Title of Regulation: 18VAC15-40. Virginia Certified Home Inspectors Regulations (amending 18VAC15-40-50, 18VAC15-40-52).

Statutory Authority: §§ 54.1-201 and 54.1-501 of the Code of Virginia.

Public Hearing Information:

December 2, 2013 - 10:30 a.m. - Department of Professional and Occupational Regulation, 9960 Mayland Drive, Suite 200, Board Room 4, Richmond, VA 23233

Public Comment Deadline: January 17, 2014.

Agency Contact: Trisha L. Henshaw, Executive Director, Virginia Board for Asbestos, Lead, and Home Inspectors, 9960 Mayland Drive, Suite 400, Richmond, VA 23233, telephone (804) 367-8595, FAX (804) 350-5354, or email alhi@dpor.virginia.gov.

Basis: Section 54.1-113 of the Code of Virginia (commonly referred to as the Callahan Act) requires regulatory boards to periodically review and adjust fees. Section 54.1-201 of the Code of Virginia provides the authority to regulatory boards to levy and collect fees; § 54.1-304 of the Code of Virginia authorizes the Department of Professional and Occupational Regulation (DPOR) to collect and account for fees; and § 54.1-308 of the Code of Virginia requires costs to be paid by regulatory boards.

Purpose: The intent of the proposed amendments is to increase licensing fees for regulants of the Board for Asbestos, Lead, and Home Inspectors. The board must establish fees adequate to support the costs of board operations and a proportionate share of the expense of department operations. By the close of the next biennium, if left at their current rates, fees will not provide adequate revenue for those costs.

DPOR receives no general fund money but, instead, is funded almost entirely from revenue collected from license and certificate application fees, renewal fees, examination fees, and other licensing fees. DPOR is self-supporting and must collect adequate revenue to support its mandated and approved activities and operations. Fees must be established at amounts that will provide that revenue. Fee revenue collected on behalf of the various boards is what funds the department's authorized special revenue appropriation.

The Board for Asbestos, Lead, and Home Inspectors has no other source of revenue from which to fund its operations.

Section 54.1-113 of the Code of Virginia requires DPOR to review each board's expenditures at the close of each biennium and to adjust fees if necessary. The Board for Asbestos, Lead, and Home Inspectors is expected to incur a deficit of $82,268 by the end of the 2012-2014 biennium and a Callahan Act percentage of -11.5%.

The regulatory review process generally takes a minimum of 18 months, so it is essential to consider fee increases now to avoid a greater deficit than currently projected. In order to address the deficit as currently projected, new fees will need to become effective by late in fiscal year 2014, or the board's deficit will increase to the point that the new fees would be inadequate to provide sufficient revenue for upcoming operating cycles, which could result in the board having to consider additional fee increases in the near future.

Substance: The Board for Asbestos, Lead, and Home Inspectors reviewed the fees listed in 18VAC15-40-50 and 18VAC15-40-52 and, based on projected revenues and expenses, developed a fee schedule that meets the requirements of the applicable statutes while being the least burdensome to the regulant population. The amendments increase application, renewal, and reinstatement fees for certification as a home inspector.

Issues: The primary issue for the proposed fee increase is the department's statutory requirement to comply with the Callahan Act.

The advantage of these changes is that the regulatory program will be able to continue to function in order to protect the public. The disadvantage is that these changes will increase the cost of the license to the regulated population; however, the impact of these changes on the income of the regulated population should not be of a great significance compared to their level of income.

Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. The Board for Asbestos, Lead, and Home Inspectors (Board) proposes to increase all fees paid by licensees, certificate holders and registrants that are subject to the Board's authority.

Result of Analysis. There is insufficient information to accurately gauge whether benefits are likely to outweigh costs for these proposed changes.

Estimated Economic Impact. Under current regulations, home inspectors pay an initial certification fee of $25, a biennial renewal fee of $25, a late renewal fee of $50 (if they renew between 30 days and 6 months after the renewal date) and a reinstatement fee of $100 if they renew later than 6 months but sooner than 2 years after their certification expires. The Board now proposes to increase all of these fees.

Below is a comparison table for current and proposed fees:

FEE TYPE	CURRENT FEE	PROPOSED FEE	% INCREASE
Initial Home Inspector Certification	$25	$80	220%
Renewal of Home Inspector Certification	$25	$45	80%
Late Renewal of Home Inspector Certification	$50	$80	60%
Reinstatement of Home Inspector Certification	$100	$125	25%

Board staff reports that fees were reduced in 2000 because they were set at a level that was too high to be justified by Board expenditures. As a consequence of high fees prior to 2000, the Board had a large surplus that has offset fees that since then were too low to cover all Board expenses. Absent some fee increase, Board staff reports that the Board will run a deficit in the next biennium. In addition to a large surplus finally being depleted, Board staff reports that fees will need to be raised because expenses for developing Department of Professional and Occupational Regulation's (DPOR's) new customer support and licensure software have greatly increased information technology costs over the last several years.

While the number of entities that the Board regulates has increased, other things being equal, the fees from additional regulants would be expected to cover application costs, customer support services costs and any other expenses that the Board might incur in regulating them. Because fees have been kept artificially low for the last decade so that the Board could use up the very large surplus that it had accrued, fees from each new licensee, certificate holder or registrant may not, in this instance, been enough to cover the per person application and customer support costs. This notwithstanding, it is likely that the necessity of raising fees would not be as urgent as it now is without large and continuing increases in information technology (IT) expenses over the last few years.

Board staff reports that DPOR has already paid $3.6 million, and expects to pay an additional $1.6 million, for its new automated licensure system. These costs are additional to other IT (VITA) costs which have increased for all state agencies. It is likely that most of the per regulant expenditure increase in the last decade is due to these increased information systems costs. In FY2005, the Board spent $32.13 per regulant; in FY2006, per regulant spending was $31.40 and in FY2007 it was $29.07. In FY2008, per regulant spending jumped to $45.45. During FY2012, per regulant spending was to $50.37. Board staff expects per regulant spending to increase further in FY2013 (to $57.07). Given this information, it is not at all clear that these increased information systems costs represent a net benefit for the Board's regulated entities.

Increasing fees will likely increase the cost of being licensed, certified or registered, and so may slightly decrease the number of people who choose to be remain in these jobs or businesses. To the extent that the public benefits from the Board regulating these professional populations, they will also likely benefit from the Board's proposed action given that the regulating will continue. There is insufficient information to ascertain whether the benefits of the continued regulation will outweigh the costs with higher fees.

Businesses and Entities Affected. Board staff reports that the Board currently regulates 5,808 individuals, contractors, labs and training programs.

Localities Particularly Affected. No locality will be particularly affected by this proposed regulatory action.

Projected Impact on Employment. Fee increases in this regulatory action may marginally decrease the number of individuals who choose to work in professional fields that are regulated by the Board. Individuals who work part time or whose earnings are only slightly higher in these regulated fields than they would be in other jobs that do not require licensure or registration will be more likely to be affected.

Effects on the Use and Value of Private Property. Fee increases will likely very slightly decrease business profits and make affected businesses slightly less valuable.

Small Businesses: Costs and Other Effects. Board staff reports that most of the entities regulated by the Board likely qualify as small businesses. Affected small businesses will bear the costs of proposed increased fees.

Small Businesses: Alternative Method that Minimizes Adverse Impact. Outside of increasing the efficiency of the business practices of DPOR or lowering other expenses charged to the department, particularly information technology related, there are no clear alternative methods that would reduce the adverse impact on small businesses from the proposed fee increases.

Real Estate Development Costs. This regulatory action will likely have no effect on real estate development costs in the Commonwealth.

Legal Mandate. The Department of Planning and Budget (DPB) has analyzed the economic impact of this proposed regulation in accordance with § 2.2-4007.04 of the Administrative Process Act and Executive Order Number 14 (10). Section 2.2-4007.04 requires that such economic impact analyses include, but need not be limited to, the projected number of businesses or other entities to whom the regulation would apply, the identity of any localities and types of businesses or other entities particularly affected, the projected number of persons and employment positions to be affected, the projected costs to affected businesses or entities to implement or comply with the regulation, and the impact on the use and value of private property. Further, if the proposed regulation has adverse effect on small businesses, § 2.2-4007.04 requires that such economic impact analyses include (i) an identification and estimate of the number of small businesses subject to the regulation; (ii) the projected reporting, recordkeeping, and other administrative costs required for small businesses to comply with the regulation, including the type of professional skills necessary for preparing required reports and other documents; (iii) a statement of the probable effect of the regulation on affected small businesses; and (iv) a description of any less intrusive or less costly alternative methods of achieving the purpose of the regulation. The analysis presented above represents DPB's best estimate of these economic impacts.

Agency's Response to Economic Impact Analysis: The Board for Asbestos, Lead, and Home Inspectors concurs with the approval. However, we would like to address the statement regarding the efficiency of the Department of Professional and Occupational Regulation's (DPOR's) business practices.

DPOR serves to protect the health, safety, and welfare of the public by establishing and administering regulatory programs for certain professions or occupations that are deemed by the General Assembly as needing to be regulated. Such programs are designed to ensure minimum competency of practitioners who elect to enter these professions by verifying applicants' compliance with specified entry standards (education, experience, and examination).

DPOR is mindful of the need to keep costs to a minimum while still maintaining its charge of allowing minimally competent individuals and companies to begin working in their chosen fields as quickly as possible and resolving complaints against licensees in a timely manner. DPOR's staff continuously strives to improve its processes to find more efficient methods of conducting its work. In addition, staff works with its regulatory boards to develop regulations and policies that minimize burdens on its regulants, including minimizing costs associated with licensure, certification, and registration.

Summary:

The proposed amendments increase fees for obtaining and maintaining certification as a home inspector.

18VAC15-40-50. Application fees.

The application fee for an initial home inspector certification shall be $25 $80.

18VAC15-40-52. Renewal and reinstatement fees.

Renewal and reinstatement fees are as follows:

Fee type	Fee amount			When due
Renewal		$25 $45		With renewal application
Late renewal	+ =	$25 $45 $25 $35 $50 $80	(renewal) (late fee) total fee	With renewal application
Reinstatement	+ =	$75 $80 $25 $45 $100 $125	(reinstatement) (renewal) total fee	With reinstatement application