STAND. COM. REP. NO. 1561

                                   Honolulu, Hawaii
                                                     , 1999

                                   RE:  H.B. No. 765
                                        H.D. 1
                                        S.D. 2




Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 1999
State of Hawaii

Sir:

     Your Committee on Ways and Means, to which was referred H.B.
No. 765, H.D. 1, S.D. 1, entitled: 

     "A BILL FOR AN ACT RELATING TO MOTOR VEHICLE RENTAL
     INDUSTRY,"

begs leave to report as follows:

     The purpose of this measure is to permit rental motor
vehicle lessors to visibly pass on concession rents and service
permit fees to lessees, as an amount separate from the periodic
rental rate set forth in the rental agreement ("unbundling").

     Your Committee distributed a proposed Senate Draft of this
measure and received testimony on the proposed draft which amends
this measure by:

     (1)  Eliminating the requirement that an independent
          certified public accountant audit a rental motor
          vehicle lessors reports;

     (2)  Repealing the authority to "unbundle" the rents or fees
          under concession contracts and service permit fees on
          June 30, 2001; and

     (3)  Making technical, nonsubstantive amendments for
          purposes of style and clarity.


 
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     In addition, the proposed Senate Draft of this measure
includes provisions that:

     (1)  Increase the surcharge tax for rental motor vehicles
          beginning January 1, 2000.  The amount of the increase
          is unspecified for purposes of discussion and
          determination during conference; 

     (2)  Exempt from the surcharge tax lessors who are renting
          out a vehicle to replace a vehicle of a lessee that is
          being repaired;

     (3)  Increase the surcharge tax for tour vehicles beginning
          January 1, 2000.  The amount of the increase is
          unspecified for purposes of discussion and
          determination during conference;

     (4)  Provide that the moneys from the surcharge taxes shall
          be deposited into the general fund rather than the
          state highway fund beginning July 1, 1999, and ending
          January 1, 2002, when that provision will be repealed;

     (5)  Repeal the surcharge tax increases on January 1, 2002;
          and

     (6)  Allow indirect and other commissions calculated in part
          from, the sale of collision damage waivers until June
          30, 2001, when that provision will be repealed.

     Catrala-Hawaii, Budget Rent A Car, and National Car Rental
submitted testimony in support of the proposed Senate draft
provided that certain amendments be incorporated in the draft.
The Department of Budget and Finance submitted testimony
commenting on the provisions relating to surcharge tax increases
and opposing the surcharge tax exemption.

     Testimony in opposition to the proposed Senate draft was
received from the Hawaii Activities and Tours Association and
Trans Hawaiian Services.

     Testimony in opposition to allowing "unbundling" was
received from the Department of Transportation and the Department
of Commerce and Consumer Affairs.

     Testimony in opposition to allowing indirect and other
commissions calculated in part from, the sale of collision damage
waivers was received from the Department of Commerce and Consumer
Affairs.


 
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     Your Committee finds that this measure provides for
additional revenues for the state general fund.  In addition,
this measure will make Hawaii's rental motor vehicle industry
more competitive by allowing rental motor vehicle lessors to
"unbundle" costs such as concession rents and service permit
fees, as they do general excise tax and licensing and
registration fees.

     Your Committee finds that tour vehicles are rented vehicles,
that is they are rented by the occupants for sight-seeing and
other purposes.  Therefore, the rental motor vehicle industry
includes tour vehicles for the purposes of this measure.

     Your Committee has amended this measure by replacing its
contents with the proposed Senate Draft with the following
changes:

     (1)  Requiring a lessor to report the following additional
          details to the Director of Commerce and Consumer
          Affairs regarding collision damage waivers:

          (A)  Records of all written, telephonic, and in-person
               consumer complaints relating to collision damage
               waiver sales for the year reported;

          (B)  A schedule of amounts charged for each collision
               damage waiver product offered;

          (C)  The number of rental agreements entered into in
               each month of the year reported;

          (D)  The number of each type of collision damage waiver
               sold in each month of the year reported;

          (E)  Gross revenues for each type of collision damage
               waiver sold in each month of the year reported;

          (F)  For each collision damage waiver reported, amounts
               expended by lessees to repair damage to rental
               motor vehicles where the payment for damages falls
               within the scope of the collision damage waiver;
               and

          (G)  All cost factors used by the lessor to determine
               the amounts charged for each collision damage
               waiver offered; and

     (2)  Amending the effective date to make it defective to
          assure this measure is discussed during conference.

 
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     As this measure proceeds into conference, your Committee
intends to take into consideration the further concerns and
recommendations provided in the testimony of the Department of
Transportation and the Department of Commerce and Consumer
Affairs.

     As affirmed by the record of votes of the members of your
Committee on Ways and Means that is attached to this report, your
Committee is in accord with the intent and purpose of H.B.
No. 765, H.D. 1, S.D. 1, as amended herein, and recommends that
it pass Third Reading in the form attached hereto as H.B.
No. 765, H.D. 1, S.D. 2.

                                 Respectfully submitted on behalf
                                 of the members of the Committee
                                 on Ways and Means,



                                 ________________________________
                                 CAROL FUKUNAGA, Co-Chair



                                 ________________________________
                                 ANDREW LEVIN, Co-Chair

 
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