xviMOTOR ~mCLE DEPUTY REGISTRARSMost largepublic deputiesmade money in1992.There are 34 single-<strong>of</strong>fice public deputies which process more than 24,000 transactionsper year. Our sample data indicate that about 33 percent <strong>of</strong> <strong>the</strong>se deputieslost money in 1992, but only 14 percent would have lost money under <strong>the</strong> currentfee schedule.For private deputies, we measured <strong>the</strong> owner's income by adding salaxy and benefitsreceived by <strong>the</strong> owner to <strong>the</strong> deputy registrar business income (revenues minusexpenses). Some owners <strong>of</strong> corporate deputy registrars who own <strong>the</strong> building<strong>the</strong>y occupy also earn income by renting <strong>the</strong> space to <strong>the</strong> deputy registrar. Whilewe included <strong>the</strong> rent as a deputy expense, we did not include <strong>the</strong> income (orlosses) earned from such investments. Our analysis shows that:• Average incomes <strong>of</strong> private deputy registrars varied greatly with size.We estimate that, in 1992, average incomes rnoged from $15,000 for small deputiesto $77,000 for large deputies. Under<strong>the</strong> current fee schedule, average incomeswould have been about $102,000 forlarge deputies, $47,000 formedium-large deputies, $28,000 for medium-small deputies, and $15,000 forsmall deputies.Average Income <strong>of</strong> Private Deputies, 1992, Actualand with Current Fees$120,000$100,000Income• Actual 1992 EiJWith Current Fees$80,000$60,000$40,000$20,000$0Source: <strong>Office</strong> <strong>of</strong> <strong>the</strong> <strong>Legislative</strong> <strong>Auditor</strong>.Small MedSmall Med Large LargeDeputy SizeWe also examined <strong>the</strong> cost per trnnsaction <strong>of</strong> <strong>the</strong> Department <strong>of</strong> Public Safety and<strong>of</strong> deputy registrars operated by non-pr<strong>of</strong>it organizations. We found that:• At <strong>the</strong> Department <strong>of</strong> Public Safety, <strong>the</strong> cost per transaction in fiscalyear 1993 was $3.26 for walk-in service, $1.32 for renewals by mail,and $4.36 for titles by mail.
EXECUTIVE SUMMARYxvii• At deputy registrars operated by non-pr<strong>of</strong>it organizations (two AAAdeputies and three deputies under contract with a vocationalrehabilitation company, CWDC Industries, Inc.), <strong>the</strong> average cost in1992 was $2.20 per transaction.The cost for deputies operated by non-pr<strong>of</strong>it OIganizations ranged from $1.77 to$2.62. -CORPORATE SALESDeputyregistrar saleprices averagedabout 3.6 times<strong>the</strong> annualnumber <strong>of</strong>transactions.Notice:Financial infonnationfrom one private deputy .registrar arrived too lateto be included in thispublished report. Thenew infonnation includeddetails <strong>of</strong> a corporatedeputy registrarsale which was madefor a higher price($189,000) than anyo<strong>the</strong>rs we found in ourstudy. As noted on thispage arid page 61, <strong>the</strong>previous maximum saleprice was $108,000.Corporate sales indicate that <strong>the</strong>re is strong interest in becoming a deputy registrar,even in small cities. Since 1984, <strong>the</strong> year private deputies were allowed to incorporate,60 <strong>of</strong> <strong>the</strong> 78 private deputy registrars have incorporated and 20 havebeen sold. Excluding four sales within <strong>the</strong> family, deputy registrars that have beensold had annual transactions ranging from 5,000 to 35,000. None <strong>of</strong> <strong>the</strong> large deputyregistrars has been sold. We obtained sale prices from 13 <strong>of</strong> <strong>the</strong> 16 deputy registrarsthat have been sold outside <strong>the</strong> family. Sale prices ranged from $20,000 to$108,000. Four sales were for $100,000 or more. On average, <strong>the</strong> sale price wasabout 3.6 times <strong>the</strong> annual number <strong>of</strong> transactions, or slightly more than <strong>the</strong> grossannual revenue, under <strong>the</strong> current fee structure.Ever since <strong>the</strong> 1983 Legislature authorized <strong>the</strong> appointment <strong>of</strong> corporations as deputyregistrars, <strong>the</strong> resulting sales have been controversial. We found no o<strong>the</strong>r statewhere corporate private agents could sell an exclusive right to do business in a particulararea, as can be done in Minnesota.We think appointing private corporations as deputy registrars is undesirable forseveral reasons. First, if a corporation is appointed as a deputy registrar, <strong>the</strong> appointingauthority loses effective control over <strong>the</strong> selection <strong>of</strong> deputies. Currently,lacking major violations <strong>of</strong> DPS standards, <strong>the</strong> appointing authority cannot exerciseits appointive powers over corporate deputies indefinitely.Ano<strong>the</strong>r problem is that each deputy who initially incorporates receives a windfallpr<strong>of</strong>it when <strong>the</strong> corporation is sold, and subsequent owners have to make a capitalinvestment, raising <strong>the</strong> fees necessary to make a deputy financially viable.In order to maintain <strong>the</strong> public's control over who becomes a deputy registrar, andto maintain low capitalization requirements for deputy registrars, we recommendthat:• The Legislature should consider repealing <strong>the</strong> authority to appointcorporations as deputy registrars.Exceptions could be made for non-pr<strong>of</strong>it organizations, such as <strong>the</strong> AmericanAutomobile Association.