Full Report (PDF) - Office of the Legislative Auditor

DISCUSSION AND RECOMMENDATIONS 57Vmying fees according to the number of transactions would recognize the economiesof scale that exists in the deputy registrar business, and could reduce costsfor many customers in metropolitan areas. However, it may also adversely affectsome small deputies if customers take their business to huger deputy registrars.Furthennore, if the fee for mail transactions were lower, small deputies could losemore business. The magnitude of these effects is difficult to estimate since it isnot clear to what extent people would switch deputies in response to price differences.There is a variety of bidding systems that could be used. One option is to periodicallyaward the deputy registrar to the lowest bidder. This approach wouldlikely reduce fees, but it may also lead to high turnover and reduce customer service.According to DPS staff, new deputies tend to make more errors and requiremore training than existing deputies. Another option is the system used by Ohio,which awards two-year contracts on the basis of a point system that considersfees, qualifications of the applicant, and customer service factors such as location.The advantage of this option is that it allows the state to balance cost and customerservice. The disadvantage is that the short contract period leads to fairlyhigh turnover rates and it takes considerable state staff resources ~ review bidsand monitor agents.Allowing deputies to set their fee within a range would allow deputies to competeon the basis of price as well as service. Currently, Minnesota does not allow deputyregistrars to charge fees below $3.50 for motor vehicle and driver's licensetransactions. As a result, efficient deputies cannot pass on their lower costs totheir customers and cannot expand their business through price competition.Fee StructureAdministrativefees do notreflect the costof processingtransactions.In Chapter 3, we showed that the current fee structure does not reflect the cost differencesfor different types of transactions. For example, motor vehicle registrationrenewals (tabs) take less than half as long to process as titles and drivers'licenses, but they all have the same administrative fee. The fee for watercraft andsnowmobile registration is only $.50, one-seventh as large as the fee for motor vehicleregistration, even though the time difference is not nearly that large. Theseprice distortions can lead to two problems. First, it is unfair to deputies who processa high percentage of the more difficult transactions, particularly walk-in titletransactions. Second, it makes it more difficult to improve customer service forregistration renewals. For example, proposals to rene~ automobile registrations ator near emission control stations are especially threatening to deputy registrars becauseit could take away the "easy" transactions, and leave them with the time-consumingtransactions. Registration renewal by phone or at kiosks could also takeaway the easy transactions. To minimize these problems, we recommend that:• The Legislature should change the fee structure to more accuratelyreflect the processing time required by different types of transactions.This would mean lowering the fee for motor vehicle registrations and raising thefee for motor vehicle title transfers and boat and snowmobile registrations. The