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PA Bulletin, Doc. No. 05-769

PROPOSED RULEMAKING

STATE REAL ESTATE COMMISSION

[49 PA. CODE CH. 35]

Biennial Renewal Fee Increases

[35 Pa.B. 2411]

   The State Real Estate Commission (Commission) proposes to amend § 35.203 (relating to fees) to read as set forth in Annex A. The proposed rulemaking would increase the following renewal fees:

   *  Biennial renewal for brokers, cemetery brokers, branch offices, rental listing referral agents, brokers of record and partners or offices for a partnership association or corporation from $84 to $126.

   *  Biennial renewal for cemetery companies, associate brokers, salespersons, cemetery associate brokers, cemetery salespersons or campground membership salespersons from $64 to $96.

   *  Annual renewal of registration of promotional property from $75 to $113.

   *  Annual renewal of approval of real estate education providers from $250 to $375 plus an increase from $10 to $15 for each satellite location, course or instructor.

Effective Date

   The final-form rulemaking will be effective upon publication in the Pennsylvania Bulletin. The new fees will take effect for the biennial period beginning June 1, 2006.

Statutory Authority

   The proposed rulemaking is authorized under section 407 of the Real Estate Licensing and Registration Act (RELRA) (63 P. S. § 455.407). It requires the Commission to increase fees by regulation to meet or exceed projected expenditures if the revenues raised by fees, fines and civil penalties are not sufficient to meet Commission expenditures.

Background and Need for Amendment

   Fees to renew real estate licenses were last increased in 1994. The Commission is required by law to support its operations from the revenue it generates from fees, fines and civil penalties. In accordance with section 407(a) of the RELRA, if the revenue raised by fees, fines and civil penalties is not sufficient to meet expenditures over a 2-year period, the Commission must increase its revenue.

   The Commission raises virtually all of its operating revenue (exclusive of application and services fees) through renewal fees. The license renewal fees are the most substantial revenue-generating fee of all the fees charged by the Commission. The Commission's current license renewal fees were established by regulation at 24 Pa.B. 2613 (May 21, 1994).

   At its January 25-26, 2005, Commission meeting, the Bureau of Finance and Operations (BFO) presented a summary of the Commission's revenue and expenses for Fiscal Years (FY) 2001-2002 and 2003-2004 and projected revenue and expenses for FYs 2003-2004 through 2010-2011. The summary, presented in the following table, demonstrated that the Commission must raise fees to meet or exceed projected expenditures to comply with section 407(a) of the RELRA through FY 2004-2005. The Offices of Revenue and Budget projected a deficit of $30,802.97 in FY 2004-2005 and continuing thereafter. The BFO recommended that the Commission raise fees 50% to meet or exceed projected expenditures in compliance with section 407(a) of the RELRA.

2001-2002 beginning balance $95,833.32
FY 01-02 revenue 3,130,883.12
Adjusted for prior year expenses 140,136.82
Prior year returned funds 0.00
FY 01-02 expenses 2,223,000.00
Remaining balance 863,579.62
2002-2003 beginning balance $863,579.62
FY 02-03 revenue 1,387,457.66
Prior year returned funds 0.00
FY 02-03 expenses 2,312,000.00
Remaining balance (60,962.72)
2003-2004 beginning balance $ (60,962.72)
FY 03-04 revenue 3,559,203.99
FY 03-04 expenses 2,372,000.00
Remaining balance 1,126,241.27
2004-2005 beginning balance $1,126,241.27
FY 04-05 projected revenue 1,400,000.00
Prior year returned funds 697,359.12
Adjusted for prior year expenses 322,403.36
FY 04-05 projected expenses 2,932,000.00
Remaining balance (30,802.97)
2005-2006 beginning balance (30,802.97)
FY 05-06 projected revenue 3,500,000.00
FY 05-06 projected expenses 2,900,000.00
Remaining balance 479,197.03
2006-2007 beginning balance 479,197.03
FY 06-07 projected revenue 1,400,000.00
FY 06-07 projected expenses 3,080,000.00
Remaining balance (1,200,802.97)
2007-2008 beginning balance (1,200,802.97)
FY 07-08 projected revenue 3,500,000.00
FY 07-08 projected expenses 3,172,000.00
Remaining balance (872,802.97)
2008-2009 beginning balance (872,802.97)
FY 08-09 projected revenue 1,400,000.00
FY 08-09 projected expenses 3,267,000.00
Remaining balance (2,739,802.97)
2009-2010 beginning balance (2,739,802.97)
FY 09-10 projected revenue 3,500,000.00
FY 09-10 projected expenses 3,365,000.00
Remaining balance(2,604,802.97)
2010-2011 beginning balance (2,604,802.97)
FY 10-11 projected revenue 1,400,000.00
FY 10-11 projected expenses 3,466,000.00
Remaining balance (4,670,802.97)

   Under the current fee structure, the BFO estimates that at the close of FY 2004-2005, the Commission's expenses will exceed its revenues by $30,522.66. By FY 2010-2011, BFO anticipates that the deficit will increase to $4,670,802.97.

   The increases in the Commission's biennial expenses occurred primarily in the Bureau of Enforcement and Investigation (BEI) and Board Administration. Nontravel BEI expenditures were budgeted at $799,500 in FY 2003-2004 but will increase to a projected expense of $1,043,399.34, a difference of $243,899.34 from budgeted. Board administration was budgeted at $580,000 in FY 2003-2004 but increased to a projected 664,651.95, a difference of $84,651.95.

   The BEI projected expense increase occurred as a result of the increased number of investigations and inspections in FY 2003-2004. Based on an average of the BEI's expenditures for the past 3 years, the BEI was allocated 1,559.33 investigative and inspection activities with 9,942.31 hours in performance time for FY 2003-2004. In actuality, 1,761 investigative and inspection activities were performed, totaling about 11,840.5 hours, putting the BEI over the projection by 201.67 activities and 1,898.19 hours. In 2002-2003, the BEI spent 9,354.92 hours on investigations and inspections. In FY 2001-2002, the BEI spent 10,603.3 hours on investigations and inspections. In FY 2000-2001, the BEI spent 9,868.70 hours on investigations and inspections.

   The increase in the Commission's administration costs can be attributed to the following:

   1.  Wages increased by approximately $27,000 due to overtime costs to process renewal applications.

   2.  FY 2003-2004 health benefits increased $68.35 per employee. Also, each agency was assessed a one-time charge of $942 per employee to be deposited into the Pennsylvania Employees Benefit Trust Fund (PEBTF). The Commission's share of the increased benefit costs and the one-time PEBTF payment was approximately $30,000.

   3.  The Commission's share of FY 2003-2004 rent of real estate costs increased approximately $19,000. This increase is a result of a full year of rent paid at a higher rate for Penn Center that at the Pine Street location. In FY 2002-2003, only 2 months rent was paid at the higher rate.

   4.  The Commission's FY 2003-2004 share of the Bureau of Professional and Occupational Affairs' (BPOA) data powerhouse costs (servers for License 2000) increased by approximately $12,000. This is a result of the increase in the BPOA's FY 2003-2004 monthly data powerhouse assessment and for a one-time balloon payment of approximately $50,000. The Commission's share of these assessments is based on licensee population.

   The Commission reviewed various alternative fee structures to ensure the lowest fee increase possible while at the same time insuring the Commission's solvency. Although the Commission is looking at ways to streamline procedures to cut costs, the fee increases are still necessary to maintain a positive balance in the Commission account. Finally, in developing the proposed rulemaking, the Commission reviewed fees of other states. It found that the proposed fees are comparable to the renewal fees charged in surrounding states and should cause no competitive disadvantage to the Commonwealth.

Description of Proposed Rulemaking

   Based upon the previous expense and revenue estimates provided to the Commission, the Commission proposes to amend § 35.203 to increase the fee for biennial renewal of licenses for brokers, cemetery brokers, branch offices, rental listing referral agents, brokers of record and partners or officers for a partnership association or corporation from $84 to $126 and cemetery companies, associate brokers, salespersons, cemetery associate brokers, cemetery salespersons or campground membership salespersons from $64 to $96 as well as increase the annual renewal registration of promotional property from $75 to $113 and the renewal of approval of real estate education provider from $250 to $375 plus $15 for each satellite location, course and instructor instead of $10. By this increase, the Commission will recoup the FY 2004-2005 projected deficit and enable the Commission's account to carry a positive balance by FY 2005-2006.

Fiscal Impact

   The proposed rulemaking will increase the renewal fees for brokers, cemetery brokers, branch offices, rental listing referral agents, brokers of record and partners or officers of a partnership association or corporation, cemetery companies, associate brokers, salespersons, cemetery associate brokers, cemetery salespersons, campground membership salespersons, promotional property registration, approval of real estate education providers, satellite locations, courses and instructors. The proposed rulemaking should have no other fiscal impact on the private sector, the general public or political subdivisions.

Paperwork Requirements

   The proposed rulemaking will require the Commission to alter some of its forms to reflect the new renewal fees; however, the proposed rulemaking should not create additional paperwork for the private sector.

Sunset Date

   The RELRA requires that the Commission monitor its revenue and expenses on an FY and biennial basis. Therefore, no sunset date has been assigned.

Regulatory Review

   Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on April 13, 2005, the Board submitted a copy of this proposed rulemaking and a copy of a Regulatory Analysis Form to the Independent Regulatory Review Commission (IRRC) and to the Chairpersons of the Senate Consumer Protection and Professional Licensure Committee and the House Professional Licensure Committee. A copy of this material is available to the public upon request.

   Under section 5(g) of the Regulatory Review Act, IRRC may convey any comments, recommendations or objections to the proposed rulemaking within 30 days of the close of the public comment period. The comments, recommendations or objections must specify the regulatory review criteria which have not been met. The Regulatory Review Act specifies detailed procedures for review, prior to final publication of the rulemaking, by the Board, the General Assembly and the Governor of comments, recommendations or objections raised.

Public Comment

   Interested persons are invited to submit written comments, suggestions or objections regarding this proposed rulemaking to Debi Sopko, Administrator, State Real Estate Commission, P. O. Box 2649, Harrisburg, PA 17105-2649 within 30 days following publication of this proposed rulemaking in the Pennsylvania Bulletin.

BEVERLY BROOKS,   
Chairperson

   Fiscal Note: 16A-5612. No fiscal impact; (8) recommends adoption.

Annex A

TITLE 49. PROFESSIONAL AND VOCATIONAL STANDARDS

PART I. DEPARTMENT OF STATE

Subpart A. PROFESSIONAL AND OCCUPATIONAL AFFAIRS

CHAPTER 35. STATE REAL ESTATE COMMISSION

Subchapter B. GENERAL PROVISIONS

§ 35.203. Fees.

   The following fees are charged by the Commission:

*      *      *      *      *

   Biennial renewal of license of broker, cemetery broker, branch office, rental listing referral agent[,] or broker of record, partner or officer for a partnership, association or corporation$[84] 126

   Biennial renewal of cemetery company registration or license of associate broker, salesperson, cemetery associate broker, cemetery salesperson or campground membership salesperson$[64] 96

*      *      *      *      *

   Annual renewal of registration of promotional real estate$[75] 113

*      *      *      *      *

   Annual renewal of approval of real estate education provider$[250] 375 plus $[10] 15 for each satellite location, course and instructor

*      *      *      *      *

[Pa.B. Doc. No. 05-769. Filed for public inspection April 22, 2005, 9:00 a.m.]



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