. The four numbers that the customer receives, the receipt the customer receives, doesn't have an expiration' date and it doesn't have the first, I think it's -- I'm not sure if it's 15 or 16 numbers, are X'd out, and so all you have are your last four numbers. But the receipt that the merchant keeps has the expiration date and has the complete credit card information. What this bill says is they can't keep their -- you know, they can't keep that number or expiration date either and what we're testifying on is, although we understand the privacy concerns, we need that in the ability to conduct business. REP. TABORSAK: So it's your testimony that your industry needs both the expiration date and the entire number of the credit card? TIM PHELAN: Yeah, we have to -- yeah, because if you call your bank up and say, you know what, I never purchased that TV from Best Buy and I want to dispute this charge, your bank is going to call Best Buy up and say we need proof of purchase. We need proof that Representative Taborsak was there, so we need his signature and we need to know --we need proof that he purchased it on the credit card, so we need you to get us a copy of the credit 92 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. card. That's why we keep it. Otherwise, the bank could say, hey look, this guy says he didn't buy it. You don't have the records. You've got to make it up. You've go to pay for it Mr. Retailer. And so that's why they keep that information that information. But along with that, Visa/MasterCard says you've got to keep it and you've got to keep it in a secure location, and you've got to keep it for at least two business cycles and then 30 days after that. So you've got to keep it for at least 90 days. And don't lose it; don't compromise it because if you do we're going tell you can't accept Visa/MasterCard anymore. You can't -- you know, you can't play by our rules any more. So the retailer is in a pretty awkward position. They -- they have to make sure they are securing this information so it doesn't get compromised and challenges and disputes, they've got to take on customers which isn't always, you know, something they want to they want to do. REP. TABORSAK: Just one last question. The receipt that goes back to the customer -- TIM PHELAN: Uh-huh. REP. TABORSAK: -- that has less information, that has the last four digits, is that a result of the private sector policy, is that a result of a federal act do you know? Why is that? TIM PHELAN: It's a result of the Fair Credit Reporting Act. REP. TABORSAK: Okay. TIM PHELAN: Yeah. And I can't tell you, for -- you know, in great detail how they arrived at 93 February 13, 2009 000t«M bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. determining that, but it was, I'm sure, as Congress heard lots of testimony as to why they needed to do that. REP. TABORSAK: Fair enough. Thank you. REP. SHAPIRO: Thank you, Representative. Further questions from the committee? Thank you for your testimony. TIM PHELAN: Thank you. REP. SHAPIRO: Next up Representative Miner. REP. MINER: Good afternoon and thank you. I wanted to thank you all, certainly the chairs, Chairman Colapietro and Shapiro and Ranking Members Bacchiochi and Witkos for raising House Bill 5225. and I apologize that I wasn't able to be here earlier. I have submitted some written testimony on behalf of my constituent, Fran Clem and her husband Stewart, who lost their son a number of years ago to rather traffic -- tragic and unfortunate situation. I think in fairness they would tell you that they have no idea whether it was a result of Mexican salvia, but when she called me in November and asked me to just get on the Internet and go to Google and start pushing the buttons, I was shocked. And I think if any of you have had an opportunity or would take the time to do that, I think you would be as well. We certainly have a lot on our plate here in the Connecticut Legislature, and I don't mean to tell you whether this is more important than anything else that we're going to do, but clearly, it seemed to me that it was a rather striking situation, that this available, 94 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. available in store fronts in the state of Connecticut, available on the internet, and we don't currently have a law, I believe, that addresses it. REP. SHAPIRO: Representative, are you aware of any other states that have currently criminalized Mexican salvia? REP. MINER: I think there are 15, Representative Shapiro. I do not know the names of the states and I can get that for you. I certainly would try and ascertain what their legislation looked like and try and provide it to the committee as soon as possible. It's my understanding that a number of states are actually discussing it at this point as well. REP. SHAPIRO: And have you any -- have you had any interaction with local or state law enforcement regarding this and how it would be enforced, if 'it would just be handled similarly to how other controlled substances are. Is it going to require training for them, because currently officers aren't used to looking for this? REP. MINER: I've not had a lot of in depth discussion with them about it. It's my understanding that they're aware of the problem at some level. It's my understanding that they don't really know how to go about dealing with it at,this point, because you can legally buy it as a plant and grow it in the state of Connecticut. You can legally buy it over the Internet. But, you know, in terms of how we would deal with it, I would suggest that it's probably would have to be treated as we've done everything else marijuana and the like. One of the, I guess, concerns that I have is 95 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. that in the process of talking about it, you introduce other people to it that may not even know that it's available. I have gotten a rather interesting batch 'of e-mail and phone calls from people. Some that suggest that we should just tax the living daylights out of it and use it as a revenue stream, and others that say we can't enforce the laws that we have now, maybe we ought to leave this one alone. But I do think that the YouTube and the Google videos are rather compelling and if it's not an act, and I have not way of knowing whether it is or isn't, but if it is not an act, it is pretty amazing stuff. REP. SHAPIRO: Thank you very much. Do we have further questions? Senator Witkos. SENATOR WITKOS: Thank you, Mr. Chairman. Thank you Representative for bringing this bill forward. I must admit, when I first read it, I thought in my mind, I switched a could of letters and I thought it said Mexican saliva, so I Googled it and won't say what came up on my computer screen, but then I went and re-Googled it -- A VOICE: It's a family show. SENATOR WITKOS: I reGoogled it and I did see some of the video footage of kids that are under the influence of this and it is -- and it's very disturbing. And we actually had somebody testify earlier from one of the Regional Action Centers of how they're dealing with it with kids on the college campuses and it's really prevalent amount the 22 to 28 year old age group. So I think we, as a Legislature, need to something before this becomes an 0001*1* >« 96 February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. epidemic as well. Thank you very much for bringing that forward. REP. MINER: Thank you. REP. SHAPIRO: Representative Nicastro. REP. NICASTRO: Thank you, Mr. Chairman. Good afternoon Rep. REP. MINER: Good afternoon. REP. NICASTRO: Just to let you know that in Bristol, our narcotics division brought this to my attention several months ago and I looked it up and I saw exactly what you saw. And they've asked me to see what we could do about it also, because they're dealing with it on a daily basis now. So it's much more widespread than people realize, and because the name is foreign to a lot of us, you know, it doesn't ring a bell. You hear the name marijuana, cocaine, we understand right away. But they're working on this and I just want you to know that it has been brought to my attention by our detective division on more than one occasion. So I appreciate your coming forward today to represent these people on this testimony. Thank you, Mr. Chairman. Thank you. REP. SHAPIRO: Thank you. Further questions from the committee? No. Thank you for your testimony, sir. REP. MINER: Thank you. REP. WITKOS: Steve Kaplan is next, but there's 97 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. like seven people testifying in favor -- in favor of the same bill, so if you could split it up, I'm sure the committee will have a couple of questions to -- and we -- I think we understand it pretty well. So there's six in a row and for the record, you could just put on -- just say your names and we can put it in the record. STEVE KAPLAN: Thank you. Good afternoon Senator Colapietro, Representative Shapiro, members of the committee, I'm Steve Kaplan. I'm legal counsel for the Connecticut Subcontractors Association. With me is Bill Flynn who's the president. Bill is also vice president of Electrical Contractors, Inc., which is a large electrical contractor in Hartford. Let me start and just very quickly summarize the real key points of this bill. The bill address a problem that Mr. Dinto pointed out a few minutes ago with contractors and subcontractors getting paid for authorized extra work that they've performed. I emphasize the word "authorize." We are not talking about a situation where there are disputes. That is not within the ambit of the bill. We were very careful to draft it accordingly. It's also -- the other key part is that the contractor or subcontractor cannot get paid through no fault of their own. This addresses a specific problem, Mr. Dinto alluded to it, where a construct -- a construction changed directive, that is a term of our art, CCD. It's in almost every contract and every subcontract. Representative Taborsak was asking about that. It's in virtually contract I see. I've been doing this for 27 years as a construction lawyer. It's a given in the industry, and here's how it works, just to 98 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. make sure everybody knows what we're talking about. Owner or GC will say a -- tell a GC or a sub, do this work. We know it's an extra. We price it, okay, proceed. There's a written directive to proceed, in most cases, or a nonarguable, verbal directive, but let's deal with the written directive. The contractor does that. Then he starts to say, okay, I need a change order, again a term are, a change order, which is defined in the contract usually to be able to bill for that. Well, we don't have the change order processed yet, and I'm not casting a spurgence. It doesn't have to be a bad GC, a bad owner. There is a zillion reasons why this happens, but it happens and it happens all the time. We have a number of contractors here like Mr. Dinto who will be able to tell you about that. When that happens, the GC and sub not only can't get paid for work they've performed, authorized, not in dispute, they also are getting more of these CCDs. They cannot refuse to do that work. They would be in breach of contract. That's what the contracts say. On a public job, Mr. Dinto said, you bid it, you have a fat spec book; you live by that spec. If you try to change that, your bid is thrown out. Private jobs, they work pretty much the same way. Subs, even very large subs like Mr. Flynn's company, Mr. Dinto's company, who are very large businesses, do not have the kind of bargaining leverage to get those terms out of contract. They do not. So what happens is, they become -- they are held hostage at the end of a job for 99 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. nondisputed work that's been authorized, but for -- again, dozens of reasons, they cannot bill for that. And that's what we're talking about. That's the issue and what this legislation does, it says if that amount of authorized work that cannot be billed for, through no fault of the contractor, exceeds 5 percent, they do not have to accept new authorized changed work. It does not affect the contract work. It does not affect work that has been through the process and change orders have issued. So that just is a very focused bill on a very focused problem. Let me -- let me have Mr. Flynn perhaps flesh out, from the contractor's point of view, and I'm very happy to answer anybody's questions on that. BILL FLYNN: Very simply, whenever -- whenever we're performing work, somebody, as Mr. Dinto said, has to pay for it. And there are number of motivating factors for people not wanting to pay for things that everybody agrees should be paid for. You may have -- you may have flaws in the design and it's recognized right out of the gate, a change order, not a change order but a directive to -- to address that design flaw is issued to us. We price it. We move forward. We're doing the work. But the owner doesn't want to pay for it because it's his architect's goof. His architect doesn't want to pay for it because he just want to pay for it. A GC may have bid the job and missed part of the scope so he owes me, but he doesn't want to pay for it or he wants to disguise it. You may have construction managers who get a percentage back from the entity if they can save money or keep the project under budget. They're motivated to disguise a lot of this 100 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. stuff from the owner because they don't want him to know that his project is not only is going to be under budget; it may be over budget. You may have owners who have -- who have financial difficulties and they agree. Yeah, you need to do this extra work, but they don't know how they're going to pay for it. Well they disguise that fact by extending us on and on and on as their bank, until we get to the end of the job, and as everyone here has stated before, here we are with a million dollars worth/ of extra work that no one has disagreed with throughout the process of the project, but now all of a sudden you're being offered 75 cents on the dollar. Or, as Representative Shapiro suggested we can sue and we can probably eat up 25 percent or 3 0 percent of the money that is owed to us by paying our attorneys and gambling that some day down the road, two or three years from now, we might see that check. Everybody on the other side of the table knows that. We have your money, and we're going -- and if we're allowed to stretch you out to the end of the job, guess what, they've got the completed project; they're using it, and they still have your money and they are negotiating with you now, where there was no negotiation in the middle. This bill forces everyone to play fair during the course of the project. It doesn't -- it doesn't put anymore additional -- it doesn't make -- give us an advantage. It doesn't give them an advantage now. It makes everybody play honest. And for the owners who claim that they don't know what was going on or whatever the 101 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. reporting part of this bill will enlighten everyone. It will require everyone to be enlightened throughout the job so that, therefore, an owner or a construction manager can't say he didn't know. So it's a fairness bill. And it's not fair -- in these times, with contractors, subcontractors out there who can't borrow money from our banks but have to be forced to finance public projects, you're not going to have many more of us out there much longer if the economy stays the way it is and we keep running our projects this way, because you're going to bankrupt a lot of very good contractors. STEVE KAPLAN: I'd just like to add something about the notion of delays because I know there's been a lot of discussion. The- subcontractors have worked with AGC, Associated General Contractors, and many other groups for about nine months now,to work on this concept and present this bill, and through that group, that joint group through AGC and the CSA, we have talked with virtually everybody in Connecticut on this -- this concept. And most people who were originally negative to this have come around and either supported and say we understand it, many large owners understand it. Many large owners have said to us, why do you need this, this is what we do anyway. And we said because not everybody does it this way, and they sit there in disbelief. Some owners, some large public owners who we've talked to oppose this. And when you really get down it -- I'm not throwing sticks and stones at anybody -- but when you really get down to it, it's an abdication of the owner's responsibility to run a job properly. When you boil down any -- any kind of owner complaint about this, that's what it comes down to because they don't want to monitor the 102 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. job and make sure that changes are being handled in a proper fashion. If we go back to the way it was 30 years ago, I'm getting old now, but when I got out of law school, when you had to have a written change order before you did any work. That was what it was like when I was, you know, coming into this business. You have to have a written change order before you have any work. You guys have put that in the Consumer Protection Statutes for the homeowner, home improvement. A contractor can't get paid without a written change order in the home improvement side. If you put that in here, my guys would go up and say, thank you very much. We are thrilled. See you all later. But the construction industry can't work that way. It can't be that black and white. You need these change directives to keep jobs going and avoid delays. But at the same token, these guys have to be able to get paid. I'm doing that authorized work and it really is a way of avoiding delays cause you avoid problems. Cesar said you avoid these problems, you keep the job going. I don't know if you folks have any questions or not. REP. SHAPIRO: Any questions from the committee? We have one. Representative Taborsak. REP. TABORSAK: Thank you, Mr. Chairman. Thanks for that explanation. So if I understand this and to try to even simplify it a little bit more, the system doesn't work very well. But you're willing to work under the system that doesn't work very 103 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. well up to 5 percent, and then at that point you think that we need to do something and give subcontractors or contractors greater rights, greater leverage to kind of stop the bleeding. Is that pretty much what this -- this does? STEVE KAPLAN: Very much so. It really says look, we know there's -- and this an optional thing. If a job's being run properly, subs, GCs, might say, yeah, we're not concerned. We know things are in the pipeline. They're getting down. No problem. It gives them the discretion to say, wait a minute. No moss. We've got to sit down. We've got to talk. We're over this 5 percent threshold. I'm not comfortable, I'm going to get paid here, or going to get paid before next sukus, for any of you who understand Yiddish, we have to sit down and talk. And that's really what it does. REP. TABORSAK: And was that 5 percent number that was taken from the state standard for public school construction. Is that how you came up with that number? You just figured it worked there; let's use it here. STEVE KAPLAN: Absolutely. We were wrestling with that because the group, and again, very broad spectrum of contractors and different construction people. What's -- you know, is 5 percent enough? 10 percent; what do we do? We have in the statutes, towns and cities cannot get 100 percent authorization for change orders on school projects that, exceed 5 percent by statute. They get 50 percent of their authorization after 5 percent. How many towns and municipal building committees on the XYZ elementary school next year are going to know that when they're going 10 percent or 15 percent over on change orders, and you're 0001*52 104 February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. issuing CCDs, and contractors say, Wait a minute. How are we going to get paid? That's going to be a very real issue. I think that legislation is about two years old, as I recall. So again, yes, we've specifically plugged that for that reason. I thank you for bringing that up. REP. TABORSAK: Okay. Thank you for your testimony. STEVE KAPLAN: Thank you very much. REP. SHAPIRO: Actually, a follow up to that question, because the 5 percent rule for schools is not working particularly well. And can we break it down to what that would mean on an actual project? Because it can be 5 percent of any subcontractor, right, so you could have someone who's doing a million dollars worth of work and you could have someone who's doing $10,000 worth of work. So for a very small amount of money, but you guys are pros in the industry, I've seen this on a personal level, if the electrician can't do something then the plumber can't do something and the carpenter can't do something. And it all rolls, you know, uphill or downhill, as the case may be. So if you have someone doing at 5 percent what could $500 worth of work and he doesn't have the change order, which is the change to the change directive, and hasn't been paid for it, and he stops all those other people from working, how does that affect the project? BILL FLYNN: Well, number one, it wouldn't. In the real world, it wouldn't. You're talking about a change order that's very time related, and you're talking about undisputed work because 105 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. that's all this bill addresses. So if you've got a school building project that has a very small subcontractor that has a change order for which he's done the work, and everybody agrees he's entitled to payment, and you saying, but then if don't fill out our paperwork that allows him to bill us and it hurts us, we can't let you do that. Isn't that kind of ridiculous? I mean, it's within their power immediately to issue the change order to have no delays. The other thing is that I can't imagine any school building committee would allow that to happen to themselves anyways. And, yes, any change order can hold up somebody else's work, but I doubt you would ever see anything like that happen. But, I mean, it's in the -- it's in the power of the entity that's paying the bill to not let this happen, and the only reason it would happen is that they've fallen down on the job and simply not issued a piece of paper that allows the individual to bill for the work they told him to do and accepted his price for. STEVE KAPLAN: I think that at the risk of getting lynched by some of my compatriots here, the notion of putting in some minimum thresholds I think would be -- would -- are certainly -- is certainly not foreign to the kind of payment statutes we have on the books. Payment bond statutes have minimum thresholds. The notion of putting in a minimum threshold for a subcontract exceeding $25,000 is something, so you avoid the I haven't gotten paid for my new hammer problem. I don't think anybody in our group, though we haven't specifically discussed it, I don't know that anybody would be particularly, you know, problematic with 106 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. that. REP. SHAPIRO: The number was chosen in connection with the school number, but that number was, to a certain extent, arbitrary and to a certain extent this one is too and -- STEVE KAPLAN: Well, also, don't forget, most subs -- the problem is not on the $25,000 subcontract. The problem is on DCI Dental Electric Sullivan Mechanical Acoustics $2 million subcontract. That's where the problem is. It's not on the very small contract. REP. SHAPIRO: Okay. Thank you very much. STEVE KAPLAN: Thank you for asking. i REP. SHAPIRO: Representative Aman. REP. AMAN: Yes, can you just further explain what the real difference between a change directive and a change order is and then tie into that, if you've gone ahead on a change directive, can they refuse to sign a change order? What actually both legally and practically happens since it, to me, appears to be exactly the same thing, except for one, you need the piece of paper to get paid and the other one you need so you're authorized to do the work. STEVE KAPLAN: You're absolutely riglit. You've pretty much answered your own question. The change order is usually defined in the contract. It's certainly a standard term of art within the construction industry. It means the change to the contract has been issued. It actually changes the contract terms in terms of scope and price. The contractor can bill to get paid as he does that work under that change order, it's now part of the contact. That's a change order. 107 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. That's certainly not the problem. A change directive is also a term of art defined in most contracts as an order, authorized order, to proceed. You do the work. We either agree on price or, if you can't agree on price, you get paid on time and material basis. That's basically what that clause says. The problem is when the contractor does that work under the change directive, they can't bill for the work under the contract terms until the change order has been processed. That's boilerplate in construction contract law. And that's just the way it works. And so that's the anomaly we're trying to address. That's really the issue. You have the change directive, you have your authorized'work, you've proceeded, you want to start to get paid for it, but for some reason the change order hasn't been processed, you don't have the vehicle to pay for it. And -- and a lot of times you get this horrific leveraging accumulating of these issues to the end of the job, and as you heard, the contracts just start to get clubbed like baby seals. That's what starts to happen. REP. AMAN: If the construction manager gives you a change directive and you both sign off on it and you proceeding to do the work, he then proceeds to give that to give that to the owner and says, this is what we should do, and the owner says, no, I don't think we should have done that. What happens at that point? STEVE KAPLAN: That's a great point. The contractor has got a legally binding directive, but he can't get paid until it's signed off by the owner. The owner may have a bone to pick with the construction manager, in 108 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. the example you just gave, and that could be the reason the change order's getting held up. But guess -- guess what? My innocent, well-performing contractor is sitting there going, why can't I get paid? Nobody -- I have an authorized direct ive that I did the work under, why is this now my problem? It sounds like Twilight Zone, but that's a reality. And that's -- that's really one of the major problems we're trying to address here. REP. AMAN: Does this also work down that the subcontractor who, you know, traditionally you maybe resub things down two or three times 'til you get to the person that's actually doing the work, how much of this goes on, you know, down the levels, would this law apply to basically the subcontractors of the subcontractors or just on the initial subcontract to the general or the owner? STEVE KAPLAN: Well, the way we have it worded, Representative Aman, is it would be applicable to a contractor or subcontractor. And again when we mentioned having some minimal price amount of a subcontractor contract to make a threshold on this, I don't think that concept is foreign. You could have it within one or two tiers. We have that in the bonding statute, a subcontractor who's in direct contract with the general contractor or CM. We're really trying to address the larger problem here. It's not really a trickle down -- it is a trickle-down problem, because it affects sub-subcontractors,-it affects vendors, because they're not going to get paid for stuff they've done until these change orders are processed and the guys up the ladder can bill and get paid. But the subcontractor is always going to have a primary interest in 109 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. getting this stuff processed and getting his guys paid. He's not trying to stiff them for what they've done, most of the time anyway. He wants to get them paid. REP. AMAN: Has this procedure been a problem more on government financed or government run projects or on private financed, private run projects, or is it about equal, or is it just completely random? BILL FLYNN: It's equal. I mean, it's like I was saying before, you have certain -- can have construction managers or general contractors that -- that are motivated to play this game. And you also have certain owners, including public entities, because of financing, budgetary concerns, so it can happen on any job public and private. REP. AMAN: Yeah, I know from working with our public building commission and when they meet and if you have August change orders, when they don't meet, all of a sudden, for no fault of anybody, you can have 6 0 or 90 days go by that the change order everybody agreed to just hasn't gone through the -- through the channel to be -- to be finished. STEVE KAPLAN: Right. The department of Public Works administers public projects for client agencies, they get it -- I've had cases, more than one time, they get into the same type of disputes with their client agency about change orders. The contractor is done, and he's sitting there going, well we can't process it yet because we're having a dispute with our client agency. This is dickey-dovey. So again, because it can be done, it gets done, because it can happen, it happens. 110 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. BILL FLYNN: Yeah, literally, we've had projects for the DPW where their client agency doesn't agree with them, and there's a squabble going on between the public entity that's going to end up with the building and the DPW about who's paying for something. But again, we've performed the work legally, accurately, it's done, we've incurred all the costs, and we're sitting on the sidelines begging for somebody to please pay us, and we can't get paid because the state agencies can't agree amongst themselves. REP. AMAN: So this is no question the work had to be done, the work was done correctly, and it's which public pocket the money is going to come out of. BILL FLYNN: Absolutely, positively correct. REP. AMAN: And under this legislation, you feel that because a project would basically stop, if they didn't get around to doing it that they would proceed to get that paperwork issued. BILL FLYNN: Representative Aman, that's not really true. It would never stop a project. I mean, we're talking about stopping any future change order work beyond that point. In other words, it's just -- it's a place where we can say, we're never going to stop the construction of the main contract work. All of the -- all of the change orders that have already been approved and there is a change order for them, are under way. None of that is ever going to come into play with this bill. This is strictly to say I've had enough of your change order work going forward, because you haven't paid me for now 5 percent of my contract value for change order work that I've performed and should be able to bill against but can't. 119 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. So it's only for any more additional work above and beyond that that would stop the project. And the entity in control could open the floodgates up and cure that problem in a minute by simply paying, issuing the paper to pay for the older change order work that's been performed but wasn't billable just by pushing out the change order, so you now could bill it. We remove your ability to have any reason to say no more. So it's a real -- what it does is it just forces -- it forces the people on the other side of the table to process their paperwork more quickly. Otherwise, you won't do any more new change order work for them. REP. AMAN: Okay. And this would not address the problem of when you submit a change order request for funding plus part of your contract and they send you back a check just for the contract price and say, sometime in the future we'll pay you for the change order. BILL FLYNN:. Yeah. It won't cure that. Right. I mean, if you've got all your paperwork in and you got a right to bill for it and then they still don't pay for that, then that's when we have to call Mr. Kaplan. REP. AMAN: Okay. Unfortunately, I've seen that happen too many times. Thank you, Chairman. REP. SHAPIRO: Thank you. I have just one quick follow-up question because I know we've been at this a while. In your conversation with Representative Aman, you discussed a key point where what happens 112 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. if there's a dispute between and owner and a GC, the GC has authorized work without talking to the owner and sent you the directive. The subcontractor has done the work, done everything he's supposed to do and you said, now why it his problem? The converse of that is now why is it the owner's problem because he did what he was supposed to do too, but under this bill, now you have the ability to stop his project, it's now his problem. He didn't do anything wrong either. STEVE KAPLAN: Yeah, the -- the owner owns the project. The owner holds the hammer. Nobody else holds the hammer. The owner holds the hammer. If the owner doesn't know what's going with his project with significant change orders being issued, or change directives rather, being issued, the owner's not doing what he's supposed to do. This project's going to blow up eventually anyway in the situation you just described. And what this does is it brings the owner in right away to say, look, we've got an issue that's got to be resolved. And however it gets resolved, it gets resolved. Now what's going to happen is the owner, if it -- usually what will happen is that they'll resolve it. That's usually what's going to happen. And most of the contractors who come to table on this thing, we need some relief, say we need some attention getting to address these issues, so we're just getting ignored. Now, in the -- if the owner and the GC get into a dispute about scope and who owns that problem, that's got to be addressed. The subs are financing this work because the owner has got a problem with his GC. The owner is the only person who can address that. The sub has got his hands tied behind his back. He has no leverage, no way of addressing that ever 113 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. really. So what this does is it brings people to the table to say, look we've got to address this. And my own guess would be, if that's an irreconcilable problem, it will be handled some way on the side and everybody will continue with the work and owner authorized change orders will continue to get -- change directives, will get processed and they'll get paid. Just my own practical experience tells me that's what will happen. REP. SHAPIRO: I appreciate your response. BILL FLYNN: Representative Shapiro, one other thing, when you foster unfairness on any kind of a business relationship in a construction project and you're forcing contractors to work without being paid properly, there's obviously -- you're obviously forcing people to now become nitpickers too. This is what's generating, I believe, the failure -- the failure for the public entities and the private entities to make proper payment fosters disagreements throughout the project. It creates issues that, in other cases, would go away. So it -- you're -- the flawed process generates more adversarial relationships on a project that generate delays and generate claims, that all arrive on the owner's desk at the end of the job and cause litigation, arbitration and prices of construction projects to skyrocket. If these projects were forced to be -- everyone was treating each other fairly and openly throughout the project, I doubt you would have half as many claims and delays that you have now. 114 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. REP. SHAPIRO: Okay. Thank you very much. •BILL FLYNN: Thank you very much. REP. SHAPIRO: Representative Taborsak. REP. TABORSAK: Thank you, Mr. Chairman. Just briefly -- STEVE KAPLAN: Sure. REP. TABORSAK: -- in the interest of saving time, I'm going to rattle off just a few last thoughts and if you can address them to the best of your ability. In Connecticut do we have kind of an industry standard construction contract. Do we use, you know, the AIA? STEVE KAPLAN: Yes. REP. TABORSAK: That is yes. STEVE KAPLAN: Standard, and if not the AIA, there are standard terms. These change order and change directive terms are in virtually every -- every private and public contract that will be out there now. REP. TABORSAK: And the contract that you're speaking of in those terms, do we kind of adopt in Connecticut the national industry standard in construction contracts? Are we -- is that your opinion? STEVE KAPLAN: Yes. Yes. REP. TABORSAK: So if we were to pass this bill into law, would we be creating a new standard? Would we be kind of making Connecticut a different place to do business, at least on that aspect. Would we be deviating away from 115 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. this kind of construction industry standard contract, and if -- if so -- STEVE KAPLAN: I haven't canvassed law in other states, so I just can't answer what other states do specifically on that issue. I would think though, as we've done with Senator Colapietro in the Fairness In Construction Financing Act that last six or seven years, and we've worked closely with him on that and the construction industry thanks him immensely for that work. We would -- we'd be setting a new -- a new and terrific standard of fairness in the construction industry by doing this, whether or not anybody else in the country does it or not. And I sincerely believe that. It would be something which would really be extremely beneficial to the industry here overall, I mean, all aspects of the industry. REP. TABORSAK: Okay. And it's your opinion that it wouldn't make Connecticut a more hostile place to come develop and things like that? STEVE KAPLAN: Oh no. In fact, you would have -- competition breeds quality and breeds price, I firmly believe. And when you have a fair set of rules governing the construction industry, you're going to have more and better contractors wanting to business in the state and that's what private and public construction really is based on is healthy competition. And I really think it would promote that. REP. TABORSAK: Thank you. STEVE KAPLAN: Thank you. SENATOR COLAPIETRO: Thank you Representative 116 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. Taborsak. Thank you, Steve. I don't know whether I should name these next three or four as the unholy alliance or just call them separately over here. It's got the union, nonunions. If you want to, you can come up together. There's five left on the samme -- the very same bill. Dan Filomeno, Glenn Marshall and Joe Epifano, and there's one more on that and that's Mike Miconte. If you all want to come up, it's okay. Glenn, you don't have nothing to do, is that what you want'to do? Do you want to sit down and stay there? DAN FILOMENO: Good afternoon Senator Colapietro, Representative Shapiro. My name is Dan Filomeno. I am on the board of the AGC Connecticut and the Subcontractors of Connecticut. I am an interior contractor, subcontractor for a union company. We do acoustical ceilings, dry wall and carpentry work. I employ between 80 and 200 employees. And let me say this, this whole thing started in December of 2007. Talking to several subcontractors and everybody was becoming very, very frustrated in the system and how things are progressing in our business. Subcontractors are the people that build buildings. We built this building. We build our hospitals. We build our schools. We are the ones that spend the money. We employ the people. We pay our payroll weekly. We pay our benefits weekly. We buy materials. We keep the economy moving in Connecticut. The biggest -- so what we did is we asked subcontractors to come in and talk about issues in our business that hamper our business. We've had 80, 90 subcontractors and contractors come in and the biggest problem 117 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. that we see in our industry is the processing of change orders. Change orders 10, 12 years ago were one-tenth the amount they are today. I don't know if it's the quality of the drawings today, the speed at which the jobs have to be completed, but there's a lot of gaps in the construction process and in the drawings. In our contracts it tells us that we have to proceed with change order work, a CCD, time and material, change order, whatever nomenclature they like to call it, that we have to proceed and do that work. That's fine. That prevents a project from being held up and it was meant to fill the small cracks in between jobs that fall through the creases. What's happened because of the lack of drawings and the speed at which we have to do these jobs, that crack is now the size of a -- you can drive tractor trailers through that crack. It's massive. The amount of change orders -- I have a person in my office and all they do is process change orders. Trust me, I don't want change orders. I want to get in, I want to build the building, I want to get out. We don't make money on change orders. Change orders come to us and the contractors have this thing nailed down. You have to show them your payroll. You have to show them your material supply slips. Then they tell you you're only allowed 10 percent markup on it. Overhead on jobs run roughly between 15 and 20 percent. I'm losing money right off the bat. So this is a huge, huge problem. Attorney Kaplan pretty much explained it, and Mr. Flynn, of the nuances of how this really works. But, for example, I was on a major job. Within 15 months we racked up a million three in change orders that I wasn't getting 118 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. paid for, because they haven't processed the paperwork saying change order and hand it to me. What happens is, at the end of the project, they sit you down and I call it extortion. What happens is, well, we'll give you a million one. We can pay it right away. You know some of these things might not qualify. I don't know if I can get it by the owner. But in the meantime they've told you to do it and they had you spend your money. The extortion comes out and it's for their own profit a lot of them. I'll say this, the contractors that are very above board that do run the jobs correctly have no problem with this. Also the owners, we've talked to several owners. We've brought owners in. We've brought contractors in. We've brought a lot of people in to discuss this bill. This isn't something we just about over night. This has been going for a year, year and a half, and we've tried to make it as fair as possible. But when we're asked to spend our and perform work, we'd like to know when we're going to get paid and how we're going to get paid and how much we're going to get paid. I don't think there's any other business out there that people are required to spend their money not knowing when they're going to get paid, if they're going to get paid, and how much they're going to get paid. And this law, although it doesn't solve all the problems out there, it does at least help address problems, bring them to the table right away and solve the issue and keep the job flowing and keep cash flowing. With the tight credit limits today and the credit market, what's going to happen now is-, you know, We can't go out and borrow money like we used to. And, you know, at the end of the year, you're holding $2 119 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. million in unapproved change orders that you can't bill for, and although" you expense for them, your financials don't look too well, you're not going to get proper bonding and you're not going to be able to get lines of credit to keep your business going. It's going to put us in perils. We're going to be out of business, and we're the ones that are building the buildings. Thank you. SENATOR COLAPIETRO: Any further questions? I think we got that pretty well down pat. Anybody else have anything to say? BILL CASARELLI:: Good afternoon. At the risk of having everybody's eyes glaze over on this one because we've kind of beat this one to death on you. I'd like to offer just a few more points if I may please, to address some of the issues that came out in the discussion. Now, there was a discussion about how -- could this bill possibly encourage delays. We as subcontracts don't see how that is possible. As a matter of fact, what we find is that by the lack of payment to subcontractors, in fact, the owner and the entities that pay us encourage delays. Now how do they do that? Well they stretch our organizations to the breaking point. That's not right. There's a few other little things that they do that don't help us. By not paying us, we can't increase our staffing, which Dan just mentioned, to be able to manage these projects. Because it's not just one change order that comes out. It's 20, it's 30, it's 40, and you have to add staff in order to be 120 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. able to manage that and if you can't get paid for it, you can't add staff. And that really doesn't help the project to move along either. All right. One of the other problems that we have is that when we don't get paid, it attenuates the project closeout. We don't --we don't really respond all that well to these little final punch lists that seem to keep cropping up. That doesn't help you guys get your building and it certainly doesn't help us get paid because they hold these punch lists over our heads at the risks of receiving retainages and outstanding change orders. By not paying, you're hurting yourself a lot more than as if you did pay and you got the cooperation of your subcontractors. There is another issue that came up about whether some of our public entities, UConn, DPW, they seem to be somewhat opposed to this. And I personally have to tell you, I'm a mechanical contractor, my office is in New Britain, Connecticut. I've done work, as Dan has, and as Joe has, and as Mike has, and as Paul Dinto and Cesar has pointed out, even with his own subcontractors, we've all done work for the state privately and for the federal government. Now look, our taxes pay for UConn and DPW to be there. If you go out and hurt us and you don't pay us, you hurt our organizations. You're going to put our organizations out of business. That's not very good for an economy where you need taxpayers in order to be able to support these entities. I truly think that they should support these things because it's a fairness item, and if you guys could do something to help us to get this passed, it would not only help you guys as State Representatives with your own buildings, but it will also help you 121 February 13, 2 009 000(<69 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. constituents so that we can continue to pay taxes and so that we can continue to support these things. I thank you for your time. I hope I beat the three minutes. SENATOR COLAPIETRO: Thank you. Thank you for your testimony. Anybody else have any questions? Thank you for your testimony and thank you for your concern. Glenn, did you have something? GLENN MARSHALL: I just would to add, Senator. I have my testimony, it was brief, but I'll just talk from my perspective as District Manager and President of the Carpenters Union, and we have over 1600 contractors, many of which are small companies. They're not highly capitalized, and they put a lot of carpenters and construction workers to work. And, I'm very concerned in these tough times right now to repeat what Dan Filomeno said, it's very difficult. We're hearing it from our small contractors that they can't get credit lines and money from the bank to put the money out to pay the workers, pay the vendors and pay the benefits. My concern is, it's about fairness and if something isn't done, we're seeing more and more contractors defaulting, not paying the benefits, you could potentially have a lot of small businesses and companies out of business and also a lot of workers who don't have health care and retirement benefits that will be paid and they'll go without it. And we know what a problem that is. So it's all 122 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. interconnected. And it is a fairness thing. And I think in a lot -of ways the system isn't working, and these are the only guys, they're at the bottom of the totem pole. They put the money out. There's a lot of unscrupulous contractors out there too, I won't get into names, but I've seen were they go in and they do this purposely knowing at the end, well, you know what, I'll get 50 cents -- I'll give them 50 cents on.the dollar. They don't have the resources to hire attorneys. It'll cost them too -much. And we had that happen at one of our mill cabinet shops, do an install on a school down in Milford a few years ago. And that was the beginning of the end for him. Within a short amount of time he ended up going out of business. He burned our funds and it really wasn't any fault of his own, but he ended up going bankrupt and those people were without pension credits and monies in their annuity accounts and their health. So it is interconnected. And, by the way, Joe Epifano and I sit on our funds and deal with this all the time and it is a problem. We hope that you'll take this into account and we could come up with some bill that give relief to these subcontractors. Thank you. SENATOR COLAPIETRO: The point is well taken. Anybody else have any questions? Thank you very much. Appreciate it. GLENN MARSHALL: Thank you very much. SENATOR COLAPIETRO: Anybody else? 123 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. JOE EPIFANO: Are we done? SENATOR COLAPIETRO: Are we done? I thought we were. JOE EPIFANO: My name is Joe Epifano. I'm with Epifano Builders. I'm a cofounder of the company. We started back in 1986, my brother and I. Actually, I'm a tradesman myself, coming from a carpentry background. We've been in business for 25 years or so. We sell -- we're a major subcontractor and small general contractor, and we self-perform just about any trade you can think of except mechanical, electrical and plumbing. We're a union contractor, signatory with six unions. And I happen to sit on the -- like Glenn said, the trust funds the Connecticut carpenters health, pension and annuity trust fund, where I see the effects of the nonpayment, what it has on the families and on the funds. I'm not going to talk about all the notes I have here because I think everybody has already hit on them. But, Representative Shapiro, asked a couple of times to a couple of the people that came up here where is the breakdown? And after a year and a half of going through this with the' group, what we decided to do as part of the bill, as you see, is to implement a monthly statement. And I think by the implementation of this monthly statement would just cure a lot of the problems. What this really comes down to, to me, is a personal accountability issue, I think we see it in society today, people are just not performing their jobs. They're not coming to work in the morning and doing what they're 124 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. charged and paid to do and we all pay for it. Subcontractors especially, because we're funding the job. This monthly statement to me is a piece of the bill that will introduce a level of personal accountability that doesn't currently exist. Construction managers don't use it; general contractors don't use it. The statement, the monthly statement would be a vehicle to track the status of cost changes on the job that would be submitted and attached to our monthly requisitions for everyone to see, anyone who's involved on the project, subcontractor, architect, engineer, construction manager, GC, whatever have you and the owner. So if there's any disputes, they're flagged and they're pulled off of this statement. Okay. We're not looking to -- to include the disputed items on the statement, as Mr. Kaplan stated. He explained basically what this is, this bill is is extra work as authorized by the owner, by the construction manager or GC, the subcontractor performs the work and we have no vehicle to get paid. That vehicle, that only vehicle to get paid is an executed change order and that's were the breakdown is. That's really essentially what it is. By having the monthly statement, I think the net result is an improvement in the project schedule. The quality of the work would be controlled. The sequence of the work performed would be controlled. Submittal processes for products would come under control because everybody's looking at this sheet and saying, you know, who's court is the ball in? Where is the hurdle? Who's holding -- what is the hold up here? How do you get this job processed? How do we get this schedule moving and so on. So I think that this sheet, that monthly statement is 125 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. just an essential piece of this that gets rid a lot of the problems and litigation. Thank you. SENATOR COLAPIETRO: Thank you. Anybody else? Anybody got any questions? MIKE MACONIE: I'm sorry. Just let me -- SENATOR COLAPIETRO: Go ahead. MIKE MACONIE: -- have a few moments here and I promise I'll be very short. My name is Mike Maconie and .I'm the executive director of the National Electrical Contractors Association here in Connecticut. I represent a number of electrical contracting firms who employ a couple of thousand people here in the state, and again, I certainly can't be a eloquent as the previous speakers and they've gone over a lot of the details surrounding why we need this bill. And I think just in summary, I'd like to emphasize again that really we believe this is all about accountability and fairness, fairness for the owner, fairness for the contractors, fairness for the subcontractors and certainly fairness for the employees that work on these jobs. So, certainly we believe if you enact this piece of legislation, that's going to go a long way in bridging that fairnessvissue that's out there and certainly that is a big item that is discussed in the industry a lot today and in the world in general today. So we do ask for your support and I do appreciate you giving us the opportunity to speak here today. 126 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. Thank you. SENATOR COLAPIETRO: Thank you. Is there anybody hiding behind the counters over there anywhere? Thank you very much. I appreciate your testimony. Next would be Steve Guveyan. STEVE GUVEYAN: Mr. Chairman and members of the committee, Steve Guveyan from the Connecticut Petroleum Council, testifying in opposition to Senate Bill 671 On Fuel Additives. A much less controversial topic, I assure you, than change order testimony that you've been listening to. A simple bill, basically says that if you sell diesel fuel, home heating oil, off-road diesel fuel or power plant fuel you have to use an additive. Our testimony today is to tell you we already use an additive. Don't really understand the rationale behind the bill, because all of those fuels sold in Connecticut, they have additives. Some manufacturers, some sellers choose to use different types of additives and there are differences especially in diesel fuel. Some people will use a higher ctane content, which is like octane in gasoline, some will mark it with a little bit lower ctane content. Our testimony today is that's really up to the manufacturers and the sellers to determine between themselves. The market here has worked well. Our conclusion is that we have not heard of any difficulty in this state pertaining to additives for any of the fuels being discussed. 127 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. If it's an additive problem, especially in cold weather, you're going to know. All of a sudden your oil burner's not going to kick on. If you have a diesel-fired car, your car is not going to be able to start. If you've got power plant problems, your engineers are going to get called in at 2:00 in the morning. We've not heard of anything like that. We do note in our testimony that there are differences between additives, and we tried to outline what those differences are. Some of them can't be put in pipelines. Some cannot be combined with others. Some are more expensive than others. Some are just better than others. So our view is the system has worked very well here. No additive problems at all to our knowledge. Let that continue. Let the buyers and sellers choose. And by "buyers and sellers" I mean large oil companies and heating oil dealers or large oil companies and terminal operators, let them choose what works best. There's been no history of problems here. Let that continue, and I think the market will be well served. Thank you. SENATOR COLAPIETRO: Thank you. Any questions from the committee? Hearing none, thank you very much for your testimony. I made a booboo Rupi. Who's Rupi? Am I saying that right? Rupi Rupwani. RUPI RUPWANI: That's correct. 128 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. SENATOR COLAPIETRO: How about that, huh? RUPI RUPWANI: Good afternoon Senator Colapietro and Representative Shapiro. My name is Rupi Rupwani. I am a real estate broker; been licensed since 1972. I oppose this House Bill 5401, Time Share Referrals. I wish Representative Mazurek's experience was that simple and Representative Esposito's comments were that simple when they mentioned why the time share industry should be benefited or not. The thing that I'm wondering, why are we trying to change the law of the land to favor the few? If -- if you try to change the law and let these people become the referral people, you are going to give the opportunity to a time share industry, which is right now . the most uncontrolled selling part in real estate that is going to have -- they're going to change their model of doing business on the base of tupper party -- Tupperware parties. That's what they're going to do. They're going to tell if I own a time share, and if I go there, and if I'm not happy and if I want to get rid of that, they're going to say, well, why don't you have a party, find a buyer, not only we'll try to sell your time share, but we're going to give you something back. So if I have a built in that interest, why will I tell somebody anything what is wrong with their resort? Right now, today, the way the market is, I'm getting three e-mails a day from time share people. I have never owned a time share. I have no intention of buying time share or selling time share. Before coming here this morning, I just went to check and see what that e-mail does. 129 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. You go in that e-mail site, it wants all your information, who you are, what you are, what kind of resort you own, how much you paid, what you're trying to sell it for, and they give you the front sale pitch that we are going to charge you $150 to give you the real market value of your time share, which is not true. You know, they -- they really take you to the cleaners. If you guys are not getting in time share e-mails, you are lucky. If you want to give me your e-mail, I will forward you those e-mails so you can see yourself that how this industry is operating. You know, if you're going to change this and let the few people in the state of Connecticut try to make few bucks, you're going to open up, you know, like a floodgates for these people where they're going to say, well you can have a time share party. You can have a time share party. I won't be surprised if they are trying to do this because the people are asking some kind of referral fee and they're say, gee, we can't give you because Connecticut is one of the two states that have forbidden us to do that. But when this was done in Connecticut to forbid to do that, you people were there or somebody else like you was there, they must have found some reason to put this law in the place, and I don't think this is the" time to change it. Believe me, I love changes. The change has been the principle of my life, but I do not like this change because it is not going to benefit the public. And I won't be surprised that if you do change the law that within four or five years, you're going to realize we made a mistake and we should have listened to Rupi and not change the law. I'm done. 0001*78 130 February 13, 2 009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. SENATOR COLAPIETRO: Thank you. We appreciate your comments. Just for your own information, this committee will decide whether we're going to do the bill or not. It's not we're going to change it or we want .to change it. That's why we have public hearings for people like you to come in and say why we should or shouldn't have the bill that we had before us, so -- RUPI RUPWANI: But this is a very -- Mr. Chairman, this change is going to hurt the name of the state. You are not making any money. The state needs the most money they can get, and even if you give a break to 100 people or 200 people, that is less money for the state. So why are you thinking of about taxing the other people but giving the tax break to few. SENATOR COLAPIETRO: Well I think I just explained that. We're not thinking about doing anything. We're listening to people like yourself to tell us whether we should or shouldn't or why we should or shouldn't do this particular bill. We haven't made up our mind and that's what public hearings are for. RUPI RUPWANI: Thank you. SENATOR COLAPIETRO: Thank you. Any members of the committee have any questions? Thank you very much for your testimony. Chris Herb followed by John Butts. CHRIS HERB: Good afternoon. My name is Chris M ts} I Herb. I'm the associate director of the 131 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. Independent Connecticut Petroleum Association. I'm here today in opposition to Ssnaf.p Rill 671, The Diesel Additive Bill. Just for way of background, ICPA represents 550 petroleum marketers in Connecticut, the vast majority of which are home heating oil dealers and gasoline distributors. A few concerns of this bill. First of all, about a quarter of the supply in Connecticut is picked up out of state. A mandate for fuel additives to be injected in the fuel supply would not cover all of the fuel that's distributed in Connecticut. Several of our members have to pick up fuel in Massachusetts, Rhode Island and New York, so we would have concerns about the ability for a marketer in North Grosvenordale to pick product and have to travel a great distance to get it, which would place additional costs on their -- in their company. The second one is any particular additive that would be mandated would have to make,sure that it complied with not interfering with engines of various models, makes, years, so we have a concern. Not only do we sell this fuel but we drive trucks and trucks of various ages and makes and models, so we would say that we'd have a concern with mandating a particular add it ive so that it did not interfere with the operation of our vehicles. And finally, the price of fuel. As I said, Connecticut is not a very large market and mandating an additive just for fuel that is sold in Connecticut could have price implications that are unintended by what I'm sure the intentions of the bill are. Finally, as Steve Guveyan brought up, there 132 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. is -- there are concerns about -- or that the concern about fuel performance and the need for additives is there. The vast majority of our home heating oil dealers and diesel distributors use various additives, whether it's for performance related, for biologicals, so the market is working. Fuels are being additized and there is no need for this bill. I urge your opposition to the Bill 671. If you have any questions, I'd be glad to answer them. SENATOR COLAPIETRO: I just have one question. What additive are we talking about that should be added to diesel fuel and what would it do? CHRIS HERB: Well, that's what our concern is. The bill doesn't say. We're not sure. We would have addressed that specifically if the bill was more specific. SENATOR COLAPIETRO: That brings me to another question. Why are you opposed to it if you don't know what it says? CHRIS HERB: Well, obviously, the unknown is -- is scary. SENATOR COLAPIETRO: It might be cheaper; who knows. Thank you. CHRIS HERB: Probably not. SENATOR COLAPIETRO: Thank you. Anybody else have any questions? Hearing none, thank you very much. John Butts. 133 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. JOHN BUTTS: Senator Colapietro, members of the -- distinguished members of the committee. My name is John Butts. I'm the assistant executive director of the Associated General Contractors of Connecticut. We are a division of the CCIA, the Connecticut Construction Industries Association. I'm here to testify in favor of SB 785. Somehow I didn't get into the holy alliance, but I wanted to register our support for the bill anyways. As an organization that represents general contractors and construction managers, as well as subcontractors, we wanted to lend our support, our wholehearted support, for this bill. I thank you' very much, and I'd be willing to answer any questions you may have. SENATOR COLAPIETRO: Thank you. Any questions from the committee? Hearing none, thank you very much. JOHN BUTTS: Thank you. SENATOR COLAPIETRO: Appreciate it. Mike Monarat from my hometown. Mark, did you use to play little league for me? MIKE MONARAT: No, that's (inaudible). SENATOR COLAPIETRO: Okay. Mike. Mike, right, I'm sorry. MIKE MONARAT: Hi, yeah, I'm Mike Monarat. My brother's Mark. He principal of St. Joes Grammar School in Bristol. A VOICE: (Inaudible.) 134 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. MIKE MONARAT: I'm sorry. A VOICE: (Inaudible.) MIKE MONARAT: Those are my nieces and nephews. Yeah. REP. NICASTRO: Through the Chair, that was Miss Bristol or something like that? MIKE MONARAT: Yes. Yeah. REP. NICASTRO: Yeah, it was. All right. Okay. MIKE MONARAT: Actually, I'm from Waterbury. I'm the Monarat from Waterbury and I run Power Fuels in Bristol, just took over Gaski's. This is new to me so I guess I want to thank Chairman Colapietro and Shapiro and all the other distinguished gentlemen and ladies for hearing me out on my support of SB 318. Back in June a special session I guess changed the minimum delivery for home heating oil from 150 gallons to 100 gallons. That was very disappointing for myself personally in the business and many colleagues in the business because to this day, I don't understand what that accomplished, except for the fact that it just put more cost and undue burden on the small home heating oil companies. Because it is -- I can't see in any way a cost savings for anyone, especially for the smaller home heating delivery companies. It actually costs more because you have to make more deliveries to try to deliver the same amount of oil at more of a cost. On average, it probably, depending on the size of a company, costs about $150 an hour to put an oil truck on the road. And if you have 135 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. some fantastic oil drivers, you might get five deliveries in that hour. So reducing down to 100 gallon delivery, if we're lucky, if we get a 30 cent per gallon margin at 100 gallon delivery we might make $30 on that delivery. So figure out the math and if we get five deliveries at $30 a gallon or $30 a delivery, I apologize, yeah, I wish we got -- I wouldn't be here if we were getting $30 a gallon -- that comes out to about 150 bucks and that $150 per hour put in truck does not really include the cost of paying the driver. So I guess I'm here to just make that a point. I know in the industry in oil market everyone tends to look at the headlines and the multi, multi millions that major oil companies, suppliers, distributors, brokers, but I think in all of that, a lot of times people forget the small retail home delivery that more and more and more we've read about have been going under. And it's even little things like this can cause it. So I guess I want to thank you again for hearing me out and I hope, you know, we didn't have a whole conglomerate. We could have probably put together 550 small dealers from around the state to come and say the thing, but, you know, I took time out and hopefully your gentlemen and ladies will take this into consideration. If anyone has any questions? SENATOR COLAPIETRO: Thank you for your testimony. We do have a couple of questions from the committee; one from Senator Witkos and Representative Taborsak as well. SENATOR WITKOS: Thank you, Mr. Chairman. And 136 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. thank you for taking the time out of your busy day to come up here and testify before the committee. I think part of the reason why a proposal like this is before us is because at the time the cost of the end user's price of the home heating oil, whether it be $4 a gallon, people just couldn't afford that extra $50 that would be required to go into their tank. But I would ask you, I'm aware that some businesses do deliver the $100, especially if they're their customers and they're on automatic. So do you think that the bill is necessary in that the free market of everybody else the competition doing it will force your company to do it as well? MIKE MONARAT: Well, I guess you could use an analogy. If you go to Costco1s and BJs and if you want to get one roll of toilet paper, you can't, right? You know, you have to buy it by the bulk. I don't buy by the bulk, so I go to Stop & Shop. There are many, many smaller one truck COD smaller operations that they do 100 gallon deliveries because they don't have, like in my case an 80 or an 85,000 dollar insurance cost every year. They don't have the overheads. You know, they work on a week's pay. So to me the market would take care of itself. If someone calls me and says they want 100 gallon deliveries and I say I'm very sorry, I only can make 150 gallon delivery. There are many out there in the market that would do the 100 gallon delivery. And if I choose not to and lose that account, if that's, you know, the way it's to be then that probably should be the way the market should handle it because you know there are plenty, but to be told, I guess in essence, how to run my business, I 137 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. can -- I have to make that delivery. Then kind of like that would be like going to Costco and BJs or whatever and saying, you know, no, you know, you can't just sell, you know, 12 rolls of toilet paper in bulk if somebody comes in here and wants to buy one roll, you have to sell it to them. So I -- and that market works okay. And I'm sure there's a whole bunch of analogies. And I would think that that would be the same case here. It's been like that -- I've been in the business 25 years and I even knew of some little guys they park their truck in the back yard and they were making 50 gallon deliveries and they would charge a $50 delivery charge and they would get it. So, you know, it sometimes doesn't make a lot of sense to me where anything really was gained. And, yeah, I guess in the consumer you would think it was because the wouldn't of had to pay, you know, those exorbitant fees. But on the other hand, on the smaller home heating back when those prices were so extreme, sometimes people don't understand the complexity and understand when I brought a load of 7500 gallons of oil into my terminal that cost me $11,000 the prior year, that same load that I brought in cost me $35,000. And you know what? I made the same 30 cents. You know, that -- those are things sometimes people don't really either see, know or understand. So if I need to get, you know, I getting the same 30 cents, but I need to deliver 150 gallons so that instead of $30, I may make $40 to cover that $150 expense for my truck with five stops, then the bill back in June says no, that doesn't make difference. You know, the poor homeowner has to have some kind of 138 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. recourse here and because the cost was so high, no, you have to deliver them 100 gallons. You know, talking about fairness with all those group of guys before, I don't know how fair that is. I really don't. SENATOR COLAPIETRO: Thank you, Senator Witkos. T Representative Taborsak. REP. TABORSAK: Thank you, Mr. Chairman. Thanks for coming up here and testifying today. I can't recall, and maybe you can help me remember, when did the reduction in the minimum cap go into effect? Do you know offhand? MIKE MONARAT: I believe it was -- let's see, I want to say October. REP. TABORSAK: Okay October of 2 008. MIKE MONARAT: 8, yeah. REP. TABORSAK: Do you know how many deliveries you do in a given year roughly? MIKE MONARAT: I would say I average personally probably, through the winter months, about 50 deliveries a day, 50 and if sometimes a bring a part-time driver in so between 50 and 70 deliveries a day. REP. TABORSAK: And that's during the winter months? MIKE MONARAT: Yeah. 139 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. REP. TABORSAK: Okay. So, is that --do you include November, where do you start? I'm just trying to -- MIKE MONARAT: Yeah, probably, I would say the -- yeah, probably from November to the end of February, March. REP. TABORSAK: And do you know how many deliveries you've made this winter below the 150, the old threshold. Do you know how many you've made in the 100 to 150 range? I'm just trying to get an idea on how many -- you know, how -- what the frequency is of people actually, you know -- MIKE MONARAT: Asking for the hundred. REP. TABORSAK: Asking for the hundred gallon, yeah? MIKE MONARAT: Okay. Probably, I'm just going to take a wild guess here because I've never really thought about that. But I'm going to say maybe 5 percent more, you know, roughly because the majority of my customers are automatic delivery customers. REP. TABORSAK: Okay. MIKE MONARAT: And on automatic the degree day and K factors that we do projected deliveries, and all of our deliveries on automatic delivery are projected between 160 and 180 gallons. It is the customer -- we'll call a customer and/ or the COD customer that call in for a specific delivery would be the ones that would fall into the minimum. You know, those are the ones that are looking for a minimum delivery. 140 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. REP. TABORSAK: And your guess is that's about 5 percent of your business or of your customer base? MIKE MONARAT: Yeah. Yeah, five maybe a little more. REP. TABORSAK: Okay. MIKE MONARAT: And. like I say, if I went back and looked at numbers, I may have to -- REP. TABORSAK: Could be different. Sure, we understand. Okay. Well, thank you. Thank you. SENATOR COLAPIETRO: Thank you for your testimony. Any further questions? Thank you for your testimony. Appreciate it. Paul Dodge. Last but not least. PAUL DODGE: -- council, Cochairmen Colapietro and Shapiro for allowing me to testify in opposition to 671. I'll introduce myself, Paul Dodge. This is -- I've been aligned or affiliated with the petroleum industry for 42 years, have 3 0 years prior experience with two major oil companies and in the year 2 000, I formed my own fuel treatment additive business. I'm based in Middletown, Connecticut, and I service southern New England. So I'm intimate to the additive side of fuel treatment and somewhat intimate to the fuel side as well. So I want make a general statement regarding additives and to give you a little background as to what we're really looking at here and why I oppose this potential bill is that all additives are fuel specific. Additives are formulated, they're chemicals, and they're 141 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. designed to do specific purposes to whether it's performance related or cold flow for winter operability. To give you a little, very brief, background as to the types of products that I sell, my summer treatment package will contain a combination of fuel additives that will address detergency in fuel, which is a -- which is cleaning agent; stability, which is very important on diesel; lubricity enhancement, which is very necessary today due to the lower sulfur fuels; corrosion is always a potential problem with fuels in storage tanks. You want to remove a certain amount of water from fuel, so you use a water dispersant. And in some cases, a ctane or performance-improving additive, and that would formulate or make up what is -- what I would call a summer treatment fuel additive package. On the winter side, you're looking at different types of additives that go into the formula. You need an additive that will improve cold filter plug point of the fuel due to waxy -- potential waxing in cold weather operability. You need a pour point depressant to lower the pour point of the fuel itself. You need a wax dispersant; you need a water dispersant; a deicer, which will actually reduce the freeze point of any moisture or water in the fuel, and in most cases, you would add a corrosion inhibitor. The reason I mentioned these specific items in the additive packages in both summer and winter is that, in almost all cases that I'm familiar with, these additive or chemical components are highly tested by ASTM regulated laboratories, because of their potential for incompatibility. So when you're looking at the bill 671 that would require a particular 142 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. additive to be used in diesel fuel, I'm diabolically opposed to something that we really don't know anything about. Thank you for your time and if you have any questions at this point, I'd be more than happy to address them. SENATOR COLAPIETRO: Thank you very much. CHRIS HERB: Thank you. SENATOR WITKOS: No questions? Thank you. Chris, I think we missed you on one bill. We were just changing it. We should have announced it, if you had a couple of things to say about it, you didn't.have to wait in line and get back in again. But go ahead. CHRIS HERB: Oh, okay. Sorry, I'll be quick. Again, Chris Herb, ICPA. We represent heating oil dealers and gasoline distributors. I'm here in support of Senate Bill 318. I know that there were a couple of questions. I'll make quick points about this. Senator Witkos actually asked a really good question about the concerns that the Legislature had during the special session about, we're actually facing, it looked like at that time, we were racing to $5 a gallon. And we understand what the intention of the Legislature was by reducing that, but at the end of the day, a home -- a home that uses a 1,000 gallons is going to use a 1,000 gallons whether it's delivered in 100 gallon increments, 150 gallon increments or more. So what the bill effectively did was, it required dealers to put their trucks on the 143 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. road more, increasing their labor costs, increasing the costs of wear and tear on the truck, the diesel that was going to those was well over $5 at time. You increase diesel emissions. You increased traffic on local roads. And then actually this morning, I didn't have this originally part of my testimony, you've actually increased the risk for accidents and slip and falls by drivers because they're obviously pulling hoses across icy terrain. So, just, you know, in summary what the bill really did was it increased the cost of product for consumers because those additional costs could not absorbed by local dealers. Industry surveys -- and this is in my testimony -- place the cost of delivery at about $32 per house. A 1,000 gallon user for 10 deliveries is about $128 more per year. You've reduced that. That equals about 13 cents more per gallon if you were able to do a more efficient delivery of approximately six. The numbers are all approximates. You know, we're probably within a couple of percent off either way. And it also depends on the type of business. A full service heating oil dealer has higher costs as Mr. Monarat testified to earlier, versus the COD guy who might be working at Sikorsky all day and have a truck and make his deliveries at night. So those numbers are -- can vary depending on the type of operation. But, as I said, at the end of the day, lowering the amount of fuel that's delivered per delivery, does increase costs and ultimately increases the cost of the product. It does not save the consumer. And with over 500 dealers in Connecticut, there's a lot places for consumers to go. The full-service 144 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. oil dealer whose costs are not conducive to delivering 100 gallon deliveries, there's plenty of options. There's lots of competition; there's consumer choice. This isn't a utility where the consumer can't choose to go somewhere else. And if a company wants to limit their offerings, then they'll lose those customers. So let the full-service guys who want to deliver 150 gallons or more compete for that customer base, while other companies who are will to make those 100 deliveries -- 100 gallon deliveries compete for that customer base. So we just ask to reinstate 150 gallon cap that was established in 1979 so that dealers can work with their customers to determine what's best for them. Thank you. If you have any questions, I would be happy to answer them. SENATOR COLAPIETRO: Thank you. I believe we have one with Senator Witkos. SENATOR WITKOS: Thank you. I just wanted to comment on a comment that you made and actually solicit some feedback. While, it's true that you're going to use a 1,000 gallons at the end of the winter season or the end of the year and it doesn't matter when get it, the cost factor is what I think we were aiming at, because it got so bad. I know people undoubtedly that they would go to the gas station and purchase diesel fuel and dump it into their oil tanks cause they just couldn't afford the minimum delivery, which, if they were behind on their oil bills, they were now COD. And it got to the point where 145 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. some of these folks had to heat their homes. They had no other means of doing so, and so I think we have to bring the human element of the fact that, you know, we harsh winters here in Connecticut. And we -- you're still going to get the same amount of service, you're going to get -- maybe the cost of business may be a little bit more. I agree. You know, whatever we can to move it back up to the 150 mark, but there's some individuals that just can't -- can't cut it. That $50 increase per gallon cost is just unreachable for them. And it's that element somehow we've got to protect to make sure that they pay their bills and may be late, but just a carte blanche and say well you're going to use the $1,000 anyway, it really shouldn't matter; it just puts the cost on us. I found that a little concerning because I know that people are desperate. And this example that I gave you, which is an illegal act to do, they did because they could afford to buy 10 gallons of diesel fuel and dump it in their oil tanks to get them through a couple of days. And so people are going whatever they can to make ends meet. CHRIS HERB: And I hope you didn't misinterpret my comment. I'm not saying that -- what I am saying is that there are -- there are so much -- competition is so vibrant in Connecticut, it is unlikely that a consumer anywhere in Connecticut wouldn't be able to find a dealer to make a 100 gallon delivery. And all this law did was put pressure on companies that had reduced costs through efficiencies to be less efficient and pass the cost onto consumers. So the same concern that you have for a customer who is paying more based on the worldwide price of crude oil 146 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. hitting all-time highs didn't affect -- save the -customer. They paid more over the long run. Because like you said, we didn't reduce consumption. Consumption remained stable. We just ended up your per unit cost increased by changing the law. Like I said, if you are a heating oil customer in Connecticut, you're going to be able to find somebody to serve you the way that you want to be served. And we're all concerned about those prices, especially companies that have to, as I said, our -- the people who own our companies don't -- aren't large multi-state utilities who work out of state. We're the people that you see at church. We're the people you see at the baseball game and the grocery store. They work with their customers. You didn't hear about heating oil customers going cold this year because heating oil dealers worked with their customers to make sure that they were properly fueled and warm for the season. Many customers from the previous season, where we didn't see nearly as high prices, didn't clean up their bills until October. So dealers are willing to spread costs over long periods of time to make sure that people are served well. SENATOR WITKOS: All right. But what we did see were individuals that were -- who had purchased into contacts at -- you know, you're lucky if the prices went down, but you weren't so lucky if the prices went up. So we did hear about those that bought in at contracts at almost $5 a gallon when now you can buy oil for $2.04 a gallon, so it's not as cut and dry. There's issues out there and I guess that's up to the consumer on how they're going to go and we're dealing with that issue now but, you know, there's two sides to every story, I guess. 147 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. SENATOR COLAPIETRO: Thank you, Senator. And I believe Representative Taborsak had a question too. REP. TABORSAK: Thank you, Mr. Chairman. Good to see you. Thanks for coming today. You may have been here when the gentleman who was just recently up that owned a fuel delivery company spoke. I asked him -- I was trying to gauge to some extent what percentage of the heating oil buying population actually went from, you know, the-buying 150, buying 200 gallons down to 100 and he said 5 percent of his business, it was an estimate, may -- you know, may have purchased somewhere in that range, in that new range. Can you give us any idea on, you know, what that percentage would be kind of industry-wide in Connecticut. And also, I mean, it seems to me, just from -- you know, and echoing Senator Witkos' comments about the constituent who had to go out and buy diesel fuel, it seems like it was a small population of people that I mean really were stuck. It affected all of us that were stuck in a situation like that that we helped, and so it would follow that it was a small population that your industry had to make that accommodation for. Can you try to give us some statistics or anything to kind of gauge how it affected the industry? Thank you. CHRIS HERB: Well, we were -- we're still in the midst of the heating season, so we haven't taken a full industry survey. When the members -- when we went out to ask the members what were chief concerns, this was the number 148 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. two concern after the contract issue. So I can tell you that it is on the minds of heating oil dealers. I was in Danbury yesterday at Norbert Mitchell who said that they about 500 additional deliveries this year at the 100 level versus the 150 gallon level. And that was just, I happened to be in the office and that issue came up. REP. TABORSAK: I'm sorry, not to cut off. Were they new..customers? You said "additional deliveries." CHRIS HERB: Existing customers -- REP. TABORSAK: Okay. CHRIS HERB: -- who last year would have taken 150 gallon deliveries requested 100 gallon deliveries, and obviously they complied with the law and made those deliveries, so and that's just the example of one. There's 700 million gallons of heating oil that's consumed in Connecticut every year so the exposure is tremendous. But I think the reality is is that it probably depends on the kind of area you serve whether it's urban or rural, probably has something to do with the socio economic makeup of that area will probably have to do with what those percentages are. At the end of the season, we will do an industry survey to see what that impact was, the economic impact on the cost of oil. But, like I said, in terms of what's on the minds of dealers, they were concerned about the increased cost to their customers by having to reduce -- to increase the amount of deliveries 14 ' February 13, 2009 bc\gbr GENERAL LAW COMMITTEE 10:00 A.M. because of the reduction in gallons. REP. TABORSAK: But we really won't know the impact of this legislation until the end of this winter season. CHRIS HERB: You'd have to get a full season under your belt. REP. SHAPIRO: Okay. Thank you. SENATOR COLAPIETRO: Any further questions? Thank you for your testimony. And with that, is there anybody else in the public that wanted to testify on any particular bills? Then I call this meeting adjourned. 0001498 ls>tate of Connecticut SENATE STATE CAPITOL HARTFORD, CONNECTICUT 06106-1591 SENATOR TONI BOUCHER ASSISTANT MINORITY LEADER TWENTY-SIXTH SENATE DISTRICT RANKING MEMBER LEGISLATIVE OFFICE BUILDING TRANSPORTATION COMMITTEE ROOM 3701 SELECT COMMITTEE ON CHILDREN HARTFORD. CT 06106-1591 CAPITOL. (860) 240-0465 TOLL FREE (800)842-1421 MEMBER FAX. (860) 240-0036 EDUCATION COMMITTEE E-mail Toni Boucher@cga clgov FINANCE, REVENUE AND BONDING COMMITTEE February 13,2009 -Chairman Thomas Colapietro, Chairman Jim Shapiro, Ranking Member Kevin Witkos, Ranking Member Penny Bacchiochi and other distinguished Members of the Joint Committee on General Law Thank you for the opportunity to provide testimony in support of SB 313^An Act Concerning the Liquor Control Act and Local Options Concerning Package and Grocery Store Beer Sales. There is ambiguity and inconsistency m Connecticut's genera)Tta®esTegarding"Kow a town can change their liquor ordinance. One section of the statute states the only role of the town electorate is what goes in the petition requesting a ballot question; however, another section indicates that the ballot must offer the electorate three options: allow no liquor, allow some liquor or allow all liquor. The General Assembly needs to clarify the proper ballot language when towns vote on a change to their liquor ordinance. Currently, the town of Wilton's liquor ordinance permits the sell of alcohol in restaurants only, but does not allow the sale in retail stores. Many residents of Wilton would like to vote on changing the liquor ordinance; however, the discrepancy in the general statutes has caused a problem with the ballot language. The Secretary of State has recommended we change the general statutes to clarify this issue and remove the current ambiguity. Thank you for your consideration of this proposal. Sincerely, Toni Boucher State Senator TBSB SERVING. BETHEL, NEW CANAAN, REDDING, RIDGEFIELD, WESTON, WESTPORT, WILTON o Printed on recydsd paper 0001*99 February 13, 2009 Co-Chair Thomas Colapietro Co-Chair Jim Shapiro Senator Kevin Witkos Representative Penny Bacchiiochi General Law Committee: I am submitting testimony in support AN ACT CONCERNING THE MINIMUM DELIVERY CAP FOR HEATING FUEL The Independent Connecticut Petroleum Association (ICPA) represents 550 petroleum marketers and their associated business in Connecticut. ICPA members employ over 13,000 people in our state and provide our fellow citizens with gasoline and heating oil. In the June 2008 Special Session the legislature reduced the minimum delivery of heating oil from 150 gallons to 100 gallons. The change in no way saved consumers money or reduced the amount of fuel used to heat homes and this bill attempts to fix that. For example, if a home uses 1,000 gallons of heating oil per year and the oil dealer is required to deliver oil in 100 gallon increments, it would take 10 trips to deliver all of the fuel to that particular customer. The same 1,000 customer who receives deliveries of 150 gallons or more will only need approximately 6 deliveries, reducing the number of deliveries by 4 per year. According to industry surveys, the cost to deliver one load of oil (regardless of the size of the delivery) is $32.00. An additional 4 deliveries would cost consumers $128 more per year or nearly 13 cents per gallon more based on our 1,000 gallon example. The negative repercussions of lowering the minimum delivery from 150 gallons to 100 is increased labor costs (additional driver hours), increased cost of operating the delivery truck (diesel fuel, wear & tear, etc.), increased diesel emissions and increased traffic on our roads to name a few. These increases in costs can not be absorbed by the oil dealer and are passed through to consumers. As the state attempts to become more efficient through budget cuts and consolidation of resources, they mandate, by law, to local family owned businesses a policy that does just the opposite by promoting inefficiency. The states 573 heating oil dealers know how to keep their customers warm and the most efficient way to accomplish that. Mandating minimums that promote inefficiency serve no one. ICPA asks that the General Law Committee support S.B. 318. AN ACT CONCERNING THE MINIMUM DELIVERY CAP FOR HEATING FUEL. Respectfully, Christian A. Herb Associate Director 4 000500 February 13, 2009 Co-Chair Thomas Colapietro Co-Chair Jim Shapiro Senator Kevin Witkos Representative Penny Bacchiiochi Dear Members of the General Law Committee, I would like to speak in favor of BHIJ^or318; raising the minimum delivery of home heating fuel from 100 gallons to 150 gallons. There is a fixed operational cost for each retail oil delivery, excluding the cost of the product. According to Gray, Gray, and Gray, the nation's premier accounting firm for companies in the oil heat and petroleum industry, their 2008 estimated operational cost for delivering an average residential drop of 150 gallons is $27.00. This figure is based on a delivering 2,000,000 gallons for the entire year. From these figures, you can calculate the total operating cost for delivering 2,000,000 gallons in 150 gallon drops, (13,333 deliveries), is $360,000. Now, lefs assume that an oil company will now deliver the 2,000,000 gallons of fuel oil in 100 gallon drops rather than 150 gallon drops. The company will now need to make approximately 6,700 more stops, (20,000) to deliver the same amount of oil. And, you would not be able to use the same $27.00 per delivery as your cost. The gallons being delivered per stop has dropped by 50%, and the amount of deliveries that would need to be made to deliver the same 2,000,000, gallons has increased by 50% as well. And although, the increased cost might not be a direct correlation, I am sure the cost would increase by at least 35% when you consider the factors involved; an increase in wages, payroll taxes, diesel fuel, and wear & tear on the vehicle resulting in additional repairs. Based on an increase in cost of 35%, the operational cost for delivering 100 gallons would be $37.00 per delivery, for a total cost of $740,000, in contrast to the operational cost of $27.00 per 150 gallon delivery for a total operating expense of $360,000. How does this impact the consumer? Directly, with a required increase in the customer's cost per gallon of fuel oil! If at 150 gallon deliveries, the operational cost was $360,000, or $.18 per gallon, ($360,000 / 2,000,000), the operational cost of 100 gallon deliveries would be $740,000, or $.37 per gallon ($740,000 / 2,000,000). That is more than double the 000501 expense! That would mean the retail cost of oil per gallon could easily increase by $.19 per gallon just to cover the increased cost while the oil company would not be adding any more to their bottom line. It would be necessary to pass this increased cost onto the customer. Of course, this is the worst case scenario-an oil company which delivers only 100 gallon drops to all their customers. This is most unlikely, but what would be a reasonable estimate if the customer was now able to order 100 gallons at the same cost per gallon of a 150 gallon delivery? Would 40% of the customers choose to have smallier deliveries for their own convenience-not because they actually cannot afford it? 60% of the customers? 50% of the customers? Would those same customers still choose to have 100 gallon deliveries if they alone absorbed the increased cost for the smaller delivery rather than it being passed onto all the customers in an overall increase in price? For customers who truly cannot afford the expense of thel50 gallon delivery, I believe it would be reasonable for the oil company to have the option to charge only that customer the increased cost that is required to deliver the smaller amount of oil rather than charging all customers more per gallon. In addition, if there were a small number of 100 gallon deliveries, the increased cost would not come anywhere near to the $.19 per gallon. Also, there are alternative ways for customers to pay for their fuel deliveries than on a per delivery basis. They could opt to be on a monthly payment plan, or budget plan, where their estimated fuel usage and estimated expense is divided by a certain number of months, usually 10-12, and they then pay that set amount each month. In this type of payment arrangement, inevitably the customer pays less per month than they would on a per delivery basis since the majority of oil is burned during the 6 months of October to March, and their payments are stretched out over 10-12 months. In many cases, the customer would be paying even less than they would for a 100 gallon delivery. In the end, if a customer who has signed onto a company's budget plan is having difficulty making their monthly oil payment, I would venture to say that the most oil companies would be willing to work with their customer through difficult times. The majority of oil companies in Connecticut are smaller family owned companies who have remained in business by establishing long lasting and sometimes even personal relationships with their customers. And long lasting relationships and repeat business is what is required for an oil company to be successful over the long term. It would also be against what most of these oil companies stand for, as well as a poor business decision, to choose not to work with a customer if they have suddenly encountered some financial difficulties when that same customer has helped the oil company stay in business over the years. 000502 I hope you will give careful consideration to raising the minimum delivery of home heating fuel from 100 gallons to 150 gallons. Especially in light of the current economic condition, if the unnecessary increased costs for making 100 gallon deliveries of fuel could be avoided, everyone would win-especially the consumer! Thank you for your time. ResDectfullv. Jennifer Tracey-Carlo, Owner Tracey Energy Services, LLC est. 1931 325 Howard Avenue New Haven, CT 06519 000503 BRISTOL RESOURCE RECOVERY FACILITY OPERATING COMMITTEE m TUNXIS1 UIVJ RECYCUNG OPERATING COMMITTEE (860) 585-0419 43 Enterprise Drive w (860) 225-9811 Bristol, Connecticut 06010 Fax (860) 585-9875 www.brrfoc.org Testimony of the Bristol Resource Recovery Facility Operating Committee And the Tunxis Recycling Operating Committee to the General Law Committee Berlin February 13.2009 Branford Proposed;Bilf324ri?CO 1434 Bristol AN ACT CONCERNING THE MANDATORY LICENSING AND OVERSIGHT OF TRASH HAULERS Burlington Hartland Good morning Senator Colapietro, Representative Shapiro and Members of the Meriden General Law Committee. My name is Jonathan S. Bilmes and I am the Executive Director of the Bristol Resource Recovery Facility Operating Committee and the Morris Tunxis Recycling Operating Committee. These two organizations are made up of 16 towns and cities in Connecticut representing over 10% of the state's population. We New Britain are concerned with the safe, environmental and cost-effective disposal of municipal solid waste and recyclables. In addition, since our Board is comprised of Mayors, Plainville Selectmen and Town Managers, we also represent tfre direct interests of our taxpayers, both residential and commercial. Plymouth Today I am presenting written testimony on Proposed Bill 324 AN ACT Prospect CONCERNING THE MANDATORY LICENSING AND OVERSIGHT OF TRASH HAULERS Seymour Southington We participated in all the meetings of the Governor's Solid Waste Hauling Advisory Group during 2006 and have testified several times here at the Capitol on this subject Warren matter. Our testimony today is consistent with our prior position. Washington We support legislation that ensures the integrity of hauling operations and encourages honest competition in the waste hauling business. We oppose legislation that does not Wolcott have a broad municipal/governmental exemption from licensing and fees. We also oppose legislation that creates potentially expensive state bureaucracies and requirements for private sector haulers who comply with local, state and federal rules and regulations. Municipal and public sector employees are not involved in predatory or anticompetitive illegal hauling activities since these individuals only work in the Printed on tree-free paper 000501* BRRFOC/TROC Testimony Page 2 February 13, 2009 towns/cities that employ them and only have access to the waste streams that the town explicitly controls. Any legislation should include a broad governmental exemption. We are concerned that the costs of the proposed licensing are not defined. Significant rule making is left to the discretion of the Department of Consumer Protection. Additional costs incurred by area haulers will be passed along to taxpayers. Whether these costs are offset by reductions from new found competition is not known. We feel that a Consumer's Bill of Rights has some merit and, to the extent any bill moves forward, it should include this concept Language protecting homeowners and businesses from predatory trash hauling practices has previously been proposed by the Attorney General's office. Finally, we would request that the commissioner, in conjunction with the Attorney General's office, be authorized to consider market share and competitive issues prior to approving any merger or sale of a licensee. Thank you in advance for considering our testimony on this important issue. Please contact me if you have any questions. ClOE^L COMPANIES LLC 800 South Sire-et POSo«916i Wa'rnair. Mi 0>45 lehruar> 12.2009 Committee on General l.aw Co-Chair I homas Colapietro Co-Chair Jim Shapiro Senator Kevin Witkos Keprscniative Penny Bacchnochi Re AN Af I' TO RHQUIKh I I It IJSI; OF FUEL ADD1 HVTS IN DIHSFI n 'FI soi n TOR run oprRATio\ OF MOTOR vrmci i s OR POWI R PI AN IS I o \\ honi It Ma> C oncern Global i) a large independent marketer of heating oil. diesel fuel and gasoline throughout the Northeast and mid Atlantic States \\ e own operate, or thrupul at 9 terminals in C onnecticut and at o\cr 50 terminals throughout the rest of our marketing area We are opposed to this bill lor the following reasons 1 L ack of empirical data demonstrating products performance C usiomcrs could he forced to increase luel costs without getting the desired results. 2 OFVI position on additive use Many OHM engine manufacturers have concern*, and m some cases void wanantees lor use ol additives that thev do not approve 3 <\STM conformance. Does the additive alter the D 975 or D396 fuel specs in an\ v\ av 4 In border areas this could make our fuel uncompetitive with fuel supplied from surrounding States thereby hurting Connecticut dealers. 5 There are compatibility concerns with premium additives we and others are currentlv using 1 hese additives are very important especiallv in v\inter because they allow the fuel to operate at the cold ambient temperatures experienced in our area 6 'I here is a lack of infrastructure to iniect additional additives and it is verv expensive to add that infrastructure www.globalp.com 800506 ll an additive perform*, users vwll hu\ it hoc a use it reduces their operating costs in one \ui\ or another W e do not need laws mandating the use of sui.li I hank \ou for >our consideration Sincere!). Ra\ (aincavage Vice President 000507 energ] Connecticut Steven Guveyan Petroleum Council Executive Director A Division of API 44 Capitol Avenue Suite 103-B Hartford, Connecticut 06106 Telephone 840-246-8846 Fax 860-246-6495 Email ctpetroleum@comcastnet www.api org Testimony Of Steven Guveyan, Connecticut Petroleum Council OPPOSITION TOrSB-671 fFUEL ADDITIVES BILL) February 13,2009 The Connecticut Petroleum Council, representing major oil companies, suppliers and terminal operators in the state of Connecticut, opposes SB-671, a bill requiring the use of additives. The bill appears aimed at a particular additive, although none are named in the bill. Each major oil company, supplier and/or terminal operator currently chooses which additives to add to diesel fuel (both on-and off-road), home heating oil and power plant fuel—the categories named in the bill. The additives vary, depending upon what the supplier wants to offer and what the customer wants to buy. Custom blending takes place in cities such as New Haven, which has multiple oil terminals. We strongly recommend the current system be allowed to continue, letting the market decide which fuels and additives should be sold—rather than mandating the use a particular additive. Currently, additives are used for a wide range of purposes: adding detergents, preventing bacteria, reducing nitrogen oxide emissions (NOx), reducing carbon dioxide emissions (C02), adding cold-flow properties for cold-weather use, and dyeing of fuel. Others are used for stabilizing fuel (in order to prevent separation) and de-icing. Points against the bill: • Some additives can be expensive, and can add up to 3 cents per gallon of fuel, depending upon which ones (singularly or combined in packages) are used. An additive such as cetane, used in diesel fuel to boost octane, is expensive, and some sellers prefer to use it in only small amounts. Others use more of it, and that may be reflected in the price. • Some additives cannot be shipped via pipeline. • Some additives may not be combined with other additives. • The bill makes no mention of specific testing criteria, or use of specific testing standards or laboratories to be used when evaluating additives. • Some additives are more effective than others in achieving their stated goals. We strongly recommend letting major oil suppliers, terminal operators and their customers choose which ones they wish to use. The history of additives used here in Connecticut has been excellent; we are unaware of any problems that have arisen from existing products. Thank you for considering our testimony. Please do not hesitate to contact us if you have questions or comments. An equal opportunity employer 000508 GASOLINE & AUTOMOTIVE SERVICE DEALERS OF AMERICA, Inc. 78 Harvard Ave, Suite 260 Stamford, CT. 06902-4543 OFFICE 203-327-4773 FAX- 203-323-6935 Web Site - www.gasda.org Our Members are responsible for selling over 60% of gasoline sold annually in the State of Connecticut! GENERAL LAW COMMITTEE PUBLIC HEARING Testimony on .Senate Bill 671 An Act to Require the use of Fuel Additives in Diesel Fuel Sold for the operation of Motor Vehicles or Power Plants By Michael J. Fox, Executive Director February 13, 2009 000509 Good morning Senator Colapietro and Representative Shapiro and members of the general law committee. My name is Michael Fox and I am the Executive Director of The Gasoline & Automotive Service Dealer's of America, Inc. a trade association representing over 450 franchise service stations in Connecticut. We oppose Senate Bill 671 AA to require the use of fuel additives in diesel fuels because it would create a special blend of diesel fuel only for Connecticut and substantially drive up the cost of gasoline for consumers in Connecticut. We have seen mandates similar to this from the Federal Government and in all cases, California comes to mind, the retail price for gasoline is substantially higher. We are not saying that fuel additives are a bad idea, on the contrary many of our members sell fuel additives to there customers who are very happy with these additives. The bill as written, would limit consumer choice, and for those consumers who do not wish to use any additive, drive up the price for their diesel fuel. Diesel prices are already at historically high retail prices due to the Federal Governments mandate for low-sulfur diesel use and the tooling costs associated with producing this new diesel fuel. We believe this is not the time for this type of new State mandate. 000510 20502 160th Street Greenbush, MN 56726 (218) 782-2575 1-800-248-4681 Statement of Central Boiler, Inc. before the General Law Committee Senate Bill 779 February 13, 2009 Sen. Colapietro, Rep. Shapiro and members of the committee: Central Boiler, Inc., is an industrywide leader in the manufacture of Outdoor Wood Furnaces. The company is located in Greenbrush, Minnesota, and maintains sales operations here in the state of Connecticut. We would like to offer comments on~ Senate BiIl"77,9;M/i Act Providing Consumer Protections to Purchasers of Outdoor Wood-Burning Furnaces. This legislation will provide purchasers with a three-day right of recission or cancellation on a purchase contract for an OWF. The bill also contains a provision granting authority to the Department of Environmental Protection to regulate OWF particulate emissions. We provide an option to homeowners who want to heat their homes using a renewable natural resource, wood. Central Boiler is very confident that people who buy an OWF have done the necessary research as to the initial cost versus the longer payback on savings from avoiding oil, electric or natural gas heating costs. Senate Bill 779 will provide consumers with a three-day right to cancel a purchase if they are having second thoughts. Central Boiler can accept this—although we really wonder if this bill is a "solution in search of a problem". We have been told by the Department of Consumer Protection that there has not been a single complaint on this type of issue. Thus we really wonder if the legislation is needed. Regardless, the bill contains two provisions that we believe are overkill. First, our dealers will have to include an "informational sheet" with the sales contract that is written by DEP. They will also have to get the purchaser to initial it and they will have to keep it on file for five years. Failure to do so could trigger a prosecution under the Connecticut Unfair Trade Practices Act. The other statutes that relate to a three-day right of recission (health clubs, dating services, buying clubs) do not contain a similar requirement for the inclusion of an informational sheet with the contract. We would therefore ask you to delete this provision (lines 45-55) as well as the violations language (lines 56-64). Finally, Central Boiler does have a number of ideas as to DEP's regulation of particulate matter and we will raise those issues with the Environment Committee once the bill is referred to them for consideration. Thank you for considering our postion on Senate Bill 779. 0005II CONNECTICUT ...to serve, strengthen ASSOCIATION and support Connecticut's Of PROFITS nonprofit community. Testimony before the General Law Committee SB 780 AN ACT CONCERNING THE SOLICITATION OF CHARITABLE FUNDS ACT. To increase the threshold gross revenue amount requiring charitable organizations to obtain an audit report by a certified public accountant. Senator Colapietro, Representative Shapiro and members of the General Law Committee, I am Ron Cretaro, Executive Director of the Connecticut Association of Nonprofits. Our association represents over 530 nonprofit organizations across Connecticut. i SB-780 proposes to modify the threshold by which a formal audit is legally required from the current level of $200,000 to $500,000. This affects organizations which, for the most part, receive no state funding. Those organizations which are recipients of state contracts in excess of $100,000 will still be subject to the onerous state single audit. A single audit is more complex and demanding to both the nonprofit and the accounting profession. Further, raising the compulsory audit threshold does not preclude funders such as foundations or the United Way from requiring an audit in return for receiving funding support no matter the size of the budget or amount of grant funds received. The beneficiaries of this legislation as proposed are the nearly 500 nonprofits which would save the time, expense and worry of an arduous audit process. More than a quarter or 148 of CT nonprofit members have annual budgets under $500,000. We do not feel the transparency or accountability of the nonprofit community will be compromised by adopting a higher audit threshold. The new IRS form 990 required to be filed by nonprofits with annual gross receipts of over $25,000 will provide additional safeguards to the public. Again, funding sources - e.g. the State of Connecticut, foundations or other entities - may still require an audit to be performed should it choose. I would further like to reference a second bill, HB 6433. An Act Concerning the Regulation of Charitable Funds which has been raised by this Committee but is not scheduled for a public hearing today. We are in concurrence with the sections of this bill recommendations related to audit timelines and the powers given to the Commissioner of the Department of Consumer Protection and Attorney General to waive an audit. Please know that our Association and its members are willing to work with the Committee on the reconciliation of the two similar bills before you. 90 Brainard Road • Hartford, CT 06114 • Tel 860.525.5080 • Fax 860.525.5088 • www.ctnonprofits.org 000512 iTNZonnecticu: Dignit-ar ;r5niirra!iD'" in' saiiOr: Margaret Smith-Hale Executive Director Written testimony of Margaret Smith Hale Board of Directors Fran Walenta in support of. SenatedBilr N of 78~0X Chairperson Susan Lather An Act Concerning the Solicitation of Charitable Funds Act Secretary Alice Egan - Treasurer Respectfully Submitted to the General Law Committee pam Brown February 13, 2009 Elizabeth bums Helen Denserr, I appreciate the opportunity to submit testimorn to the Denise Fleminc General Law Committee in favor of Senate Bill 780, An Gil Hayes Act Concerning the Solicitation of Charitable Funds Act. Marcia Hess Betsy Hope Robert LeMay On January 1, 2009 ITNNorthCentralConnecticut™ began Nicholas Mills' offering rides 24/7 to seniors and adults with visual Amv-beth Sirarc impairments in Bloomfield, East Granby, East Windsor, Enfield, Granby, Somers, South Windsor, Suffieid, Windsor and Windsor Locks. This alternative program is unique and uses a combination of volunteer and paid drivers who provide rides in private vehicles. There is no restriction on the purpose of a ride, and help is offered to carry packages, fold walkers, and open doors. ITNNorthCentralConnecticut™ is a community-supported nonprofit that does not use public dollars for operating expenses. Volunteers are used to keep the service affordable. Fares, memberships, car donations, walks and other resources fund the operation. Our average fare is only $9. Our budget for FY 2009/2010 will be $282,300. This includes 2.5 employees plus 2 part-time paid drivers. It will take four years of operations before our fares and memberships will be self-supporting. In the growth years we will rely on grants and private donations. An audit that could cost between $6,000 and $8,000 will be a heavy burden and take away from our ability to increase our capacity and possibly reduce our opportunity to receive grants. F.C Bo* A4C. 96 Main Street, Suite E, East Windsor CT 0608E Tei 860 756-7833 Fa) 860 253-6400 INROIS'TM^ONNZ-INVA'TT o-r 000513 We are very grateful for the support of the Connecticut Society of CPAs; the Connecticut Council for Philanthropy; the Department of Consumer Protection; the Attorney General; the Connecticut Association of Nonprofits; and the Pro Bono Partnership. Thank you for the opportunity to express my support of SB780, An Act Concerning the Solicitation of Charitable Funds Act. Please feel free to contact me at (860)758-7833 or at [email protected]. P.C Box 44£, 99 Main Street, Suite G, East Windsor, CT 0608E Te: 86C 756-7833 Fax 860 253-6400 iriT3<3iTI\!ho'1r,CenzralC~ O't 00051If Connecticut Council for Philanthropy it • vine iu., •i ^wanting e;,tc;n ^ g/.i.-.f David Davison Chair Written Testimony of American Savings Foundation Shells Pemn Vice Chair Nancy P. Roberts, president, Connecticut Council for Philanthropy Pemn Family Foundation Stewart Hudson Secretary Emily Hall Tremame Foundation February 13,2009 Richard Gray Treasurer University of Connecticut In support of: Pat Baker Connecucut Health Foundation Lucy Ball Lone Pine Foundation CrSenate~Billl780An Act Concerning the Solicitation of Charitable Funds Act Glenn A. Cassis African-American Affairs Commission Good morning, Senator Colapietro, Representative Shapiro and members of the Barbara Fernandez State Office of Insurance and General Law Committee. Thank you for the opportunity to submit testimony. I am Financial Services Nancy Roberts, president of the Connecticut Council for Philanthropy which Robert Forrester Newman's Own Foundauon represents more than 100 grantmaking organizations in Connecticut whose granting Doreen Fundttler-Zweig Jewish Community Foundation to nonprofit organizations is approximately $245 million. Our mission is to support of Greater Hartford William Graustem effective philanthropy in Connecticut. Wlllnm Caspar Graustein Memorial Fund J. C David Hodden The Connecticut Council for Philanthropy supports }5B 780 An Act Concerning the Robinson & Cole Christopher Hall Solicitation of Charitable Funds Act. Our members support raising the audit Hartford Foundaoon for Public Giving threshold from "in excess of $200,000 annually" to "in excess of $500,000 annually" Kim A Healey for a certified public accountant audit. NewAlIance Foundation Debro Hertz William H Pitt Foundaoon G. Robert Hohler The Council encourages effective practice in grantmaking including transparency, The MeWille Charitable Trust accountability and appropriate due diligence in reviewing nonprofit organizations' Patricia McGowan Kosun. Ruflkess. & Co financials, however, the escalating cost of audits for small nonprofit organizations is Vvette Melendei Connecticut State not a good use of charitable money for the benefit they provide. University System Kate MJHer The Hartford Courant Raising the audit threshold would enable small nonprofit charitable organizations to Foundation Sue Murphy use their dollars for charitable works rather than for a required expense of $6,000 - Liberty Bank Foundation Nancy Roberts $7,000 or more per audit. In these increasingly difficult economic times this money Connecticut Council could mean more services in the community. for Philanthropy Susan M. Ross Fairfield County Community Foundauon Foundations and corporate grantmakers could still request an audit or a review of Sheilah Rostow Bank of America financials before they make a grant to a nonprofit. Our funders report that smaller Anita Ford Saunderz nonprofit organizations find it increasingly difficult to find a firm that will perform Anita Ford Saunders Communication an audit for them. We urge you to pass SB 780f to raise the audit threshhold to "in excess of $500,000 annually," thereby conserving charitable resources. Thank you again for the opportunity to present the Council views in support of SB ,780. Please feel free to contact me at (860) 525-5585 or [email protected] with any questions, or to be put in contact with a fimder or grantmaker in your community that can provide additional information. 221 Mam Street, Hartford CT 06106 phone 860-525-5585 fax- 860-525-0436 www CTphilanthropy.org 000515 "s 25 Dudley Road Wilton, CT 06897 Connecticut Appleseed Phone 203.210.5356 Web www.ctappleseed.org Bob Kettle Executive Director Written Testimony of Board of Directors Bob Kettle, Executive Director Martin L. Budc, Char Connecticut Appleseed Center for Law and Justice, Inc. Chair Emeritus - Hartford Seminary Marie A Casper Zeldes, Needle & Cooper, PC In Support of SenateBilT^Nci^780^ Carols Clapp An Act Concerning the Solicitation of Charitable Funds Act The Hartford Financial Services Group Micnael C D'Aaostinc Bingham McCutchen LLP Respectfully Submitted to the General Law Committee Elizabeth A Maldonadc February 13, 2009 Northeast Utilities • . I Priva S Morganstern I appreciate the opportunity to submit testimony to the General Law Pro Bono Partnership. Inc Committee in favor of Senate Bill 780. An Act Concerning the Ndidi N Moses Assistant United States Attorney Solicitation of Charitable Funds Act. I do so on behalf of the Board of Honorable Jon Newman Directors of the Connecticut Appleseed Center for Law and Justice. U S Court of Appeals Second Circuit Dr. Micnael M Perl My name is Bob Kettle. I am the Executive Director of Connecticut Associates in Periodontics. PC Appleseed, which is a statewide, non-partisan 501 (c)3 organization Davie Rei: dedicated to building a more just society. Our mission is to develop McCarter & English, LLP solutions for the causes, rather than the symptoms, of our state's Howard C Rifun social problems. We deploy volunteer lawyers and other Deputy Treasurer, State of Connecticut professionals to achieve systemic changes through legal and legislative advocacy, negotiation, education and other initiatives. Dear Brad Saxtor. Quinmpiac University School of Law John A Snutkin Rather than serving individual clients, we place our emphasis on Shearman & Sterling LLP developing practical and lasting solutions for injustices and disparities MaryE Sommer in healthcare, public education, immigration and child welfare. CT Supenor Court Judge Connecticut Appleseed is the only statewide legal group devoted Robert M Taylor III primarily to bringing about structural changes that can help large Day Pitney LLP numbers of people at one time. By relying heavily on volunteer Peter L Thoren Executive Vice Presideffl attorneys, we operate efficiently with a 2-person staff. We minimize Access Industries. Inc overhead and conserve resources so that we can devote charitable Marilyn 7 West donations to print educational materials, conduct research and The Travelers Companies present educational forums to the greatest degree possible. Artnur h Whitt Yankelovich Group Over the last few years our annual budget has hovered just above Affiliations listed only for the current $200,000 audit threshold. Connecticut Appleseed sought purposes of identification and received a waiver from the Department of Consumer Protection's audit requirement for 2007 because our total cash receipts in that year were roughly $203,000. 000516 We are advised by the Dept. of Consumer Protection's Public Charities Unit that a further such waiver cannot be granted to our organization. With total cash receipts of slightly more than $250,000 in 2008, Connecticut Appleseed therefore faces a 2008 audit requirement whose incremental cost may be $5,000 more than a review. Nor is this issue solely a financial matter; satisfying audit requirements consumes a great deal of non-profit staff time. Economic conditions are stressing Connecticut's non-profit community to an extraordinary degree. Tough times mean that every dollar counts. Grantors, badly weakened by financial markets, are giving smaller grants and spreading their funds more thinly. Amid increasingly intense competition for funding, non-profits must work far harder simply to survive. When you're stretching every penny, a difference of $5,000 can be factor in a non-profit's survival. But of greater concern to the General Assembly is that fundraising necessities are displacing staff time and diverting Board member attention that - more than ever - needs to be devoted to Mission. By raising the state's audit threshold, SB 780 will permit small organizations like Connecticut Appleseed to better focus the use of our revenues for Mission-related purposes like reducing educational and health disparities. SB 780 will materially help Connecticut Appleseed better assist those in our state who suffer from gaps in public and private programs and services. The unanimous stakeholder support for SB 780 assembled before you is unique in my own experience. It seems particularly noteworthy that the Connecticut Society of CPAs is willing to forego the income they will derive if the audit threshold is not raised. On behalf of Connecticut Appleseed's Board of Directors, I want also to express appreciation to the Attorney General for the leadership he has exerted on this issue. Once again, thank you for the opportunity to express my support for SB 78Q, An Act Concerning the Solicitation of Charitable Funds Act. Please feel free to contact me at (203) 210-5356 or at [email protected]. 0005/7 i§>tate of Connecticut HOUSE OF REPRESENTATIVES STATE CAPITOL HARTFORD, CONNECTICUT 06106-1591 REPRESENTATIVE MARILYN GIULIANO TWENTY-THIRD ASSEMBLY DISTRICT RANKING MEMBER EDUCATION COMMrTTEE LEGISLATIVE OFFICE BUILDING MEMBER ROOM 4200 PUBLIC HEALTH COMMITTEE HARTFORD, CT 06106-1591 PROGRAM REVIEW & INVESTIGATIONS COMMITTEE HOME (860)395-1107 CAPITOL (800)842-1423 TOLL FREE (800)842-1423 FAX (860)240-0207 E-MAIL Manlyn Giuliano@housegop cLgov Testimony by Representative Marilyn Giuliano Before the General Law Committee Senator Colapietro, Chairman Representative Shapiro, Chairman Senator Witkos, Ranking Member Representative Bacchiochi, Ranking Member Support for SB 780, An Act Concerning the Solicitation of Charitable Funds Act Thank you for the opportunity to testify in support of SB 780, An Act Concerning the Solicitation of Charitable Funds Act. The current requirement of an annual audit for any nonprofit with a gross revenue of $250,000 has placed a burden on small nonprofits in particular. Senate Bill 780 seeks to raise the monetary threshold from $250,000 to $500,000 in a way that recognizes the hardship of the cost of annual audits on small nonprofits but maintains the transparency of accounting. For one small nonprofit in my district - a largely volunteer art association - their annual cost for a full financial audit is approximately $4,000. As this small art association struggles with finances, they must, for example, sell $12,000 in paintings per year to net the cost of their annua] audit. SB 780 would provide important financial relief and maintain the integrity and intent of the audit's purpose. For this reason, I urge the committee's endorsement of this important proposal. PLEASE VISIT MY WEBSITE AT WWWHOUSEGOPCTGOV 178 March 22, 2007 Representative Marilyn Giuliano Room 4200, Legislative Office Building Hartford, CT 06106-1591 RE: Audits Required of Non -Profit Organizations Dear Representative Giuliano: Thank you again for having your staff research the requirement that annual audits are required by the State of Connecticut for any non-profit organization with annual revenues over $250,000. The purpose of this letter is to request that changes be made to serve the purpose of the audits in a manner that reduces the disproportionate burden it places upon many smaller organizations. Ensuring that the public trust is upheld and that funds donated are properly used is a beneficial purpose for audits. However, the threshold of $250,000 and annual frequency results in extremely high costs that are disproportionate for the purpose served. Lyme Art Association has annual revenues of approximately $300,000 per year. The cost of an audit is in excess of $4000. This represents a significant burden for our organization since it is a strain to meet operating costs even with a small staff. For instance, our membership revenue is budgeted for $36,000 this year so the cost of the audit is over 10% of that income. Another example would be the comparison to sales of paintings. We have to sell over $12,000 in paintings to net the cost of the audit That represents over half of what the average exhibition grosses in sales revenue. It would be greatly appreciated if the requirement for the annual audits could be amended to increase the revenue threshold and reduce the frequency from annual to every 3-5 years. An approach might be to adjust the frequency based on various revenue levels in order to reduce the proportionate cost for the smaller & medium size non-profit organizations, or provide a means of applying for waivers periodically. Thank you again for the assistance you have provided and for your consideration of this proposal. Respectfully, Steven A. Ross Board of Directors 000519 CSssiiCPA Connecticut Society of Certified Public Accountants (CSCPA) Oral Testimony Concerning Raised Bill ("RB^ N6?780 An Act Concerning the Solicitation of Charitable Funds Act Respectfully Submitted to the General Law Committee by Thomas M. Wood, CPA Secretary, Board of Directors Connecticut Society of Certified Public Accountants _ February 13, 2009 000520 Good day Senator Colapietro, Representative Shapiro, members of the General Law Committee. I'm Thomas Wood, Secretary of the 6,000-member Connecticut Society of Certified Public Accountants. I am here to testify in favor of Raised Bill 780, "An Act Concerning the Solicitation of Charitable Funds Act," as it pertains to raising the audit threshold. This bill would raise the audit threshold for charitable organizations from the current law's level of those receiving $200,000 in gross revenue per year to those receiving $500,000 in gross revenue per year up. The CSCPA supports Raised Bill 780 for several reasons. The current $200,000 was adopted in 2000 and, through inflation and rising costs, is an example of a cost/benefit equation that rapidly became obsolete. The smaller the charitable organization, the more difficult it becomes to absorb increased costs. These increased costs come not only from inflationary pressures in such areas as healthcare, but also in the very rules that govern the CPA profession. Auditing standards, the requirements that certified public accountants must follow in planning and performing an audit, have expanded greatly in recent years. The additional time and cost to conduct an audit under these increased requirements have effectively priced an audit out of the reach of many smaller charitable organizations. While considering the increased audit threshold, the CSCPA was cognizant of the need to balance protection of charitable organization funders with the best use of a charitable organization's limited funds. The Internal Revenue Service has provided a governance backstop in a revised Form 990, Return of Organization Exempt from Income Tax. According to IRS Commissioner Doug Shulman, "The revised 990 Form "Will give the IRS and the public a much better view of how exempt organizations operate. The improved transparency provided by these changes will also benefit the tax-exempt community." 000501* The CSCPA believes that Raised Bill No 7R0 is a common-sense approach to assist smaller charities combat their diminished purchasing power while at the same protecting the public, the government, and the benefactors and beneficiaries of Connecticut's not- for-profit community. The Connecticut Society of CPAs appreciates the opportunity to submit testimony in favor of Raised Bill 780, "An Act Concerning the Solicitation of Charitable Funds Act." 000522 Some additional verbiage from the IRS. The new form requires each filing organization to provide certain information regarding the composition of its board or governing body, certain of its governance policies and practices, and the means by which it is held accountable to the public by making governance and financial information publicly available. Many of the questions request information on practices or policies that are not required by federal tax law However, good governance and accountability practices provide safeguards to help ensure that the organization's assets will be used consistently with its exempt purposes This is a critical tax compliance consideration, especially for organizations that are subject to private benefit, excess benefit, and private inurement prohibitions. In addition, well- governed and well-managed organizations are more likely to be transparent with regard to their operations, finances, fundraising practices, and use of assets for exempt and unrelated purposes. 000523 There is no testimony for pages 523. The next page is 524. 184 'JV? C|#H EN Financial Consulting for Not-for-Profiti Testimony before the General Law Committee Written Testimony of Adam P. Cohen, CPA In Support of Senate Bill Nor:780ra An Act Concerning the Solicitation of Charitable Funds Act Respectfully Submitted to the General Law Committee February 13, 2009 Senator Colapietro, Representative Shapiro, and members of the General Law Committee, my name is Adam Cohen. I am a CPA practicing in West Hartford. I appreciate the opportunity to submit testimony to the General Law Committee in favor of Senate Bill 780. An Act Concerning the Solicitation of Charitable Funds Act. I have served or advised hundreds of not-for-profit organizations in my professional practice and as a volunteer over the past 30 years. In my current practice I concentrate on serving not-for- profit organizations. I serve on the Conn. Society of CPAs' not-for-profit committee and the American Institute of CPAs' National Not-for-Profit Conference Planning Committee. Last January, after a year's discussion, I proposed to the CSCPA's Not-for-Profit Organizations Committee that we recommend raising the threshold for requiring small not-for-profits. This fall we brought together the organizations represented today and others to develop a consensus. I am gratified that the Public Charities Unit, Attorney General and Commissioner of Consumer Protection embraced our suggestion and proposed the legislation your committee is considering. Preface: This change will not affect audits now required under the Connecticut Single Audit Act or the federal single audit act. Organizations expending $100,000 or more in state funds during their respective fiscal years will still be required to provide audited financial statements and the CPAs' "Single Audit" reports on compliance. Most organizations under $500,000 in gross receipts, however, do not receive more than $100,000 in state awards. While it may be cost-beneficial to the State budget to also raise the Single Audit Act audit threshold, this legislation does not change the Single Audit requirement. Any third-party including a grantor, contributor, federated fundraising organization or lender may still require audited financial statements. History, Increased Complexity and Raised Expectations CPAs follow "Generally accepted auditing standards" (GAAS), which have developed over many years, going back to 1939. GAAS was much simpler when the public charities statute was enacted in 1986. AICPA had 49 Statements of Auditing Standards (SAS). In the succeeding years the profession has issued additional standards so we are now up to SAS No.116. The accounting profession and Congress have reacted to well-publicized situations, mostly in the public securities markets. Congress passed the Sarbanes-Oxley Act of 2002 and created the PCAOB - the Public Company Accounting Oversight Board. [Sarbanes-Oxley does not apply to not-for-profit organizations (except for the two provisions on document retention and whistleblower protection).] The PCAOB and expectations raised by SOX, however, have driven auditing standards for even nonpublic entities since 2002. Adam P. Cohen CPA. LLC • 81 South Mam Street » West Hartford. CT 06107 • Phone 860-521-6400 • Fax 860-521-6403 [email protected] • www.cohen-nfp-cpa.com 000525 w Cost-Benefit Assessment Auditing standards require procedures and documentation that are excessive for small organizations that have very basic operations and systems. The same auditing standards apply to small not-for-profits and to large entities. The cost to audit a small entity, although lower in dollars, is not reduced proportionately to its size. On its 2007 Form 990 the American National Red Cross disclosed it paid one quarter of one percent of its revenues for audit fees. One small Connecticut not-for-profit paid $9,000, or 3% of its gross revenues of $300,000. A foundation audit client has principally one asset, cash; it receives contributions from its sponsor, vendors and customers, and a golf tournament. The foundation makes grants to about 20 organizations. The Foundation's financial statements total 8 pages, including the table of contents and my opinion. The audit checklists total over 100 pages. Small organizations may elect to prepare financial statements, but select the level of service and CPA services most appropriate for them, in lieu of an audit required by statute. Transparency is now a guiding principle for not-for-profits. In 1986, the Internet was not common and the Public Charities Unit served as a valuable repository for Forms 990 and financial statements. For the past ten years Guidestar.org, has posted nearly all charities' Forms 990 and additional financial information for many of them. Many organizations post financial information or Forms 990 on their websites. Beginning with 2008, a newly revamped annual IRS Form 990, requests important information about not-for-profits' governance, policies and activities, including questions about state law compliance. One question asks, "Describe whether and how the organization makes its governing documents, conflict of interest policy and financial statements available to the public." The availability of information through other sources and a cost-benefit assessment, however, lead me to recommend the passage of SB 780. A related bill, HB 6433. An Act Concerning the Regulation of Charitable Funds, is not scheduled for a public hearing today. J concur with the sections of that bill including its provisions relating to extensions for registrations and the authority given to the Commissioner of the Department of Consumer Protection and Attorney General to waive an audit. Thank you again for the opportunity to express my support forVSB 780. An Act Concerning the Solicitation of Charitable Funds Act. Please feel free to contact me at (860) 521-6400 or at [email protected]. 000526 PAR TNERSHIP Executive Director Director. Hartford Program Rjchard S Hobish, Esq Priya S Morganstern. Esq Admitted in AT and CT Admitted in CT Written Testimony of Priya Morganstern, Esq., Director, Hartford Program Pro Bono Partnership, Inc. In Support of Senate:BiH No^7803> An Act Concerning the Solicitation of Charitable Funds Act Respectfully Submitted to the General Law Committee February 13, 2009 I appreciate the opportunity to submit testimony to the General Law Committee in favor of Senate Bill 780. An Act Concerning the Solicitation of Charitable Funds Act. My name is Priya Morganstern. I direct the Hartford Program of the Pro Bono Partnership, Inc., a tax-exempt public charity that provides free business legal services to eligible nonprofit community-based organizations in Connecticut, New Jersey and Westchester County, NY. We provide these services through the volunteer efforts of local business law attorneys. To be eligible for our services, an organization must be (1) a nonprofit, community-service organization working with the poor and disadvantaged or otherwise providing important social services, as well as arts organizations, civic organizations, and environmental organizations, and (2) unable to pay for legal services without significantly impairing resources for programs. Since its inception a decade ago, the Partnership has provided legal assistance to 1,500 nonprofit organizations on approximately 5,000 legal matters, providing advice on more than 650 new matters each year. In Connecticut alone, we have provided free legal assistance to almost 400 nonprofits. My position brings me into contact with a broad spectrum of nonprofit organizations. Every day I and our volunteer attorneys work with Connecticut charities that are struggling to do more with less, working to keep their heads above water so they can continue delivering services and achieving their missions. For these organizations, every dollar is precious, and every dollar spent on an administrative requirement is one dollar less that can be used to provide important community services. Imagine if the state could reduce the burden on some these nonprofits by giving them a well-deserved financial break - at no cost to the state. Senate Bill 780 does just that. Currently, any organization engaged in fundraising, with gross revenues in excess of $200,000, must submit an audited financial report to the Department of 280 Trumbull Street. Hartford. CT 06103 • Tel 860.541 4950 • Fax 860.275.8299 237 Mamaroneck Avenue, Suite 300, White Plains, NY 10605 • Tel- 914 328 0674 • Fax 914.328.0539 www.probonopartnershiD org 000531* Testimony of Pro Bono Partnership, Inc General Law Committee Heanng February 13, 2009 Consumer protection. But audits are extremely expensive, often costing up to $8,000 or more, and particularly for small organizations that amount can represent a significant annual diversion of money from the organization's mission. By raising the audit trigger amount to over $500,000, SB 780 permits the small organizations to use their revenues for charitable activities rather than for administrative functions. The Department of Consumer Protection estimates that this change would re-direct approximately $3 million away from accountants' fees and other administrative costs to the charitable activities that are so important to the citizens of this state. Among the Pro Bono Partnership's clients, this change would benefit a wide variety of organizations, including organizations that provide: - neighborhood-based social services, - training to child care providers, - reading services to assist the hearing impaired, - transportation services for the elderly and sight-impaired, - arts and cultural activities, - environmental and preservation services, and - financial literacy training, to just a few. When we help these organizations we are really helping the people they serve. In recognition of this, SB 780 is supported by every conceivable stakeholder, as you have seen today: the state's accountants, as represented by the Connecticut Society of CPAs; the funding community, represented by the Connecticut Council for Philanthropy; the Department of Consumer Protection; the Attorney General; and the state's nonprofit community, represented by the Pro Bono Partnership, the Connecticut Association of Nonprofits, and the other individual nonprofit organizations present today. I think we would be hard-pressed to find many other proposals with such across-the-board support. Once again, thank you for the opportunity to express my support of SB 780, An Act Concerning the Solicitation of Charitable Funds Act. Please feel free to contact me at (860) 541-4951 or at [email protected]. 000531* MICHELSON. KANE. ROYSTEE & BABGER. P.C. ATTORNEYS AND COUNSELORS AT LAW HARTFORD SOUARE NORTH TEN COLUMBUS BOULEVARD RICHARD L BARGER BETH N MERCIER HARTFORD. CONNECTICUT O6IO6 STEVENB KAPLAN PAUL R FITZGERALD MARK E BLAKEMANt TELEPHONE I860! 522-1243 MARK D O'HARA CHRISTOPHER W HUCKt FACSIMILE I860) 548-0194 PAUL S TAGATAC wwwmkrbcom Testimony of Attorney Steven B. Kaplan Legal Counsel to the Connecticut Subcontractors Association i Act Concerning Construction Change Orders General Law Committee February 11, 2009 My name is Steve Kaplan. I am a partner with Hartford law firm of Michelson, Kane, Royster & Barger PC in Hartford, where I have concentrated in the area of construction law for 27 years. I routinely represent contractors, subcontractors, construction managers and owners in virtually all matters involving contracts for public and private construction. I am Legal Counsel to the Connecticut Subcontractors Association, as well as Vice-chairman and a founding member of the Executive Committee of the Construction Law Section of the Connecticut Bar Association. The Connecticut Subcontractors Association supports Senate Bill 785. An Act Concerning Construction Change Orders. The CSA thanks this committee for raising the bill. The proposed legislation would amend Conn. Gen. Stat. §42-158j (private construction) and §49- 41a (major public construction, but excluding CDOT projects.) The amending language for both statutes is virtually identical. Senate Bill 785 addresses the critical problem of procuring payment for a contractor or subcontractor who has performed authorized extra work, but cannot get paid for that work through no fault of his own because a "change order" has not been issued. The bill establishes a 5% threshold on the amount of authorized change directive work that can be imposed upon a contractor, or a subcontractor, without processing change orders for. that work that can be billed and paid. When that 5% threshold is reached, the contractor or subcontractor does not have to perform additional extra work under new change directives until the current, pending change directives are processed as approved, billable change orders. The bill covers only pending change directives; it does NOT apply to approved change orders or to original contract work. The bill does NOT apply to DISPUTED work. The 5% threshold also tracks the current change order limits for state funding required on public school construction projects. Per Conn. Gen. Stat. §10-286(c), the State reduces its funding by 50% for change order work on school building projects that exceeds the authorized total project cost by 5%. The bill also requires that every contractor and subcontractor include a statement with each monthly payment requisition indicating the status of all pending and approved change 000531* orders and change directives. This provides a necessary method for all parties—the owner, the contractor, and the subcontractors—to track the status of change orders and change directives. Senate Bill No. 785 should be approved because: > Typical contract provisions, and the current law, forces contractors and subcontractors to perform authorized extra work without any means of getting paid when a change order has not been issued—"through no fault of their own." > The bill will force all parties to address in a timely fashion problems arising from unprocessed change orders. > The bill would prevent owners from imposing unlimited, authorized extra work directives upon contractors and subcontractors without also addressing payment for that work. > Contractors and subcontractors would no longer be forced to finance the performance of excessive, authorized extra work for unlimited time periods. > Owners and contractors would be required to properly manage projects involving significant, authorized extra work, rather than ignore paying for this work at the expense of the subcontractors who perform the work. Again, thanks to the General Law Committee for considering this important legislation. 2 000531* MINORITY CONSTRUCTION COUNCIL Meeting the Challenges of Construction with Excellence & Diversity Friday, February 13,2009 Topic: An Act on Concerning Construction Change Orders Where: The State of Connecticut General Assembly General Law Committee @ 10:00 A.M. From: Cesar Mejia: Executive Director of the Minority Construction Council (MCC) Good Morning representatives of the General Law Committee: My Name is Cesar Mejia and I am the Executive Director of the Minority Construction Council here in Hartford, also known as the MCC. We represent minority contractors from all four comers of the state and our mission is to promote the overall health and vitality of the states minority contracting community. Our members buy materials, equipment goods and services, provide opportunities to the underemployed, provide training to those who need it, create commerce and build bridges between both the private and public sector to create a better Connecticut. We have over 150 members and independently our members are very engaged in the political process that affects their business, personal and professional lives and I am here today to speak on their behalf. The MCC is in support of this legislation for two basic reasons. First, it is our belief that this legislation will help the State of Connecticut decrease its spending in the construction arena. Within construction projects there are issues that can and should be solved as quickly as they develop that are being postponed to a later date. The State incurs additional cost due to delays and claims that are derived from conflicts in interest accumulated. Secondly, the individuals that are presently financing the projects are the sub-contractors. They have to pay for materials, labor, etc. before they get paid. This practice is unfair compounded by the feet that the change order and/or payment issues are not solved in a timely manner. They are also mandated to proceed in performing work. Who and how this particular work is supposed to get paid have not been resolved. In closing, we, the MCC of Connecticut encourage you to keep support this legislation as it will save the State of Connecticut millions of dollars and the sub-contractors will get a fair deal. Thank you for your time. Are there any questions? Respectfully Submitted this day as Testimony: Cesar Mejia Executive Director Minority Construction council www MCCCT.org 15 Lewis St., Suite 302 Hartford, CT 06103 Main 888-MCC-CT11 Localr860-882-0675 Fax 860-527-1102 000531* STATE OF CONNECTICUT DEPARTMENT OF PUBLIC WORKS 165 Capitol Avenue, Hartford, Connecticut 06106-1606 RAEANNE V.CURTIS Commissioner TESTIMONY OF DEPARTMENT OF PUBLIC WORKS BEFORE THE GENERAL LAW COMMITTEE FEBRUARY 13,2009 SJB. No. 785 (Raised) An Act Concerning Construction Change Orders. The Department of Public Works (DPW) is not in support of S J. No778'5. the repealing of the general statues in order to limit the amount of unapproved change order work imposed on contractors and subcontractors in its current form. DPW is working with the industry to have all subcontractors properly and promptly paid on our DPW construction projects. We have taken the following steps: a) Contractor Payment Process posters in each project job trailer; b) the payments the subcontractors are considered in the DAS Contractor Evaluation, and c) considered in the DPW Objective Criteria used in the award decision for each project's general contractor. If a subcontractor has a problem they should document the problem to the DPW and Department of Administrative Services (DAS). The Change Order process requires cost back up materials that includes the subcontractor's costs and signature in the package. Therefore, the subcontractor knows the Change Order costs as submitted to the owner. And, in the project trailer and office, DPW maintains the monthly contactor invoices on file and available for review by the subcontractors. This record shows what work, and or Change Orders have been paid to date. DPW desires that all contractors and subcontractors be paid for all work completed in a timely fashion. Also, DPW desires to have the total value of all change orders on any project total to less than 5 percent of the construction projects contract amount. From the perspective of DPW; current contracting laws were written to protect the public interest, not the special interest of the contractors as in the proposed language. This language has the potential to cause significant delays to other trades and cause an overall delay in the completions of public projects. This wording is apparently written around both the general contractor's overall contract for the project and also for the subcontractor's contract with the general contractors. When viewed from the perspective of a specific subcontract a 5 percent chaiige in that subcontract value could be a very small change to the overall contract For example; if there was a building addition that included the installation'of 18 new windows. The addition of one additional window could trigger this clause. The Department of Public Works, if requested, is available to meet to discuss the information contained in this testimony. Please contact Doug Moore, DPW Chief of Staff, at (860) 713-5800 with any further questions. Phone: (860) 713-5800 Fax: (860) 713-7253 Internet Web Site: http://www.ct.gov/dpw An Affirmative Action/Equal Opportunity Employer 000531* CONNECTICUT 900 Chapel St., 9th Floor, Now Haven, Connecticut06510-2807 CONFERENCE OF Phone (203)498-3000* Fax (203) 562-6314 • www.ccm-ct.org ffl MUNICIPALITIES THE VOICE OF LOCAL GOVERNMENT TESTIMONY of the CONNECTICUT CONFERENCE OF MUNICIPALITIES to the GENERAL LAW COMMITTEE February 13, 2009 CCM is Connecticut's statewide association of towns and cities and the voice of local governments - your partners in governing Connecticut. Our members represent over 93% of Connecticut's population. We appreciate this opportunity to testify before you on issues of concern to towns and cities. CCM appreciates the opportunity to submit testimony regarding Raised SenatetBilD7855£l/t Act Concerning Construction Change Orders". CCM is uncertain about the necessity of such legislation, regarding construction change orders, and is working to determine its implications on municipalities. CCM urges the committee to obtain a fiscal note on, Raised Senate Rill 7RS "An Act Concerning Construction Change Orders," to ensure this proposal does not complicate existing procedures. ## ## ## If you have any questions, please contact Donna Hamzy, Legislative Analyst via email [email protected] or via phone (203) 498-3000. 000531* CSA Connecticut Subcontractors Association 1131-0 Tolland Turnpike, # 272 • Manchester, CT 06042-1679 • (866) 995-3919 www.connecticutsubcontractors.ore Testimony of Catherine Flaherty, CAE Executive Director, Connecticut Subcontractors Association Senate Bill 785, An Act Concerning Construction Change Orders General Law Committee February 11, 2009 My name is Catherine Flaherty. I am the Executive Director of the Connecticut Subcontractors Association, which represents the construction subcontracting industry in Connecticut. The Connecticut Subcontractors Association strongly supports Senate Bill 785, An Act Concerning Construction Change Orders. The CSA thanks this committee for raising the bill. Many of CSA's members routinely experience the same problems on private and public projects: they are ordered to perform authorized, extra work, they properly perform that work, but they cannot get paid because a "change order" has not been issued "through no fault of their own." Senate Bill 785 addresses this problem by placing a 5% cap on the amount of new, authorized change directives—for which a change order has NOT been processed— that a contractor or subcontractor can be required to perform. This does NOT include DISPUTED work, or original contract work. The bill also requires that every contractor and subcontractor include a statement with each monthly payment requisition indicating the status of all pending and approved change orders and change directives. This provides a method for all parties—the owner, the contractor, and the subcontractors—to track the status of change orders and change directives. The proposed legislation is necessary because: • It limits the unfair shifting of financing burdens to trade contractors who are forced to perform authorized, extra work without any means of ensuring timely payment for that work; • It requires owners, contractors and subcontractors to track and process authorized change directives in a timely and responsible fashion; • It reduces delays and unanticipated disputes on projects by eliminating irresponsible "processing" deficiencies by owners and contractors; • It promotes ongoing communication and attention to change directives and processing of change orders. Again, thanks to the General Law Committee for considering this important legislation. 000531* THE ASSOCIATED GENERAL CONTRACTORS OF CONNECTICUT, INC. A Division of Connecticut Construction Industries Association, Inc. 912 SILAS DEANE HIGHWAY, WETHERSFIELD, CT 06109-3433 Telephone (860) 529-6855 £13 Fax (860) 563-0616 E-mail: [email protected] Senafe^Bill-785ftAn Act Concerning Construction Change Orders Genera] Law Committee February 13,2009 CCIA/AGC/CT Position: Support Connecticut Construction Industries Association, Inc. (CCIA) represents the commercial construction industry in Connecticut and is committed to working together to advance and promote a better quality of life for all citizens in the state. CCIA is comprised of more than 350 members, including contractors, subcontractors, suppliers and affiliated organizations representing all aspects of the construction industry. Associated General Contractors of Connecticut (AGC/CT), a division of CCIA, represents commercial, industrial, and institutional construction contractors, subcontractors, material suppliers and professionals serving the construction industry. AGC/CT is the Connecticut chapter of the Associated General Contractors of America, a national contractors trade association. Senate Bill 785. An Act Concerning Construction Change Orders, would relieve a contractor or subcontractor of any express or implied duty to perform any future changes to the work once the cumulative sum of "pending construction change orders" or "other pending change directives" exceeds 5% of the contract or subcontract. Pending construction change orders or pending change directives are authorized written directives for extra work that have been issued to a contractor or subcontractor but the payment amount cannot be processed through no fault of the contractor or subcontractor who performed the work. The definition does not include change orders that are in dispute. The bill also requires that each contractor and subcontractor include a statement with every monthly payment requisition indicating the status of all pending and approved change orders and change directives. CCIA and AGC/CT support Senate Bill 785 and we respectfully request that the General Law Committee approve the bill. Contractors and subcontractors are often exposed to crippling financial risk when they are authorized to perform changes to the work, they properly perform the work, but they can't get paid - simply because the paperwork is not processed. Meanwhile, they are in financial jeopardy because they have paid for the extra labor and materials that went into performing the changed work and are effectively operating at a loss. The problem often escalates to the point that it cripples the unpaid contractor or subcontractor when the owner has no knowledge about the changes to the work, doesn't make financial arrangements to provide for it, and has no financing left to pay for the work at the completion of the project. This leaves the well-performing contractor or subcontractor no 000535 choice but to accept a fraction of what it is duly owed months or years after the work is performed. Senate Bill 785 provides a relief mechanism that would resolve this problem. Senate Bill 785 is necessary because: • Contractors and subcontractors cannot continue to finance changes in the work on their own and should not have to negotiate for less than the value of the work at the end of the project. • It would encourage the settlement of problems related to unprocessed change orders during the project rather than having them fester until the end of the project when the subcontractor is often the victim. • The statement that would be required with every requisition would keep all members of the construction project updated, including owners, on the status of all change orders, so that owners are not surprised at the end of the project by the costs of unanticipated extra work that has already been performed. • Contractors and subcontractors should be relieved of any duty to perform extra work when the undisputed amount due and owing to them under unprocessed change orders exceeds 5% of their contract value. For more information, please contact John Butts, Assistant Executive Director, AGC/CT or Matthew Hallisey, Director of Government Relations and Legislative Counsel, Connecticut Construction Industries Association (CCIA) at 860-529-6855. 2 000531* CSA Connecticut Subcontractors Association 1131-0 Tolland Turnpike, # 272 • Manchester, CT 06042-1679 • (866) 995-3919 www.connecticutsubcontractors.ore Testimony of William Flynn President, Connecticut Subcontractors Association Senate Bill 785. An Act Concerning Construction Change Orders General Law Committee February 11, 2009 My name is Bill Flynn. I am the President and a founding Board Member of the Connecticut Subcontractors Association, a trade association that represents all segments of the Connecticut construction subcontracting industry. I also am Vice-President of Electrical Contractors, Inc. of Hartford, one of the largest electrical contractors in the State. Our construction firm has performed dozens of projects for the State DPW, many towns and cities, and a variety of large private owners in our state. The Connecticut Subcontractors Association strongly supports Senate Bill 785, An Act Concerning Construction Change Orders. The CSA thanks this committee for raising the bill. Senate Bill 785 addresses a critical problem in our construction industry—paying contractors and subcontractors for authorized, extra work that they have properly performed, but for which they cannot bill because a "change order" has not issued "through no fault of their own." If those "bottlenecked" change directives exceed 5% of the contract amount, then the contractor or subcontractor does not have to perform additional extra work under new change directives until the current, pending change directives are processed and can be billed. The bill does NOT apply to approved change orders or to original contract work. The bill does NOT apply to DISPUTED work. The 5% threshold also tracks the current change order limits for state funding required on public school construction projects under Conn. Gen. Stat. §10-286(c), which reduces State funding by 50% for change order work on school building projects that exceeds the authorized project cost by 5%. The bill also requires that every contractor and subcontractor include a statement with each monthly payment requisition indicating the status of all pending and approved change orders and change directives. This provides a necessary method for all parties—the owner, the contractor, and the subcontractors—to track the status of change orders and change directives. In summary the proposed legislation will: • Protect against owners running out of money during the course of the project; • Increase transparency; • Match the change order limits mandated for public school construction; • Help to eliminate delays and unanticipated disputes on projects; and • Reduce the unfair shifting of project financing burdens from owners to trade contractors. 000531* Senate Bill No. 785 should be approved because: a Owners and Project Managers will utilize a standardized procedure to keep track of the status of all extra work on the project, whether per approved change orders or pending change directives; • Owners will be able to follow the project needs and commitments, so they can stay currently apprised of their financial obligations. It provides full transparency for all extra work - including cost, dates and status; • Contractors and Subcontractors will be able to track their extra work in terms of the status of each approved and pending change order or directive; • Contractors and Subcontractors will get paid promptly for all authorized extra work performed, and will not have to finance the cost of authorized extra work indefinitely. The proposed legislation would require all parties to mange the project properly and move forward with approvals for previously performed work in order for new changed work to be performed. Both public and private owners and contractors will be required to acknowledge outstanding extra work that has been authorized and performed, but cannot be processed for payment through no fault of the subcontractor. The proposed legislation will benefit the Owners on public and private projects. It shines a light on authorized change directives that need to be processed for billing and payment, rather than delaying the processing and payment of change orders until the end of the job. This will avoid unexpected disputes when the growing amount f authorized, but unpaid change directives reaches a "boiling point." It also will prevent the unfair and unethical practice of an owner, or contractor, batching all unprocessed change directives that is then "leveraged" against the subcontractor for payment purposes. Again, thanks to the General Law Committee for considering this important legislation. 000531* NEW ENGLAND REGIONAL COUNCIL OF CARPENTERS JliratfyerJja0i* af Carpenters anfr xtxs of JVmertca CARPENTERS LOCAL 210 TC7TELEPHON1 E P O. BOX 668 (203) 334-4300 427 STILLSON ROAD FAX (203) 334-4700 FAIRFIELD, CT 06824-0668 GLENN MARSHALL. PRESIDENT LOCAL UNION 2 IO Good morning, Chairman Colapietro and Chairman Shapiro. My name is Glenn Marshall, and I am the President of Carpenter's Local 210, as well as District Business Manager for the carpenter's union in Connecticut. I am here to make some brief remarks You might not think a bill regarding change orders would have an impact on rank-and- file construction workers, but it does. The New England Regional Council of Carpenters is signatory with more than 1,600 contractors. A vast majority of these companies are small businesses. The slumping economy and tightening credit market have made it extremely difficult for many of our small contractors to compete and survive. A small subcontractor often verbally commits to a change order from a construction manager, but, in some cases, is not paid for many months. Or after the job is completed, they are only paid for a portion of the actual cost. If a general contractor or construction manager is not doing his job in processing the order for one reason or another, it could hold up payments for months or yearswhich could put small contractors out of business and, in turn, put many workers—and their families—at risk with no health coverage and unpaid retirement benefits. Thank you for your time and consideration. •^gjajg^iOT 000531* hJCC •V'; PLUMBING-HEATING-COOLING CONTRACTORS OF CONNECTICUT TESTIMONY BOB MACCA LEGISLATIVE CHAIR CT PLUMBING, HEATING & COOLING CONTRACTORS ASSOCIATION BEFORE THE GENERAL LAW COMMITTEE FEBRUARY 13,2009 RE: SUPPORT - SB-785. AN ACT CONCERNING CONSTRUCTION CHANGE ORDERS The Connecticut Plumbing, Heating & Cooling Contractors Association (CT-PHCC) supports SB-785, An Act Concerning Construction Change Orders, which caps unapproved change orders to 5% of the project cost until an approved change order has been issued. This bill addresses concerns that arise when modifications to the terms of the construction contract are made and price details are worked out later. This sometimes makes it difficult to negotiate a fair price for the work and leads to litigation or arbitration, which is costly for everyone. This bill will force owners and project managers to process change orders before the contractor and subcontractor have to complete the project, which will ensure that we get paid in timely manner. CT-PHCC urges your support for this bill. CT-PHCC is a not-for-profit trade association that represents the professional plumbing, heating and cooling contractors in the State of Connecticut. CT-PHCC and its members are committed to protecting the health and safety of the public. Contractors who belong to the association have demonstrated reliability and trustworthiness and are licensed by the state of Connecticut. Testimony Connecticut Water Works Association (CWWA) Before the General Law Committee Public Hearing February 13,2009 The Connecticut Water Works Association (CWWA) expresses the following concerns relative to SB-785. An Act Concerning Construction Change Orders, as currently drafted. As we understand it, the bill establishes a 5% cap on the amount of unapproved change orders that will be performed by the contractor or subcontractor until an approved change order has been issued. This would apply to commercial contracts exceeding $25,000 in scope and public works contracts exceeding $100,000. As a practical matter, change orders are often required due to necessity, such as unforeseen circumstances or regulatory compliance issues. Recognizing this, standard industry contract forms already include a mechanism for owners and contractors to agree to an equitable price for change orders as well as a process for resolving disagreements. Contracts also require that all changes be given in writing so if a dispute arises, there is evidence that the contractor/subcontractor was directed to perform the work. These provisions protect contractors and subcontractors while allowing important public and private projects to move forward without delay. CWWA is concerned that the provisions in SB- 785 may stall the completion of important projects, such as water service extensions and pump stations, until price details can be negotiated. As a practical matter, municipal change orders can take months to formalize. Idling a full construction crew, on the clock, while the administrative process moves to act, is inefficient, and expensive. In addition, under these circumstances, contractors and subcontractors would have considerable leverage in negotiating the price to continue the work, to the detriment of customers and taxpayers. On most public projects, the public's best interest is in the work proceeding, with price details to be worked out later. Although we understand that this bill is intended to track similar limits for public school construction, SB-785, as currently drafted, applies to projects costing as a little as $25,000 while the public school construction provisions only apply to projects exceeding $10,000,000. The Connecticut Water Works Association, Inc. (CWWA) is an association of public water supply utilities serving more than 500,000 customers, or population of about 2'A million people, located throughout Connecticut. Membership in the Association is open to all Connecticut water utilities: investor-owned, municipal and regional authorities. As purveyors of public water supplies, our members have an obligation to provide sufficient quantities of high-quality water at a reasonable cost to consumers of the communities served 0005l» I GENERAL LAW COMMITTEE PUBLIC HEARING FRIDAY, FEBRUARY 13,2009 Re: SB 785- AAC Construction Change Orders Testimony Presented by: Joyce A. Wojtas, Lobbyist Mechanical Contractors Association of Connecticut The Mechanical Contractors Association of Connecticut (MCAC) supports the concept of this bill, which is intended to speed up the payment and/or actually effectuate payment to subcontractors for extra work that is performed under a change order authorized by the General Contractor or Construction Manager for a project. Any changes in the law would not involve work that is in dispute. The MCAC members include mechanical contractors who perform plumbing, process piping heating, piping and cooling work and generally work as subcontractors on major projects. In today's contracting world, the subcontractors are the people actually constructing a project and employing the many trades people necessary to construct a building or other facility. They are the ones that have to meet weekly payroll, health insurance, workers compensation insurance, unemployment compensation and pension benefit payments for the thousands of workers on a construction site. The subcontractors are also the ones that have to pay their suppliers on time (often when material is delivered to a site) for the materials and supplies that go into a project. In view of the fact that the subcontractors are, in reality, bankrolling each and every project, it is incumbent that they be paid in a timely fashion, whether it is for the regular work performed or for extra work that is required of them. Far too often, payment to the subcontractor is held up for such a long time that that he or she is forced to accept a smaller payment than the actual value of the extra work and materials that were required by the written, authorized change order. Formal complaints to awarding authorities about non- payment for change orders or non- payment of any progress payment or retainage will not happen because everyone is nervous about getting the work and complainers are just not going to be awarded contracts. Although the state contracting agencies do not like the language in this bill, there should be some resolution to the problem that will get the subcontractors paid for work performed satisfactorily. I aim certain that the many proponents of this bill will work out some acceptable compromise. Thank you for your consideration in this matter. For additional information, please contact Joyce Wojtas 860-280-4623 or [email protected] 00051* 2 TESTIMONY BOB MACCA LEGISLATIVE CHAIR CT PLUMBING, HEATING & COOLING CONTRACTORS ASSOCIATION BEFORE THE GENERAL LAW COMMITTEE FEBRUARY 13,2009 RE: SUPPORT - SB-788. AN ACT AMENDING THE WORKERS COMPENSATION ACT The Connecticut Plumbing, Heating & Cooling Contractors Association (CT-PHCC) supports provisions in SB-788, An Act Amending the Workers Compensation Act, which provides that a license applicant can provide the name of their insurer, policy number and effective dates of coverage in order to renew their license with the state Department of Consumer Protection. This is a common sense measure that will make it easier to renew an occupational license online. Often times, a certificate of coverage is not available from the insurer and the applicant has to wait to renew their license until one is available. SB-788 addresses this situation by allowing the applicant to certify as to the workers' compensation coverage in place. CT-PHCC urges your support for this bill. CT-PHCC is a not-for-profit trade association that represents the professional plumbing, heating and cooling contractors in the State of Connecticut. CT-PHCC and its members are committed to protecting the health and safety of the public. Contractors who belong to the association have demonstrated reliability and trustworthiness and are licensed by the state of Connecticut. 0005U3 620 Norwich NL Tpke Uncasville, CT 06382 Tel. (860) 848-2800 Fax (860) 848-2801 www.sectrac.org February 13, 2009 Senator Cola-Pietro, Representative Shipiro and Members of the General Law Committee: Thank you for the opportunity to speak to you today in support oTBill-#5225? My name is Rayallen Bergman and I am the Prevention Coordinator for the Southeastern Regional Action Council. Salvia divinorum is becoming more widely known about and used in modern culture. The National Survey on Drug Use and Health, sponsored by the Substance Abuse and Mental Health Services Administration (SAMHSA), for 2006 estimated that about 1.8 million persons aged 12 or older had used Salvia divinorum in their lifetime, of which approximately 750,000 had done so in that year. Youth ages 18- 25 are 3X more likely to use salvia within a 12 month period. Salvia is being smoked by individuals to induce hallucinations, the effects of which are described by its users to be similar to those induced by LSD and Ecstasy. It is being widely marketed on Internet sites aimed at young adults and adolescents eager to experiment with these types of dangerous substances. Over 5000 videos are available on YouTube sharing the "Salvia Experience". With little restriction, Salvia is already being shipped into Connecticut and being sold in CT Specialty Stores. Salvia divinorum leaves are most often smoked or mixed with a tea for a longer lasting high. When the untreated leaves are smoked, the high is less intense which has led to more concentrated preparations or extracts. When smoked, the high is quick and intense, yet lasts approx. 15-20 minutes. These extracts are the main psychoactive ingredient Salvinorin A (which is accountable for 96% of the effect) and Salvinorin B. An ounce of salvia leaves sells for around $30 on the Internet and special! stores. The liquid extract from the plant, salvinorin A are sold in various strengths labeled "5x" through "60x." A gram of the 5x strength, about the weight of a plastic pen cap, is about $12 while 60x strength is around $65. By isolating these extracts, recreational users have also experimented in combination with various other drugs. 0005UU Once these drugs are in the body here are just a few of the physical and psychological effects. The loss of physical coordination, visual alterations or visions, dream-like state, sense of total confusion or madness, sense of flying, floating twisting or turning and tunnel vision. It is important to share with you how this drug has impacted us in Southeastern CT and our work as the Regional Action Council. The RAC's are where the community turns to-for help in combating and preventing substance abuse that threaten our children and the health and safety of our citizens. We have had numerous inquiries into Salvia. We know, anecdotally, that this drug is being used on the college campuses, with Military personnel, young adults (22- 28) and is quickly gaining momentum throughout other population and communities. We also know that this drug is being sold at local head shops. We have incorporated Salvia awareness and education into all of our Current Drug Trend Workshops and Information. Through our efforts, School Resource Officers, high school and college health staff, college Resident Assistants and Directors, and Youth Services providers have already been educated on the growing dangerous trend. At this point, we know that other states have prohibited Salvia growth, sales, importation or extracts of the plant. We strongly support that Connecticut follow in these state's footsteps. I would rather be on the front end of preventing the dangers of the drug then waiting until we are 20 steps behind. Thank you. To the General Law Committee yS- Legislature of the State of Connecticut: My name is Frances P. Clem. My husband, Stuart, and I lost a son to drugs and alcohol on January 7th, 2004. For the last five years, to honor Christopher's life, I have dedicated my life and work to encouraging young people to make healthy choices and to appreciate the power that they have to make the world a better place. I am writing today about Mexican Salvia, a grave concern for the citizens of the state of Connecticut. Mexican Salvia is a hallucinogen. It affects its users profoundly with powerful, violent experiences that alter their brain chemistry. Our young people are aware of the extreme dangers that can occur, and, in a feeble attempt to be "safe", usually only one person at a time is allowed to get high, in order that the rest of them can prevent a suicide, serious self injury, or cessation of breathing. Right now, Mexican Salvia is easily available on the internet. What is even more disturbing to me is the fact that, should a convenience store or movie rental store or ice cream parlor choose, they can sell Mexican Salvia over the counter legally in Connecticut. At the present time, thirty eight states allow the legal sale of this dangerous substance. Connecticut is one of these states. This substance is a threat to all of us. It is a threat to our kids who do not have the mature brain development that enables them to make good decisions. It is a threat to families where parents are using and neglecting their children. It is a threat to anyone in a car that is sharing a road with someone who is under the influence of Mexican Salvia. 0005U6 Party drugs like Mexican Salvia destroy lives. There is not enough research done yet to determine the long term damaging effects of its use, or what damage may be done if it is taken with other drugs or alcohol. Our son, Christopher, was only 25 years old. Chris loved his family and his friends and we loved him. He was a Berkshire star athlete, an award winning artist and a cum laude graduate of the University of Hartford. An error in judgment, made under the influence, cost him his life. As long as my broken heart still beats, I will pray and work to prevent another family from suffering the loss that we have suffered. Thank you for your time and consideration. I urge you to act on legislation to make the possession of Mexican Salvia illegal in the state of Connecticut. 00051* 7 State of Connecticut HOUSE OF REPRESENTATIVES STATE CAPITOL HARTFORD, CONNECTICUT 06106-1591 REPRESENTATIVE PAMELA Z. SAWYER RANKING MEMBER HOUSE REPUBLICAN WHIP HIGHER EDUCATION AND EMPLOYMENT COMMITTEE FIFTY-FIFTH DISTRICT MEMBER CAPITOL- 1-800-842-1423 APPROPRIATIONS COMMITTEE (860)240-8700 LEGISLATIVE MANAGEMENT COMMITTEE FAX. (860) 240-0207 TRANSPORTATION COMMITTEE Testimony by Representative Pam Sawyer General Law Committee Proposed House BUf5390^ February 13, 2009"10^)0 Room IE RE: AA Streamlining The State's Permitting And Professional Certification Processes Good morning Chairmen Colapietro and Shapiro, Ranking Members Witkos and Bacchiochi, and members of the General Law Committee. For the record, I am Representative Pam Sawyer, representing the 55th District. I am here today to speak in favor of Proposed House Bill 5390. I have had numerous conversations with constituents through the years on the problem regarding great delays in processing of licensure applications and permits at the Department of Consumer Protection, the State Department of Education, and other state agencies. The need is urgent There are residents who worked hard to obtain all the training necessary to get into the workforce BUT CANNOT, because they are unable obtain their certificate or license in a timely manner from the state. • It should not take a licensed plumber moving into CT from out of state over 6 months to get a license. • A special education teacher from NY with over 5 years experience moved in March could not get her teaching certificate by November. Exasperated, she had to ask for help from my office. Her paperwork was complete with the original application! She had a job given to her in Hartford in March that she could not receive Ml salary for because of the state delay. • A home daycare provider may take up to a year to get her licensure! That is just wrong. When citizens jump through all of the hoops the state places on professionals, they SERVING THE TOWNS OF ANDOVER, BOLTON, HEBRON AND MARLBOROUGH 95 SOUTH ROAD BOLTON. CONNECTICUT 06043 PHONE (860)649-5655 00051* 8 should be treated respectfully and in a timely manner, particularly now more that ever in these tough economic times. A fast turnaround time to get people their licenses is essential and can be made through: • A review of the agency permitting process. • Efficiencies made wherever possible. • Cross training of personnel to handle high volume periods. • Set a goal of a 30 day turnaround time. I am open to amending my proposed bill to ensure that improvements to the licensure and permit processes can be made within available budget resources. 00051* 9 CONNECTICUT ASSOCIATION OF REALTORS;. Statement on OTTNoI540?: AAC TIME SHARE REFERRALS...OPPOSE Submitted to General Law Committee February 13, 2009 by Tim Calnen Vice President of Government Affairs My name is Tim Calnen and I'm speaking today in opposition to Proposed House Bill 5401: An Act Concerning Time Share Referrals. Last year, a similar House Bill failed in the Senate - - and for good reason. The proposal sets a dangerous precedent by letting people go around the real estate license law, yet still get paid, for promoting a developer's time share plan or another owner's interest. Connecticut's real estate license law has been on the books for over a half century to protect the public. People being enticed to buy time share intervals need the protection and recourse that the license law provides. That law says that anyone engaging in the real estate business needs a real estate broker's or salesperson's license. "Engaging in the real estate business "means "acting for another and for a fee or other valuable consideration" in marketing an interest in real property (Sec 20-311[3]). The proponents of HB 5401 may argue that there is nothing wrong allowing people to be rewarded for "spreading the word" to friends and family about an enjoyable vacation or resort location. Aside from asking why they need to be paid if it's such a good deed, there are many pitfalls to this thinking. — what if the person "spreading the word" has never been to the complex because they bought a time share but kept exchanging it for a different one in another location? — who discloses to the purchaser the total financial obligation may be more than just the initial purchase price and may be subject to additional management or special assessment fees? -- if people do get rewarded for such referrals, is their an obligation up front to disclose this to friends and family? 000550 CONNECTICUT ASSOCIATION OF REALTORS p.2 — who does the consumer complain to when they are victims of wrongdoing by people who make these kinds of referrals on a regular basis and are not policed by the Real Estate Commission or Consumer Protection Department? Proponents may also argue that the "reward" would only be of "nominal value". This could easily be abused if the "promoter" engages in multiple referrals, and it raises the proverbial "Camel's nose under the tent" ... how much is "nominal"? 000531* H>tate of Connecticut HOUSE OF REPRESENTATIVES STATE CAPITOL HARTFORD, CONNECTICUT 06106-1591 REPRESENTATIVE THEMIS KLARIDES ONE HUNDRED FOURTEENTH DISTRICT DEPUTY REPUBLICAN LEADER 23 EAST COURT MEMBER DERBY, CONNECTICUT 06418 EDUCATION COMMITTEE FINANCE, REVENUE AND BONDING COMMITTEE HOME (203)735-5911 JUDICIARY COMMITTEE OFFICE 1-600-842-1423 PUBUC HEALTH COMMITTEE FAX (860)2400207 E-MAIL Themis Klandes@housegop ctgov General Law Committee Public Hearing Friday, February 13,2009 Testimony On P.B. 5401, An Act Concerning Time Share Referrals Senators Colapietro, Maynard, and Witkos; Representatives Shapiro, Taborsak, and Bacchiochi; and members of the General Law Committee: I am sorry I cannot come before you today to request your support of P.B. 5401. An Act Concerning Time Share Referrals. I have proposed this bill to address a provision in our statutes which is discriminatory to a segment of Connecticut's population that participates in vacation timeshare programs. Connecticut is one of only two states in the nation with real estate laws (CGS Sec. 20- 322(3) and 20-325a) and regulations (Conn. Agencies Regs. Sec. 20-328a(e) which state that only real estate agents are permitted to receive rewards or benefits from referring a friend, relative or acquaintance to buy into a time share vacation opportunity. The penalty for violating this law includes a $1,000.00 fine and up to six months in prison. Many retail stores and commercial businesses frequently offer rewards or rebates to customers who refer their services to a friend or relative. Those rewards and rebates often result in a financial gain but do not result in any legal penalty. Rewards for time share referrals are not monetary and do not adversely affect the State of Connecticut or any real property, but are subject to an arcane real estate law restricting them to only licensed real estate agents. This does not seem fair or equitable. Ownership in a time share involves buying time, not property. Time share owners have no responsibility for insuring or maintaining any buildings or property and any damage to those buildings or property is solely the responsibility of the business entity that owns the property and manages the time share plans. Because there is no exchange of currency in any time share reward, any gains or rewards should be considered a benefit of purchase and not a financial gain. 000531* Page Two While I realize there are many more urgent issues that must be addressed by the General Assembly this year, this proposal would serve to eliminate a law that is out of step with the practices of 48 other states and bars citizens of Connecticut from enjoying the same benefits enjoyed by time share owners in the rest of the country. Therefore, I respectfully request that the General Law Committee consider passage of this bill. I would be happy to answer any questions you might have and thank you for your time and consideration. Sincerely, Themis Klarides Deputy Republican Leader TK/pb 000531* Ashley Griffin Hamden, CT - HB 540fi Page 1 My name is Ashley Griffin. I wrote this to testify in supports HB S4Q6 AN ACT CONCERNING PUBLIC ACCESS TO INFORMATION REGARDING PHARMACY XND PHARMACIST PRESCRIPTION ERRORS. I am a friend of Diana and Stephen Henderson. When I heard of the pharmacy errors which they had experienced with two separate prescriptions for their daughter I was not surprised. I have been learning over time that apparently there are not high standards or regulations in Connecticut to prevent and also hold accountable pharmacists who make errors. In fact, just recently in my own field (veterinary medicine) a colleague of mine in Connecticut (who practices excellent medicine) called in a prescription for one of her patients, a very cute little dog. My understanding is that my colleague documented exactly what prescription the patient needed in her records and also repeated it on the phone to the pharmacist with two employees as witnesses. However, the pharmacist evidently did not write the dosage information correctly on the prescription label. This resulted in the dog being over-dosed. Because of this the little dog became very ill and was hospitalized. Multiple attempts were made to save her from the over dosage. Unfortunately, she could not recover from the over dosage and in the end had to be euthanized. It was horrible and very sad forth e veterinarian and also the poor clients, who inadvertently had over dosed their dog by followingth e directions written by the pharmacist However, even worse was that apparently the pharmacist had no remorse and even attempted to point a finger instead at the veterinarian, who had done nothing wrong. In addition, the practice found later that apparently there are no laws in Connecticut to hold pharmacists accountable for their errors. This was very disturbing. I am concerned about the casual lack of standards being in place to hold pharmacists in Connecticut accountable as well as to prevent them from repeating errors already made. Pharmacists have a responsibility to make certain they are filling prescriptions properly. They are paid very well forthei r work and with that kind of premium should hold at the forefronttha t they will pay full attention to details. In my opinion, if they are not then perhaps they should not be in the pharmacy profession. The public gives their trust (and in some cases their health or life) to pharmacists and depends on them to simply fill a prescription PROPERLY. It makes excellent sense for a pharmacist to double or even triple check everything on a label BEFORE it is purchased for each patient This practice protects innocent patients from harm and also protects the pharmacist from his or her own mistakes. In addition to having better checks and balances in the system I also believe that mandating pharmacy personnel to report all errors will solidify safety for patients and motivate pharmacists to stay alert to details. Moreover, I feel errors that escape a better system should be made available for the public to enable Innocent people to make informed choices. I believe the public is forgiving and understanding (to a reasonable degree) when mistakes occur. People know that no one in this world is perfect It will not ruin a pharmacist's career to accept responsibility for his/her errors at work (unless it was a very severe error). If anything, the public will more likely feel that a pharmacist with a reported error is probably now a better pharmacist because they learned from and acknowledged their mistake(s). A bigger problem would be that when there are no consequences human nature is to not pay the needed attention to prevent reoccurrences of the same or further errors. This is unacceptable. Ashley Griffin Hamden, CT 000531* HB 5406 Page 2 When a prescription is filled it is not supposed to be like playing Russian roulette. Consumers should be aware of their pharmacist's track record. This issue is not supposed to be about the pharmacists and their concern of being exposed. It's supposed to be about their own customers (the people they are supposed to be serving) being kept safe from pharmacy errors which can harm or even kill innocent patients. I was informed that a lobbyist actually recently stated that if pharmacists' errors were exposed this would cause the pharmacists to be 'embarrassed' and then this may 'scare' them enough to cause them to try to 'cover up' their mistakes. My response to this is that if pharmacists who made errors were allowed to be exposed they SHOULD be embarrassed and hopefully scared enough from repeating errors again. Anyone knows that consequences make people think twice. Again, thafs human nature. In fact, even other pharmacists who haven't made an error will also be more conscientious about their actions at work as potentially having very severe and negative effects on innocent people (if reporting is mandated and errors are made public). Furthermore, if a pharmacist purposefully tries to hide his/her errors then they should have double trouble and perhaps have their license suspended or revoked (in addition to being exposed to the public). There has to be some sanction imposed for such selfish, unconscionable behavior of trying to hide facts like these from the innocent individuals whom pharmacists are supposed to be serving. Cover ups in medical issues are simply unethical. In fact, thafs exactly the type of pharmacist I would want to avoid. Essentially, if reporting pharmacy errors is not mandated and these errors are not made public then there is no incentive for pharmacists to be more careful. I believe the public is fair and also forgiving to a degree. Either way the public should have the right to know the history of who is filling their prescriptions because there is potential for severe negative impact It is insult to injury and belittles the harm that has been done to not have any consequences at all. 000555 / CONNECTICUT PHARMACISTS ASSOCIATION 35 Cold Spring Road, Suite 121 Rocky Hill, CT 06067 • (860) 563-4619 Fax: (860) 257-8241 • Email: [email protected] Website: www.ctpharmacists.org Testimony before the General Law Committee Friday February 13, 2009 Re: HB: 5406 AAC Public Access to Information Regarding Pharmacy and Pharmacist Prescription Errors Good Afternoon Senator Colapietro and Representative Shapiro. My name is Margherita Giuliano. I am a pharmacist and Executive Vice President of the Connecticut Pharmacists Association. The Connecticut Pharmacists Association is a professional organization representing approximately 1000 pharmacists in the state. I am here today to speak to you in opposition to'HB~5406:j AAC Public Access to Information Regarding Pharmacy and Pharmacist Prescription Errors. As pharmacists we take an oath to provide the best care for our patients. We strive for perfection. One error is one too many. We have worked tirelessly as a profession and as an industry to implement technologies and processes that minimize the probability of an error. And we are good. We are perfect 99.9% of the time. But some times our systems fail. We've dealt with increased prescription volume, shortages in staffing, mandates from insurers and government to handle issues that are not relevant to patient care. All of these distractions as well as the continued decrease in reimbursements from state and private payers have contributed to difficult environments to practice in. I am not trying to make excuses -1 am just trying to share with you the frustrations that our pharmacists deal with on a day to day basis. Adequate reimbursement is critical in being able to protect the public. We need to be able to staff our pharmacies properly and to provide them with the tools and technologies available to dispense medications safely. When an error occurs it is devastating to the patient. It is also devastating to the pharmacist. We recognize the responsibility we have to our patients when we fill their prescriptions. As health care providers we know that it is important for us to be checking dosage, looking for drug interactions and evaluating medication related problems in our patient's profile. We catch errors every day from other members of the healthcare team. That is our responsibility. E-prescribing is a great tool in helping to remove the issue of poor handwriting for prescriptions - but with that new technology has come new types of errors from prescribers that pharmacists need to be vigilant about. These sorts of interventions where errors are prevented go virtually unrecognized. In 2005 the federal government passed the Patient Safety and Quality Improvement Act which was enacted in response to the growing concern about patient safety in the United States. Administered by the Agency for Healthcare Research and Quality (AHRQ), this Act provides for 000531* CONNECTICUT PHARMACISTS ASSOCIATION ; 1 35 Cold Spring Road, Suite 121 Rocky Hill, CT 06067 • (860) 563-4619 Fax: (860) 257-8241 • Email: [email protected] Website: www.ctpharmacists.org the creation of Patient Safety Organizations (PSOs). PSOs allow healthcare providers the ability to report errors and provide information on patient safety and quality improvement without the risk of losing the protection of data confidentiality or fearing discovery in the case of potential litigation. By providing access to de-identified error data we can identify areas in the systems that need to be improved. We need to continue to foster an environment of voluntary reporting - not only of errors but of "near misses". A near miss is when a potential error is caught before it gets to a patient. Currently we don't track near misses for fear of discovery. This new federal law allows pharmacies and pharmacists to share what they learn from near misses and errors. This information is then evaluated and "best practices" are developed and shared with the pharmacists to implement new processes in their pharmacies. It is critical that we encourage this free flow of information. That is how we will improve quality and provide a safer environment to practice in. It will not occur by publicly humiliating the pharmacist. -The Department of Consumer Protection and the Commission of Pharmacy have been cutting edge in dealing with prescription errors. They have pharmacists complete a course on quality assurance to provide them with tools to use in their daily practice to minimize errors. The Department also tracks the pharmacists and the pharmacies that errors occur in to see if a pattern can be identified. If a person wants to know if a pharmacist has had action against their license, they can obtain that information through a freedom of information request. The process is already in place. My final plea is to encourage our patients to become our partners in safe prescription practices. Here are some suggestions: • Know the name of the medication you are taking and why you are taking it. • Be patient when you come into the pharmacy. We want to be able to give every prescription the due diligence it needs. Even when there isn't a line of people in front of you there is a line of prescriptions in the back ahead of you. We always do our best to safely accommodate those waiting. • Check your prescription before you leave the pharmacy. Ask questions if you do not fully understand instructions or if you have any concerns about your medications. If something looks different - tell us. Communication is important. Your pharmacist is never too busy to answer your questions. • Get to know your pharmacist. They are your ally in helping you get the most from your medications. Thank -you for the opportunity to speak to you today. 000531* STATE OF CONNECTICUT DEPARTMENT OF CONSUMER PROTECTION TESTIMONY OF DEPARTMENT OF CONSUMER PROTECTION COMMISSIONER JERRY FARRELL, JR. PRESENTED TO THE GENERAL LAW COMMITTEE FRIDAY, FEBRUARY 13,2009 Senator Colapietro, Representative Shapiro, Senator Witkos, Representative Bacchiochi and Honorable Members of the Committee. Thank you for providing me with the opportunity to comment on four DCP legislative proposals before you today. ^j^/ff^l SB-778 AN ACT AMENDING THE WORKERS' COMPENSATION ACT 9&1 Current law requires state agencies such as Consumer Protection to obtain "sufficient evidence"\Jfk I. i of workers' compensation insurance before they issue new or renewal licenses to applicants. — Specifically, the law mandates that no license be issued unless a candidate submits proof of insurance coverage in the form of a "certificate". The intent of this 1986 legislation was to ensure that employers - such as home improvement contractors and new home construction companies - comply with state laws to provide workers' compensation coverage for their employees. If they do not, workers who are injured on the job must be paid by the State's Second Injury Fund. The Department of Consumer Protection has been increasingly unable to fully comply with this "hard-copy" certificate requirement not only because it entails a labor-intensive, manual review process for tens of thousands of renewal applications but also because it conflicts with agency efforts to streamline and automate its services to the public which now include an online license renewal process. In 1995, the Department established a wholesale lockbox arrangement with a bank in order to ensure the immediate deposit of state funds and to expedite the issuance of renewal licenses to the public. This new process, however, necessitated the replacement of the "hard-copy" insurance declaration with a signed statement included on the renewal application form certifying to the appropriate workers' compensation insurance coverage. In 2001, we upgraded to a retail lockbox arrangement which does not allow any paperwork other than the renewal coupon and payment to be mailed to the bank. This situation of technical non- compliance was noted by the Auditors of Public Accounts in our audit reports for the fiscal years ending June 30,2004 thru June 30, 2007. As a result, we have been working with the State Workers' Compensation Commission in order to address the needs of both agencies while ensuring compliance with the statutes. Accordingly, I am requesting your approval for an amendment to the law that would allow us to accept a certified statement rather than a separate "hard-copy" workers' compensation 165 Capitol Avenue, Hartford, Connecticut 06106-1630 TDD (Telecommunications Device for the Deaf): (860) 713-7240 Internet Web Site, http://www.ct.gov/dcp dcp-oirovoio5 An Affirmative Action / Equal Opportunity Employer ' ji 000558 insurance certificate from tens of thousands of applicants for renewal license. It is significant to note that the Auditors of Public Accounts welcomed our intent to submit a legislative proposal that would add a fourth form of "sufficient evidence" for workers compensation insurance coverage. We have also implemented their suggestion that we work with the State Workers' Compensation Commission to share information about our licensees in order to reduce the number of uninsured employers operating in the State thereby protecting employees in the workplace and minimizing the number of claims that must be paid by the State's Second Injury Fund. I am hopeful that you will approve our request for an amendment to the Workers' Compensation statutes so that we can continue to improve our delivery of services to Connecticut citizens wherever possible through the use of new technology. Passage of this particular bill will directly benefit the Connecticut businesses and citizens whose livelihoods are impacted by the timeliness of our services. SB-779 AN ACT PROVIDING CONSUMER PROTECTIONS TO PURCHASERS OF OUTDOOR WOOD-BURNING FURNACES This proposed legislation seeks to amend Section 22a-174k of the Connecticut General Statutes by requiring sellers of outdoor wood-burning furnaces (OWF's) to provide potential purchasers of such products in this state with the following: • Three day right of cancellation • Consumer information package that includes full disclosure of the current restrictions on locating and operating OWF's in Connecticut Specifically, Senate Bill 779 would ensure that potential buyers in Connecticut are made aware of the restrictions governing OWF siting and operation before they complete the purchase of a device that they may not be able to legally install on their property. Furthermore, it facilitates the informed purchase of outdoor wood-burning furnaces and creates purchaser protections while promoting local air quality. In addition to these proposed consumer protections, Section 2 (c) of the raised bill requires retailers to maintain a record of the notice to OWF purchasers for five years. We feel that this is unnecessary and ask that you strike this record-keeping requirement from the bill. Sufficient penalty is imposed on a seller/vendor for failure to issue the required notifications in advance of an OWF sale. The Department of Consumer Protection urges the passage of Senate Bill 779 which was developed in concert with the Department of Environmental Protection because it provides additional protections to consumers. Since the purchasers of home improvement services, dating services, health club memberships and weight-loss programs all enjoy a three-day right > of cancellation, we believe there should also be a buyer protection program for the purchasers of outdoor wood-burning furnaces. As background, restrictions on the siting and operating of outdoor wood-burning furnaces were enacted by the General Assembly in response to citizens' complaints about the impact of OWF smoke on the air quality and public health. Since this legislation was passed in 2005, the 000559 Department of Environmental Protection (DEP) has recorded more than 400 complaints about the new criteria for setting up and operating OWF's. Specifically, the siting restrictions outlined in the law make compliance impossible for some owners while the cost of coming into compliance is beyond the means of others. Furthermore, some OWF owners have not only expended significant funds on purchase and installation but also on unsuccessful efforts to comply with the regulations. Clearly, consumers need to be made aware of the legal requirements for OWF installation and operation before they purchase these products. The operation of an outdoor wood-burning furnace produces emissions that impact the environment. OWF's, like all other wood-burning devices, release fine particulates into the air which, when inhaled, can aggravate existing heart and lung diseases and cause cardiovascular symptoms, asthma attacks and bronchitis. OWF design generally leads to incomplete combustion resulting in frequent periods of excessive smoking and much higher quantities of particulate matter than other wood-burning devices. While some cleaner models are available, the North East States for Coordinated Air Use Management (NESCAUM) estimates that most OWF's produce at least 20 times more emissions of particulate matter (PM) than the current generation of EPA-certified woodstoves. In addition, while fireplaces and wood stoves used seasonally may operate for only a few hours a day, OWF's can operate all day and all year when used for both space heating and hot water applications. The negative impact to the environment from OWF's is exacerbated when, contrary to both the 2005 statute and manufacturers' instructions, materials such as household garbage, tires or pressure treated wood (containing highly-toxic arsenic) are combusted. Maine, Massachusetts, New Hampshire, New York and Vermont have adopted - or are in the process of adopting - more stringent rules governing OWF's. SB-780 AN ACT CONCERNING THE SOLICITATION OF CHARITABLE FUNDS ACT This bill would increase the threshold gross revenue amount that requires charitable organizations to obtain an audit report by a certified public accountant. Each year, thousands of charitable organizations are required to register and provide financial reports to the Department of Consumer Protection's Public Charities Unit. Any organization with gross receipts of $200,000 or more must include an audit opinion from a CPA with its annual registration. Due to the heightened audit standards required of professional auditors, the cost of an audit has increased significantly in recent years. We understand that an audit can cost even a small organization $5,000 or more and, while it is an important tool in preventing and discovering financial impropriety, we feel that the cost of this regulatory compliance must be taken into account when evaluating its reasonability and usefulness. For a charitable organization with $200,000 in receipts, spending $5,000 on an audit would mean that it is using 2.5 % of its revenue on the preparation of a single state government filing. We do not believe that diverting a significant amount of a charity's assets away from the accomplishment of its charitable purpose is in the public's interest. This is especially true in these times when charitable contributions are increasingly difficult to come by for many organizations. 3 000560 Our proposed audit threshold - $500,000 in gross receipts - is much more reasonable. A charitable organization with this level of revenue will most likely have an audit done routinely simply to keep its financial house in order. a^HBR6301 AN ACT CONCERNING THE PRACTICE OF PHARMACY AND ELECTRONIC PRESCRIPTIONS This legislative proposal would make two separate changes to existing law in the area of electronic prescriptions. They are as follows: • Allow Connecticut pharmacies to maintain records of prescriptions electronically rather than in paper format as currently required • Add Schedule II drugs to the list that physicians can prescribe and transmit electronically to pharmacies - current state law allows Schedule HI, IV and V drugs to be transmitted electronically to pharmacies. It is significant to note that this proposed legislation (as well as the currently codified list of drugs) would only take effect when specifically allowed under The Federal Controlled Substances Act. At the present time, changes to the Federal Act consistent with the changes described have been enacted and are currently awaiting the promulgation of regulation by the Drug Enforcement Administration within the next several months. If passed, this legislative proposal would: • Further the use of "e-prescribing" and "e-health" and the associated efficiency and improvements that come with electronic/computer records • Reduce the number of medication errors caused by illegible handwriting by allowing the expanded use of electronic transmission of prescriptions from physician to pharmacy • Enable pharmacies to fill prescriptions more quickly, efficiently and accurately since allowing pharmacies to maintain their filled-prescription record-keeping electronically would result in a more efficient and dependable system. Furthermore, electronic prescribing is exempt from Federal requirements to use tamper-resistant paper, thereby reducing the burden on practitioners. • Result in improved efficiency, accuracy and a reduction in costs, although federal legislation will be required to allow the practices contained in this proposal to take effect in Connecticut. However, as in similar legislation passed in previous years, we are preparing ourselves in advance of anticipated enabling Federal legislation. I thank you for your time and attention and am open to any questions that you may have regarding our legislative proposals. If you should require any additional information, please contact Gary Berner, Legislative Program Manager, at 713-6208. Thank you. 3 000561* Diana Henderson Hamden, CT RE: HB 5406 Page 1 Thank you Senator Colapietro and Representative Shapiro. My name is Diana Henderson and I am testifying in support of.HB 5406, AN ACT CONCERNING PUBLIC ACCESS TO INFORMATION REGARDING PHARMACY AND PHARMACIST PRESCRIPTION ERRORS. Last week I submitted related testimony in support ofeSBf325? I am extremely fortunate, and very grateful, that both Sen. Looney and Rep. Sharkey have introduced legislation on this important topic. My infant daughter was the victim of not one but two (2) pharmacy errors. In one a medication intended for use in her ear was mislabeled with instructions that it be placed in her eye. In the second she was given a completely wrong medication. Both errors occurred at the same time at the same pharmacy. I contacted the Department of Consumer Protection Drug Control Division and followed through in every way. Since that time I have done everything humanly possible to get information about pharmacy errors and have discovered that the state of Connecticut offers no transparency, accountability or checks and balances. There is no way to make an educated decision about where to have my family's prescriptions filled. There is no way to choose a safe pharmacy even if it is located next door to a dangerous one. I am asking you to make information about pharmacy errors public so that consumers have the ability to make an informed decision about such an important part of our health care. To be clear -1 am not asking the state of Connecticut to break new ground. A simple internet search of pharmacy board minutes around the nation showed that many other states already release identifying information. I am circulating examples of how 9 or 10 states address the issue of pharmacy errors. I have also attached examples from both Arizona and Kansas to my written testimony, as well as sample minutes from the Connecticut Commission of Pharmacy for comparison. In written testimony against SB 325 a pharmacy lobbyist claimed that keeping this information secret somehow serves to protect the consumer. [Type text] 000561* Diana Henderson Hamden, CT RE: HB 5406 Page 2 The argument seems to be that secrecy leads pharmacists to be more open about their errors. In fact in her testimony related to SB 325 she indicated that a transparent system, which apparently works well in numerous other states, would be "disastrous" here and lead Connecticut pharmacists to "hide or bury" their errors. She spoke of pharmacists becoming "scared" or "embarrassed." When weighed against a parent's ability to make an informed decision about having their child's prescription filled safely this seems like a minor consideration. Pharmacists are respected professionals and holding them to an appropriate standard of professional conduct should not translate to fear, embarrassment or refusal to cooperate in appropriately protecting their patients. Having the pharmacist appear on the record to indicate not only how an error occurred but also what has been done to reduce the likelihood of it being repeated makes me more confident as a consumer that errors are being addressed than having all errors cloaked in secrecy. In the examples attached here errors were addressed by such simple actions as rearranging the placement of medications to reduce the likelihood that the pharmacist would take the wrong one off the shelf. Erroneously giving a prescription to a customer with a similar name was addressed by verifying the patient's street address as well as name. Making these simple actions public should not cause embarrassment but can make consumers safer and allow us to feel more secure that errors are being appropriately addressed. I did not encounter the cooperative environment that the pharmacy lobbyist tried to present. Instead I experienced a cavalier attitude that seems to come from pharmacy staff knowing that there will be little, if any, consequences for their actions. When we contacted the pharmacy about the first error a pharmacy employee actually laughed and said "Oh that happens all the time. Of course the drops go in her ear." When we contacted them again about the second error the pharmacist indicated that [Type text] 000561* Diana Henderson Hamden, CT RE: HB 5406 Page 3 she had found my daughter's bottle of medication, labeled with her name, but made no efforts to contact us to warn us about the error. When I reported my daughter's errors to the pharmacy I was not given instructions about contacting Drug Control. Fortunately I found the contact information on my own. The Drug Control agent I met with indicated that the vast majority of patients who experience errors return the medications to the pharmacy. This makes it extremely difficult to document errors even if reported. In the past week I had 5 prescriptions filled and could not locate the contact information to report any possible error to Drug Control on any of them. In other words hiding or burying errors already occurs. The idea that if pharmacists are either scared or embarrassed they will be more likely to "hide or bury" errors could easily be addressed by making pharmacists and other pharmacy employees mandated reporters. In the same way that teachers and day care providers are mandated to report suspected child abuse these professionals can be required to report any and all suspected errors. Openness should lead to increased vigilance in preventing errors as well as greater efforts to identify and correct problems which allowed them to occur. As the system currently exists the Department of Consumer Protection seems to be protecting the pharmacy industry at the expense of protecting the consumer. My daughter was already a victim twice. Please give me the tools to make a better choice about where to fill her prescriptions in the future so that I can minimize the risk of her being the next victim of a pharmacy with a history of preventable errors. [Type text] 000561* Diana Henderson Hamden, CT RE: JHB 5406 Page 4 Arizona COMPLAINT # 2858 Pharmacist Tammy Bruno and Pharmacy Supervisor Melanie Malee were present in response to a consumer complaint. Compliance Officer Sandy SutdifTe gave a brief overview of the complaint. Ms. Sutcliffe stated that the complainant stated that her prescription for Wellbutrin SR lOOmg was incorrectly filled with Wellbutrin SR 150mg. The patient was out-of-town when she discovered the error. The patient missed approximately one or two doses of her medication before she received the correct medication. The patient did not take any of the incorrect medication. President McCoy asked Ms. Bruno about the complaint. Ms. Bruno stated that the two strengths of Wellbutrin were beside each other on the shelf. Ms. Bruno stated that the bottle was a sealed bottle and she did not catch the error when she verified the prescription. Ms. Bruno stated that when the patient called her that evening she should have been more aggressive in getting the correct medication to the patient. Ms. McCoy asked Ms. Bruno what she has done to change her practice since this error occurred. Ms. Bruno stated that the two medications have been separated in the pharmacy. Ms. Bruno stated that the pharmacy has received the updated scales and the final verification cannot be completed if the filling verification has not been completed by using the scale. Ms. Bruno stated that they have the updated picture of the medication in their system. Ms. McCoy thanked the respondents for appearing. Complaint #2868 Pharmacist Debbie Walton and Pharmacy Technician LaTanya Calamity appeared in response to a consumer complaint. Compliance Officer Ed Hunter gave a brief overview of the complaint. Mr. Hunter stated that a prescription was filled correctly by the pharmacist, but was given to the wrong patient by the pharmacy technician. The technician gave the patient a prescription belonging to another individual with a similar name. The technician's employment was terminated. President McCoy asked Ms. Walton^about the complaint. Ms. Walton stated that when they were made aware of the error they contacted the patient. Ms. Walton stated that the patient told them he would check with his doctor and then come to the pharmacy to pick up the correct medication. Mr. Dutcher asked Ms. Walton about her new procedure to insure that the correct medication is given to the correct patient. Ms. Walton stated that when the patient signs the log when they pick up their prescription, the technician is to verify that the name matches the name on the prescription. Ms. McCoy asked Ms. Calamity if she was the technician involved in this incident. Ms. Calamity replied yes. Ms. Calamity stated that she now works at a different pharmacy. Ms. McCoy asked Ms. Calamity if she has changed the way that she verifies that the correct patient is getting the correct medication. Ms. Calamity states that at the pharmacy that she works at now that they must verify the patient's address and she also verifies the patient's first and last name. Ms. Calamity stated that at the pharmacy she works at now there are steps and training provided. Ms. Calamity stated at the other pharmacy she asked the patient their name and gave them their medicine. http://www.azpharmacv.eov/0405MINUTES.html [Type text] 000561* Diana Henderson Hamden, CT RE: HB 5406 Page 5 Kansas STACI L. SNIDER #13371: Staci Snider appeared pro se. Assistant Attorney General, Marty Snyder, represented the Board. Ms. Snyder advised the Board that the Respondent was charged with K.S.A. 65-1637 (a)(4) by substituting levothroid on a prescription written for Synthroid. Ms Snyder stated that a consent agreement was sent to the Respondent recommending a $250 fine and a period of one-year probation. The Board heard both the Respondent and the Complainant. A motion was made and seconded to go into executive session to deliberate until 9:50 a.m. Those present in executive session were Tom Frazier, LaTonyua Rice, Debra Billingsley and Randy Forbes. (Whitchurch/Gilstrap). Motion carried (5-0). RECONVENE: The Board meeting reconvened at 9:50 a.m. with all members present as previously stated. MOTION: A motion was made and seconded to accept the consent agreement as written (Whitchurch/Paul). Motion carried (5-0). MICHAEL D. McDANIEL #11364: Michael McDaniel appeared with his attorney, Gary Peters. Assistant Attorney General, Marty Snyder represented the Board. Ms. Snyder advised the Board that the Respondent was charged with violating K.S.A. 65- 1637 (a) in that he had filled a "dispense as written" prescription for Amnesteem with Claravis. The Respondent was also charged with K.A.R. 68-7-12b for failure to file an incident report. Howard Paul recused himself from the hearing and did not participate in any discussion. Ms Snyder stated that a consent agreement was sent to the Respondent recommending a $500 fine and one-year probation. The Respondent advised that Walgreens had taken aggressive remedial action by requiring the Respondent to take continuing education regarding drug substitution and that he had received an internal reprimand. A motion was made and seconded to go into executive session to deliberate until 10:25 a.m. Those present in executive session were Jim Kinderknecht, Debra Billingsley and Randy Forbes. (Whitchurch/Gilstrap) Motion carried (4-0) RECONVENE: The Board meeting reconvened at 10:25 a.m. with all members present as previously stated. MOTION: A motion was made and seconded to accept the stipulation as written and to accommodate Mr. McDaniel on the language in the newsletter reporting the violation. (Whitchurch/McFarland). Motion carried 4-0. http://www.kansas.gov/pharmacy/Minutes/March%202004%20Minutes.pdf [Type text] 000561* Diana Henderson Hamden, CT RE: HB 5406 Page 6 STATE OF CONNECTICUT DEPARTMENT OF CONSUMER PROTECTION COMMISSION OF PHARMACY Legal Matters Attorney Schwane suggested that letters of reprimand be sent for the following dockets: Docket Number 06-3022 Docket Number 06-2974 Docket Number 06-3152 Commission Action: Commissioners passed a vote of (6-0) to accept. Pharmacists Who Have Completed the Continuing Education Course on Prescription Errors Attorney Schwane presented the following cases involving pharmacists who have committed prescription errors. These pharmacists have completed a USP Practitioners' Reporting Network error form and taken the continuing education program concerning prescription errors. The Department recommends that the Commission vote to dismiss the following cases. 06-6925 06-3740 06-9967 06-9190 06-5424 06-2850 06-4375 Commission Action: Commissioners passed a vote of (6-0) to dismiss the above mentioned pharmacy files. http://www.ct.gov/dcp/lib/dcp/pdf/drug_control_pdf/dcl206minutes.pdf [Type text] 000531* ^tate of Conm?rtirut GENERAL ASSEMBLY GENERAL LAW COMMITTEE ROOM 3300 LEGISLATIVE OFFICE BUILDING HARTFORD, CONNECTICUT 06106 (203) 240-0470 General Law Committee PUBLIC HEARING AGENDA Tuesday, February 24, 2009 10:00 AM in Room 1C of the LOB COMMITTEE BILLS FOR REVIEW 1. S.B. No. 838 AN ACT CONCERNING CONSUMER PRIVACY AND IDENTITY THEFT. 2. S.B. No. 892 (RAISED) AN ACT CONCERNING GIFT CERTIFICATES. 3. S.B. No. 925 (RAISED) AN ACT ESTABLISHING A RESTAURANT GIFT CARD AND CERTIFICATE GUARANTY FUND. 4. S.B. No. 926 (RAISED) AN ACT CONCERNING THE SALE OF CONNECTICUT WINE AT FARMERS' MARKETS. 5. H.B. No. 6433 (RAISED) AN ACT CONCERNING THE REGULATION OF CHARITABLE FUNDS. 6. H.B. No. 6434 (RAISED) AN ACT CONCERNING CONSUMER DEPOSITS AT BANQUET FACILITIES. 7. H.B. No. 6470 (RAISED) AN ACT CONCERNING RESIDENTIAL RETAIL HEATING OIL AND PROPANE CONTRACTS. 8. H.B. No. 6471 (RAISED) AN ACT MAKING CHANGES TO THE LIQUOR CONTROL ACT. 9. H.B. No. 6472 (RAISED) AN ACT CONCERNING WINE FESTIVALS. 10. H.B. No. 6473 (RAISED) AN ACT EXPANDING THE HOURS OF OPERATION FOR FARM WINERIES. ^ Primed en recycled paper 000531* ^iai? of (Enrmectirut GENERAL ASSEMBLY GENERAL LAW COMMITTEE ROOM 3500 LEGISLATIVE OFFICE BUILDING HARTFORD, CONNECTICUT 06106 (203) 240-0470 PUBLIC HEARING ATTENDANCE Date: February 24, 2009 Time: 10:00 AM Room: 1C Present Absent Altobello, Buddy X Aman, Bill X Bacchiochi, Penny X Colapietro, Tom X D'Amelio, Tony X Esposito, Louis X Gomes, Edwin X Kissel, John X Maynard, Andrew X Mazurek, Corky X Musto, Anthony X Nafis, Sandy X Nicastro, Frank X Reecl, Lonnie X • Robles, Hector X Shapiro, Jim X Taborsak, Joseph X Tong, William X Witkos, Kevin X Printed en recycled paper ®tate of Connecticut GENERAL ASSEMBLY GENERAL LAW COMMITTEE ROOM 3500 LEGISLATIVE OFFICE BUILDING HARTFORD. CONNECTICUT 06106 (203) 240-0470 2009 MEMBERSHIP LIST Chairs: Sen. Tom Colapietro (D) Rep. Jim Shapiro (D) Vice Chairs: Sen. Andrew Maynard (D) Rep. Joseph Taborsak (D) Ranking Members: Sen. Kevin Witkos (R) Rep. Penny Bacchiochi (R) Members: Rep. Buddy Altobello (D) Rep. Bill Aman (R) Rep. Tony D'Amelio (R) Rep. Louis Esposito (D) Sen. Edwin Gomes (D) Sen. John Kissel (R) Rep. Corky Mazurek (D) Sen. Anthony Musto (D) Rep. Sandy Nafis (D) Rep. Frank Nicastro (D) Rep. Lonnie Reed (D) Rep. Hector Robles (D) Rep. William Tong (D) @ Prtnted on recycled paper CONNECTICUT GENERAL ASSEMBLY GENERAL LAW COMMITTEE . PUBLIC HEARING tn ^^ SPEAKER REGISTRATION o CD CD LEGISLATORS, AGENCY HEADS, AND MUNICIPAL OFFICIALS Room: Date: 3-1 jjfl^l Time: PLEASE PRINT Representing Pro/ Written No. Speaker Bill Number(s)/Subject(s) (self, organization, agency...) Con Testimony? © COMM. ffctJZ&l/l POf ® \ "otwv.rf^WnWr tmkn My^nAs- K- tU U^-7 / jeS s N Joa«v VWYtan SelP Fro 1 . my pw. etf ^ M^MM^sMt VA? 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P y X PcXe-r Ci$e.t\ !ftl { AdUhury V H-il A' x AU/z^ksxLi^ A/Scxz. a^Jlf a/ X fVio KWCC- uli 1 • P fj X ItWta Q>sWllt> A/v/Cc, P Kl tVfr-£> Y X l CM* G iio P y X (rc-f-/' y^f/' ~ 0/\ ro C CU70 r A" X , ' ' J1 *T5- — f%7777-< Ort Tc k w 1 1 1 _• • — i'l UJ MEMBERS OF THE PUBLIC AND LOBB YISTS PAGE. / Representing Pro/ Written No. Speaker Town of Residence Bill Number(s)/Subject(s) (self, organization, agency...) Con Testimony? Q(Y~7o X CL' 22 23 24 25 26 27 • 28 29 30 31 32 33 34 35 MEMBERS OF THE PUBLIC AND LOBBYISTS PAGE 2=. OF_2~ 1 February 24, 2009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. CHAIRMEN: Senator Colapietro Representative Shapiro VICE CHAIRMEN: Senator Maynard Representative Taborsak MEMBERS PRESENT: SENATORS: Witkos, Kissel, Musto REPRESENTATIVES: Bacchiochi, Aman, D'Amelio, Esposito, Mazurek, Nicastro, Reed, Robles, Tong REP. SHAPIRO: Good morning, everybody. I would like to call to order the public hearing of the General Law Committee. As most of you already know, we've reserved the first hour for testimony for Legislators, agency heads and commissioner-level people and constitutional officers. After that time, we open it up to the public, and people will have three minutes to come and state their turn, and state their case, and then we will have question and answer from the committee. Right now, I would like to call first -- I don't see -- there are a number of members of the committee who are on their way, including Representative Mazurek and a few others, so you will see more of the committee here. And first on our list is Commissioner Farrell. JERRY FARRELL, JR.: Good morning. It's nice to be back in front of General Law for the second time this session. REP. SHAPIRO: Good morning, Commissioner. JERRY FARRELL, JR.: I'm Jerry Farrell. I'm the Commissioner of Consumer Protection. I'm here 2 February 24, 2009 ch/rned GENERAL LAW COMMITTEE 10:00 A.M. to testify on two bills this morning, the first of which is fairly familiar to the General Law Committee. It's Senate Bill 838. the Identity Theft Bill. Members who were here last year will remember it as Senate Bill .30. It was very much a bipartisan effort that put together that bill. It originated out of the Governor's office. The Governor is very concerned about identity theft, and it was further aided and championed by General Law's own cochairman, Senator Colapietro, who put a lot of interest and effort into the further drafting of the bill, so -- and Senator Nicastro1had his own -- well, Representative Nicastro. We're elevating you. He had a complementary bill that actually passed last year that references this bill. So every time I go to some of them with lawyers and they ask me about the Nicastro bill, they say, "And it references this Senate Bill 30. but whatever happened to Senate Bill 30?" So this year we'd very much like to get this legislation through. You know, identity theft remains a huge problem. There was a news report this morning that quantified how much identify theft costs the United States, whether it's the individual consumer or the businesses that are affected, and that press report put the dollar figure at $56 billion. That's a lot of money that's going down the tubes as a result of identity theft. The bill includes several great provisions. There's a better definition of what constitutes identity theft. There are enhanced criminal provisions. There's better record management by private companies that retain personal identifying information. So we are very hopeful that this year, this bill can pass. The other bill that I would like to testify on 3 February 24, 2009 ch/rned GENERAL LAW COMMITTEE 10:00 A.M. is House Bill 6471, which thanks to the committee, this initiated out of DCP and was raised by you. It concerns changes to the 'Liquor Control Act. It's fourfold in what it does. It eliminates the racquetball permit. If you go back to the 1970s, racquetball clubs were quite the phenomenon. Currently, there is no one, no licensee, that has a racquetball permit. And there's always been an impetus to consolidate the number of liquor permits, and we haven't heard of anyone who's concerned about that particular permit going away. The second provision in there -- and you may be wondering why my friends the chefs are here this morning. The second provision would allow wine-tasting classes in programs that are accredited by the Department of Higher Education. It would allow wine-tasting classes at colleges. Currently, there is an excellent program at Naugatuck Valley Community College. If you get an invitation to go there, I would have to tell you, take them up on the invitation. They have a wonderful program that trains both young and older students about the hospitality industry, and part of their curriculum goes to allowing the students to make their own wine and then serve it as part of the events they have there at the school. Throughout the semester, they will put on dining events where they make the food, serve the food, and certainly having the wine, the several bottles that they make during the course of a semester, be served as part of that experience certainly seems something that we should permit. Senator Hartley worked very hard on this legislation last session. The third provision, and you're going to get testimony from the Commission on Culture and Tourism on this as well, would allow filming 000516 4 February 24, 2009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. in cafes and taverns after regular closing hours. As the film industry has grown in Connecticut, we have encountered several situations that because film production companies need to film for 24 hours, that they need to be filming when a restaurant, a cafe or a tavern is not truly in operation. They need to be there in those after-hours, that unfortunately, the Liquor Control Act prevents that. The cafes and taverns, there is a specific provision that prevents anyone from being in those establishments after those operating hours. This change would allow people to be within the premise not drinking. I mean, obviously, they can portray drinking just without the alcohol. It is keyed into the fact that this would not be any film production. It would have to be a film production that qualifies for the state tax credit. So it's not just anyone putting up a camera and saying I'm a filmmaker. It's someone who is qualified through Culture and Tourism for those tax credits. And the last provision to our omnibus liquor bill would allow cafes to open at 6:00 a.m. to serve breakfast. Currently, restaurants can do that, that they can open at 6:00 a.m. They obviously can't serve alcohol at 6:00 a.m., but right now, there is a prohibition in the statute that prevents them from opening their doors. And our thought is that cafes and restaurants should be on equal footing. If they wish to offer breakfast to their patrons, allowing them to open at 6:00 a.m. with no liquor would seem to be appropriate. So those are the suggestions that we put in front of you, and we hope you can adopt them. 5 February 24, 2009 ch/rned GENERAL LAW COMMITTEE 10:00 A.M. REP. SHAPIRO: I have one question for you, then I think Senator Colapietro has a number. On the identify theft bill, 838, I noticed that there's a bifurcation of the crime depending on the age of the victim. It looks as if it's intended to protect seniors in some way differently from those who are not. Can you explain the genesis of that and the reasons therefore? JERRY FARRELL, JR.: Again, all of those things come out of the recommendations of the Identity Theft Task Force of approximately three years ago, and I didn't serve on the task force, but in reading through the recommendations, I believe the feeling of the task force was that, you know, obviously any crime against someone 60 or older is that much harder to recover from. And so I think it's analogous to other provisions in your statutes, that you make it a different crime when it's committed against someone 60 or older. REP. SHAPIRO: Thank you very much. Senator Colapietro. SENATOR COLAPIETRO: Thank you. Commissioner, I met with the Governor's people on that very same bill yesterday. We did a couple little tweaking, just clean-up changes, like they used to say the word "person" instead of "person or business." We just added those to it. And they took a provision out from last year that had nothing to do with identity theft that was so troublesome for some of the people to understand. But the other thing that I think I would like you to explain to the committee is how the fund works, because that's basically what we left 6 February 24, 2009 ch/rned GENERAL LAW COMMITTEE 10:00 A.M. out of Representative Nicastro's bill was the fund to add to it. And this bill was supposed to pass. It did pass the Senate and it failed in the House, but the fund, I don't think even I quite understand how the fund works. Could you explain that for us? JERRY FARRELL, JR.: Yes. You know, I think we were looking for a mechanism to get restitution of some sort back to consumers. Right now, I probably could act under CUTPA and hold hearings and order restitution to consumers if it's, let's say, a corporate act that causes a problem to a consumer, that a corporation loses information, and as a result of that, the consumer has identifiable losses, but right now, we don't have an exact mechanism to get those kind of funds to the consumer. You know, we have had instances where both the attorney general and I have been involved where we have assessed civil penalties, but there is an agreement in place that civil penalties came to the State, but there is no real mechanism to turn around and say, well, you know, the State isn't truly the victim. There are very identifiable people who can prove their losses in the same way that -- you're all familiar with the Home Improvement Guarantee Fund, that there is a set of criteria that the consumer comes to the Department having met, and qualifies for funds out of that Guarantee Fund. So we're trying to make it analogous to the Home Improvement Guarantee Fund. There is approximately four guarantee funds that the Department has. So that's the impetus behind it. SENATOR COLAPIETRO: I think it's a great idea. I 7 February 24, 2009 ch/rned GENERAL LAW COMMITTEE 10:00 A.M. guess what I'm really driving at is where does the money originally come from to put into the fund? JERRY FARRELL, JR.: Well, I think it would come from two sources that -- I'm searching for the legal term of where there is a forfeiture. I believe it mentions forfeiture under some of the more criminal provisions of the bill, where someone who is the perpetrator of an identity theft crime might forfeit assets to the State, and those funds would go into that guarantee fund. Or alternatively, through an administrative proceeding where DCP is looking at the actions of a corporation, not that they intentionally lost information, but through inaction or some other omission identifying information got lost, that a penalty would be assessed\ , and that would go into this guarantee fund. So it does not look for any initial contribution by the State into that fund. It would be exclusively out of either the perpetrator's pocket, or where it's a corporate kind of situation, out of an administrative penalty. REP. SHAPIRO: Do we have further questions from the Committee? Representative Taborsak. REP. TABORSAK: Thank you, Mr. Chairman. Good to see you, Commissioner. Just a question I'm hoping you can help me understand. The changes to the language in Subparagraph A, the first subsection under Section 1. I think it's the definition of identity theft. As I read this, the prior language defined identify theft as when such person intentionally obtains -- I'm reading the language in the brackets -- obtains personal identifying information of another person without the authorization of such other 8 February 24, 2009 ch/rned GENERAL LAW COMMITTEE 10:00 A.M. person and uses that information to obtain or attempt to obtain money, credit, et cetera. The new language takes out the part about obtaining the information, and supplants that with knowingly uses personal identifying information. So I guess my question is, just to get a better understanding of why that language change took place and what -- where we're trying to go with it, what we're trying to accomplish. I guess the first question I would haive, if you could kind of give us a background of it, and also answer a specific question of would this -- and this is kind of through an example. Taking out the requirement that the person obtain the information, would this, the way the statute, or the way this bill is proposed now not make it a crime if a person were to go out and obtain personal information of a person but not use it? That's I guess my first concern is that it looks like the way that we're defining identity theft, if someone was caught with, say, you know, a computer full of personal information of people but hadn't used it yet, would there be difficulty in prosecuting them under this language, in your mind? If you could answer that question and kind of explain why this language is being tinkered with and what we're trying to accomplish, that would be helpful. JERRY FARRELL, JR.: I'll take a crack at it, knowing that Commissioner Danaher is going to testify after me, and of course, he's a more appropriate authority on criminal prosecution. You know, my sense of why the language got changed is there are certainly going to be instances where someone is in possession of personal identifying information for legitimate reasons initially, but then goes 9 February 24, 2009 ch/rned GENERAL LAW COMMITTEE 10:00 A.M. and uses it thereafter for a fraudulent purpose. You know, the classic example that perhaps you're familiar with is obviously in a divorce situation, you know, we all have our spouse's Social Security number, date of birth, all of that kind of information certainly within our possession if not memorized. Obviously, as the divorce progresses and gets finalized, you could certainly have someone who goes and misuses that information at a later date. So I think it's trying to make the distinction where there isn't -- that there isn't necessarily a need for it to be obtained initially under some false purpose. And thereafter, I'm going to defer to Commissioner Danaher to further parse that for criminal purposes. But that's my understanding of why it's constructed in that fashion. REP. TABORSAK: Thank you. REP. SHAPIRO: Further questions? Representative Nicastro. REP. NICASTRO: Thank you, Mr. Chairman. Good morning Commissioner, again. JERRY FARRELL, JR.: Good morning. REP. NICASTRO: I was looking at the bill, and I recall this very much last year. We ran out of time, basically, what was happening. We were running up and down between the House and the Senate, and we were trying to work with the Governor's office. And I know Senator Colapietro was trying to get everything taken care of, and time just elapsed. I was looking at the bill, and if I read this correct, in Section 2, it says a person is guilty of theft in the first degree -- if they're under age 10 February 24, 2009 ch/rned GENERAL LAW COMMITTEE 10:00 A.M. 60, it says for an amount exceeding $10,000, but if they're over age 60, $5,000. Was there a specific reason why we're doing that? I mean, why can't it be $5,000 for both? They just -- leaving it at that level, why does it have to have a higher plateau? JERRY FARRELL, JR.: You know, my understanding of the reason why it was drafted that way was that it mirrors several of the existing criminal statutes that do lower the dollar threshold when it's a crime against a senior citizen. So that's my understanding of why there's a distinction. REP. NICASTRO: You know, I just thought if it's identity theft -- I mean, age -- and I can respect this. I'm a senior citizen, okay, but looking at it, I would think, you know, we'd keep it~at the same level, 5,000. It's still a crime. I mean, somebody can be young, but $5,000 could be all the money in the world to them if they lose that. That's why I was concerned about that. JERRY FARRELL, JR.: I hear you. I know we have analogous statutes that -- for instance, on fuel companies that -- there were a number of criminal prosecutions brought against fuel companies that defrauded consumers, and we were better able to proceed on the ones that involved senior citizens, because that statute was more clear-cut that the dollar amount, the threshold that had to be met was less. REP. NICASTRO: I don't know if it would be -- I don't know how my colleagues feel. I'm just wondering -- I wonder if we had the figure at 5,000, if that would create a problem. I'm looking at time limitations and things like that, but it's just a suggestion. Thank you. Thank you, Mr. Chairman. 11 February 24, 2009 ch/rned GENERAL LAW COMMITTEE 10:00 A.M. REP. SHAPIRO: No further questions? Thank you very much, Commissioner. JERRY FARRELL, JR.: Thank you. REP. SHAPIRO: Next is Commissioner Danaher. JOHN A. DANAHER, III: Morning. My name is John Danaher. I'm the Commissioner of the Department of Public Safety. I appreciate the opportunity to be here, and I'd like to speak in support of Senate Bill 838. the identity theft bill that you've been discussing. I'd like to also, in addition to thanking you for the opportunity to address it, I'd like to thank the Governor for her work in advancing this matter. The report that was the genesis of this bill was the product of a great deal of effort, and this, in our judgment, is a crime that needs the attention that it's getting. This is an insidious offense. An individual is probably better off getting mugged than they are being the victim of identity theft, because when someone gets mugged, it ends. It's over and you can move on with your life. In my last occupation before this one, I prosecuted a number of these cases and came to know from the victims firsthand how painful it is. I think we all have the experience of coming home on a Friday night and getting a bill that's legitimate but is erroneous, and you get upset because you can't do anything about it for three days. I've talked to victims who were the victim of identity theft, and they come home and they see bill after bill, day after day that's totally illegitimate. I'd like to put this in the context of one of 12 February 24, 2009 ch/rned GENERAL LAW COMMITTEE 10:00 A.M. those cases, because I think it will address some of the questions that you raised earlier. The victim in the case I'm thinking of, the one that we prosecuted, was an elementary school secretary who was past the age of 60. She was a single person and on a very limited income and was the victim of identity theft. She was getting a series of bills, dunning letters. At one point, she was actually sued. Some company that wasn't being paid for these illegitimate bills retained a law firm as a collection agency and they brought a small-claims action against her. By this time, I had spoken with her, and it was just by happenstance I found out about it, and we found a Secret Service agent who had the time to investigate the case and pursued it. But she had gone to the local authorities, and they said, well, you know, okay, you live in our town, but it was very obvious who was committing the crime, because they were having goods sent to their home address in another city. So the local authorities said, well, the criminal is in this other city. You need to go to this other police department. So she went to that police department. They said, well, you live in this other city, so go to your own police department. This bill will address that situation. But federally, we didn't care who lived where, so we pursued it. At sentencing, she was quite eloquent about what it's like to be in her situation and to be sued, to have your credit rating destroyed. If she needed to buy another car, she wasn't going to be able to get a loan. If she needed specialized medical equipment, she couldn't get it. It took a long time to clear up her credit rating, even though we found the person responsible and they were incarcerated for what they were 13 February 24, 2009 ch/rned GENERAL LAW COMMITTEE 10:00 A.M. doing. I believe that -- and if I may, I'll jump to some of the questions that were raised and answer them to the extent I can. I believe that the age variance that appears here reflects the fact that older individuals who may be on a limited income need to have their situation addressed perhaps more promptly and more ^aggressively than someone who's not in that situation. Just as we have crimes for assault against older individuals reflecting the fact that they're more vulnerable, this proposed bill enhances the penalty for those who victimize individuals over the age of 60. I mean, it's still an offense if the individual is under 60, but the bill looks for a higher value before it makes it a Class B felony, and that's under current Section 2. Section 3, it's, again, still an offense. It's a Class C felony if the individual is over 60. In that circumstance, no loss is necessary. For someone under 60, the loss would have to be $5,000 or more. The section also -- and I think this also goes to one of the questions that was raised. In Section 5(b), it criminalizes the possession of access devices, and that might give somebody pause because it includes things like scanning devices, which many people have, but it's only criminal if -- it's only unlawful possession if it's possessed for the purpose of fraudulently using the information. Another case I prosecuted involved an individual who was found to have in his motor vehicle a variety of driver's licenses from another state in a variety of names. He had with him a laptop computer that had in it the seals of every state in the United States 14 February 24, 2009 ch/rned GENERAL LAW COMMITTEE 10:00 A.M. loaded on. He also had something called a Fargo Quatro Printer, which the instruction manuals made it clear that it was capable of creating identification documents up to and including barcodes, so you could make driver's licenses that would look like the driver's license made by any state in the United States. He had laminating devices. He had everything you needed, and although he had not used all of the false IDs that he had created for the purposes of obtaining funds -- we couldn't prove that -- there was sufficient evidence to show that he was possessing all of those devices for the purpose of engaging in identity theft. He was prosecuted, convicted and incarcerated for that. So what this does is make it a little easier to prosecute those individuals who possess the devices for the purpose of fraudulently using the ID information of other people. I think there was one other question as to how funds go into the Privacy Protection and Guarantee and Enforcement Account, and Commissioner Farrell did explain a number of the ways. I would simply offer in addition Section 13(g) provides that any civil penalties that would be imposed would go into that fund; then the fund would be available for reimbursement to victims like the secretary I described who had no way to be made whole. Because what so often happens in these cases, you have the organized criminal rings that do this and earn significant profits, but you have a lot of individuals who do it. They'll simply steal a handbag out of a grocery cart at a grocery store, which is what happened to the secretary, and then use that information, take the credit card and order goods. They're 15 February 24, 2009 ch/rned GENERAL LAW COMMITTEE 10:00 A.M. not big-time criminals, but they spend the money immediately for gambling or for whatever other purpose, and there's no recourse left through reimbursement. So if there were a fund like this, then those entities that do have funds and are the subject of civil penalties, those entities would provide a revenue source to go into the fund, and that will provide an opportunity for victims who can't otherwise obtain reimbursement to get that reimbursement. So I think that this bill plugs a number of holes. It would permit us to do a much better job at enforcing the laws that prohibit identity theft. It would help bring down this offense. I think it's important that we do this, because the federal resources are increasingly limited. Federal authorities look for a significant dollar loss before they have the opportunity to devote resources to these cases. I know that the law enforcement community would love to do a better job with this. We don't really have the tools to do that that this statute would give us. In the example I gave earlier about the secretary being frustrated going from one police department to another, that problem would be overcome through Section 9 of this bill, which places jurisdiction in the place where the victim resides, and that's the place to put it, where the victim is already being victimized by the crime. Let's make it a little easier for the victim to communicate with the law-enforcement entity that can obtain redress. That's our view of the bill. We support it. We hope that it gets farther than it did last year. 16 February 24, 2009 ch/rned GENERAL LAW COMMITTEE 10:00 A.M. REP. SHAPIRO: Thank you, Commissioner. I did have one question. I wanted to follow up what you were just talking about from Section 9(e) jurisdictionally, and the law does place jurisdiction in the focus of the harm, but does doing that really solve the intrajurisdictional issue if you have a criminal, or criminal syndicate in California that obtains the information and uses the information in cyberspace and the victim happens to be in Connecticut? Are we going to have a problem with California law enforcement, with the feds, who may view it as a federal crime because it's on the Internet? Does this solve the problem? JOHN A. DANAHER, III: It solves a problem. It doesn't solve all the problems, but it resolves the one that I addressed, that the victim is not going to be turned away by the local police department. And that gets things started. If the criminal is in a jurisdiction that's beyond the reach of local authorities, then that's the time they go to the federal authorities and turn it over to them. I would like to let you know about something that we1 re doing that I think is helpful with regard to this specific issue, and I give all the credit to the resident agent in charge on Secret Service in Connecticut, Brian Murphy, who obtained funding to assemble the White Collar Crime Task Force which would address crimes like this, and he came to us and asked if we, would be willing to participate in the task force, which we are. So we have a detective assigned.to that task force. As it happens, a member -- and I'm not going to disclose the name, but a member of our State government contacted me last week. His wife is the victim of identity theft. We 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. turned it over immediately to that task force. It turns out that, just as in the hypothetical you raised, the people responsible are not in Connecticut. They're in New York. But we've already -- the task force has already been in contact with detectives in New York who identified, I think, ten other victims. The case is moving forward, and we expect to resolve that successfully. So by working with the federal authorities, if the case is truly local, we'll address it locally. If it's below the financial threshold that the federal authorities have, we'll address it locally. But if it's interstate and you want to use the federal tools such as the ready access to a grand jury, we have that by being a part of that task force. So this section, however, eliminates the confusion and the problem and gives a clear message to all local police departments they're the right place to go when the victim is in their town and comes to them. REP. SHAPIRO: Thank you very much. Senator Witkos followed by Representative Nicastro. SENATOR WITKOS: Thank you, Mr. Chairman. I just wanted to get a clarification. Currently if somebody in the scenario you gave stole something, a credit card or some kind of device, a check, and they purchased something in a retail outlet or something like that, you would charge them with a larceny. Now we would -- this is an additional crime, you're saying? We would be able to charge them with identity theft as well? JOHN A. DANAHER, III: I think what you just described would already be a crime in that the person intentionally obtained personal identifying information. They stole the 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. credit card. And they did it for the purpose of obtaining money in the name of the other person without that person's permission. So that already would be a crime. What this bill does is to take that a step further. We would no longer have to prove they intentionally obtained the identifying information. That's a level of proof, when you think about it, isn't really necessary. If someone has the identifying information from another person, whether they picked up the wrong coat at the 1 dry cleaner that had a credit card in it and it wasn't intentional. But if they did the wrong thing, that they took that identifying information and went out and obtained goods and services in the name of another person, that should be an offense, and this bill would make it an offense. So yeah, that's a different -- it would be a different offense. SENATOR WITKOS: In your experience, how many reports come through the state police where the person is dually charged with both in the scenario that I gave you or that you offered where a purse is stolen and a credit card is used say at a gas pump or at a retail outlet and they're charged with both the larceny charge and criminal identity or identity theft? JOHN A. DANAHER, III: I don't have the precise answer to that information, but fortunately, I have with me a subject-matter expert, a Master Sergeant David Delvecchio, who undoubtedly knows the answer to that question. (Pause.) JOHN A. DANAHER, III: Sorry about that. We don't have precise numbers. We can get that for you. But principally, generally what happens is what the troopers will do is review the 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. facts of the case and they will find every criminal statute that might fit those facts. It may be larceny and identity theft and others. And they'll present them all to the state's attorney, who will make the judgment as to whether one, both or more statutes should be used in charging the individual. I know that's not much of an answer. It's basically how the process works. But in terms of how often it happens, I can pursue that and provide you with that information. SENATOR WITKOS: No, you don't have to pursue it. It was just curiosity. My background is such that we never really looked at the criminal identity for that type of scenario that I offered, and I didn't think that, to be honest with you, happened that much in law enforcement where you would look for that additional charge/ because most people would identify the larceny in that particular scenario that I offered. / I just have one concern with Section 9 of the bill, which puts the onus to the place of residence where the victim lives, and I understand the premise behind that, but as we move down the road towards this bill becoming law, many departments are such that they don't have the manpower to send officers to all ends of the state to conduct investigations. And more and more towns that have residential trooper programs, as a matter of fact, are reducing the size of the residential troopers because they can't afford it. And my concern is that current practice is, well, you have to go report it to the town in which the crime occurred. How do we balance that with the abilities of the municipalities to supply the manpower to investigate a crime where somebody went on a spending spree and 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. hit all the malls in Danbury, Manchester, Enfield, and they live in a remote part of the state, to their small-sized police department where now they're going to have to go out and investigate all these different crimes? Can you comment on that? JOHN A. DANAHER, III: I think there's a two-part answer to that. First, the proposed language is that it may be prosecuted in that judicial district. In other words, the victim, if it's Farmington, the victim can go to the Farmington Police Department, and with this understanding, the Farmington Police Department's going to say, okay, we understand. We have jurisdiction here. We can do this. However, since the word is "may," other resources are available. If the loss amount is high enough, it could be done federally. Otherwise, bring it to the state police and we will run it through the task force, assuming we have the sufficient resources. We'll do our best to -- we do our best to respond to whatever is presented to us. As we all know, resources are thin. We haven't reached the point yet where this task force, because it's so new, of turning away cases. That may happen some day, but then we'll have to make adjustments and see if we can get more resources. But at least this task force exists, and we provide an alternative if a local police department couldn't handle it or the trooper couldn't handle it. SENATOR WITKOS: Thank you, Mr. Chairman. REP. SHAPIRO: Thank you. Representative Nicastro. REP. NICASTRO: Thank you, Mr. Chairman. 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. Good morning, Commissioner. My credit cards -- I only have two, okay --on the back of it, I say, "Request identification." I don't sign my name. I say, "Request identification." Do we have current law on the book that -- I'm leading up to something. Do we have current law on the books where it says a checkout person must request identification when they use a credit card? JOHN A. DANAHER, III: To my knowledge, we do not. It's interesting you raise that. I had occasion to -- I've heard of that technique. I was talking to an individual who has that on his cards, and he said he's had it for a couple of years and he's been asked a grand total of once for his identification. So it's pretty widely ignored by the -- REP. NICASTRO: You know, as little -- it sounds like I'm opening up a can of worms, but as little as it seems, you know, if we had something like that on the books where checkout tellers in all your large box stores and things like that had to request, we could knock out a lot of this identity theft. Smaller amounts, granted. Smaller amounts. You know, it might be $50, $100 or something. Small amounts. But if it were required. You know, if we're going to protect our citizens, why don't we do something like that where it requires the checkout people to ask for- identification -- driver's license. Let me see your driver's license. Why can't we do that? JOHN A. DANAHER, III: Anything that we could do to make people more sensitive to this issue, and as we've discussed, the offensive nature of the crime I think would be desirable. It's not anything that I think we would oppose. 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. REP. NICASTRO: I don't see -- Commissioner, excuse me. I didn't mean to interrupt you. I don't see where it's going to back up the lines. I mean, if I handed the man or the woman my credit card and they said may I see your driver's license, you're talking 3 0 seconds at the most, okay? And if somebody says, "Oh, gee, I don't have it," right away it brings speculation, question. It brings a question. And if we're going to really clean this mess up that we've got throughout the country, it starts at, you know it starts there with the small things. JOHN A. DANAHER, III: I wouldn't diminish the suggestion, either, that it's only addressing small offenses. The individual that I described who had the printer and the laptop and so on was a professional, it turned out, at doing this, and he made his living with a little team of -- let's call them employees. We use the word "smurfs" -- who would go into stores and come out with a hundred dollar identity theft event. And by doing it constantly and repeatedly, he made a great deal of money at it. A lot of the professionals, and the large-scale professionals do follow this approach and take small amounts at a time, because they don't generate a lot of attention by law enforcement. And if somebody is caught, it's a sixth-degree larceny or fifth-degree larceny. It' part of the cost of doing business. They pay a fine and they go right back to work. So I think it's important to catch it at all levels, not just -- REP. NICASTRO: That's what I'm saying. I mean, what would it take to have something in front of a register: When a credit card is used, identification is required. I mean, come on. You know, like you said in the case that you 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. gave. I'm just wondering about that. Thank you. Thank you, Commissioner. Thank you, Mr. Chairman. REP. SHAPIRO: Further questions from the Committee? Representative Taborsak. REP. TABORSAK: Thank you, Mr. Chairman. Thank you, Commissioner, for testifying today. Just a follow-up on your explanation of Section 5. You were -- thank you for addressing my question earlier. On the issue of possession, you pointed out the language in Subsection B that the threshold is more or less that they not only possess the information, but that they possess it for the purpose of fraudulently altering, obtaining or using the personal identifying information of another person. From your perspective, you know, from the prosecution perspective, would it not be easier if we made that threshold something like consent based? If they obtain the information and possess it without the consent of that person. Why would we not want to -- I mean, I think from a prosecution perspective, that would be helpful for you. I mean, the onus would be on the person possessing the information to show that they had consent or that they have some sort of legitimate purpose. Why wouldn't we want to do that, if you could? JOHN A. DANAHER, III: Well, to just -- just coming up with a scenario that I'm talking off the top of my head, if somebody stole a scanning device from somebody else and they intended to use it for the purpose of scanning in the photographs in their home, under the language you just suggested, they would be guilty of identity theft, which is really not what they would be doing. They simply stole a device. 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. They took it without consent and they now possess it. I think what this statute does, it simplifies the task of the prosecutor by limiting the prosecutor to proving two things: Number one, that they possess the device, which is defined in Section A, and number two, that they possess it for the purpose of, and then the language there makes clear that it1s identity theft specifically. So I think it appropriately criminalizes the conduct in the context of identity theft as opposed to simply criminalizing somebody who steals or takes a device but they don't actually plan to use it for identity theft and you can't prove that that's what they're doing. REP. TABORSAK: Just another follow-up here. I guess the information that I was more focused on, the access device definition includes also account numbers, personal identification numbers. That sort of information was what I was more focused on, so I guess my question is, for that type of an access device, which is really the -- it's really personal identifying information, why wouldn't we want to have that higher threshold of -- listen, if you have a list of Social Security numbers of people, why not put the onus on the person who has possession to show that they have consent from those people. Wouldn't that be easier for you to do your job? JOHN A. DANAHER, III: I think that that would be a fair approach. Again, we're talking on the spur of the moment here, but I think if you look through the definition of access devices and picked off all the kinds of things, Social Security numbers, for example, something that no one would have any business having, that would be not an inappropriate Subsection D, you know. Maybe it could say possessing these things without the consent of the owner is a 000597 25 February 24, 2009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. Class A misdemeanor. Off the top of my head, I wouldn't be opposed to that. I think that would make some sense. By doing that, you would draw a good line between somebody who simply possesses a laminating machine without consent of the owner. REP. TABORSAK: Thank you. REP. SHAPIRO: There are no further questions from the Committee. Thank you, Commissioner, for your testimony. Up now is Attorney General Blumenthal followed by Karen Senich from Culture and Tourism. RICHARD BLUMENTHAL: (Inaudible) tanks are TVFTIWNO installed by the distributors. Right now many of the distributors and dealers require that tanks be owned by them rather than the consumers, and hence, they prevent consumers from changing dealers because they own the tanks and they will service only those tanks. So what we're seeking to do is break the link between the tank and the dealer, and thereby liberate the consumer, and one proposal that I would suggest is that we provide consumers the right to purchase their propane tanks for fair market value, including depreciation, at the end of a three-year contract period. Also, it would require a written contract that will give consumers the kind of disclosure that they need and stronger measures to provide for disclosure of fees in connection with maintenance service or environmental programs that may add significant costs to these contracts. Stating those fees, full disclosure I think is very important. Similarly, with regard to the problem of restaurants that sometimes fail and then are unable or unwilling to reimburse consumers for gift cards and gift certificates, we're 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. proposing that there be a guarantee fund that the restaurants themselves would fund, similar to the guarantee funds that exist now for health clubs and for home-improvement contractors. These gift cards and gift certificates, I can tell you from the experience of my office, are an increasingly frequent source of problems for consumers when the establishment simply goes out of business. Sometimes the restauranteur goes to another location. Again, a very small, minute fraction of the whole industry, but one that undercuts the credibility and trust of all restaurants. And so the restaurant association has been working with me -- and I don't want to speak for them, because they may have reservations about some of the details here, but in general, recognizing that there is a problem that has to be addressed simply to make sure that consumers can trust gift cards and gift certificates from restaurants. We're also proposing, more generally, certain changes in the protections that are afforded to gift-card holders more broadly. In general, as you can see from the discussion of -Senate Bill 892. where we have urged that the Legislature clarify that gift certificates or gift cards include any certificates or cards, even if they're donated to a charity, it makes consistent the limits on fees in connection with the statute of limitations. It requires retailers to maintain a separate escrow account or secured line of credit that, will enable redemption of all gift cards, and consumer notice in case there are fees and other restrictions on the use of these gift cards. As you know, we've been fighting for many 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. years to enforce provisions that ban expiration dates or hidden fees in connection with gift cards, and unfortunately, we've been preempted in many respects by federal law or federal agencies that insist that federal law preempts our statutes, and we're continuing those efforts to enforce our laws despite claims of preemption, but in the meantime, we can provide better protection under our own statutes in this way, and hopeful that we can avoid some of the very unfortunate experiences as consumers have encountered with Sharper Image, Linens 'N Things, Tweeter, Blue Tulip, KB Toys, just a few of the companies that have gone out of business recently. So I'd be happy to work with the Committee on any of the details here, and I thank the Committee and the Chairman very much for hearing me today. REP. SHAPIRO: Thank you, General Blumenthal. And I applaud both you and my esteemed cochair for your work in particular on gift cards. Gift certificates did not used to be a big issue, because they were unwieldy and people didn't like using them, but with the increasing use of them, the advances in technology that make them like a credit card, they are exploding in businesses both small and large, and I think this is very important. Toward that end, I have just a couple of questions about first the restaurant gift card and then the general gift card bill,. With respect to the restaurants, is it restaurants who offer gift cards will contribute into the fund, or is it all restaurants would contribute into the fund? RICHARD BLUMENTHAL: My feeling is that it should be all restaurants. Of course, I'm flexible on how the committee and the restaurants would 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. want the burden allotted. The reason I would suggest all restaurants would simply be administrative problems that might arise with restaurants beginning to offer gift cards midway through the year and then having to either become a part of the fund, perhaps not knowing about it, perhaps not doing it, what the penalties would be if they neglected to do it, and I think the amounts of money would be very small from each restaurant, because obviously, the Home Improvement Contractor Fund and the Health Club Fund require, per establishment, fairly modest amounts. REP. SHAPIRO: Thank you. And with respect to the general gift card requirements to have either a line of credit or an escrow account for the amount of total gift cards issued, does this address the national retailers, some of whom you've talked about like, say, at a Best Buy, and are we looking to have them hold an amount in escrow for the amount of Connecticut gift cards or in general? RICHARD BLUMENTHAL: Well, I think that we'd be looking for an amount in escrow to satisfy the Connecticut gift cards. My hope is that other states would adopt the same kind of system and that very quickly the national companies would establish some kind of escrow system that would satisfy their obligations across the country. REP. SHAPIRO: Thank you very much. Senator Colapietro. SENATOR COLAPIETRO: Good morning. I have a basic disagreement with your office and myself about gift cards. I know we passed that bill, I think it was two years ago on the gift cards where you can't pay fees and you can't charge 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. fees and -- it was a good bill. I mean, the restaurants liked it and consumers liked it. Everybody seemed to have liked it. Now we've got some few people trying to work around that bill, and by calling them -- not credit cards, because they're preempted by the national, the federal reserve, the federal people, that what they do is now they sell you a gift card. They're calling it gift cards, and they're charging a $3.50 fee on that gift card, and then if you give it to somebody else, they charge them a fee after a certain amount of time, which is exactly the opposite of what we tried to do with the gift-card law. And because we're preempted by them, I think we should be really tough on them. When they've got these -- now, what they've done now, they bought a bank in Florida and they put these cards, these racks up saying this is credit cards. It really isn't credit cards, because it may be a Visa card or something along those lines. It is not a credit card. And you can say legally it might be a credit card. It's not, because it's charging a fee, which our law says you can't charge. And whether it's preempted or not doesn't mean that they can just come in and say we're going to ignore Connecticut law and do what we want. I think we should toughen up on them, make them take them all back out in the whole State of Connecticut, put a rack up there that says these are not gift cards. They are. And what your idea of disclosure, definitely I can't see it myself. Even with my glasses, I have a hard time reading disclosure on some of these things, but I took it home and I used a magnifying glass, and it says on there it costs you -- if you buy $100 gift card for Representative Mazurek and you pay $3.50 for that card, then Representative Mazurek decides 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. that I'll just hold onto it for a while because our Connecticut law now says that I can have it as long as I want. Finds out later on that they've reduced it so much because they're charging him a fee that there is no more gift card there. So it's not really a gift card. It's just a plain old ordinary Visa card, and that's what happens. I think what they're doing is deceiving consumers now about that it is not a gift card. It is not a gift card. It's a Visa card. And so by saying it's a gift card just tells them, look, we're not telling you the real truth. We're calling it a gift card, but that's not what it really is, because they've got the fees, and our law says differently. So I mean, I think this committee also had before it in-the past, we had a resolution urging the federal government to try to do something about this, because to me, it's almost the same thing as the state mandate on the municipalities. It's telling us that we can't do what we want to dp, which we thought was good for the consumer and the businesses themselves. So letting them get away with it that easy I think is wrong, and I'm hoping that we can all get together and urge the federal government to get off their duffs and do something about this, because it was a good bill. It didn't cost anybody anything. RICHARD BLUMENTHAL: Well, I'm not sure, Senator, where we differ. SENATOR COLAPIETRO: Well, we differ on what they call a credit card. RICHARD BLUMENTHAL: Yeah, but you don't differ with me. 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. SENATOR COLAPIETRO: No, your office I said. RICHARD BLUMENTHAL: No, not my office, either. My office has gone to court. I'm not sure you're aware, Senator, but my office for three and a half years was in litigation with Simon Properties on this very issue, and eventually the federal court said the State of Connecticut is preempted. SENATOR COLAPIETRO: Right. I agree with that part. I do. I agree with that part. I RICHARD BLUMENTHAL: Well, I don't agree with that part. SENATOR COLAPIETRO: Well, I think we ought to. RICHARD BLUMENTHAL: I don't agree that the State should be preempted. What they have done, just by way of explanation, is in issuing the gift cards, they have gone to national banks. And their claim is that the national banks are regulated only by federal agencies. The OCC and the FDIC and so forth, and, therefore, the State of Connecticut cannot limit the terms of those gift cards. And it isn't only the stores. It's actually the mall owners, which is why we were engaged in litigation with Simon, and eventually, to our great consternation and disagreement, the courts have sided with the mall owners. And what we do need, you and I are in complete agreement, is a change in the federal law and federal policy. SENATOR COLAPIETRO: I guess I shouldn't have said your office and I disagree. I mean the courts and I disagree absolutely on that. But what I'm just simply saying is that they win the first round, or they can win the battle, but 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. the war is really they're calling it a gift card. And the State of Connecticut law is clear. I mean, any attorney can tell you that. It's clear that it says no fees charged on gift cards. What they're doing is they're advertising gift cards in Stop and Shop in the gold racks saying this is -a gift card with $3.50 to buy one, and the you give it to is now charged. It's really not a gift card. It's a Visa card. So maybe we ought to look into that. I'll tell you later instead of mentioning the names out in the open who they are and what they did. They ended up buying a bank so they could qualify to usurp what we're trying to do. Thank you, Mr. Chairman, and thank you. REP. SHAPIRO: Thank you. Further questions? Representative D'Amelio. REP. D'AMELIO: Thank you, Mr. Chairman. I appreciate it. Good morning, Mr. Attorney General. Thank you for being before the Committee today. Regarding the restaurant gift cards, you know, in your testimony you mentioned like Linens 'N Things and some major consumer home-improvement centers. You know, they write hundreds of million -- well, they do hundreds of millions in dollars in sales. Many of the restaurants that are out there are mom-and-pop shops, you know, barely making a million dollars or less. There's many restaurants. When you're talking about a fee, you said it's very minimal. What do you envision? RICHARD BLUMENTHAL: $50. REP. D'AMELIO: For the year? For all restaurants? 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. RICHARD BLUMENTHAL: Well, you raise a good question. First of all, when you're talking about a mom-and-pop restaurant, you know, the eight-seat diner or twelve-seat diner maybe should not come within the law. I don't know all that many diners that offer gift cards, for example, but you might want to just define the kinds of establishment that would be responsible for making the payment by size, by type, a reasonable definition. And you could go to the distinction that Representative Shapiro alluded to, which is, do they offer gift cards or not. But home-improvement contractors are very small establishments. Most of them are just a single person or two or three people operating out of a truck or a store-front office. But we require that they put money into a guarantee fund that is tremendously valuable to people who are denied full-fare service and often have no means of recovery because they are small operations that cannot provide for reimbursement in the event that the work is done shoddily or incompletely. So I think that the amount of money would be very small. Obviously, the larger number of establishments, the smaller each one has to contribute, but it would be fairly minimal. I think there are some practical issues, such as, you know, the chain restaurants. Do you collect from them, each of them, $50? Or does McDonald's pay $50 for the whole state? Do you take all kinds of restaurants as opposed to some that may offer gift cards or gift certificates? I think those are some pretty straightforward issues, and I think you're absolutely right to raise the issue of what the size should be. 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. REP. D'AMELIO: How would we determine what the fee would be? Like in the past with these other industries, the amount of, you know, complaints or, you know, the amount that people have lost, do you try to monitor that and try to set up a fund that can compensate that number? RICHARD BLUMENTHAL: I think we can go back to the previous five years, see what the average rates were, calculate how much would be needed to satisfy those kinds of problems. I think the latest year is probably more representative, because it reflects downturns in the economy. It happens to be a problem at particular times of year, as you may know, the first few months of the year, because gift certificates are purchased at the usually toward the end of the year, around the holiday time. They are redeemed toward the beginning of the year or sought to be redeemed, and that also happens to be the worst time economically for most restaurants. REP. D'AMELIO: One more question? Thank you, Mr. Chairman. I don't know if you have this data, but do you see the problem more toward national chains versus the mom-and-pops, like the independents that are out there, you know, that may be going out of business and not honoring -- because, you know, I come from the Waterbury area, and I know of like three or four restaurants that have flipped hands, you know, were sold to others, and they honored the gift certificates or cards from the previous owner just to keep that clientele coming. I don't know if it's more of a problem with the national brand or if it's -- I don't know if you have that information to share with us. 35 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. RICHARD BLUMENTHAL: I would say, Representative, that it's really both. For example, Bennigan's, which closed some restaurants here and then declined to honor the gift cards, sometimes we can persuade them that they should do the right thing, but even if they close Connecticut restaurants and they keep open restaurants in Massachusetts, people don't want to travel for an hour and a half to redeem a gift card. They want it in the place where it was bought, or they want the money to use it somewhere that's convenient for them. So I would say in answer to your question it's really both. REP. D'AMELIO: And just, would the consumer -- if this fund is set up, it's to make the consumer whole? If they spent $100 on a gift card from a restaurant that went out of business, they would receive $100 from this fund? RICHARD BLUMENTHAL: Correct. REP. D'AMELIO: Okay. Thank you. RICHARD BLUMENTHAL: Most of them, by the way, are in that general range of amount. You know, we're not talking about $1,000 gift cards. We're talking, you know, somewhere between $50 and $150. So the amounts per consumer are not huge, and the amounts overall probably aren't that big either as compared to the Home Improvement Guarantee Fund, where, you know, typically, jobs are worth anywhere from $10,000 to $50,000, and very often, the loss exceeds the amount that they can even recover through the guarantee fund. So as you may know, I proposed some changes in the guarantee fund to make it more equitable, but that's a much larger problem in terms of the amounts at stake. 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. REP. SHAPIRO: Representative Esposito. REP. ESPOSITO: Thank you, Mr. Chairman. Good morning. RICHARD BLUMENTHAL: Good morning. REP. ESPOSITO: In Section 2 -- I'm sorry, Section 3, it says, "On October 1, 2009, and annually thereafter, each owner of a restaurant shall pay a fee of $100." That goes to the question earlier: Will it be per establishment, or if the owner has multiestablishments, will he be paying one fee for five restaurants? RICHARD BLUMENTHAL: Although it may not be clear, I would suggest that it be per establishment. REP. ESPOSITO: That's why I was asking that question in particular, because I know the question was asked earlier and we alluded to the fact it should be all of the restaurants involved and not just one. And the other question, in regards to the guarantee fund itself, I see we're just targeting restaurant gift cards and certificates, but aren't there other establishments that also provide gift certificates for -- because I'm a former gas-station owner. We used to give out a free oil change or gasoline. Maybe we should expand this to just any establishment and not call it a restaurant gift card or certificate, so that it would apply to everyone. And I think that would open up the fund, or it would have a larger net to capture more monies to be put into the fund. RICHARD BLUMENTHAL: Well, you could. We haven't see a problem with gas stations. So, you know, my thought is to target the solution to meet the problem, but there would be no 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. preclusion. And again, it would reduce -- if you included all restaurants, it would be $50 to $100. If you included lots of other establishments, it might even be less. REP. ESPOSITO: I'm going to the question earlier about the fee, and you keep saying $50 to $100, yet in Section 3, it references a $100 fee. . And for a smaller restaurant as opposed to a large steak house that might be doing multiple millions of dollars per year in sales as opposed to a smaller restaurant which may be under -- maybe $500,000 a year, maybe there could be a sliding-fee schedule with a minimum, and then it ratchets up from there, but it's just some thoughts. RICHARD BLUMENTHAL: That could be done. REP. ESPOSITO: Thank you. REP. SHAPIRO: Representative Reed. REP. REED: Thank you, Mr. Chairman. Good morning. RICHARD BLUMENTHAL: Good morning. REP. REED: I have to begin by thanking you, because over the holidays you were doing a news story on this credit card thing, and you advised people to use cash, which I've never done. I don't know how people can figure out what to buy for twenty-something kids in their life. And I had always bought those shiny gold things. But I took your advice and I' gave cash and wrapped it up and put little bows on it, and I was very popular. i RICHARD BLUMENTHAL: Depending on how much cash you gave. 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. REP. REED: You've got to turn out a few bucks for the twenty-somethings. You know how that is. Make sure they come home for Christmas. But it was a really good thing, and I was concerned it wouldn't be, that it would be vulgar and whatever, that it wouldn't be as exciting as the credit card. It turned out to be a good idea, and in terms of restaurants, I actually got a Zagat and put cash in with a circle around the restaurant where I thought they ought to go in New York, and they were wonderful to them. So this all worked out. There are ways around this. But I think this is good legislation. Getting back to the propane and home-heating oil, I'm just trying to get a sense, you know, I understand the propane scenario with the propane companies owning the tanks and that putting the consumer in a double bind if they want to change companies or find another contract, they're already obligated to this tank. But I'm wondering, and I know about the Waterbury scenario with the closing of the home-heating oil company. In my district, we have so many mom-and-pop home-heating oil companies whose clients sing the praises of them. They're caring people and have been for a couple of years now, and in trying to help people make it through the -- I mean, they've been very responsible. So I'm wondering in -- as you put it in context, how big is the home-heating oil problem? RICHARD BLUMENTHAL: Well, the home-heating oil problem•doesn't raise the same issues regarding the tanks and ownership of the tanks. That's typically involved in the propane aspect of the heating industry. But disclosure is the main problem, I think, in the home-heating oil context where, for 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. example, we encountered the latest investigation we're doing, and I don't think it affects the Branford area, a company that solicited people for contracts that locked them into capped price contracts, which was a good thing last year, very bad thing this year, but they simply renewed those contracts without adequately informing the consumers. It was a kind of opt-out requirement, and most consumers didn't realize that they had to opt out, so they were paying a price that was higher than the market price for a substantial period of time, and we're seeking refunds now for those folks, and I think disclosure is an important aspect of the home-heating oil business. REP. REED: And you're finding it with larger organizations, again, to -- RICHARD BLUMENTHAL: Larger organizations, generally. REP. REED: Thank you. Thank you, Mr. Chairman. REP. SHAPIRO: Senator Musto. SENATOR MUSTO: I'll try to be quick, General. Thank you for coming in today. I have a couple of questions about the home-heating oil and propane as well. It strikes me, first of all, at first blush, that requiring purchase of the tank and gas, propane gas, or fuel, rather, seems like it may violate some kind of tying arrangements under federal anti-trust law. Do you have any comment on that? RICHARD BLUMENTHAL: Yeah. It really, it would if they had a position of market dominance, but the industry is pretty splender in terms of 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. size. So those tying arrangements are illegal if there are just a few players in the market if one or more has a monopolistic type of power, but not if there's sort of splintered or fractionated power in the industry. SENATOR MUSTO: Okay. Thank you. It just seems like if everybody's doing it, maybe there was some kind of oligopolistic issues -- RICHARD BLUMENTHAL: Well, and again, there would be if they were agreeing with each other to do it. SENATOR MUSTO: There are just too many of them and they're not coordinating their efforts. RICHARD BLUMENTHAL: Correct. SENATOR MUSTO: Okay. Thank you. There was a section here in 6470 that says -- I think it's Section F. It says, "Provisions of the section shall not apply to existing contracts." If they have a contract -- if they have written contracts before October 1, 2009. I was wondering two things about that. First of all, there may some issues in here like the issue of liquidated damages in Section -- I think it's B(l), that would be good ideas no matter when the contract would apply. Are there any other -- or I should just ask, shouldn't the provisions of this apply maybe at the renewal date or something? RICHARD BLUMENTHAL: I would agree with you that if there are renewals, it certainly should apply to the contract after renewal, and it could be made retroactive to apply to existing contracts. You might encounter an objection there in terms of the unfairness or even illegality of interfering with an existing contract. But I would certainly favor doing 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. it. SENATOR MUSTO: Okay. And lastly, some of these contracts -- I didn't see anything in here. Maybe I missed it. Some of these contracts have I think you referenced auto-renewal provisions. Is it your intention that this 36-month period prevent any sort of auto-renewal, or would auto-renewal provisions still be permitted in these contracts? RICHARD BLUMENTHAL: My feeling is that any sort of renewal should be an opt-in. In other words, an explicit consent and agreement in writing that the contract be extended or renewed. SENATOR MUSTO: Is there anything in here that would prevent us from having to get into a fight about that at some point with some oil company that says, well, we can have renewals. There's nothing in here that says we can't have automatic renewals. We have a 36-month contract, and if you don't opt out at the end of 36 months, it renews for 36 months automatically. Or should that be more explicit? RICHARD BLUMENTHAL: Well, there may be a need to make it more explicit. You know, on all these provisions, I have no pride of authorship. I'm happy to have refinements or changes, improvements. Certainly this legislation is a work in progress, as I think I indicated in my testimony, and we'd be happy to welcome suggestions. SENATOR MUSTO: Thank you very much. I'll let you go now. RICHARD BLUMENTHAL: Thank you, Senator. REP. SHAPIRO: Thank you very much, General 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. Blumenthal. RICHARD BLUMENTHAL: Thank you. REP. SHAPIRO: Next up is Karen Senich, followed by Senator Hartley. KAREN SENICH: Good morning, Senator Colapietro and Representative Shapiro and members of the General Law Committee. I'm Karen Senich, and I'm the Executive Director of the Commission on Culture and Tourism. My office is the State's Film Office, and I am here today to testify in support of House Bill 6471, which is An Act Making Changes to the Liquor Control Act. i In particular, I'm here to support that section which changes, in part, what those premises which are issued cafe permits or tavern permits are allowed to do. In particular, we have movie productions, TV productions that are looking to film inside these premises, generally after hours. And this change to this statute would allow these premises to remain open to allow these productions to use these premises for a fee, generally, for filming. No alcohol would be served at that time, and no members of the public would be present during this time, either. Usually, these productions, we could say eight or nine out of ten productions that come to the state looking for these locations are looking in particular for cafes, bars or taverns to shoot in. The Commission has been very fortunate that the Department of Consumer Protection has been so willing to work with it for the productions that have come to this state so far since 2006, and we look forward to maintaining that relationship with the Department of Consumer 000615 43 February 24, 2009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. Protection, and we thank them for this proposal, which would allow these premises to be occupied solely for the purposes of filming. And we believe that this is the right step to continue growing this industry that has produced jobs and revenue for the State. Thank you very much. REP. SHAPIRO: Thank you, Director. One quick question. We're obviously not selling to the public during these hours or serving to the public. For filming purposes, water will equal vodka and brown liquid will equal whiskey? Is that how this works? KAREN SENICH: Don't movies make magic? They won't be using anything that is owned by the premises except for the structure and seats and the establishment. REP. SHAPIRO: Okay. So all movie magic. KAREN SENICH: Yes. REP. SHAPIRO: Thank you. Do we have questions from the Committee? Thank you very much for your testimony. Is Senator Hartley in the room? If not, then we will move on to our public portion of the testimony. SENATOR COLAPIETRO: We can start with Eric Rosenburg, followed by Tim Phelan. ERIC ROSENBURG: Thank you, Mr. Chairman and Committee members. My name is Eric Rosenburg. I'm with TransUnion. We're one of the three nationwide and global consumer reporting agencies. We're headquartered in Chicago. We employ about 2,500 employees, and we're in the business of risk management, credit reporting, fraud prevention and the likes. I'm here to testify about Governor's Bill 838. We have 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. some concerns. Although we, in general, support measures to strengthen ID theft laws and provide rights to consumers and businesses that have been victimized by identity theft, we do have concerns with Section 19 of Bill 83Q,. < Section 19 would give broad rule making authority to the consumer protection -- Commissioner of Consumer Protection to adopt regulations regarding Section 42-470. That subject matter is how businesses use Social Security numbers, publically display Social Security numbers, use it to authenticate individuals. Our concern broadly is that Social Security numbers in this law was worked on many years ago. It's very mature, and we're concerned that by opening it up to potential rule making, there might be unintended consequences that could result. We have seen similar rule making in New Jersey and Massachusetts over the last couple of years, where rule-making authority broadly was granted to their consumer protection bureaus, and they went in wholeheartedly and changed the intent of the law and made it much harder for us to match consumers' identities using Social Security numbers and fight fraud. So our concern would be that you look very closely before enacting a law that gave those broad rule-making authority to the Consumer Protection Commissioner. Thank you, and I'm available to answer any questions you might have. REP. SHAPIRO: Do we have questions from the Committee? Thank you for your testimony. ERIC ROSENBURG: Thank you very much. 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. REP. SHAPIRO: We have Senator Hartley followed by Tim Phelan. SENATOR HARTLEY: Good morning, Mister Chair, Representative Shapiro and Senator Colapietro. For the record, I'm Joan Hartley, Senator from the 15th Senatorial District, and I'm here this morning with the very distinguished folks to my left with the white hats. It's always good to be with the people with the white hats, I think. I'm here to speak in support of House Bill 647^., An Act Concerning Change to the Liquor Control Act, which, as I understand it, is a department bill, and there is a particular section in there that I would like to reference, and that is Section 2(c), which would allow for the manufacturing or dispensing of wine as part of an academic course in an established curriculum under the control and approval of an accredited institution of higher education and located on the premise of such accredited institution. What we are specifically talking about is a very unique program that is currently being offered at Naugatuck Valley Community College. It essentially is a wine and viticulture course where the students are learning about the principals of enology, which is wine making, and viticulture, which is the growing of grapes. And if you happen to be in the Waterbury area and go by the community college, you can see sitting kind of up on the hill, actually, is their small vineyard, which for years they have been cultivating and growing as part of their hospitality study and programming where they are now raising the grapes, producing, manufacturing the wine, and also in their programming, learning the correct dispensing of that wine as part of the 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. established curriculum. We got very close to having this pass last year, and I was very grateful to Senator Colapietro for his help, and then because it was very late in the session that we realized that we needed to have this legislation to support the program, it did not, in the final hours of the House, make it out of the House, on sine die day, actually. It was a sad event. But nonetheless, so we are here -- REP. SHAPIRO: We'll see what we can do about that this year. SENATOR HARTLEY: Yeah, right. We'd be grateful, yeah, for all of us -- to identify the program appropriately and to support it. As we know that there are, I think, 25 wineries in the state. We do need a very skilled work force. Hospitality continues to grow, and it is a very unique program to our community college, and I think something that we can all be proud of. So for those reasons, I ask the support of all the members of the Committee. And you'll hear from the group from Naugatuck Valley very soon, and their door is always open, so if you have occasion, you would really enjoy a visit to the hospitality program and to one of their incredible dinners. The students they are putting forward are incredibly trained and, I think, will serve us well in keeping a skilled work force in the state. So I thank you, and if there are any questions, I would certainly be delighted to attempt to answer them. REP. SHAPIRO: Thank you, Senator. Do we have questions from the Committee? If not, thank you very much for your testimony. 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. SENATOR HARTLEY: Thank you. REP. SHAPIRO: Tim Phelan followed by Lanca Jacobson. Sorry, Lance Johnson. TIM PHELAN: Representative Shapiro, Senator Colapietro, Senator Kissel, Representative Nicastro. It's a tough act to follow Senator Hartley and her fine, eloquent testimony, but 1 will try. I am here today to testify in very, very strong opposition to two bills: Raised Bill Number 892 and Senate Bill Number -- I forgot the other one there. I'm sorry. Senate Bill Number 925. Both of these bills set out to deal with an issue that, quite frankly, this Committee and our industry have worked hard on over the last two or three years. In fact, in 2004, we passed an act dealing with gift cards and the relationship between retailers and consumers that is now a model act that other states, I think, are following. Before I get to my prepared remarks, I just want to say that the simple act that we did in 2 004 protects consumers, and it benefits them in the long run. There is no expiration dates, no dormancy fees, no inactivity fees, and in return, the retailer no longer has to worry about the State coming in as we had on a previous law where the State treasurer could come in and require that unredeemed portions of the gift card be escheated back to the State. You changed that law. You added the proper protections for both the consumers and you allowed the retailer to continue to issue gift cards without having to worry about whether or not the government was going to come in and demand some portion of that unredeemed gift card back. 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. The proposed legislation we think serves no real great purpose. When a retailer files a bankruptcy, files for bankruptcy, it is the U.S. Bankruptcy Code, not state law which determines the rights of all creditors, including the holders of unredeemed gift cards. When Congress established the priorities for creditors, it said consumer creditors had a lower priority than other creditors such as employees, employees' wages, contributions to employee benefit plans and taxes. Any state law purporting to alter the priority of a creditor's claims as mandated by Congress or purporting to remove funds received from the sale of gift card from a debtor estate would be invalid. We believe the proposed legislation would be very harmful to the state's retailers. I know the Attorney General talked about a very small amount that retailers -- that restaurant owners would have to put into a guarantee fund. Any amount of money in this economy that small restaurant owners or small retailers have to take out of cash flow to put into a guarantee fund would be harmful to them. And if this year you start with a small amount, what's to say you're not going to increase that amount? We think, again, that the whole premise behind establishing a fund is somehow the government and Legislators picking and choosing winners and losers before the game has even begun. We certainly saw that in this Christmas season. We didn't think the comments by the Attorney General during the holiday season were helpful at all to retailers. If anything, in our mind, it let folks know we're not to shop when we needed people to get out to shop. And finally, we think the perceived problem is 49 February 24, 2009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. overstated. Of the thousands of retailers located throughout this state that sell gift cards, only a very small percentage file for bankruptcy protection. Of those that do not file, most must -- or those that do file for protection, most seek and obtain the bankruptcy court's permission to honor outstanding gift cards. There are occasions, as there were this holiday season, when some national retailers did not. They chose not to or they attempted not to. They were wrong. They were called on the carpet and they changed their policies. That1s what they should have done. But to change the law to set up a guarantee fund or to talk again about inactivity fees or dormancy fees is just, it sends the wrong message at a terrible time for consumers and for retailers. Thank you. REP. SHAPIRO: Thank you for summarizing. Questions from the Committee? If not, thank you very much for your testimony. Actually, next up is -- well, it looks like Lance Johnson testifying for AARP, and I'm the one who needs glasses, so thank you. LANCE Q. JOHNSON: Good morning. I'm Lance Q. Johnson, and I'm a volunteer advocate for the 630,000 AARP members in Connecticut, and I'm here today to support Senate Bill 838 concerning consumer privacy and identity theft. Victims of identity theft spend on the average $1,180 or 60 hours cleaning up their credit records. Damaged credit can make it tougher to get good interest rates on a car loan, home mortgage or credit card. Identity-theft related fraud continues to dominate Federal Trade Commission's list of top frauds. One recent national study 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. correction of the public record when false information on an individual is on record by virtue of an offense by another. AARP commends the due authority of the Commissioner of Consumer Protection and the Attorney General under this bill. We also commend the position of restitution structure that is fair, reasonable and self-sustaining. _Senate Bill 838 creates a nonlapsing privacy protection guarantee account within the general fund to be used by the Commissioner of Consumer Protection to reimburse losses to victims of identity theft who are unable to collect on the judgment outlined in the bill. The changes described in Senate Bill 838 will significantly enhance Connecticut's identity theft laws and will give seniors and their families the protection needed to avert a financial disaster. AARP urges members of this committee to support Senate Bill 838. Thank you. MR. SHAPIRO: Thank you, Mr. Johnson. A question that we were touching on before on testimony on this bill related to the differential between the threshold of the dollar crime. If it was $5,000 worth of damages for a senior citizen, there was one penalty, and it had to be $10,000 in damages to be a crime for younger members. As a representative of AARP and older Americans, is that something you're in sync with? Is AARP on board with the differential in penalties? LANCE Q. JOHNSON: I think we are, because it's this age group, our seniors, that are the most vulnerable. I had the opportunity to going around with the State Banking Commission this past summer and giving talks on this issue -- not on this bill, but on these issues -- and we're dealing with a generation that I think 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. estimated that 15 million Americans were victimized by identity theft in 2006. As a .result, preventing identity theft and related frauds has been a top priority for AARP and other consumer advocates. An AARP study showed that 81 percent of older consumers are concerned about becoming a victim of identity theft. Breach of personal information and identity theft are two issues that are extremely difficult to manage for all consumers. However, when it happens to the frail and elderly consumer, it becomes a huge financial crisis. More than half of all persons 65 and over rely on their Social Security check for most of their income. If this consumer becomes a victim of identity theft, their entire ability to function financially stops. The emotional toil on a person who worked hard to build a lifetime of good credit can be devastating. The Governor's proposed legislation, Senate Bill 838, contains strong provisions that will protect the identity security of Connecticut residents. This bill broadly defines personal identifying information to include most, if not all, examples of information that can be stolen. It contains a comprehensive breakdown of potential offenses with penalties reasonably related to the severity of the crime. AARP is also supportive of the enforcement mechanisms in the bill. Significantly, this bill provides a private right of action for aggrieved parties. The damages are adequate and the restitution is provided to make the victim whole. The bill would also extend its statute of limitation from two to three years. Additionally, there's a provision that mandates the 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. the added penalty is probably most appropriate, because I think the perpetrators of this identity fraud are probably targeting the senior group more so than other individuals because of their vulnerability. They are a generation that grew up trusting people. We have a hard time teaching them that if you've got a question on a strange caller, just hang up. But it's not in the nature of the older generation to be that abrupt, usually. So they're more vulnerable, yes, and I think also targeted because of that. I think it is appropriate. REP. SHAPIRO: Thank you very much. Questions from the Committee? Representative Nicastro. REP. NICASTRO: Thank you, Mr. Chairman. Lance, good morning. Following up from what the Chairman said, I think earlier what I was driving at is that I agree with you. Seniors are more susceptible to identity theft. There's no doubt about it. But what I was saying was instead of having two different layers, especially with the economic times as they are right now, if we left the threshold at 5,000 for identity theft regardless of the age, would that be a concern if we did that? In other words, it wouldn't be hurting the seniors. It would be saying that younger people who are also trying to make ends meet and have lost their jobs, things like that, would also have a chance to jump in if identity theft took that. Is that a problem? LANCE Q. JOHNSON: No, that's not a problem. REP. NICASTRO: Thank you. 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. Thank you, Mr. Chairman. REP. SHAPIRO: If there are no further questions, thank you for your testimony. SENATOR COLAPIETRO: James Jones? Jamie Jones? Followed by Karen Rotella. JAMIE JONES: Senator Colapietro, Representative Shapiro, members of the General Law Committee. My name is Jamie Jones. I'm a sixth generation farmer from Shelton, where my family is stewards of the Jones Family Farm and Winery. Today I'm in front of you as the president of the Connecticut Vineyard and Winery Association, the CVWA for short, and we are an association of 20 farm wineries spread across the state. Our primary goal is to promote the cultivation of grapes, and also we market all of our products together as part of the Connecticut Wine Trail. I'm here to ask you to please strongly consider support of three bills. The first bill, Number .6473, An Act Expanding the Hours of Operation For Farm Wineries. We hope you consider moving that from 8:00 hour to 9:00 when we are forced to stop selling and serving our wines. The reason for that is a number of the wineries often have charitable events or festival type activities, especially in the summer and fall, and 8:00 is often still daylight, and we'd just like the opportunity for the extra hour to continue and be able to continue hosting those events, and of course, that would just match what the liquor stores' hours are, which was recently adjusted from 8:00 to 9:00. The other bill. 6472. An Act Concerning Wine Festivals, last year, the wine festival bill 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. unfortunately did not pass. It came very close to passing. We would like to be able to hold a wine festival to promote our entire industry, but also to be able to sell wine by the bottle. In the past, it's only been permitted to sell wines basically by the tasting or a glassful, and if people wanted to purchase the wine, they had to take orders for shipping. The reality of that is it just economically doesn't work out. There's just something magical about being able to purchase a product on the spot. So we hope, again, this session that you will consider that. The final bill, Number 926, An Act Concerning the Sale of Connecticut Wine At Farmers' Markets, is something we are also very interested in having you look at. I think 14 other states do allow locally-produced wine, wine grown in their state, to be sold at local farmers' markets. I'm sure you're quite aware that the farm markets have become very exciting. They become their own little bustling activities in the cities. And wine is one the one things, an agricultural product, that is now missing from the fruits, the vegetables, the cheeses and the meats to really make it complete. So I hope you consider that. I'll just quickly mention that Jennifer McTiernan from CitySeed has also submitted testimony. She was sorry she could not be here. She runs the New Haven farmers' markets. And also Hillary Hopkins-Criollo from Hopkins Vineyards wished she could be here, but unfortunately, due to a child's doctor's appointment, she could not make it. Thank you. SENATOR COLAPIETRO: Just one quick question. The law that we passed last year for the extra 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. hour, from 8:00 to 9:00, was optional for all package stores. Would you object to that being optional the same as -- JAMIE JONES: Oh, absolutely. Most wineries close at 5:00 or 6:00. It's just occasionally they have events and they would like the opportunity, if so exists, they could extend from 8:00 to 9:00. SENATOR COLAPIETRO: Just for consistency, I mean, you1 re going to go the same as the package store, the hour was optional, and most of them chose not to stay open anyway. JAMIE JONES: Yeah. No, that's -- absolutely. Thanks. REP. SHAPIRO: One additional question about the farmers' markets. When you sell wine on premises, I assume you card individuals -- JAMIE JONES: Absolutely. REP. SHAPIRO: -- and have a process. How do you envision extending that process into the farmers' market, which is a less-controlled environment, and I'm not sure how you'll staff the booths and all those things. How do you envision carrying out the right security procedures? JAMIE JONES: It is an excellent question. I would -- it would be up to each individual winery. By law, they have to be adequately staffed and they'd have to have someone to be carding each person. I know at our establishment, anyone who comes in who looks at all questionable, I mean, you know, I won't say an age, but you just politely ask them to see their ID and to verify it. So absolutely that same process would have to take place at the farmers' 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. markets. REP. SHAPIRO: Thank you very much. Questions from the Committee? Thank you for your testimony. JAMIE JONES: Thank you. SENATOR COLAPIETRO: Karen Rotella. KAREN ROTELLA: Good morning. Thank you for the opportunity to speak here today. My name is Karen Rotella. I'm Professor of Hospitality Management at Naugatuck Valley Community College, arid I'm the program director, and I do not walk around the school with this hat on. REP. SHAPIRO: That's too bad. It looks good on you. KAREN ROTELLA: Naugatuck Valley Community College t is unique within all of the 12 community colleges in that we are the only one that offers students the opportunity to enroll in wine and viticulture courses. We currently have 100 students in our program, and it's growing at the rate of about 12 percent a year. And this unique aspect of our hospitality program gives students a competitive edge when they get out in the employment industry, because they've had a chance to work with wines to become knowledgeable in that field, and the nation's fastest-growing industry is in the hospitality field. Under -current regulations with the Liquor Control Act, we are not allowed to serve wine that we manufacture at the campus to our guests when they come to functions at the 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. college. So they learn all aspects of wine production, wine tasting, wind paring, and then they can't serve it to anyone. So they hit a brick wall in their education on that final step. So this change to the Liquor Control Act would just allow us to serve wine when we hold an on-campus function: A dinner, we raise money for scholarships and we invite the public in to allow the cooking students to practice their skills. Waterbury currently has the highest unemployment rate in the state, and we would like our students to have this educational opportunity, to give them the edge when they go out to look for employment. So that's why we're asking for your support, and thank you for the opportunity. SENATOR COLAPIETRO: Any questions from the Committee? REP. SHAPIRO: Yes, thank you, Professor. And this may be beyond your realm of knowledge, because I'm going to ask you about other community colleges. You said you're the only one that actually has a vineyard and a wine-tasting course, but there are other community colleges with culinary programs? KAREN ROTELLA: Yes. There's four in the state. REP. SHAPIRO: Norwalk Community College being one. And the provisions of the specific language of this bill talk about a course of instruction, but it doesn't specify wine instruction. Is it your opinion that yours is the only program that would benefit from this because you have the vineyard and it's wine instruction or would the culinary instruction at Norwalk Community College, could that be expanded to include wines and wine parings and all the 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. things you talked about? KAREN ROTELLA: It would include any curriculum approved in a higher-education setting, so if they chose to offer this in an educational setting, then they would be included, but it has to be wine manufactured at the campus. The bill specifically states the wine is manufactured on site at the campus. REP. SHAPIRO: Okay. Thank you very much. KAREN ROTELLA: You're welcome. And you're all invited to Waterbury. If you're in the area, come see the program. SENATOR COLAPIETRO: Thank you for your testimony. Seeing there's no members of the Committee with questions, Peter Cisek followed by James Umbarger. Did I say that right? A VOICE: Yes, you did. Actually, you did a great job. PETER CISEK: Good morning. I was just making sure that I was on target here versus afternoon. My name is Peter Cisek. I'm a professor at Naugatuck Valley Community College as well as National Director of Education for the American Wine Society. And I appreciate the opportunity to showcase to some of our students here how laws become what they are. So this is actually a great opportunity. The kids are learning a lot here, and I thank you for the opportunity to speak. I am specifically supporting House Bill 6471. An Act Making Changes to the Liquor Control Act. Specifically, hospitality and tourism are important segments of the service industry here in Connecticut. Wine is becoming a larger segment in both. We now have approximately 25 wineries in the state, and I 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. believe that number will continue to rise in the future. In fact, I think at this point maybe 25 is too low. We currently need a trained labor force to accommodate this growth. The role of the community college is to prepare students to either enter the work force upon graduation, whether it is a couple of training classes, a certificate or degrees, or to prepare them to transfer where they can obtain or continue their studies towards a higher degree. The end goal, basically, is for these students to get a job. In fact, we kid sometimes that it shouldn't be called a diploma. It should be called a hunting license. We get you your hunting license. You can now go hunt for a job. The model that I'd like to reference for the purposes of just thought process here is the Finger Lakes in New York State. Today, they have more than 100 wineries producing 40 million bottles of wine per year. The region is among the largest wine producers in the nation. It is in part through the support of the region's educational system that the industry has grown to where it is today. Workers have been trained to tend to the vines, pour in the tasting rooms, and ferment and bottle in the cellars of these wineries. Restaurants have added these wines to their menus and customers now have a choice of consuming a quality-made, local wine. I believe that the best education is obtained through a hands-on approach. Our students will become better educated and be able to excel at their career choice in the hospitality industry with your support House Bill 6471. I thank you for allowing me to speak, and I'd be happy to answer a question 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. or two if you have it. SENATOR COLAPIETRO: I just have a quick question. My cochair just brought up an interesting point. If we pass the bill as is, then the only people that would benefit would be yours that could grow grapes on your campus? Because the other campuses --at least I'm not aware of any campuses that have enough room to grow grapes. PETER CISEK: We just happen to have a vineyard. You can get grapes from California. You can buy grapes from New York State. So we -- that helps us because we have the vineyard on campus, and that's part of what we do, but we also get grapes in from M&M Produce up here in Hartford and other places, so that wouldn't be a barrier to entry for anybody who would be interested in doing the same thing. SENATOR COLAPIETRO: I was just curious if we just changed that, it wouldn't affect you at all? PETER CISEK: I would have a problem with it at all, but it really is a moot point, because it doesn't say grown on premises. Just manufactured. And it doesn't then say, to my knowledge, that specifically grapes that you have grown. SENATOR COLAPIETRO: Well, I thought that you just got through saying that they were grapes that were grown on campus. A VOICE: (Inaudible.) SENATOR COLAPIETRO: Manufactured on campus. Okay. PETER CISEK: Correct. SENATOR COLAPIETRO: Thank you. Any questions from 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. the Committee? Thank you for your testimony. PETER CISEK: Thank you so much. SENATOR COLAPIETRO: James Umbarger. JAMES UMBARGER: I'm not a hat kind of guy. Chair, members, my name is James Umbarger from New Milford, and I'm here to give a little perspective from the students' viewpoint. At Naugatuck, there are transitioning high-school students, people seeking career changes, and people such as myself, card-carrying AARP members who consider themselves lifelong learners and like to learn things. I am here to speak to 64 7],: specifically, Section 3077(c). There are several courses in the curriculum where this applies. Last semester, the fall semester, I took three courses. One was food prep, which teaches you the back of the house operation, how to prepare food. Another course was what they called service management, which teaches the students about the front of the house operations, managing the dining room, restaurant. And the other course that I took from Mrs. Rotella was safety and sanitation. And in that course, the classmates of mine, we all got our serve-safe food designation as well as a serve-safe alcohol designation. So three of those courses are really quite germane to the issue today. The front of the house, really you have to get your hands around all aspects of service: How to serve wine, how to serve food, and how to really carry on an intelligent conversation with the clients or the customers about what you're serving, not only the food, but the wine as well. 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. You were talking about does this deal exclusively with the wine production facility. In my mind's eye, no, because what I think the school -- I'm sure the school's trying to do is turn out professionals who are conversant in all aspects of the hospitality program. I'm in the hotel management part of the program, even though I have the hat and white coat on now, but I did take the food prep, the safety and sanitation and the service management courses last year. So I think this really rounds out the experience for the students so they can go on and really be viable candidates for restaurant careers, which hopefully will continue to grow in this state. SENATOR COLAPIETRO: Maybe I should ask this from you while I'm at it. I just asked our staff. I'm curious, the liquor laws now today say that you've got to be a certain age before you can sell it or manufacture it. I'm wondering how that's going to affect this bill. How do you keep -- JAMES UMBARGER: Again, being a student, and I did read the bill -- I'm sorry? SENATOR COLAPIETRO: You might pass for the age limit, but you're all right. JAMES UMBARGER: The gray hair gives me away. The students range in age from even some people older than me and some out of high school. I think the service would be very similar to that in a restaurant where you can have servers dispensing. And I think that is critical for anybody trying to get their arms around the hospitality industry to know how to serve the dinner and how to pour appropriately the glass of wine. So I'm sure the liquor laws would be complied with, but I think this 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. is really trying to turn out a well-rounded potential employee to the hospitality industry. SENATOR COLAPIETRO: I understand perfectly. I'm just trying to make sure that it doesn't conflict with the laws that we have today, because I don't think you'd like it if somebody walked in and said you've got three students that are under age over there. They've got to leave. Or something like that. JAMES UMBARGER: I don't think this -- and I know the supervision through all the courses, from my experience, especially in the kitchen, because it is a dynamic environment, the supervision is quite close by the instructors and the people at the school, because there's -- especially in the kitchen, it was -- you did notice their eyes looking over your shoulder all the time. SENATOR COLAPIETRO: Thank you for your testimony. Any questions? Representative Taborsak. REP. TABORSAK: Just more a comment. Thank you, Mr. Chairman. Thank you for coming, Mr. Umbarger. We appreciate your perspective. I think it's an interesting bill and a real good opportunity for the school, so thanks for giving us a well-spoken student's perspective on it. Good to see you. JAMES UMBARGER: If I could respond, somebody was asking about the other schools. Even if they don't have a wine-production facility, I think the service aspect in their culinary and hospitality programs, it would be good information to pick up on. 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. SENATOR COLAPIETRO: I think, for your information, I misunderstood that, that you were going to be growing the grapes there, and there's really not a lot of room in most of our -- or all four of them, I should think, to grow any grapes in there. So yeah, you do have to get them someplace else. Thank you. Jennifer Vincent followed by Patricia Costello. JENNIFER VINCENT: My name is Jennifer Vincent, and I am currently enrolled in the hospitality program at Naugatuck Community College. As a student looking to enter the world of hospitality, I need to gain as much experience as possible in all aspects of food and beverage service. Currently, I am not allowed to serve the wine we have manufactured to our guests at the college functions. This problem can easily be remedied by the passing of House Bill 6471. This will allow us to practice in real-world settings the art of wine service at fine-dining establishments. As I finish my studies and seek employment, I will need the competitive edge that will give this act to me and my classmates. Thank you for your support. SENATOR COLAPIETRO: That was short and sweet. You've still got another half a minute if you want. Any questions from the Committee members? Thank you for your testimony. PATRICIA COSTELLO: I guess I'm the first one to say it: Good afternoon. I'd like to thank you all for listening to us today. My name is Patricia Costello, and I am employed at Naugatuck Valley Community College as an educational assistant in the Hospitality Department. I am also a professional in the hospitality industry. I come here today to 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. talk in support of Bill Number 64 71, An Act of Making Changes to the Liquor Control Act. I would like to talk about wine for one second. I'd like to tell you that you may think it's just fermented grape juice in a bottle, but wine is a live, living and cultural thing. From the moment that the plant comes from the ground to the blossoming, the fruition, the fermentation and crushing of the grapes, and even in the bottle in your store or on your wine rack, it's still a living thing. Wine itself covers a lot of things. It covers history, culture, some romanticism and travel. It speaks to us in lots of ways. You may ask how I know these things. I know them because I took Professor Cisek's wine classes, his viticulture classes, and it certainly has helped me in the industry. I can tell you some important things about the wine in planning of events. As an event planner or as a caterer, it allowed me to better speak to my clients' wishes and plan things for them. It gave me an edge. Also, in planning menus, I planned some wine-event menus where I was able to actually pair a specific food to a specific wine, which I would not have known how to do without taking the class. And also, as a writer, I've written some articles that have been published in newspapers, some on food and wine, all with knowledge that I gained from the wine courses at NVCC. I believe that this will give other people an advantage in this industry, and I would like to ask for your support in this bill. Thank you very much. And Senator Colapietro, I can answer your 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. question about the wine service in the classes, because I took the classes. When someone takes a class, we were given -- first of all, we had to show our identification so that the professor knew exactly how old everyone was. And if someone was on the borderline there of becoming 21, he knew exactly the day that that person turned 21. Everyone else -- so if it was a class where there was wine handled, you could pour but you couldn't drink. You could not imbibe. Also, we had a waiver, a safety waiver, and we had to read all about the dangers of alcohol. So that will answer your question, I think. Does anyone have another question about the courses or anything? SENATOR COLAPIETRO: Thank you for your testimony. Joe McDonald followed by David Cohen. No Joe McDonald? No Dave Cohen? DAVID COHEN: Good afternoon. My name is David Cohen. I'm executive vice president and co-owner of Standard Oil of Connecticut. We are a family-owned heating oil company headquartered in Bridgeport, Connecticut. We provide heating oil and heating repair service to over 25,000 accounts in Fairfield, New Haven and Litchfield Counties. I would like to direct my comments today to HB 6470, An Act Concerning Residential Retail Heating Oil and Propane Contracts. This bill, in part, deals with allowing customers to enroll into Guaranteed Oil Price contracts using telephonic communication; more specifically, using an IVR or Interactive Voice Response system. First, I would like to give you some historical background on the guaranteed oil price contracts. These contracts became popular around 2 0 years ago as a way for 67 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. customers to control the cost of their heating oil. The oil company and the customer would sign a contract to provide heating oil at a specified price and for a specified period of time. These contracts immediately became popular and, in spite of recent history, they remain popular today. It gives customers great comfort to know exactly how much they will be paying for oil through the upcoming heating season. About 4 0 percent of our customers are on some kind of guaranteed oil price contract at this time. Originally, our company sent written contracts to our customers through the mail and gave customers six to eight weeks to sign the contract and send it back to us. This worked well when oil prices were stable. However, as oil prices became more volatile, this became extremely risky. We would have to buy a 10-mi11ion gallon inventory of oil and then hope that oil prices would not fall during the next six to eight weeks. Many oil companies have therefore stopped offering guaranteed oil price contracts to their customers because the risks simply became too great. Our solution to this problem has been to develop an Internet-based system for our customers. Every day, we post a price on our website and allow customers to go in and commit to a price if they so choose. If they do choose to lock in, we then purchase the futures contracts to back up our guaranteed oil price commitment to our customer. This way, we can provide a convenient method for customers to lock in to a guaranteed price while not exposing our company to potentially catastrophic risk. The only problem with this system is that there are a number of customers who do not have Internet access, especially some older customers. 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. Since almost every homeowner has a telephone, a telephone-based system would allow these customers to phone in to our Interactive Voice Response system and lock in a price at their convenience. This bill has many safeguards for the consumer, including the requirement that the text of the contract be offered in writing beforehand, that the system be able to record the transaction, and that the customer is allowed three days to rescind the contract. I believe this bill is a good one for the consumer. It allows all consumers, whether they have Internet access or not, the opportunity to lock in a Guaranteed Oil Price if they so desire. I therefore am in favor of this bill. If you have any questions, I would be happy to answer them. SENATOR COLAPIETRO: Any questions from the Committee? We have one here. REP. TABORSAK: Thank you, Mr. Chairman. Thank you for testifying today. Just a quick question on your comments there in describing the bill. Please, if you could, elaborate a little bit more on how -- it sounds like there's some sort of a record kept of the contract and there's this right of rescission. Is a written document actually sent to the purchaser of the contract? DAVID COHEN: Yes. REP. TABORSAK: It is? DAVID COHEN: It is, yes. It has to be sent in writing in the mail ahead of time, yes. REP. TABORSAK: And when would the right of 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. rescission period start if it was -- DAVID COHEN: The bill requires three days after the customer received the letter from the company. REP. TABORSAK: Okay. So they would have three days to review the actual written terms. So if they were a little bit confused over the phone what transpired, they would have the opportunity -- DAVID COHEN: They have the written terms in advance. The only thing the letter's going to say is what the price was, the number of gallons and the term, maybe. They already would have had any kind of liquidated damages or any other requirements in advance of calling in. The letter that follows-up would reiterate the price that was specified. REP. TABORSAK: Just so I understand you, you said that they would have the terms in advance. How would they have those terms? DAVID COHEN: They're sent out. REP. TABORSAK: They're sent out -- okay, just so I -- I'm trying to understand this process. I think in general the idea makes sense to give consumer a little more ability to buy oil and get into these contracts when it's beneficial for them. So I'm working with you here on that. But if I were to call in to use this system, at that point in time, if that's my -- would that be my initial contact with the company? DAVID COHEN: No. I mean, these are mostly sent out to our existing customers. So, and what we do with this system would be -- is to send out a contract in writing, and we would also 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. send a letter that would have a pin number, ,so there would be a unique pin number so that we know that the customer got the contract in writing ahead of time, and they would have to enter that in when they called into the Interactive Voice system. REP. TABORSAK: Would this system be available for first-time purchasers or no? DAVID COHEN: It would, but again, you would have to send them either by e-mail or by regular mail a copy of all the terms and conditions. REP. TABORSAK: Okay. So if I were a first-time purchaser and I were trying to use this system, there would be some safeguard to make sure that I would get the written terms and the letter telling me about my right of rescission before that rescission period were to begin; is that correct? DAVID COHEN: Correct. REP. TABORSAK: Okay. Thank you. SENATOR COLAPIETRO: Any further questions? Senator. SENATOR WITKOS: Thank you, Mr. Chairman. My question is Subsection E of Section 1 where it talks about the delivery of the oil and you have to have the ticket, and it states that the ticket has to be given to the purchaser or an agent of the purchaser at the time of delivery. Now, my concern is that oftentimes you could put the ticket and leave it in the door or leave it in some conspicuous place if somebody made a delivery. Now, the language of this makes it sound like it has to be given to an individual person, and I just wanted to make sure that that1s not what we1 re trying to 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. accomplish here, and I wanted to get some feedback from you as well. DAVID COHEN: I mean, again, it says given to the purchaser or agent of the purchaser. It would definitely be very difficult for the heating-oil industry to have to hand deliver a ticket to somebody. Most of these deliveries are made when people are not home on some sort of automatic delivery agreement. So it would be very detrimental if we had to actually give it to a person. We cannot put it in the mailbox, because the Post Office gets very upset when you do anything like that, so our company puts it in a plastic bag and we have like little door hanger type things, but I would hope that this would not be construed to mean that you have to hand it to a physical human being. SENATOR WITKOS: And I would concur, and I just wanted to bring that to the Committee's attention that they may want to tweak that language a little bit. Thank you. SENATOR COLAPIETRO: Thank you, Senator. And thank you for your testimony. I think is Joe McDonald back in the room? Joe McDonald followed by Gary Sepin. JOSEPH MCDONALD: Good afternoon. I'd like to thank the Committee for giving me the opportunity to speak on behalf of .House Bill 6470. An Act Concerning Residential Retail Heating Oil and Propane Contracts. My name is Joseph McDonald. I'm the Vice President of Sales and Marketing for Petro Oil. We're based out of Stamford, Connecticut, and we serve approximately 24,000 customers in the state and employ about 184 employees. I have some prepared statements that I'm going to run through that are very similar to what you've 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. already heard, and then I'll certainly answer any questions that I can on behalf of our company. The Connecticut Legislature adopted the Connecticut version of the Uniform Electronic Transactions Act in 2002. By its adoption, the Legislature approved the use of electronic signatures and records. In 2 000, Congress passed the federal ESIGN law. Both the Connecticut form of UETA and the federal ESIGN Act are technology neutral in that they do not mandate any particular form of technology to create an electronic signature. Connecticut's UETA and federal ESIGN both permit electronic signatures and records to create binding obligations. Because of the requirements of federal ESIGN, it is important for the Connecticut statute to specifically permit telephone recordings between a representative and a customer. Connecticut currently has a statute which requires all home heating oil retailers to disclose in writing to the customer the terms and conditions of a protected price contract for heating oil before the customer accepts the contract. Connecticut also has a statute requiring that retail dealers have either a surety bond, futures contract or other hedging mechanisms for any protected price agreements to ensure that they are able to meet the pricing commitments to customers. This bill seeks to recognize that writing can be an electronic writing. This amendment simply incorporates Connecticut UETA into the statute on the home heating oil protected price written disclosures requirement. This amendment makes clear that the terms and conditions of a protected price agreement can be made to a customer in an 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. electronic writing, via the Internet, in a phone call between a company representative and the customer that is recorded with the customer's permission and through other electronic means. In today's environment, it's not practical to make an offer to a customer over the phone, mail them the terms of the offer, have them sign it and make them mail it back to the company. With the volatility of the oil market, the price may have changed substantially from the time of the initial quote to the time the company received the signed document from the customer. This process is a nuisance for the customer and does not give the retail dealer the ability to give them the price protection that they demand. The offer and acceptance of that offer need to occur at the same time so we can properly secure that product for our customers. Any delay of time between the offer and the acceptance creates risk ori behalf of the customer and/or the dealer. We desire to make these disclosures electronically, including via a phone call between a company representative and a customer, which, again, is recorded with the customer's permission. And then we follow-up with a paper copy of the terms and conditions that they agreed to, and we also save a copy of the electronic record and offer of acceptance, and it can be retrieved if needed. This is all in an effort to provide our customers the ability to protect their price from the volatility in the oil market in a manner convenient to them while giving the retail dealers the ability to effectively hedge the necessary product to offer that protection. We actually submitted in writing a testimony that has a few changes that we 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. requested to this, but in general, we're in favor of this bill and would like to see it passed. REP. SHAPIRO: Thank you very much for your testimony, Mr. McDonald, and for coming up from Stamford. Hailing from there as well, I know I don't see too many people make the trip. But I do have a question for you. You talked about the current contracts that you have and the requirements under state law that you disclose the terms and conditions. But it's my recollection, and I could be incorrect, that this bill also provides for some new disclosures or exclusions regarding fees that you're allowed to charge. Can you explain to me would this be a change in practice for Petro or is this compliant with your current practice? JOSEPH McDONALD: No, there wouldn't be much of a change in practice. I think you asked Mr. Cohen this question about how he treats existing customers and new customers. In general, our existing customers are on an ongoing -- we have about half of our customers that choose that protected price plan. So what we disclose both on the phone and record and in writing are the main terms and conditions, which is basically the term of the contract, the protected price level, whether it be a capped or what we call a ceiling price, and the fixed price, as well as any liquidated damages clause. So we have no additional fees or anything like that that are added into our pricing plans that this would affect. REP. SHAPIRO: Thank you very much. And you mentioned briefly that you had in your written testimony proposed changes to the bill. Why don't you tell me about some of them now. How 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. would you improve this bill if it were up to you? JOSEPH MCDONALD: There's three separate items. One is very simple that I'll cover first. We just were asking that the bill be clarified. It currently talks about employing an interactive voice response system, which I believe that Mr. Cohen said that he utilizes. We don't necessarily do that. We actually have recording devices that record the conversation between the customer and our company representative, and we just ask to clarify that a bit, that it says a voice recording system or similar technology. It may be covered by the similar technology. We'd just like to clear that up. The other thing that we discussed in this bill is that it's asking for customers to see terms and conditions in advance of signing up with us, and that's where the difference between an existing customer and a new customer comes on. When we sign up a new account, many of our customers call us on the phone because they saw an advertisement- or direct mail or one of our trucks that are running all over the place, and they want to get price protection. They're either just moved into the home or they're with another company who they left or whatever it may be. So obviously, they don't have a set of our terms and conditions in advance. Now, we'll record the key terms of conditions, which again, , would be the price, the price plan and the length of the contract. Record that, and then we send a written confirmation of what they just signed up for. We, for new -- and I'm speaking on behalf of our company -- for new accounts give those customers three days to rescind, since it is the first time 76 February 24, 2009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. that they have seen our paperwork. But for existing customers, since they're already an account of ours, we send them the confirmation that we recorded and did not want to have to provide three days' right of rescission for an existing customer, for the simple reason that if I sign a customer today, and again, with the volatility in the heating-oil market, it could go up ten cents before they receive that and go up another ten cents before I get that rescission back. So as a company, do we buy the product the day I talk to the customer, or do I have to give that customer a certain period of time to get that rescission back? But again, on the new accounts, we do offer that since they haven't received our general terms and conditions in advance. All of our other customers have that in advance. REP. SHAPIRO: Thank you very much. Are there other questions from the Committee? If not, thank you very much for your testimony. SENATOR COLAPIETRO: Gary Sepin followed by Bruce Dietch. GARY SEPIN: Hello. Good afternoon. Gary Sepin of Sepin Energy Products in Monroe. I wanted to speak in support of Bill 6470. I believe Mr. McDonald and Mr. Cohen covered all the basic important points. I just want to underscore a few additional points. I think the reason for this bill is that it's to clarify a way of doing business that helps support and reduce risk for both consumers and heating-oil dealers and even heating-oil wholesalers. I've always found that the best way to reduce consumer risk is also to not put heating-oil dealers at risk or even wholesalers at risk. 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. This bill seeks to clarify how this business is done, to provide very clear disclosure for customers so they understand what they're getting into. This has been a very difficult and volatile time for heating-oil dealers because, obviously, energy prices have fluctuated dramatically. A lot of homeowners felt misled and misguided if they entered into expensive fixed-price agreements. This bill really seeks to clarify that and provide adequate disclosure. My role in this project is a little bit more involved because I also co-own a software company that facilitates electronic heat commerce for this purpose and also facilitates telephonic contracts. Our company currently serves the needs of several hundred thousand residential consumers from Maine to Virginia and many in Connecticut, and this is of great importance to me because I've notice that some of the other New England states that we do business in, Vermont, New Hampshire, Maine, and so forth, have actually adopted similar regulations and modeled them after Connecticut laws. As Dave and Joe already spoke, the telephonic agreement has been the one that's been the least understood, and this bill really seeks to clarify the telephonic agreement. I'm very much in support of the telephonic portion of this and the way it's structured, because many customers, even though they do have computer access and Internet access feel the need to call on the telephone to speak to a human being to have these programs explained to them, even though they have a computer, and we want to make it very, very clear. Generally speaking, consumers who feel like they've been mislead or misunderstood what was going on usually did so because they didn't have an 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. adequate opportunity to speak to somebody and have the programs adequately disclosed to them. This bill really seeks to clarify that. We're in agreement with the sending of the terms and conditions, which we've done for several years. We recommend that. I think the heating-oil community, the dealer community has even put itself out on a limb a little bit agreeing to a three-day right of rescission, because we certainly don't get a three day right of rescission downstream from our wholesale suppliers. As was specified before of the extreme volatile risk, you know, we've had movements in the heating-oil market that have been as high as 25, 30 cents a gallon in one day. Much to people's surprise, the little old heating-oil dealers really don't make that much margin, and 25 cents is way beyond what we would normally make in a year on a client. So a movement of one day, we simply can't take that risk exposure. And without a doubt, the necessity of synchronized buying and selling is key to the removal of risk in this market. To that end, the postal mail service simply cannot be used due to the time lag and the commitment lag. That pretty much leaves us with electronic agreement or telephonic agreement. SENATOR COLAPIETRO: If you would, would you please just wrap it up, because the bell went off like a minute ago. GARY SEPIN: Oh, I'm sorry. Any questions? SENATOR COLAPIETRO: Any questions from the Committee? 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. Well, thank you very much for your testimony. Appreciate it. Bruce Dietch? Not here? Well, that's good. I like that, scratching them off like that. Chris Herb followed by I think it's -- it looks like Michelle Morrissey. CHRISTIAN HERB: Good afternoon. My name is Chris Herb. I'm the Associate Director of the Independent Petroleum Association. We represent over 550 petroleum marketers in Connecticut and serve over 682,000 consumers with heating oil each year. I'm here today in favor of House Bill 6470. You've heard a lot of good testimony on the purposes of the bill in terms of why electronic contracts, whether they're telephonic or Internet based, are needed and necessary. With the increased volatility in the marketplace, it is the absolute most responsible way to market heating oil to protect consumers and to protect -- all of these companies, for the most part, are family-owned, Connecticut-based companies. So this is the most effective way to do that. This legislation has been passed out of this Committee unanimously for the last two years, and for lots of reason has never passed into law. We're hoping that this is the year. This bill and the language in it has been a collaboration of ICPA, the Office of the Attorney General, and the Department of Consumer Protection. Not always the case when the heating-oil industry and the Attorney General's office and Consumer Protection are all in unanimous agreement on this, so I just want to, for peace of mind, for all the reasons stated previous, this is a consensus bill. Not only consensus -- unanimous. There's been very few controversial sections. 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. I believe that the Attorney General earlier stated that there may be some changes to come, language that we are working with them right now, but it by no means is controversial. So I appreciate your support for this bill, and hopefully we get it out this year and passed into law. If you have any questions, 11d be happy to answer them. SENATOR COLAPIETRO: Any questions? We have one. Representative Taborsak. REP. TABORSAK: Thank you, Mr. Chairman. Good to see you today. Thanks for testifying. I'm hoping you can help me understand how this bill would work with some legislation that was passed a couple of years ago that required sellers or other similar parties of consumer goods and services to provide in their contracts a clear, conspicuous provision for liquidated damages where the consumer would have to initial the provision in order for that provision to be enforceable in court. I'm just wondering if you can explain how -- I'm trying to understand if this proposed bill would comply with that law or if it somehow would be exempt from that law. Can you elaborate on that? CHRISTIAN HERB: Well, as you heard testimony earlier, there are existing statutes on the books that do allow for Internet-based contracts, telephonic contracts, but because there's a specific section of the statute, Consumer Protection and the Attorney General's Office has decided to just enforce upon the way that that part of the statute addresses heating-oil contracts. So to this point, the industry, who does extensive training on this, and the Attorney General's Office and Consumer Protection regularly participate in those 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. education programs. They have not said that we've had to do that. Just the disclosure of a liquidated damages clause and a signature at the end of the contract was adequate. The only thing that they have told us is if the signature line is above the terms and conditions, that those terms and conditions would not be -- that they would not interpret those to be consented to by the public. So for some reason, and part of the reason what necessitated this bill was that there is a separate portion of the statute that specifically dictates how heating-oil contracts should be constructed and offered, and because of that, that's why we needed to include being able to do them electronically, because specifically, the law says that you have to have them in writing. The interpretation means that that's pen to paper, that that isn't electronic. So to your question specifically about liquidated damages, the guys that we receive from, the regulatory agencies that have cognizance over this is that no, you do not have to have an initial on the liquidated damages terms. REP. TABORSAK: And that's how you've been advised from the Attorney General's Office? CHRISTIAN HERB: Correct. They've reviewed hundreds of contracts, two years ago with the Department of Consumer Protection, audited every heating-oil contract in the State of Connecticut, and we have never been provided any guidance on having to do it that way. Contracts have not been scrutinized or questioned based on not having an initial for liquidated damages clause. 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. REP. TABORSAK: Okay. Just so I understand your testimony exactly, is it that the Attorney General's Office has specifically advised you that you do not need to follow that statute, or is it that he hasn't brought that to your attention or that his office hasn't brought that to your attention as being a problem with the standard contract? CHRISTIAN HERB: No, the latter, yes. They have not said that that is a problem. Like I said, they have reviewed hundreds of these. They specifically audited them, and it has not come up as an issue. They have participated in education programs in front of hundreds of dealers and provided guidance, regulatory guidance on constructing contracts. The education seminars that we do are conducted by Robinson & Cole. Their contract counsel does those, and it has never been something that has been required of a heating-oil contract. And as I said, and I don't know -- I'm not a lawyer, and I don't know --we assumed, and the reason why, as I said earlier, that we needed this bill, because there was a portion of federal and state law that allowed for electronic contracts, we didn't even think we needed this. But we were told because there is a separate portion of the statute that only spoke to how oil contracts were constructed, we needed to do this. And I don't know if that's why they have not provided us any specific guidance on having to have a separate initialing of the liquidated damages clause. REP. TABORSAK: Okay. Thank you. Thank you, Mr. Chair. CHRISTIAN HERB: There was a question that was asked by Representative Shapiro that I wanted to answer, just to let you know, if you could indulge me. You asked about the surcharges. 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. The heating-oil industry, it is specially prohibited in the statute for heating-oil dealers to charge surcharges. Back in the late '70s, the heating-oil industry was brought under a unit-pricing system, so all of your costs had to be included in the final price to the consumer. At that time, there were some heating-oil dealers that were charging 25 cents for the gallon. Others were charging 35 cents. Well, the 25-cent charge accompanied a $15 delivery surcharge. So at that time, the Legislature said that all heating oil should be sold in the unit-pricing structure. There are three exemptions to that. If the delivery is under 100 gallons, on a bill that you guys heard earlier this session, if the delivery is required after the normal operating hours, or if the delivery is out of the normal operating territory, those are the only permissible times that the heating-oil dealer can charge a surcharge. So you won't see in a contract that there's a surcharge assessed unless it1s under those conditions. REP. SHAPIRO: Just to follow up, you said that's heating oil, but not necessarily propane; correct? CHRISTIAN HERB: I can't speak to the propane side. I do know the heating-oil side of that. REP. SHAPIRO: If this relates to both, then I'm not sure that they were under the same unit-pricing obligations that you were in. I believe there were additional charges in propane contracts that were not disclose. CHRISTIAN HERB: That's not my area of expertise. REP. SHAPIRO: Okay. Thank you. 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. SENATOR COLAPIETRO: We have I think it's F. Michael Morrissey, followed by Peter Berdon. MICHAEL MORRISSEY: Good afternoon. I'm Michael Morrissey, State Director to the National Propane Gas Association, and I'm here speaking on behalf of our members. We'd like to comment on Raised Bill 6470. An Act Concerning Residential Heating Oil and Propane Contracts. In each of the last two years, our leadership team has worked very closely and very hard with the Attorney General's Office attempting to craft some language to address some of the concerns that the State has had pertinent to consumers who purchase propane in our state. Unfortunately, for whatever reason, we haven't been able to get this legislation passed into law. RB 6470 offers a real and viable solution for residential customers to purchase propane in our state. We are supportive of the bill, provided it be amended to add the word "initial" in front of the word "contract" at Paragraph G as shown below, and that's in my written testimony. This important change would allow our industry to recover the incremental costs of doing business should they increase in the future. And that concludes my testimony. I'd be happy to answer any questions. SENATOR COLAPIETRO: Any questions from the Committee? REP. SHAPIRO: Yeah, one quick question. Could you please go through your proposed amendment again? You're in Subsection G and you wanted to add "initial" to where? MICHAEL MORRISSEY: It's on -- I show that in bold 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. font in my written testimony where it reads, about mid part down in the paragraph, "Customer on October 1, 2009, and may not increase during the" -- and we're asking that the word "initial" be inserted in front of the word "contract." REP. SHAPIRO: Okay. And the effect of that would be? In practical terms for your customers? MICHAEL MORRISSEY: The effect would be that we cannot predict what the cost of doing business is going to be in the future, and it could change. And part of the provisions of this proposed legislation limit the duration of a contract to no more than three years. Some folks may elect, when they send out agreements to those who don't have them, they have the option of sending out a one-year agreement, a two-year agreement or a three-year agreement, but no more than that. So we envision that, and this is where when the Attorney General testified earlier, there's some tweaking of the legislation that we need to do. What we are proposing is that there be a renewable feature in that initial agreement, because if there isn't, it puts us back to the same spot we are today where we have a group of customers who are obligated to have a written agreement but wouldn't if it didn't have a renewable feature to it. REP. SHAPIRO: Okay. But you're saying the fees in the initial contract would not be able to raise, but in any subsequent contract or any renewals, the fees could go up each time you renew or at any time within those subsequent contracts? MICHAEL MORRISSEY: Well, again, we are suggesting that the consumer at the time the initial term is satisfied, that that consumer, if any fees 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. were to go up, have the same right that they have today, and that would be to opt out of that agreement at no penalty or no charge to that consumer. And that's the tweaking that we need to work out with the Attorney General's Office today. REP. SHAPIRO: Okay. That sounds like a little more than tweaking, but good luck. Thanks very much. SENATOR COLAPIETRO: Any further questions from the Committee? Thank you for your testimony. MICHAEL MORRISSEY: You're more than welcome. Thank you. SENATOR COLAPIETRO: Peter Berdon followed by John Burton. PETER BERDON: Good afternoon Senator Colapietro, Representative Shapiro, members of the Committee. My name is Peter Berdon. I am the executive director of the Wine and Spirits Wholesalers of Connecticut. I'm here and pleased to testify on three bills, and Senator Colapietro, I'm glad to see that you're sitting down, because you're going to hear the words "in support of" come out of my mouth. We've provided written testimony relative -- REP. SHAPIRO: There it was. It just came out of your mouth and that was it. PETER BERDON: No. We've provided written testimony in support of Senate Bill 926 as well as House Bill 6472. I would like to provide some comments orally with respect to 6471_, which is An Act Concerning Changes to the Liquor Control Act, because we've not provided written testimony there. I'd like to say that we are very supportive of Naugatuck 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. Valley Community College's program in the viticultural area. We think that having a trained work force in the hospitality field is very important, and as many of you are aware, wine and spirits is a key component to the hospitality industry, and having an educational program that can take place that educates people about wine and hopefully spirits also is really key to ensuring that folks, when they go out to the work force, that they are able to service their customers well. We wish to suggest making two changes that will help enhance that. One is there should be a gallonage cap on the amount of wine that can be produced by the university. I would suggest say 500 gallons, which dovetails with the Federal Alcohol Administration Act, which is the federal limit by which you need to have a permit, I believe. I need to check that, but I believe that dovetails with that limit. The other is there should be clarity made that a university, in addition to providing wine tastings for wines that they produce, they should also be able to provide wine tastings for wines that they purchase at a package store. So that flexibility should also be added to that provision of the statute. Under University of New Haven, by way of example, their culinary programs do run wine tastings, but to give them the lawful ability to do that and to go out to a package store, purchase a selection of wines, or spirits for that matter, and provide a tasting at the college-course level, I think is important and would help enhance those programs. With respect to Senate Bill 926, I see my time is up so I provided by written testimony on the other two bills, so you have that there. 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. If there are any questions, I'm certainly happy to answer them. Thank you. REP. SHAPIRO:- Sure, I'll give you a little leading. What is the nature of your support for Bill 926? PETER BERDON: We think that providing farm wineries flexibility to showcase their products in another setting is helpful to the farm wineries. We would suggest two minor changes in there. It should be limited to farm wineries and not to the general manufacturer's permit. We provided that language change in our testimony there. I think that answers your question, Representative Shapiro. REP. SHAPIRO: Who would you be looking to exclude by excluding the manufacturers?' Like Diageo or InBev or someone? PETER BERDON: Correct. Someone of that nature. The intent, it is my understanding, is that it was to provide products that have an agricultural base to them or an agricultural nexus, providing them the opportunity to participate in these farmers' markets. SENATOR COLAPIETRO: Well, Peter, what you talked about before was allowing the package stores to have wine tasting as well. I think that is in another bill. I can't remember the number, though. PETER BERDON: I'm sorry, Senator. Perhaps I misspoke or I wasn't clear. The intent of my testimony was to allow a university such as Naugatuck Valley to have a wine-tasting course as part of their curriculum. But in order to get the product, they need to get it from somewhere, so the university should be able to 89 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. go to a package store, buy say six different wines, bring them into the classroom and allow the students to taste those six different wines. I understand that, so they should be able to do the wine that they manufacture, but by way of example, University of New Haven, in their culinary arts program, they may test Kendall Jackson, Cakebread, a number of different products, because they don't grow them there at their university. You should provide that flexibility within the university structure so that they are not confined to having to have a vineyard on their premises in order to have that wine-tasting class. It's to give them some added flexibility that I think they need and deserve, so that when students go into a culinary arts program they're not limited to the selection of product that they can taste or sample. SENATOR COLAPIETRO: I think Senator Kissel, you have a question? Oh. Any further questions from the Committee? REP. SHAPIRO: One final question for you on 6472, the wine festivals. You said you're actually in support of this as a once-a-year wine festival. Do you have proposed limitations on this as well? PETER BERDON: Yes, I do, and thank you, Representative, for the question. We had had a long discussion with the Connecticut Farm Wineries last legislative session, had come up with what we thought was an agreeable solution for everyone. However, it involved the State kind of participating in that process. We understand that the State Department of Agriculture does not want to participate in that process. We believe that the first 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. section of the bill, which allows the Connecticut Vintners and Winery Association to host a one-time three-day event comports with that agreement. The section of the section of the bill, however, which allows any charitable wine foundation, which is an undefined term, to hold wine festivals throughout the state does not comport with that intent. In theory, there could be any number of charitable wine foundations that could be formed for the purpose of hosting these wine festivals for out-of-state folks, and so you could end up with 52 of them or 104 of them, quite frankly, because there's a number of different wineries that could participate in each of these different events. So we think that in terms of prudence and in terms of simplicity and in terms of solving the present need of our Connecticut farm wineries here, the simplest solution is simply delete Section 2 . REP. SHAPIRO: Thank you very much. No further questions from the Committee? Thank you for your testimony. PETER BERDON: Thank you so much. I appreciate your time. REP. SHAPIRO: And batting cleanup, we have John Burton. Thank you very much for your patience in waiting it out here. Sometimes it's worse. JOHN BURTON: Thank you, Mr. Chairman, members of the Committee. My name is John Burton. I'm here today on behalf of a company that you may be familiar with, LexisNexis. If you're not familiar with LexisNexis, we are an industry leader in providing information and decisioning capabilities to the legal, business, government and law-enforcement 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. communities. Because I know I'm last, in the interest of brevity, I thought about my testimony. It would just be wine is good. Identity theft is bad. But I did want to provide just a little bit of comment on Connecticut House -- .Senate Bill, excuse me, .,83 8. LexisNexis, we welcome any law which strengthens protections and penalties for identity theft and identity theft-related activities. But we did want to share with you some of our recent experiences and offer cautionary insight relating to one section of the bill that has been talked about earlier today; that is, Section 19 relating to the adoption of agency regs to implement the law. Recently, we have run into two situations which I think just coincidentally happen to be two of your neighboring states of Massachusetts and New Jersey where the legislature passed comprehensive data protection and ID theft style bills and included provisions in those laws for agency drafting of regs to implement the law. In these two instances, unfortunately what happened was either by design or by result, the agency kind of substituted itself for the legislative process and essentially created new law in the form of regs, including adopting regs with no basis in the original law that was passed and involving provisions that the legislature had specifically rejected during the legislative process. The result has been and continues to be just a compliance train wreck for the business communities as well as the legislature and the state agencies which are tasked with enforcing it. Just to kind of give you some anecdotal evidence, in Massachusetts, the Attorney General was forced to issue an official opinion saying I'm not going to enforce this 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. law until we can go back to the legislature and fix the problems that have arisen as a result of the regulation drafting process. So what you have is the legislature, after spending exhaustive resources and time in drafting a law has now got to go back and revisit the issue and reinvent the wheel all over again as a result of the regulation drafting. Similarly, in New Jersey, who passed a law, I believe, "now three or four years ago, and today the rule and regulation process is still ongoing as a result of everybody having to go back and forth on the comment period because the regs and the regulations have extended beyond what the legislature passed, so conversation is going to go back to the legislation and the regulative process. So three, four years down the road, we're still in the process of drafting regulations there. We believe the language in previous Connecticut law and in Senate Bill 838 is unambiguous and does not need any additional regulations going forward. Thank you, and if there are any questions, I'll be glad to field them. If not, I believe we're done. REP. SHAPIRO: Thank you very much for your testimony. I do have a question. Can you provide the committee with a "for example" when you talk about regs that undermined the legislation and how they caused problems? JOHN BURTON: Yeah. I'll give you an example. The example in Massachusetts, though not focal to the situation here in Connecticut had to do with certain encryption of data and destruction of records. And regs were drafted as such that unless you were a national or an international data aggregator like LexisNexis, 2 9 February 24, 2 009 ch/med GENERAL LAW COMMITTEE 10:00 A.M. if you were a small business, a regional business, they were drafted in such a way that they couldn't comply with it. They said, we're either going to have to just stop doing business today or we've got to get some sort of clarification or relief under the legislation. In New Jersey, the situation has been kind of across the board. As was brought up earlier by the representative from TransUnion, there have been issues concerning appropriate and regulated business use of Social Security numbers for fraud prevention identification. So it's really kind of spanned the gamut of the issues of this greater issue of identity theft and data protection. So our belief is that the legislative process delivers a solid framework for compliance for businesses in this capacity, and you just expose yourself to potential danger in the sense of conflicting regulations or regulations that extend beyond the law that was passed when you get into sometimes into this agency drafting of regulations. REP. SHAPIRO: So with respect to the New Jersey law and the regs that followed, there was an incongruence between what the legislature said businesses could use Social Security numbers for, and then the regs came back and said no, you can't? JOHN BURTON: Yes, that's exactly what happened. REP. SHAPIRO: All right. Thank you very much. Do we have other questions from the Committee? If not, that's a wrap. Thank you very much. JOHN BURTON: Thank you. REP. SHAPIRO: This public hearing is now closed. 000681* STATE OF CONNECTICUT [ STATE POLICE J ^gg DEPARTMENT OF PUBLIC SAFETY OFFICE OF THE COMMISSIONER John A Danaherttt Lieutenant Edwin S Hemon Commissioner Chief of Staff Rep. Jim Shapiro, Co-Chairman February 24, 2009 Sen. Thomas A. Colapietro, Co-Chairman General Law Committee Legislative Office Building Hartford, CT 06106 SB 838 AN ACT CONCERNING CONSUMER PRIVACY AND IDENTITY THEFT Identity theft is a serious crime that can have devastating consequences for the victim. These types of crimes are often associated with other types of criminal activity, such as fraud, drug and weapons trafficking, money laundering, internet crimes and terrorism. By Executive Order 11, Governor M. Jodi Rell established the Governor's Identity Theft Advisory Board to make recommendations to improve Connecticut's laws and help address this growing problem. This board issued a report January 6, 2006 which included among its recommendations making it a crime to possess access devices, document-making equipment, and authentication implements for the purpose of obtaining, tampering with or using the personal identifying information of another person. Current law does not criminalize the simple possession of items like these, but would require their use to obtain a benefit to constitute identity theft. Passage of this bill will provide law enforcement with a necessary tool to assist in the apprehension and prosecution of criminals engaged in identity theft. Sincerely, Department of Public Safety Phone: (860)685-8000 FAX: (860) 685-8354 1111 Country Club Road Middletown, CT 06457-9294 An Equal Opportunity Employer Testimony of AARP Connecticut On S.B. 838, "An Act Concerning Consumer Privacy and Identity Theft" General Law Committee Feb. 24, 2009 On behalf of more than 630,000 AARP members in Connecticut, I am here today to supportJS.B. 838, An Act Concerning Consumer Privacy and Identity Theft. Victims of identity theft spend, on average, $1,180 and 60 hours cleaning up their credit record. Damaged credit makes it tougher to get a good interest rate on a car loan, home mortgage or credit card. Identity theft-related fraud continues to dominate the Federal Trade Commission's (FTC) list of top frauds. One recent national study estimated that 15 million Americans were victimized by identity theft-related fraud in the 12 months ending in mid-2006. As a result, preventing identity theft and related frauds has been a top priority for AARP and other consumer advocates. An AARP study showed that 81% of older consumers are concerned about becoming a victim of identity theft. Breach of personal information and identify theft are two issues that are extremely difficult to manage for all consumers. However, when it happens to the frail and elderly consumer it becomes a huge financial crisis. More than 1/2 of all persons 65 and older rely on their social security check for most of their income. If this consumer becomes a victim of identity theft, their entire ability to function financially stops. The emotional toll on a person who worked hard to build a life time of good credit can be devastating. The Governor's proposed legislation S.B. 838. An Act Concerning Consumer Privacy and Identity Theft contains several strong provisions that will protect the identity and security of Connecticut residents. This bill broadly defines "personal identifying 000681* information" to include most, if not all, examples of information that can be stolen. It contains a comprehensive breakdown of potential offenses, with penalties reasonably related to the seventy of the cnme. AARP is also supportive of the enforcement mechanisms in the bill. Significantly, this bill provides a private right of action for aggrieved parties. The damages are adequate— even providing for treble damages—and restitution is provided to make the victim whole. The bill would also extend the statute of limitations from two to three years. Additionally, there is a provision that mandates the correction of the public record when false information on an individual is on the record by virtue of an offense by another. AARP commends the dual authority of the Commissioner of Consumer Protection and the Attorney General under this bill. We also commend the imposition of a restitution structure that is fair, reasonable, and self-sustaining. S.B. 838 creates a non-lapsing Privacy Protection Guarantee account within the General Fund to be used by the Commissioner of Consumer Protection to reimburse losses to victims of identity theft, who were unable to collect on a judgment as outlined in the bill. The Privacy Protection Guarantee account will be funded by, certain civil penalties, fines and proceeds from the sale of "ill gotten gains" covered by the legislation. And, if funds in the account run out, victims would be reimbursed when funds become available. The changes described in S.B. 838. will significantly enhance Connecticut's identity theft laws and will give seniors and their families the protection needed to avert a financial disaster. AARP urges members of this Committee to support S.B. 838. 000681* M. Jodi Rell GOVERNOR STATE OF CONNECTICUT Testimony of Governor M. Jodi Rell Presented to the General Law Committee Tuesday, February 24, 2009 Regarding Governor's Bill Ne. 838 An Act Concerning Consumer Privacy and Identity Theft Over the last few years, it has been a goal of my administration to increase the protection afforded Connecticut residents over their personal information. To this end, in September 2005,1 established the Governor's Identity Theft Advisory Board. The Identity Theft Advisory Board harnessed the expertise from many State agencies and organizations on the issue, including the Departments of Banking and Consumer Protection, Offices of the Chief State's Attorney and Victim Advocate, and Connecticut Business & Industry Association. In January 2006, the Board issued its recommendations which served as the basis for my proposed legislation in the 2008 session, and once again, as the basis for my proposal this session. Regrettably, we can all think of many recent events in Connecticut as evidence of identity theft's pervasiveness. Identity theft takes on many forms - from dumpster diving to old-fashioned stealing of wallets and bank statements. Perhaps most troubling is how the information obtained is used to facilitate other crimes, such as credit fraud, phone or utilities fraud, and bank fraud. Furthermore, significant technological advances in recent years have increased the ability of people to commit sophisticated crimes such as identity theft. I applaud the efforts of the Legislature last year in laying the foundation for privacy protection and identity theft prevention with the passage of Public Act 08-167. But more must be done. I ask for your help in addressing this increasingly troubling problem. The consumer protections, regulatory oversight and enhanced penalties proposed in this bill will go a long way toward deterrence of future identity theft cases in Connecticut. Among other protections, this identity theft legislation will upgrade the crime of criminal impersonation, require full restitution from those convicted of identity theft and make it illegal to own equipment used in identity theft. I urge the committee's passage of Governor's Bill 838. With these additional tools to safeguard consumer information and penalize violators, I am confident that we will reduce the occurrence of identity theft in Connecticut. EXECUTIVE CHAMBERS • STATE CAPITOL 210 CAPITOL AVENUE, HARTFORD, CONNECTICUT 061 06 TEL (86O) 566-4840 • FAX (860) 524-7396 • WWW CT GOV GOVERNOR RELL@CT GOV 000681* Testimony of Jerry Farrell, Jr. Commissioner of Consumer Protection General Law Committee Public Hearing Tuesday, February 24, 2009 Governor's Bill No. 838 "An Act Concerning Consumer Privacy and Identity Theft" Senator Colapietro, Representative Shapiro, Senator Witkos, Representative Bacchiochi and Honorable Members of the General Law Committee. I am Jerry Farrell, Jr., Commissioner of Consumer Protection. Thank you for the opportunity for me to testify in support of Governor's Bill 838, "An Act Concerning Consumer Privacy and Identity Theft." Let me start by commending Governor Rell on her foresight and dedication to a most troubling issue in our society—one that can impact every one of us in this room, as well as to our loved ones. The issue is identity theft, and the number of Americans affected by it continues to rise. According to a study released earlier this month, the number of identity theft cases in the US jumped 22% to 9.9 million in 2008. This is an enormous increase which must be addressed. And in a time when our nation's economic picture is bleak, some fear that those who would commit these crimes are emboldened and that the number of identity theft cases will escalate. The impact of identity theft on our nation's economy is immense. Tens of billions of dollars are lost every year. These costs are borne by all members of society when credit card companies or phone companies raise their rates to account for these losses. Last year, we made significant progress in laying the foundation for identity theft prevention with the passage of Public Act 08-167. That Public Act: 1) required that all persons or businesses in possession of personal information safeguard the information and destroy it prior to disposal, 2) required a privacy protection policy by all persons who collect Social Security numbers in the course of business, and 3) created civil penalties for violations of these requirements. But more must be done. The Department's supervisory authority over these matters must be clarified. This bill provides the Department of Consumer Protection with explicit authority to hold hearings, issue fines and enact regulations related to consumer privacy matters. One government entity with primary enforcement over these matters is necessary for effective deterrence. Moreover, a privacy protection guaranty and enforcement account, funded by the penalties collected, will also be established by the Department to provide restitution to victims. It is important to note that Public Act 08-167 references this account, but failed to establish the account, creating significant confusion in its implementation. 000681* Consumers will also be further protected. The bill requires employers to obtain and retain employment applications in a secure manner and to take reasonable steps to destroy such applications. Criminal penalties will be enhanced, especially for identity theft crimes against seniors, one of the most vulnerable populations in our society. In addition, the bill requires courts to issue orders correcting public records for identity theft victims and allows consumers to seek 2 years of commercially available identity theft protection from violators. Finally, the bill voids licenses issued by the state based upon false statements of personal identifying information and makes such violators guilty of a class A misdemeanor. With the knowledge that the prevalence of identity theft in Connecticut will only increase if not stymied now, I urge you to support passage of Senate Bill No. 838, for the protection of all Connecticut residents' financial well-being. Thank you for your consideration, and the opportunity to appear before you today. 000681* Statement Insurance Association of Connecticut Joint Committee on General Law February 24- 2009 SB 838. An Act Concerning Consumer Privacy And Identity Theft The Insurance Association of Connecticut has a concern with SB 838, An Act Concerning Consumer Privacy And Identity Theft, in that it appears to confer authority for any violation of sections 42-470 and 42-471 to the Department of Consumer Protection. The insurance industry is subject to the provisions of both 42-470 and 42-471. The insurance industry is licensed and regulated by the Department of Insurance. As such, if an insurer violates any of the provisions of those statues, or any law, it is already subject to the authority of the Insurance Department. It would appear that SB 838 may cause an insurer to be subject to dual and potentially conflicting regulatory authority. Furthermore, subdivision (d) of 42-471 specifically confers enforcement authority to Department of Consumer Protection only in those circumstances when the alleged violator is an entity that is not licensed by any other state agency. SB 838 appears to be in direct conflict with provisions of 42-471. For the above stated reasons, the IAC respectfully requests that SB 838 be amended to clarify that the authority being vested to the Department of Consumer Protection is only to those entities that are not regulated by any other state agency. STATE OF CONNECTICUT Department of fc" •c Information Technology State of Connecticut Department of Information Technology Chief Information Officer Diane S. Wallace Testimony before the General Law Committee February 24, 2009 Chairmen Colapietro and Shapiro, and Honorable Members of the General Law Committee, I am Diane S. Wallace, Chief Information Officer of the State of Connecticut Department of Information Technology. I thank you for this opportunity to testify before you today in favor of SB 838, An Act Concerning Consumer Privacy and Identity Theft. First, I would like to thank Governor Rell for her leadership in establishing the Task Force on Identity Theft, a task force on which I was proud to serve. SB 838 incorporates the Task Force's recommendations. It builds on the progress made last year with the passage of Public Act 08-167. It retains the enhanced criminal penalties, employer protections and expanded enforcement authority provided to the Department of Consumer Protection. It adds greater penalties for identify theft crimes against senior citizens and criminal impersonation. It also requires that all proceeds derived from identity theft crimes be deposited in the privacy protection guaranty and enforcement account. We continue to support these provisions and believe they are essential steps to heighten protection for consumers and citizens. As the State's lead agency for technology, DOIT is well aware of the increasing threats and dangers in the world of cyberspace. We take data protection seriously, and understand the need for additional protections for those - including the elderly ~ who may be most vulnerable to identify theft. 101 East River Drive • East Hartford, CT 06108-3274 www.state.ct.us An Equal Opportunity Employer DOIT's existing data center stores more than 2.4 petabytes of data and is the host site for more than 100 statewide and agency applications. It also connects to 1000 points statewide. Protecting this data and systems is essential. DOIT deployed new firewalls, and intrusion prevention and detection tools, and has blocked more than four million intrusions/threats alone between FY 2006 and FY 2008. DOIT upgraded its anti-virus systems and blocked 603,442 attacks across 30 agencies and 10,000 devices. We also have deployed new tools to monitor/analyze State network traffic and continued our multi-year oversight of state HIPAA compliance program for ten state agencies for security of electronic health records. As you know, in 2007 Governor M. Jodi Rell announces a new statewide security policy governing laptop and mobile computing devices as well as storage devices. The policy requires any data residing on a mobile device to be encrypted, limits the amount of data and length of time it may reside on the mobile device, and requires protections from unauthorized access and disclosure. Governor Rell ordered and DOIT executed an accelerate laptop encryption effort, which resulted in more than 6000 laptops being encrypted in 65 agencies. It was an unprecedented enterprise IT security mobilization involving collaboration between agencies and IT professionals throughout the executive branch. These are just a few of our initiatives designed to heighten protections of sensitive data and we pledge to continue these efforts. We ask for your favorable consideration of SB 838 and thank you again for your continued leadership. Thank you. 000681* STATE OF CONNECTICUT OFFICE OF VICTIM ADVOCATE 505 HUDSON STREET, HARTFORD, CONNECTICUT 06106 Michelle S. Cruz, Esq. Testimony of Michelle Cruz, State Victim Advocate State Victim Advocate Submitted to the General Law Committee Tuesday, February 24, 2009 Good morning Senator Colapietro, Representative Shapiro and distinguished members of the General Law Committee. For the record, my name is Michelle Cruz and I am the Victim Advocate for the State of Connecticut. Thank you for the opportunity to provide testimony in SUPPORT of: Senate Bill No. 838, An Act Concerning Consumer Privacy and Identity Theft Identity theft is a very frustrating crime which often leaves unsuspecting victims with months or even years of work to clear their good name and credit history. In most cases of identity theft, the victim is not aware of a problem until significant damage has been done. In addition, identity thieves are using the internet and other technology to commit these crimes and are often never apprehended. The Office of the Victim Advocate (OVA) was a member of the Governor's Identity Theft Advisory Board created in 2005. As a result of the Advisory Board's' efforts, along with the highly publicized issue of identity theft, Connecticut has passed . significant legislation to investigate identity theft crimes, prosecute individuals and assist victims of identity theft to recover from the devastating affects of the crime. Further, the OVA has published, "Identity Theft: A Guide for Connecticut Citizens," which was adopted by the Governor's Identity Theft Advisory Board. This guide is updated annually for any changes in the law and is available on the OVA's website (www.ova.state.ct.us). One of the unintended consequences of advancements in technology is that identity thieves are able to use. that technology to victimize innocent citizens. Senate Bill No. 838 will strengthen the laws in Connecticut for the prosecution of identity thieves and provide victims with remedies to restore the good name and credit. I strongly urge the committee to support this important proposal. Thank you for consideration of my testimony. Respectfully submitted, fciiunene v_ruz, r,sq. State Victim Advocate Phone (860) 550-6632,(888) 771-3126 Fax (860) 566-3542 An Affirmative Action/Equal Opportunity Employer 000681* ii»tate of (EonrtECticiit DIVISION OF CRIMINAL JUSTICE Testimony of the Division of Criminal Justice Joint Committee on General Law - February 24, 2009 In support of: .S.B. No. 838 An Act Concerning Consumer Privacy and Identity Theft The Division of Criminal Justice supports this bill, which would correct a shortcoming in our existing identity theft statute and make additional changes to strengthen the law with regard to this crime. Specifically, the Division introduced language in last year's session similar to that found in Section 1 of the bill to deal with the problem that exists in enforcing the present law. Currently, section 53a-129a of the general statutes requires that a person unlawfully obtain and use personal identifying information of another in order to commit the crime of identity theft. Unfortunately, the current definition does not cover situations where the perpetrator comes into possession of the personal information in a lawful manner but subsequently uses such information without the victim's authorization. It is the unauthorized use of personal information and not how such information is initially obtained that should be the target of our statute. After all, modern life requires us all to provide personal identifying information to others on a regular basis. This shortcoming was brought to light by a criminal case where the defendant obtained the victim's personal information in the ordinary course of business as an in-home caretaker and subsequently used that information without the victim's authorization. The defendant created credit card accounts in the victim's name and incurred substantial debt on those accounts without the victim's knowledge. The authorities were not able to charge identity theft because the information was not obtained without the victim's authorization. The Division of Criminal Justice would respectfully recommend the Committee's Joint Favorable Report for S.B. No. 838. An Act Concerning Consumer Privacy and Identity Theft. We would be happy to provide any additional information or to answer any questions the Committee might have. 000681* RICHARD BLUMENTHAL 55 Elm Street ATTORNEY GENERAL P.O. Box 120 Hartford, CT 06141-0120 Office of The Attorney General State of Connecticut TESTIMONY OF A TTORNEY GENERAL RICHARD BLUMENTHAL BEFORE THE GENERAL LA W COMMITTEE FEBRUARY24, 2009 I appreciate the opportunity to support Senate Bill 892, An Act Concerning Gift Certificates. This proposal: (1) clarifies that gift certificates or gift cards includes any certificates or cards are donated to a charity; (2) makes consistent the limitations on fees in the escheat statutes with the limitations in the consumer protection statutes; (3) requires retailers to maintain a separate escrow account or secured line of credit sufficient to redeem all outstanding balances of gift cards; (4) requires consumer notice on any gift card or certificate that is not subject to the state restrictions on fees and expiration date. The escrow and secured line of credit requirements are consistent with the Consumers -Union's Model State Gift Card Law. Gift cards and gift certificates are often used in lieu of cash or provided to charities as auction items. Their use has exploded exponentially over the past decade and so has the amount of consumer losses when the gift card store closes or declares bankruptcy - more than $100 million in the last year. Moreover, approximately 24% of gift cards remain unused after one year. Whether it is Sharper Image, Linen 'N Things, Bennigans, Tweeter, Blue Tulip or KB Toys, consumers have seen the value of their gift cards reduced to zero. Gift cards and certificates are a financial debt that the store owes to the card or certificate holder. Yet, in bankruptcy court, consumers stand behind all the secured creditors, often receiving absolutely nothing for their card. It is inappropriate for secured lenders to take funds that are owed to consumers. Although state law cannot change bankruptcy laws, a separate escrow account for the cash that consumers spend on gift cards and certificates would prevent the retailer from using those funds for ordinary business expenses and creditors from using those funds to pay the debt owed to them by the retailer. Similarly, a secured line of credit payable to the Department of Consumer Protection would ensure that consumers could obtain the full value of their gift cards or certificates even when the retailer or restaurant is in bankruptcy. 000678 Finally, many gift card issuers have begun using nationally chartered banks to operate their gift cards. As a result, the National Bank Act supersedes our state laws prohibiting expiration dates or dormancy fees. This legislation requires such cards to clearly notify consumers that because the issuer is a national bank, they can, and do, charge dormancy fees or set expiration dates. Consumers are aware of our consumer protections regarding gift cards. They are less aware of the federal law that takes away those protections when a national bank is involved in the gift card operation. I urge the committee's favorable consideration of Senate Bill 892. 000681* CONNECTICUT BANKERS ASSOCIATION TO: MEMBERS OF THE GENERAL LAW COMMITTEE FR: CONNECTICUT BANKERS ASSOCIATION CONTACTS: TOM MONGELLOW, FRITZ CONWAY RE: .S.B. 892. AN ACT CONCERNING GIFT CARDS POSITION: OPPOSE This bill would impose new restraints on the gift cards that are issued or sold by banks in connection with so-called "open systems". These restraints are unfair and unreasonable and we strongly oppose this bill. Indeed, as an alternative, we would encourage the Committee to consider the adoption of an amendment to exempt these cards from the definition of "gift certificates", and thereby allow state chartered banks to compete on even footing with national banks when selling "open system" gift cards. By way of background, existing Connecticut law prohibits expiration dates on gift certificates. Connecticut law also prohibits the charging of certain fees in connection with gift certificates. These restraints are understandable in the context of a traditional "gift certificate" that is issued by a single store or restaurant to permit the purchase of a good or service from that particular store or restaurant. However, "open system" gift cards are quite different from "gift certificates". They are issued by banks who are members of open network systems; the same systems that accept Visa, MasterCard, American Express, etc. This means that the cards can be used all over the world with any merchant that accepts cards on these systems. Expiration dates are included on the cards, but that is done as a security feature (similar to the expiration date on a credit or debit card). Once the card has expired, the value is not lost. The holder of the card can typically request a refund (or a new card) through the issuing bank. Fees are sometimes charged on these cards because, unlike a gift certificate, the issuing bank will not be the seller of the underlying goods or services purchased with the card. It does not stand to directly benefit from the purchase. The bank is, instead, providing a financial service (production and encoding of the card, continuing access to the networks, processing the payments, etc). The bank should be free to charge what the marketplace is willing to pay for these services. Recent court cases have made it clear that a state cannot prohibit a national bank from issuing an open system gift card containing an expiration date. These same preemption principles prevent a state from restricting the fees a national bank can charge. In Connecticut, this has resulted in a competitive disadvantage for state chartered banks that wish to offer these popular products. SB 892 could further compound that competitive disadvantage by (i) requiring segregated escrow accounts or lines of credit to back the cards (which is not necessary in the context of a bank issued card); and (ii) requiring additional cumbersome disclosures if the state chartered bank sells a card issued by a national bank. We submit that these provisions are not warranted and will harm the Connecticut banking industry. The more reasonable approach would be to amend the definition of "gift certificate" to exempt these open system gift cards and thereby allow Connecticut banks to offer these popular cards. In so doing, the activities of the Connecticut bank would be subject to the supervision of the Connecticut Department of Banking. Again, the State of Connecticut has no jurisdiction over cards issued directly by national banks. (860) 677-5060 10 Waterside Dnve Farmington, Connecticut 06032-3083 FAX: (860) 677-5066 Connecticut Farm Bureau Association 775 Bloomfield Ave., Windsor, CT 06095-2322 (860) 768-1100 • Fax (860) 768-1108 • www.cfba.org February 24,2009 Testimony in Support of the following Bill: Raised Bill No. 926 AN ACT CONCERNING THE SALE OF CONNECTICUT WINE AT FARMERS' MARKETS. Submitted by: Steven K. Reviczky, Executive Director, Connecticut Farm Bureau Association The following testimony is submitted on behalf of the Connecticut Farm Bureau, a statewide nonprofit membership organization of nearly 5,000families dedicated to farmers and the future of Connecticut agriculture. Senator Colapietro, Representative Shapiro and members of the General Law Committee: Connecticut Farm Bureau supports Raised Bill 926 and the effort to open up fanners' markets to farm wineries. More and more, Connecticut citizens are demanding locally grown and produced farm products. Farmers' markets have evolved into critical venues where farmers connect directly with consumers and are a vital component of today's agricultural economy. Fanners markets are most successful when they offer a wide range of Connecticut Grown foods and products. Allowing farm wineries access to farmers' markets will help sustain both the fanner and the market. Connecticut Farm Bureau urges positive consideration of Raised Bill _926, 000681* CONNECTICUT PACKAGE STORES ASSOCIATION CONNECTICUT PACKAGE STORES ASSN. 700 PLAZA MIDDLESEX Executive Director MIDDLETOWN, CT 06457 Carroll J Hughes PHONE-860.346 7978 Assistant Executive Director FAX -860 343 0014 Josh D. Hughes Esq. Testimony of the Connecticut Package Stores Association in opposition to Senate Bill 926. AN ACT CONCERNING THE SALE OF CONNECTICUT WINE AT FARMERS' MARKETS. This bill would allow an exemption for farm wineries enabling them to sell their products away from their permit premises. All other beverage alcohol retailers including package stores are required to make their sales at one permitted location and cannot utilize their permit to travel to additional towns. Additionally, in light of the recent Supreme Court Granholm decision, any situation that is allowed for in-state entities must also be allowed for an out-of-state entity. Allowing an in- state winery to sell at various locations around the state might also open an opportunity for an out-of-state winery to establish retail locations throughout Connecticut without regard for an established permit premises. We understand the importance that the farm wineries provide to Connecticut residents. However, we want to ensure that there re no loopholes to cause concerns in the retail tier of the industry. Alan Wilensky President of CPSA Owner of Max's Package Store East Lyme, CT To: Committee on General Law From: Jennifer McTiernari H., Executive Director, CitySeed Re: Bill No. 926 (RAISED) An Act Concerning the Sale of Connecticut Wine at Farmers' Markets. Date: February 24, 2009 I am submitting this written testimony to strongly urge the Committee on General Law to support this act and permit Connecticut farm wineries to sell Connecticut wine at farmers' markets. As the Executive Director of CitySeed, I can attest to the strong community interest in local food and farm products, including wine, as well as the positive benefit farmers' markets have on community development, local economic development and farm viability. CitySeed is a non-profit organization that operates a network of farmers' markets in the City of New Haven and seeks to promote increased access to local, healthy food and farm viability. During the 2008 market season. City Farmers' Markets redeemed over $78,500 in WIC and Food Stamps from New Haven residents who are most nutritionally at-risk. In addition, these four, outdoor markets contributed over $1.75 million to the local economy. The most successful markets are those that offer the greatest variety of Connecticut grown and produced farm products. Wine would be an outstanding addition to the farmers' market. Customers would enjoy purchasing local wines and supporting farm wineries in their state. Also, this product is available year-round, which would be a boon to markets, like ours, that operate year-round. Along similar lines, the most successful farmers are those that diversify their product lines and are entrepreneurial in their approach to doing so. Farm wineries are one of the best examples of entrepreneurialism and should be rewarded for their innovative strategies for diversifying their bottom lines. The time for this bill is right now. Farmers' markets are thriving and greatly benefitting communities and Connecticut's agricultural base. Being able to offer Connecticut wine for sale at markets would only make markets more effective at connecting market-goers to the sources of their sustenance and introducing them to the bounty of Connecticut's farms. In closing, I enthusiastically hope you will support Bill No. 926. Thank you for your time and consideration. CitySeed inc. Post Office Bos 2056 New Haven, CT 06521 t'f 203.7~3.3736 www,cityseed.org 000681* RICHARD BLUMENTHAL 55 Elm Street ATTORNEY GENERAL P.O. Box 120 Hartford, CT 06141-0120 Office of The Attorney General State of Connecticut TESTIMONY OF ATTORNEY GENERAL RICHARD BLUMENTHAL BEFORE THE GENERAL LA W COMMITTEE FEBRUARY24, 2009 I appreciate the opportunity to support House Bill,6433, An Act Concerning the Regulation of Charitable Funds. House Bill 6433 increases the annual minimum gross revenue that requires a charity to conduct an independent audit from $200,000 to $500,000. Audits by certified public accountants cost between $5,000 and $10,000, thereby requiring some charities to spend almost 5% of their charitable donations on audits. Raising the limit to $500,000 will ensure that only those charities with significant funds are required to have an audit conducted by a certified public accountant. Under current law, boards of directors of non-profit organizations have the discretion to conduct a CPA audit or some other form of accounting review to ensure that the charitable funds are properly recorded and that appropriate accounting controls are in place even if such audit is not statutorily required. Finally, the $200,000 annual minimum revenue threshold was set 9 years ago, requiring some adjustment to reflect increases in inflation and other financial factors. In addition, House Bill 6433 makes several minor and technical changes to the Solicitation of Charitable Funds Act including authorizing the Commissioner of Consumer Protection to waive late fees and audit report requirements if appropriate, changes the length of time to file a late annual report from 180 days to 6 months, increases the registration fee for fundraising counsel to $500 which is the same as the fee for paid solicitors. The proposal also clarifies that a paid solicitor under the Solicitation of Charitable Funds Act includes any person who receives any consideration for their solicitation efforts. The Public Charities Unit -which oversees the registration of charities and solicitors — is a joint effort of the Department of Consumer Protection and the Office of the Attorney General. My office worked on this proposal with the Department. I urge the committee's favorable consideration of House Bill 6433 with an amendment that would change the effective date from October 1, 2009 to July 1, 2009 in order to provide immediate relief from the audit requirement for many charities. 000681* CONNE ICUT ...to serve, strengthen ASSOCIATION and support Connecticut's of : : - "r nonprofit community. HB 6433 AN ACT CONCERNING THE REGULATION OF CHARITABLE FUNDS ACT. Senator Colapietro, Representative Shapiro and members of the General Law Committee, I am Ron Cretaro, Executive Director of the Connecticut Association of Nonprofits. Our association represents over 530 nonprofit organizations across Connecticut. HB 6433. submitted by the Attorney General and the Commissioner of Consumer Protection, proposes to modify the threshold by which a formal audit is legally required from the current level of $200,000 to $500,000. This affects organizations which, for the most part, receive no state funding. Those organizations which are recipients of state contracts in excess of $100,000 will still be subject to the onerous state single audit. A single audit is more complex and demanding to both the nonprofit and the accounting profession. Further, raising the compulsory audit threshold does not preclude funders such as foundations or the United Way from requiring an audit in return for receiving funding support no matter the size of the budget or amount of grant funds received. The beneficiaries of this legislation as proposed are the nearly 500 nonprofits which would save the time, expense and worry of an arduous audit process. More than a quarter or 148 of CT nonprofit members have annual budgets under $500,000. We do not feel the transparency or accountability of the nonprofit community will be compromised by adopting a higher audit threshold. The new IRS form 990 required to be filed by nonprofits with annual gross receipts of over $25,000 will provide additional safeguards to the public. Again, funding sources - e.g. the State of Connecticut, foundations or other entities - may still require an audit to be performed should it choose. As you are aware, the General Law Committee has already given a Joint Favorable to SB 780 which proposes to raise the audit threshold from $200,000 to $500,000. We are in concurrence with the sections of this bill recommendations related to audit timelines and the powers given to the Commissioner of the Department of Consumer Protection and Attorney General to waive an audit in the bill before you, HB 6433. Please know that our Association and its members are willing to work with the Committee on the reconciliation of the two similar bills before you. 90 Brainard Road • Hartford. CT 06114 • Tel 860.525.5080 • Fax. 860.525.5088 • www ctnonprofits.org 000681* RICHARD BLUMENTHAL 55 Elm Street ATTORNEY GENERAL P.O. Box 120 Hartford, CT 06141-0120 Office of The Attorney General State of Connecticut TESTIMONY OF ATTORNEY GENERAL RICHARD BLUMENTHAL BEFORE THE GENERAL LA W COMMITTEE FEBRUARY24, 2009 I appreciate the opportunity to support House Bill 6434, An Act Concerning Consumer Deposits at Banquet Facilities. This proposal requires any wedding or convention facility operator to escrow any consumer deposit in excess of $500 for the lease or rental of such facility or maintain a secured line of credit for such funds. Connecticut consumers have lost potentially tens of thousands of dollars in deposits for securing facilities for weddings and family functions when the facilities abruptly closed prior to their events being held. The deposits were meant to protect the facility from last minute cancellations by the consumer. All too frequently, facilities in effect gamble with the consumers' deposits — using them to meet other bills and stay financially afloat. When the facility closes, the consumer loses the deposit and also needs to find and pay another banquet facility. The emotional turmoil and financial cost can ruin an otherwise joyous family event — whether wedding, anniversary or birthday. Large consumer deposits — in excess of $500 — should be placed in escrow to ensure payment for the rental of the facility or to provide liquidated damages if the consumer cancels. An escrow account secures the deposits separate from the facility's general cash and prevents the facility from using the deposits for other operation costs. Placing these funds in escrow will' enable prompt refunds if the facility goes out of business ~ avoiding the need for consumers to fight through bankruptcy court proceedings. As an alternative, the facility could maintain a secured line of credit payable to the Commissioner of Consumer Protection in the event of a default. I urge the committee's favorable consideration of House Bill 6434. 000681* Villa Capri 906 North Colony Rd. Wallingford, CT 06492 Phone: 203-265-7174 Fax: 203-284-8090 Email: [email protected] Web: www.ViIlaCapri.com Statement By Ralph Mesite, Villa Capri To Oppose Bill 6434- Deposits At Banquet Facilities General Law Committee - February 24,2009 To Whom it may concern, I almost fell off my chair when I read this Bill in question. In the Banquet business deposits are Approx. 20-25% of our cash flow. Without these deposits to use we COULD NOT be in business. Our deposit, for Example, for Weddings could run a couple of thousand of dollars. A lot of these deposits are appropriated to working staff, cost to organize, budgeting, buying power, and the cost of doing business. We have a policy of the recieving the initial first deposit upon booking the event In the contract it will be stated when the second deposit is due. All these deposits are already allocated. To Hold these deposits until final payment is unheard of in our field. We use this money as I stated above as our only Cash Flow besides full payment. I do not know what I will do if this Bill Passes. There are other Bills that I spoke against (ex. the Bill For a 30% Additional Corporate tax surcharge). Just the addition of these two Bills will force me to close my doors. I understand some business caused this Bill to surface. We should not be punished for other wrong doing. We use to own the Yankee Silversmith Inn, Wallingford, Conn. We had a fire and severe water damage, June 2007 . May 2008 we had to make one of biggest decisions of our life; we closed because the damage was unrepairable. Doing Business in Wallingford for almost a lifetime, our thoughts were on our Staff (60)-and our customers. We placed many staff in other restaurants. ALL the GIFT CERTIFICATES and DEPOSITS were fully refunded. We did this for our good name. My Family and I have opened the Villa Capri in 1960. Next year will be our 50th year. If this Bill passes we will probably not make it. If we had to close we would loose 25-60 employees plus 72 Plus Purveyors, not to mention the support we give to the community. Please do not pass this Bill. During these difficult times closing businesses will be detrimental for employment and Tax Revenue. We are all struggling and to cut off cash flow would have an Impact statewide. Thank you for your time. 000681* RICHARD BLUMENTHAL 55 Elm Street ATTORNEY GENERAL P.O. Box 120 Hartford, CT 06141-0120 Office of The Attorney General State of Connecticut TESTIMONY OF ATTORNEY GENERAL RICHARD BLUMENTHAL BEFORE THE GENERAL LA W COMMITTEE FEBRUARY24, 2009 I appreciate the opportunity to support House Bill 6470. An Act Concerning Residential Heating Oil and Propane Contracts. This legislation requires heating oil or propane gas suppliers to have written contracts with consumers if there are charges or fees in addition to the unit price per gallon. Such contract may not exceed three years in duration. The legislation also allows for a delivery surcharge for service outside the delivery area or outside the normal business hours without a written contract. The written contract must be in plain language and shall not include any liquidated damages amount beyond the actual damages to the retailer because of the consumer breach of the contract. Electronic contracts that comply with the Connecticut Electronic Signatures Act and its federal counterpart will satisfy the written contract requirements. This draft is a partial work in progress, because I will submit an amendment barring current anticompetitive, restrictive requirements regarding propane tank ownership — imposed by dealers on consumers. These requirements limit consumer choice and raise prices. Specifically, I urge the committee to consider requiring propane dealers to offer consumers the right to purchase their propane tanks for fair market value, including depreciation, at the end of their three year contract. Finally, the legislation requires that a real estate disclosure statement provided to a prospective buyer indicate the existence of any propane gas tank in excess of 20 gallons and provide the name of the owner of the tank and any contract related to such tank. My office has received hundreds of complaints from consumers concerning their heating oil.or propane contracts. The complaints concern assessment of fees such as tank removal fees and minimum delivery charges and other financial penalties that restrict the ability of a consumer to choose another supplier. A propane dealer may quote a price per gallon and then assess a $4 "environmental fee" on each delivery although the fee may bear no relation to any additional costs incurred by the dealer. In another example, a propane customer sought to switch to a lower cost supplier only to be told removing the tank would cost hundreds of dollars — a cost never made known to the consumer. Retailers may claim that these fees were clearly explained over the phone to the consumer - without any written contract of those provisions. The retailer may 000681* refer to a taped telephone conversation ~ up to 5 or 10 minutes in duration ~ where such terms are explained. The consumer would have no record of such information. Critical provisions such as fees that purport to pay for some maintenance service or environmental program often amount to significant additional costs for consumers. These provisions inhibit consumers from adequately shopping for the lowest price for heating oil or propane because the prices that are quoted may contain additional hidden fees. House Bill 6470 simply requires that the retailer state all fees in writing unless the retailer is charging only a unit price plus any delivery fee already authorized under law. The legislation allows for current customers without a written contract to continue such relationship provided they were given a written contract that doesn't increase fees during the contract period and given notice that they may reject any contract within 60 days of receipt. This provision ensures that existing customers who were notified in writing of their existing contract obligations can continue to receive heating oil or propane if they neglect to sign such contract. I urge the committee to consider the attached amendment regarding guaranteed price contracts for heating oil or propane. My office has been inundated with complaints regarding such contracts. This amendment defines a guaranteed price contract, increases to 80% the amount of guaranteed delivery that must be backed by futures contracts or physical supply contracts, requires notice to the Consumer Protection Commissioner of cancellation by the holder of any futures contract or physical supply contract and limits the obligations of a survivor of an estate to such contracts. Finally, my office is working with the Department of Consumer Protection and industry representatives on an amendment to address additional concerns including limits on propane company ownership of propane tanks, increased civil and criminal penalties for violations of these regulations and prohibitions on retail price discrimination except if based on delivery distance or volume. I urge the committee's favorable consideration of House Bill 6470 with the attached amendment. 000681* OFFICE OF THE ATTORNEY GENERAL 2009 GENERAL ASSEMBLY SESSION GENERAL LAW COMMITTEE PROPOSED AMENDMENT TO HOUSE BILL 6470, AN ACT CONCERNING RESIDENTIAL RETAIL HEATING OIL AND PROPANE CONTRACT SUMMARY OF AMENDMENT: This proposal: 1. creates a definition of guarantee price contract to include all forms of prepaid and fixed price heating oil and propane contracts; 2 increases from 75% to 80% the amount of guarantee price contact commitments that must be obtained through futures or physical supply contracts; 4. requires any holder of a futures contract, surety bond, or physical supply contract to notify the Commissioner of Consumer Protection of any cancellation of such contract or commitment; 5. prohibits the application of the consumer's obligations under a guaranteed price contract to survivors or the estate unless expressly assigned to them, provided the estate would remain liable for any actual damage suffered by the retailer for a breach of such contract. TEXT: After line 183, add the following: Sec. 4. Section 16a-23n of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2009): (a) As used in this section: (!) "capped price contract" means an agreement where the cost to the consumer of heating oil or propane may not increase above a specified price per gallon but the consumer may pay less than the specified price under circumstances specified in such contract; (2) "fixed price contract" means an agreement where the cost to the consumer of heating oil or propane is set at a specific price during the term of the contract; 000681* (3) "futures contract" means a standardized, transferable, exchange-traded agreement that requires delivery of heating oil or propane at a specified price on a specified future date; (4) "guaranteed price contract" means a fixed price or capped price contract or any other agreement where the per gallon price is set at a specified amount unless certain circumstances occur; (5) "physical supply contract" means an agreement for wet barrels or wet gallons of propane that has been secured by the heating oil or propane dealer from a wholesaler; (6) "surety bond" means a bond issued by a licensed insurance company on behalf of a dealer, guaranteeing that such company will reimburse any consumer losses incurred as a result of the failure of the dealer to fulfill an obligation to a consumer. [(a)] (b) A contract for the retail sale of home heating oil or propane gas that offers a guaranteed price [plan] contract including fixed or capped price contracts and any other similar terms, shall be in writing and the terms and conditions of such price plans shall be disclosed, including a description of the circumstances under which the price may increase or decrease. Such disclosure shall be in plain language and shall immediately follow the language concerning the price or service that could be affected and shall be printed in no less than twelve-point boldface type of uniform font. [(b)] (c) A home heating oil or propane gas dealer that advertises a price shall offer said price for a period of no less than twenty-four hours or until the next advertised price is publicized, whichever occurs first. [(c)] (d) No home heating oil or propane gas dealer shall enter into a [prepaid home heating oil or propane gas contract or a capped price per gallon home heating oil contract] guaranteed price contract unless such dealer has, within five business days after receipt of a valid guaranteed price contract, either: (1) Obtained and maintained heating oil or propane gas futures contracts, physical supply contracts or other similar commitments that allow such dealer to purchase, at a fixed price, heating oil or propane gas in an amount not less than [seventy-five] eighty per cent of the maximum number of gallons or amount that such dealer is committed to deliver pursuant to all [prepaid home heating oil or propane gas contracts] guaranteed price contracts entered into by such dealer [or that such dealer estimates is committed pursuant to all capped price per gallon home heating oil or capped price per unit propane gas contracts, respectively, ] 000681* or; (2) obtained and maintained a surety bond in an amount not less than fifty per cent of the total amount of funds paid to the dealer by consumers [pursuant to prepaid home heating oil or propane gas contracts] or that the dealer estimates will be paid to the dealer by consumers pursuant to all [capped price per gallon home heating oil or capped price per unit propane gas contracts, respectively] guaranteed price contracts. Such dealer shall maintain the amount of futures contracts, physical supply contracts, or the amount of the surety bond or secured letter of credit required by this subsection for the period of time for which such [prepaid home heating oil or propane gas contracts or capped price per gallon home heating oil or capped price per unit propane gas contracts] guaranteed price contracts are effective, except that the amount of such futures contracts, physical supply contracts, secured letter of credit, or surety bond may be reduced during such period of time to reflect any amount of home heating oil or propane gas already delivered to and paid for by the consumer. [(d)] (e) No [prepaid home heating oil or propane gas] guaranteed price contract shall require any consumer commitment to purchase home heating oil or propane gas pursuant to the terms of such contract for a period of more than eighteen months. [(e)] {0 Any [prepaid home heating oil or propane gas] guaranteed price contract shall indicate: (1) The amount of funds paid by the consumer to the dealer tinder such contract, (2) the maximum number of gallons of home heating oil or maximum amount of propane gas committed by the dealer for delivery to the consumer pursuant to such contract, and (3) that performance of such [prepaid home heating oil or propane gas] contract is secured by one of the [two] options described.in subsection [(c)] (d) of this section. Any such contract shall provide that the contract price of any undelivered home heating oil or propane gas owed to the consumer under the contract, on the end date of such contract, shall be reimbursed to the consumer not later than thirty days after the end date of such contract unless the parties to such contract agree otherwise. (g) Any person who enters into a futures contract, physical supply contract or who provides a bond pursuant to this section shall notify the Commissioner of Consumer Protection, in writing, upon cancellation of such commitment. (h) The provisions of any guaranteed price contract shall not be enforceable against the estate or survivors upon the death of the customer signing such contract except that the estate may be liable for any actual damages suffered by the retailer because of the death of the customer and cancellation of such contract less good faith mitigation of such damages. PETRO Kestinj £ A r CwJdcp.rj Swvcej February 24, 2009 Co-chair Thomas Colapietro Co-chair Jim Shapiro General Law Committee: Thank you for the opportunity to speak before this committee regarding H.B. #6470, AN ACT CONCERNING RESIDENTIAL RETAIL HEATING OIL AND PROPANE CONTRACTS. My name is Joseph McDonald. I am speaking on behalf of Petro, where I am the Vice President of Sales & Marketing. Petro serves over 24,000 residents of CT and employs approximately 184 employees in the state. The Connecticut Legislature adopted the Connecticut version of the Uniform Electronic Transactions Act in 2002. By its adoption, the Legislature approved the use of electronic signatures and records. In 2000, Congress passed the federal ESIGN law. Both the Connecticut form of UETA and the federal ESIGN Act are technology neutral, in that they do not mandate any particular form of technology to create the electronic signature or record. Connecticut's UETA and federal ESIGN both permit electronic signatures and records to create binding obligations. Because of the requirements of federal ESIGN, it is important for the Connecticut statute to specifically permit telephone recordings between a representative and customer. Connecticut has a statute, which requires that home heating oil retailers disclose IN WRITING to the customer the terms and conditions of a protected price contract for heating oil before the customer accepts the contract. Connecticut also has a statute requiring that retail dealers have a surety bond, futures contract or other hedging mechanism for any protected price agreements to insure they are able to meet the pricing commitments to customers. This bill seeks to recognize that "writing" can be an electronic writing. This amendment simply incorporates Connecticut UETA into the statute on the home heating oil, protected price written disclosures requirement. This amendment makes clear that the terms and conditions of a protected price agreement can be made to a customer in an electronic 000681* writing - via the Internet, in a phone call between a company representative and customer that is recorded with the customer's permission and through other electronic means. In today's environment, it is not practical to make an offer to a customer over the phone, mail them the terms of the offer, have them sign it and make them mail it back to the company. With the volatility of the oil market, the price may have changed substantially from the time of the initial quote to the time the company received the signed document from the customer. This process is a nuisance for the customer and does not give the retail dealer the ability to give them the price protection that they demand. The offer and the acceptance of that offer need to occur at the same time so we can properly secure that product for our customers. Any delay of time between the offer and the acceptance creates risks on behalf of the customer and/or the retail dealer. Petro desires to make these disclosures electronically, including via a phone call between a Petro representative and a customer, which is recorded with the customer's permission. A paper copy of the terms is also sent to the customer with the confirmation of price and term. The recording is saved as an electronic record of the offer and acceptance, and can be retrieved if needed. This is all in an effort to provide our customers with the ability to protect their price from the volatility in the oil market, in a manner convenient to them, while giving the retail dealers the ability to effectively hedge the necessary product to offer that protection. While we are in favor of passing H.B. #6470 in principal, we would like to request a few minor changes to this bill. Those changes are detailed in a separate document, which is being submitted along with this written testimony. I urge the committee to adopt the recommended changes and support the passing of H.B. #6470. AN ACT CONCERNING RESIDENTIAL RETAIL HEATING OIL AND PROPANE CONTRACTS. Respectfully, Joseph McDonald V.P., Sales & Marketing 000681* Requested changes to H.B. #6470, AN ACT CONCERNING RESIDENTIAL RETAIL HEATING OIL AND PROPANE CONTRACTS. Section (d)(1) of the legislation has the effect of treating prospective customers and renewing protected price customers differently. We ask that subsection (d)(1) be deleted from the bill. As currently drafted, the subsection requires that a dealer provide to the consumer prior to any telephonic communication all terms and conditions of the contract, in writing, except for the contract duration, the unit price and the maximum number of units covered by the contract. For this reason, a company can enter into a telephonic agreement only with existing customers who are renewing a protected price agreement. A company cannot offer a prospective customer a protected price agreement by telephone, as it is not able to meet the requirements of (d)(1). Similarly, an existing customer who is interested in a protected price agreement for the first time is also unable to enter into a protected price agreement by telephone, as the company cannot provide the terms required by (d)(1) in advance of the call. The legislature should not treat customers differently and therefore, section (d)(1) should be deleted. Section (d)(2), (which would now become (d)(1)), should read as follows: (1) employs an interactive voice response system, a voice recording system or similar technology". This change would allow for the recording of two human beings interacting and agreeing on a contract, not just a human and an IVR (which is a computerized database). Section (d)(4), (which would now become (d)(3)) should have the following language deleted: "with the written stipulation that the consumer is bound by such terms and conditions unless the agreement is rescinded by the consumer, in writing, not later than three business days after receipt of such letter by said consumer". Making the contract valid unless rescinded by the consumer, in writing, not later than three business days after receipt of such letter by said consumer creates uncertainty for the dealer and the customer. As a dealer, it is not clear when we should secure the product for our customer - should we secure it on the day of the telephone recording, or only after the three day period has expired without a rescission? The dealer is bound on the day of the telephone recording, and also bound to secure the product as of that date; why should the customer not also be bound as of that same date? 000681* February 24, 2009 Co-chair Thomas Colapietro Co-chair Jim Shapiro Senator Kevin Witkos Representative Penny Bacchiochi General Law Committee: I am submitting testimony in support of H.B. 6470. AN ACT CONCERNING RESIDENTIAL RETAIL HEATING OIL AND PROPANE CONTRACTS. The Independent Connecticut Petroleum Association (ICPA) represents over 550 petroleum marketers and their associated business in Connecticut. ICPA members employ over 13,000 people in our state and provide our fellow citizens with heating oil and moor fuels. Our heating oil dealers serve 682,000 consumers with heating oil, approximately half of which operate with contracts for their product deliveries. The original statute we are proposing to amend today came about through a collaborative effort involving our association, the Department of Consumer Protection and the Office of the Attorney General. The heating oil dealer registration law of eight years ago, and its subsequent amendments, has succeeded in strengthening consumer protection and raising the level of corporate responsibility and behavior in our marketplace. Our law has become the model for laws recently passed in Vermont, Maine and other states in the northeast. ICPA provides education programs to teach companies how to prepare valid contracts and further has issued a written Member Services Bulletin to guide companies on how to write valid contracts that are in compliance with the law. Contract issues are, more often than not, at the heart of the conflicts that arise between consumers, companies and government so it is in all of our interests to make the protocols for valid agreements as absolutely clear as possible. We are here today with regard to the sections of the bill that pertain to electronic contracts. The Office of the Attorney General and our industry has made considerable progress on protocols for what constitutes a valid contract under various state and federal electronic commerce statutes. Thank you for your work on this legislation, and we thank the Office of the Attorney General for their time and effort to work with us in arriving at suitable protocols for what constitute valid agreements that protect both consumers and the companies that offer them. Please support H.B. 6470. AN ACT CONCERNING RESIDENTIAL RETAIL HEATING OIL AND PROPANE CONTRACTS. Respectfully, Christian A. Herb Associate Director 000681* (800] 822-3835 www.standardoil.com RQ Box 4005. Bridgeport; CT 06607 Standard Oil Fax (203) 333-3358 Fast, Expert Service 24 Hours A Day. February 24, 2009 Co-chair Thomas Colapietro Co-chair Jim Shapiro Senator Kevin Witkos Representative Penny Bacchiochi General Law Committee: Good afternoon, gentlemen, my name is David Cohen, I am Executive Vice President and a co-owner of Standard Oil of Connecticut. We are a family-owned heating oil company headquartered in Bridgeport, CT. We provide heating oil and heating repair service to over 26,000 residential accounts in Fairfield, New Haven and Litchfield counties. I would like to direct my comments today to H.B. 6470, AN ACT CONCERNING RESIDENTIAL RETAIL HEATING OIL AND PROPANE CONTRACTS. This bill, in part, deals with allowing customers to enroll into Guaranteed Oil Price contracts using telephonic communication, more specifically using an IVR or Interactive Voice Response system. First, I would like to give you some historical background on Guaranteed Oil Price contracts. These contracts became popular about 20 years ago as a way for customers to control the cost of their heating oil. The oil company and customer would sign a contract to provide heating oil at a specified price for a specified period of time. These contracts immediately became popular and remain very popular to this day. It gives many customers great comfort to know exactly how much they will be paying for oil through the upcoming heating season. About 50% of our customers are on some kind of Guaranteed Oil Price contract at this time. Originally, our company sent written contracts to our customers through the mail and gave customers 6-8 weeks to sign the contract and send it back to us. This worked when oil prices were very stable. However, as oil prices became more volatile, this became extremely risky. We would have to buy a 10 million gallon inventory of oil and hope that oil prices would not fall during the next 6 to 8 weeks. 000681* Many oil companies have therefore stopped offering Guaranteed Oil Price contracts to their customers because the risks are too great. Our solution to this problem has been to develop an internet-based system for our customers. Every day we post a price on our website and allow customers to go in and commit to that price if they so choose. If they do choose to lock-in, we then purchase futures contracts to back up our guaranteed oil price commitment to our customer. This way we can provide a convenient method for customers to lock-in a guaranteed price while not exposing our company to potentially catastrophic risk. The only problem with this system is that there are a number of customers who do not have internet access, especially some older customers. Since almost every homeowner has a telephone, a telephone-based system would allow these customers to phone into our Interactive Voice Response system and lock-in a price at their convenience. This bill has many safeguards for the consumer, including the requirement that the text of the contract be offered in writing before hand, that the system be able to record the transaction and that the customer is allowed 3 days to rescind the contract. I therefore believe this bill is a good one for the consumer. It allows all consumers, whether they have internet access or not, to continue to obtain a Guaranteed Oil Price if they so desire. Please support H.B. 6470. AN ACT CONCERNING RESIDENTIAL RETAIL HEATING OIL AND PROPANE CONTRACTS. If you have any questions I would be happy to address them at this time. Sincerely,. David Cohen Executive Vice President Testimony of T. Michael Morrissey, Connecticut State Director to the National Propane Gas Association C/O Morrissey Consulting, 332 Strickland ST, Glastonbury, CT 06033 (Office 860-633-8781) before the General Law Committee of the CT General Assembly on February 24,2009. Reference: Raised Bill No. 6470: AN ACT CONCERNING RESIDENTIAL HEATING OIL AND PROPANE CONTRACTS. Senator Donald A. Colapietro and Representative James Shapiro and other distinguished members of the committee; I am T. Michael Morrissey, Connecticut State Director to the National Propane Gas Association. Today, I represent local members of our national trade association. In that capacity, I am here to comment on Raised Bill No. 6470: AN ACT CONCERNING RESIDENTIAL HEATING OIL AND PROPANE CONTRACTS. In each of the last two years, our leadership team has worked very closely with representatives of the Attorney General Office to craft language to address concerns the State of Connecticut has had regarding residential consumers who purchase propane. Despite our efforts over the years, our state has for many reasons, not passed our suggested changes into law. This has been frustrating for the Attorney General's Office and the Department of Consumer Protection as well as for our industry. R.B. No. 6470 offers a real and viable solution for residential customers who purchase propane in our state. Testimony of T. Michael Morrissey, Connecticut State Director to the National Propane Gas Association C/O Morrissey Consulting, 332 Strickland ST, Glastonbury, CT 06033 (Office 860-633-8781) before the General Law Committee of the CT General Assembly on February 24,2009, We are supportive of the bill provided it is amended to add the word initial in front of the word "contract" at paragraph (g) as shown below: (g) The provisions of this section shall not apply to an existing customer of a person, firm or corporation selling at retail fiiel oil or propane gas on October 1. 2009, who does not have a valid written contract in effect on said date, if such existing customer receives a written contract prior to October 1.2009. containing all the terms and conditions for delivery of such fuel oil or propane gas and the amount of any fee, charge or penalty allowed under this section that such person, firm or corporation shall assess to the customer under such contract provided: (1) Fees in such contract shall not be greater than the fees charged to such existing customer on October 1.2009. and may not increase during the initial contract term: (2) the existing customer may reject such contract by notifying the person, firm or corporation selling at retail such fuel oil or propane gas not later than sixty days after the receipt of such written contract without any penalty, including, but not limited to. a tank removal fee: and (3) such written contract-shall be effective if the existing customer does not reject such contract not later than sixty days after receipt of such contract. This important change would allow our industry to recover the incremental costs of doing business, should they increase in the future. This completes my testimony and I would welcome your questions at this time. 000100 TESTIMONY PRESENTED TO THE GENERAL LAW COMMITTEE February 24, 2009 Karen J. Senich, Executive Director Connecticut Commission on Culture & Tourism Testimony Regarding House Bill 6471 AN ACT MAKING CHANGES TO THE LIQUOR CONTROL ACT Senator Colapietro, Representative Shapiro and members of the General Law Committee: my name is Karen J. Senich and I am the Executive Director of the Connecticut Commission on Culture and Tourism, which is the state's film office. I appreciate the opportunity to testify in support of house bill 6471 - An Act Making Changes to the Liquor Control Act. In 2006, the State adopted a tax credit program for film production, the intent of which was to encourage and grow the production industry in the state, thus generating economic return and creating jobs. Since 2006, the State has issued tax credit vouchers to 43 productions. Included in that total are 28 feature films, 1 mini-series and 1 movie of the week which include scenes filmed in establishments which hold tavern or cafe permits. Among the locations sought for filming, these cafes, bars and taverns are almost always on the list. Although there are a few times the production can shoot the scene while a cafe, tavern or bar is open, most require the use of the facility while closed. The Commission has been fortunate to have been able to work with the Department of Consumer Protection to assist these productions to create solutions to allow for the scenes to be filmed in Connecticut. These venues are generally compensated for the use of the bar, tavern or cafe. The Department of Consumer Protection's proposal to allow for these premises to be occupied solely for the purposes of filming is the right step for Connecticut to grow and sustain this industry. Thank you for the opportunity to address this committee. 000681* Naugatuck Valley Community 750 Chase Parkway • Waterbury, CT 06708 College wunv.nvcc.commnet.edu February 24, 2009 General Law Committee H.B. 6471 An Act Making Changes to the Liquor Control Act I am Karen Rotella, Program Coordinator for the Hospitality Management Department at Naugatuck Valley Community College in Waterbury. I appreciate the opportunity to support House Bill 6471 AN ACT MAKING CHANGES TO THE LIQOUR CONTROL ACT. Naugatuck Valley Community College is unique within the community college system because it offers students the opportunity to enroll in Wine & Viticulture courses. The principles of enology (wine making), viticulture (grape growing), vineyard management and food and wine parings are taught as part of the hospitality curriculum. This unique field of study gives our students the competitive edge when seeking employment in one of the nation's fasting growing industries. We currently have 100 students enrolled in the program, and we are growing at a rate of 12% per year. Under the current regulations, wine manufactured by students may not be served to guests at our on- campus functions, such as elegant dinners and fund raisers for scholarships. The passage of H.B. 6471 will allow our students to practice the art of wine service in settings that prepare them for future employment. Waterbury region currently has the highest unemployment rate in the State. Please help us provide our students with an educational opportunity that gives sets them apart from the rest of the field. Thank you for your support. A CONNECTICUT COMMUNITY COLLEGE AA/EOE/MF 000681* Naugatuck Valley Community 750 Chase Parkway • Waterbury, CT 06708 College wxvw.nvcc.commnet.edu February 24,2009 TESTIMONY OF PETER J. CISEK PROFESSOR NAUGATUCK VALLEY COMMUNITY COLLEGE NATIONAL DIRECTOR OF EDUCATION: AMERICAN WINE SOCIETY Before The General Law Committee Supporting: Proposed H.B. 6471 An Act Making Changes to the Liquor Control Act Hospitality and Tourism are important segments of the service industry in Connecticut. Wine is becoming a larger segment in both. We now have approximately 25 wineries in the state and I believe that number will continue to rise in the future. We currently need a trained labor force to accommodate this growth. The role of the Community College is to prepare students to either enter the workforce upon graduation (whether it is a couple of training classes, a certificate or degree(s)} or to prepare them to transfer where they can continue their studies towards a higher degree. The end goal is for these students to obtain a job. The model I would like to reference is that of the Finger Lakes in New York State. Today, they have more than 100 wineries producing 40 million bottles per year; the region is among the largest wine producers in the nation1. It is in part through the support of the region's educational system that the industry has grown to where is today. Workers have been trained to tend to the vines, pour in the tasting rooms, and ferment and bottle in the cellars of these wineries. Restaurants have added the wines to their menus and customers now have a choice of consuming a quality made "local" wine. I believe that the best education is obtained through a "Hands-On" approach. Our students will become better educated and be able to excel at their career choice in the Hospitality industry with your support of the proposed H.B. 6471 An Act Making Changes to the Liquor Control Act. Thank you for allowing me to speak. Peter J. Cisek httoV/www fingerlakes.org/wine htm A CONNECTICUT COMMUNITY COLLEGE aa/eoe/mf 0007 03 Testimony of Jerry Farrell, Jr. Commissioner of Consumer Protection General Law Committee Public Hearing Tuesday, February 24, 2009 HB-6471 "An Act Making Changes to the Liquor Control Act" Senator Colapietro, Representative Shapiro, Senator Witkos, Representative Bacchiochi and Honorable Members of the General Law Committee. I am Jerry Farrell, Jr., Commissioner of Consumer Protection. Thank you for the opportunity for me to testify in support of House Bill 6471. "An Act Making Changes to the Liquor Control Act." The Department of Consumer Protection is charged with safeguarding the health and safety of Connecticut citizens by regulating all persons and firms involved in distributing, selling and dispensing alcoholic liquor. As Commissioner, it is my responsibility to consider carefully any changes to our Liquor statutes mindful of our mission of protecting our fellow citizens. In HB-6471, the Department is suggesting four separate changes to Connecticut's Liquor Control Act which I feel are warranted and consistent with our mission. First, in Section One of the bill, the Department is proposing the elimination of the Racquetball Facility Liquor permit. The permit type is not in use, and therefore obsolete and unnecessary. Second, the Department is proposing legislation that would allow Institutions of Higher Education, namely, our colleges and community colleges to offer to adult students the ability to include wine tastings in their wine education curriculum. Passage of this section will clarify that this practice is allowable under state law. Third, the Department proposes legislation that would allow the holders of Cafe Liquor Permits to open for business at 6am for the purpose of serving breakfast-without alcohol—if they wish. Under current law, these permit types have not been allowed to open until 9am. The Department has heard from many cafe liquor permit holders who/run their businesses in a similar manner to restaurants (which are able to be open for breakfast), and agrees that this change is fair and equitable. Fourth, the Department proposes a legislative change wherein the holders of a Cafe Liquor or Tavern permit may remain open, after regular closing hours, when the permit premise is being used as a site for film, television video or digital productions deemed eligible for production tax credits, as defined in statute, by a production company. This proposal comes about as a result of the Department learning that production companies often work around-the-clock to complete their projects. Current law requires that that no one may remain on site after closing hours for Cafe or Tavern permit premises. This change 000 7 0 U carves out a very narrow exception to that requirement, which makes qualifying production companies and associated personnel exempt, thereby promoting film production work in Connecticut. We hope that by acknowledging the need expressed by production companies, we will demonstrate that Connecticut is a friendly place to do business and supportive of the growth of this industry in our state. This modest change in the law, which does not change the hours of service of liquor, will assist the industry and aid in attracting and retaining jobs associated with film production. Thank you for the opportunity to discuss the changes to Connecticut's Liquor Control Act contained in the bill. I look forward to answering any questions you may have, and I respectfully urge your support for this bill. 000681* CONiNECTICUT STATE OF CONNECTICUT GROWN DEPARTMENT OF AGRICULTURE Testimony Regarding, Raised House Bill No. 6472. An Act Concerning Wine Festivals, Before the General Law Committee, February 24' , 2009 Senator Colapietro, Representative Shapiro and members of the Commerce Committee, my name is F. Philip Prelli, Commissioner of Agriculture. I am here to testify in strong support of the concept of allowing a not for profit organization the chance to operate a wine festival. i Connecticut farm wineries are one of the fastest growing sectors of the Connecticut farm economy. There are presently 28 licensed wineries in the state and more on the way. We are very proud of the quality and distinction that Connecticut wines have to offer. Allowing a not for profit organization the ability to run "tastings" and bulk sale of wine at a festival designed for just that purpose is a wonderful opportunity for growers to showcase their wines to a broader section of the marketplace in addition, not for profits will be able to earn badly needed funds to continue their missions helping people in these tough economic times, and the public will be able to assist their favorite non profit and enjoy one of Connecticut's treasures, Connecticut Grown wine. That is a win for the organizations, the growers and the festival attendees. Since 1978 when the legislature passed the "Farm Winery Act" Connecticut farmers have increased the variety and selection that they offer. The wines are hand crafted and are greatly influenced by Connecticut's unique soil and climate. Our farmers offer red, white, dry and sweet wines. In addition our wineries produce berry and other fruit wines that are beyond comparison. Connecticut's vineyards are internationally recognized and award winning. Obviously the licensee must meet all state and local requirements that are necessary to obtain state liquor licenses. In conclusion, let me again emphasize that allowing not for profit organization to run wine festivals would be a robust opportunity for not for profits, consumers and farmers alike. I urge the Committee to pass this bill. Thank you for your time and consideration. 165 Capitol Avenue, Hartford, CT 06106 Phone: 860-713-2503 Fax: 860-713-2516 An Affirmative Action/Equal Opportunity Employer 000681* isrtate of Connecticut HOUSE OF REPRESENTATIVES STATE CAPITOL HARTFORD, CONNECTICUT 06106-1591 REPRESENTATIVE MARY G. FRITZ NINETIETH ASSEMBLY DISTRICT ASSISTANT DEPUTY SPEAKER LEGISLATIVE OFFICE BUILDING MEMBER ROOM 4013 JUDICIARY COMMITTEE HARTFORD, CT 06106-1591 LEGISLATIVE MANAGEMENT COMMrTTEE HOME (203)269-1169 PLANNING AND DEVELOPMENT COMMITTEE CAPITOL (860)240-8571 TOLL FREE (800)842-8267 FAX (860)240-0206 E-MAIL Mary Fntz@cga ct gov Testimony By Representative Mary G. Fritz State Representative, 90th District On .H.B. 6473, An Act Expanding the Hours of Operation for Farm Wineries February 24, 2009 Dear Senator Colapietro, Representative Shaprio and Honorable Members of the General Law Committee. I am asking for your support on H.B. 6473, "An Act Expanding the Hours of Operation for Farm Wineries." - This bill is very important to one of my Wallingford wineries "Gouveia Vineyards." This faculty is used for many fund-raising functions by organizations in Wallingford and the surrounding area. Most of the functions, as you know, start with a cocktail hour followed by dinner and then festivities. The evening usually begins at 6 or 6:30 pm and come 8 o'clock no more liquor can be served. This limited time period does SERVING CHESHIRE AND WALLINGFORD 000681* not give our organizations much time to raise the desperately needed money. Oh! Did I mention most of these groups are non-profits! By expanding the hours you will not only be helping the many organizations that use Gouveia Vineyard but also the other vineyard facilities across the state. Thanking you in advance for your support, I remain, Gratefully, State Representative, 90th District 000681* RICHARD BLUMENTHAL 55 Elm Street ATTORNEY GENERAL P.O. Box 120 Hartford, CT 06141-0120 Office of The Attorney General State of Connecticut TESTIMONY OF ATTORNEY GENERAL RICHARD BLUMENTHAL BEFORE THE GENERAL LA W COMMITTEE FEBRUARY24, 2009 I appreciate the opportunity to support Senate Bill 925. An Act Establishing a Restaurant Gift Card and Certificate Guaranty Fund. In this time of economic downturn or distress, my office is besieged with complaints about restaurants failing financially and then refusing to honor gift cards or gift certificates. Although a small fraction of the total, these failures threaten to undermine the entire industry's credibility and public trust. This proposal addresses that danger. This proposal establishes a guaranty fund to provide a source of funds for holders of gift cards or gift certificates issued by restaurants that go out of business. This guaranty fund, modeled after several existing guaranty funds for home improvement contractors and health clubs, is a low-cost method of ensuring consumers full value for their gift cards when a restaurant closes or files for bankruptcy. The idea emerged from discussions with restaurant owners as a means of restoring consumer confidence in purchasing gift cards and certificates. Under this legislation, on October 1, 2009 and annually thereafter, each restaurant would contribute $100 annually to the fund, unless the guaranty fund's balance on the precedingJuly-1- exceeds $500,000. In that case, the Consumer Protection Commissioner may set a lower annual fee sufficient to ensure adequate reserves to pay for anticipated claims in the following calendar year and maintain a $500,000 balance. In the alternative, the committee could consider establishing an escrow account or secured line of credit as outlined in Senate Bill 892. Upon the closing of a restaurant, card or certificate holders would apply to the Department of Consumer Protection for reimbursement of the unexpired balances. The Department of Consumer Protection, through the Attorney General, would seek reimbursement of any funds paid from the guaranty fund from the restaurant owner. Any individual owning more than 25% of the restaurant owner equity would be personally liable for any restaurant gift card or certificate knowingly issued when such card or certificate is likely to be unredeemable within ninety days of issuance. Any owner whose restaurant ceases operations with outstanding gift card or certificates paid by the guaranty fund could not open another restaurant until any liability to the guaranty fund is repaid. The Commissioner may use the resources of the guaranty fund to pay for the costs of administering the fund, providing such amount shall not exceed $50,000 annually. I urge the committee's favorable consideration of Senate Bill 925. 000681* Connecticut Vineyard & Winery Association Testimony in Support of the following Bills: Bill No. 926 AN ACT CONCERNING THE SALE OF CONNECTICUT WINE AT FARMERS' MARKETS. Bill No. 6472 AN ACT CONCERNING WINE FESTIVALS. Bill No. 6473 AN ACT EXPANDING THE HOURS OF OPERATION FOR FARM WINERIES. Members of the General Law Committee, my name is Jamie Jones and my family owns the Jones Family Farms and Winery in Shelton. I am here today in my capacity as the President of the Connecticut Vineyard and Winery Association (CVWA). We are a private, non-profit association of twenty (20) farm wineries from around the state. Our goal is to promote the cultivation of grapes, spread awareness of the quality wines being produced in our state and market our businesses through the Connecticut Wine Trail brochure and our website. Together our farms comprise over 1500 acres of open space and our businesses received 500,000 visits from travelers searching for local wines. We are an important part of both Connecticut's beautiful landscape and local economy. I come before you today to voice our support for the following bills. Each of these bills will allow us to expand our sales of wine to more customers. Currently underway is an exciting movement by people craving for locally produced products such as Connecticut grown wine. Farmer's markets have become a popular outlet for farmers to market their products to customers who cannot make it out to the farm. Many farms and wineries are located in rural settings, away from population centers and farmer's markets allow growers to bring their produce to convenient, easily accessible locations where people can shop for their weekly food needs. Unfortunately in Connecticut, wine has not been permitted to be sold in approved Department of Agriculture farmer's markets. Please consider following in the footsteps of other states such as New York, with their flourishing green markets and allow wine to be sold at farmer's markets. In August of 2007 a Connecticut Wine Festival was held at the Farmington polo grounds. Several thousand guests attended, but were disappointed not to be able to purchase wine by the bottle. The festival was a good public relations event for our industry, but was not deemed an economic success because of inadequate sales through shipping. In 2008 a wine festival was not held. Please consider legislation enabling a Connecticut Wine Festival where wine can be sold by the bottle. Current Connecticut state statute forces farm wineries to finish wine sales by 8 PM. However recent legislation extended the time of sales by liquor stores to 9 PM. During the summer and fall many wineries have events and hours that go into the early evening. Extending the wineries 000710 hours of sales to 9 PM to match that of liquor stores will allow for better customer service and increased sales. Please keep in mind that the more wine is sold, more sales tax and excise tax is collected by the state. 000681* Senator Colapietro, Representative Shapiro and members of the General Law Committee, I am Robert DeZinno, President of the Connecticut Restaurant Association. We wish to express our views concerning SB 925. An Act Establishing a Restaurant Gift Card and Certificate Guaranty Fund, and SB 892. An Act Concerning Gift Certificates. The Connecticut Restaurant Association expresses its concern for consumers that might lose their money when a restaurant gift certificate becomes unredeemable due to the unforeseen failure of the restaurant A business failure is always a tragic event for its owners and their families, its employees, and in the case of outstanding gift certificates, its customers. We are also concerned about Connecticut's restaurants that have lost gift certificate sales recently due to the lack of consumer confidence brought on by the publicity afforded this issue. Traditionally, holiday season sales of gift certificates are brisk, providing needed sales during the otherwise quiet months of January and February. Our members have reported December, 2008 gift certificate sales as much as 50% less than the year before. After adjusting for a slower general economy, it is still apparent that a lack of consumer confidence was the cause. Small business prefers to solve its problems without government involvement. That being said, in concept, a gift card guaranty fund seems like a solution to the problem. However, there are many issues that we feel have not been adequately addressed in the proposed legislation. They follow: • The ability to develop a new system within a tight timeframe • The affordability to the state of management of the system • The proposed payment into the guaranty fund is reasonable for a larger operation, but might be burdensome to a small "mom and pop" operation • Some quick serve restaurants issue gift cards in amounts as low as $5, yet have hundreds of units around the state • The proposed guaranty fund addressing only restaurant gift certificates, when other industries also sell gift certificates • There are hundreds of point-of-sale systems that produce and validate gift cards, and the state's ability to be able to read the outstanding balance on a card when presented against the fund for reimbursement Our association is diligently pursuing the industry's own solution to the problem. We have met with insurance providers to discuss bonding participating restaurants, offering the consumer a new level of confidence. We are currently in the development stages of a gift certificate that could be honored at hundreds of restaurants across the state. In the event of a restaurant closure, the gift certificate would still be redeemable elsewhere. Addressing^B 892, in the opinion of this association, an escrow account or letter of credit create an unacceptable burden on our small businesses. The sale of a gift certificate creates a liability that the business agrees to honor; in the course of the conduct of its business, a restaurant assumes many liabilities, all of which are 000681* routinely paid. Considering the investment in the business, ordinary vendor credit, and equipment leases to name a few, gift certificate sales are likely one of the smaller liabilities that the restaurant holds. Escrow accounts are not generally required to assure satisfaction of normal business liabilities. The value generated by the business' acceptance of the liability must benefit the business as well as the consumer. Consumers must make educated decision of their own. Thank you. 000681* WINE AND SPIRITS WHOLESALERS OF CONNECTICUT, INC. PETER A. BERDON GEORGE MONTANO EXECUTIVE DIRECTOR PRESIDENT EMERITUS GENERAL COUNSEL February 24, 2009 TESTIMONY OF WINE AND SPIRITS WHOLESALERS OF CONNECTICUT Concerning: _ SB 926 An Act Concerning The Sale of Connecticut Wine At Farmers Markets, and HB 647% An Act Concerning Wine Festivals The language of Senate Bill 926 An Act Concerning The Sale of Connecticut Wine At Farmers Markets seeks to grant to "holders of a manufacturer permit or a manufacturer permit for a farm winery" permission to sell wine at a farmer's market (emphasis added). The Wine & Spirits Wholesalers of Connecticut, Inc. does not oppose permitting farm wineries to sell wine produced by the farm winery at a farmer's market, but does oppose granting such a privilege to a manufacturer. Under current law manufacturers are generally prohibited from selling directly to consumers and are required to distribute their products through the state controlled Three-tier System. In as much as Connecticut wholesalers are an integral component in the Three-tier System, the WSWC opposes any expansion of a manufacturer's ability to circumvent that long established system of distribution. Accordingly, the WSWC suggests that the first sentence of the bill be amended to read as follows: "Notwithstanding any provision of this chapter, the holder of a manufacturer permit or a manufacturer permit for a farm winery may sell wine manufactured in this statoproduced by the farm winery at a farmers' market operated on a not-for-profit basis in this state." The WSWC believes that this suggested change is supportive if the intent of the bill to provide additional exposure to Connecticut Farm Winery products, while at the same time protecting the interests of the members of the WSWC. The WSWC does not oppose the portion of the language of House Bill 6472 An Act Concerning Wine Festivals (Section 1) which seeks to grant to the Connecticut Vineyard and Winery Association the opportunity to hold a single three day wine festival for Connecticut Farm Wineries. In fact this portion of the bill is similar to the accord struck between the WSWC and the CVWA duming the last legislative session. The WSWC does, however, oppose the language in Section 2 which grants an unlimited number of permits to out-of-state entities to hold and profit from wine festivals within this state. While Section 2 of the proposed bill seeks to limit the granting of such a permit to a "charitable wine foundation", an undefined term, it does not limit the participants from being profit making corporations. Additionally, there is no way to practically limit the over all number of such permits. In fact given the vast number of out-of-state wineries, it is conceivable that groups of different wineries could have different "charitable wine foundations" sponsor a wine festival on their behalf so that in effect there would be a wine festival each week. Such a result, while perhaps unlikely, was never previously contemplated. Given the complexity of limiting all out-of-state wineries to a single event, as is currently proposed for Connecticut Farm Wineries, the WSWC suggests that perhaps the best solution is to simply delet Section 2 from the bill. Respectfully submitted, Peter A. Berdon 132 TEMPLE STREET • NEW HAVEN, CT 06510 Telephone (203) 624-9900 Fax (203) 624-9870 www.wswc.oig uMon c 20 tftMsSiM n 'i 1 ywr Kimw'"' -t— 21