Dan Morain

A nice, quiet little business

Assemblyman Mike Gatto, D-Los Angeles.
Assemblyman Mike Gatto, D-Los Angeles. Associated Press file

Californians will buy millions of cars from dealers this year and incur many costs. One is the electronic vehicle registration fee.

As expenses go, it’s minor, $29, hardly enough to get under consumers’ skin. But the fee has been the recurrent focus of legislation. Why? Campaign money helps explain it, though everyone involved swears they would never engage in pay-to-play politics.

And yet, while legislative leaders dwell on lofty and pressing issues, a small group of businesses and their lobbyists are intensely interested in Assembly Bill 605, a seemingly uncontroversial bill by Assemblyman Mike Gatto, a Los Angeles Democrat.

Democrats and Republicans embrace AB 605. The Assembly approved it 80-0. Two Senate committees have voted by a combined 15-0 for it. It awaits a Senate floor vote in the last days of the legislative session.

The bill’s main backer, Motor Vehicle Software Corp., stands out for having contributed almost $900,000 to California campaigns since 2012, including $667,000 to Democrats and $203,000 to Republicans.

“Everybody gives money,” Gatto said. “When you start letting that affect you, you should hang it up.”

John Brueggeman, who was a Montana legislator before becoming Motor Vehicle Software’s executive vice president, explained the company’s generosity: “It is important to stay involved in the process. … Most major software companies participate.”

Motor Vehicle Software, which is based in Agoura Hills, offers one core service, electronic vehicle registration, and controls most of that obscure business in California. The company collects sales paperwork from dealers, transmits it to the Department of Motor Vehicles and delivers license plates to consumers. For that, car buyers pay $29, with $25 to Motor Vehicle Software and $4 to the DMV.

“We have the best software, no question,” Brueggeman said. Motor Vehicle Software also offers superior service, he said.

To make the notoriously bureaucratic DMV more efficient, the state started outsourcing registration in the mid-1990s. It seems reasonable. Private enterprise can be efficient. Competition is good.

Motor Vehicle Software’s main competitors, Dealertrack Technologies Inc. and Computer Vehicle Registration, offer a variety of services to car dealers, one of which is electronic vehicle registration.

By bundling their services, they offer discounts to dealers. That savings ought to get passed to consumers. Or not. We are, after all, talking about car sales and all the haggling that goes on.

The Legislature got involved in electronic vehicle registration in 2000 when former Sen. Richard Polanco, D-Los Angeles, carried a bill to authorize the DMV to set the fee to cover the cost of the service. Gov. Gray Davis vetoed it in September 2000, saying he worried about consumer privacy.

Polanco persisted, reintroducing the bill. It authorized but didn’t require the DMV to work with outside vendors, and requested that the DMV establish fees for the service. As the bill was pending in 2001, Computerized Vehicle Registration donated $10,000 to Davis. Davis overcame whatever qualms he had and signed the Polanco bill that summer.

The Legislature stuck its nose into electronic registration a decade later. This time, lawmakers required that car dealers contract with outside companies for the service, and authorized the $29 fee. The companies’ business doubled. Defying the laws of economics, however, the increased volume didn’t drive down consumer costs. Car buyers still got clipped for $29.

Gatto proposed legislation in 2012 to cut the fee to $22. But Motor Vehicle Software, the main proponent of this year’s bill, claimed the reduction would restrict competition. The bill died that summer.

That same summer, Motor Vehicle Software started donating money to California politicians, $232,000 by the end of the 2012, $333,000 last year, $66,800 so far this year, $899,435 in all, according to data provided by Secretary of State Alex Padilla.

One company stands out dominating the business of providing electronic vehicle registration, and for contributing almost $900,000 to California campaigns since 2012.

In an interview, Gatto said he introduced AB 605 because he worries that “bad actors” are bundling services in ways that could be anti-competitive. His bill would restrict bundling and require that DMV audit the companies’ books.

Bill Rountree, vice president of the Dealertrack unit that provides electronic registration, believes the bill is a sop to Motor Vehicle Software and would limit his company’s ability to compete.

“We’re a little naive about the sort of the politics being played,” Rountree said, adding he has never donated to politicians, though his firm did retain the lobbying services of Nielsen Merksamer to defeat AB 605. “Perhaps we’re out of touch.”

For an assessment of the bill’s wisdom, turn to the Senate Transportation Committee’s staff analysis:

“It is fair to ask the question of whether the expense of creating this regulatory structure is outweighed by the benefits of potentially lower prices. While rooting out overcharging is always a worthy goal, even if the DMV found that prices were too high by 20 percent, the savings to car buyers would be $5.”

The analysis offers an alternative to expensive and intrusive audits: “There appears to be some belief that the current $29 price may be too high. Having the DMV reexamine that price would be quicker and less costly.”

Car dealers don’t have much interest in getting the lowest price for electronic vehicle registration, the analysis says, because the cost is passed on “entirely to car buyers, who have no choice in the matter.” So true.

In their attempt to make the DMV more efficient, legislators created a nice little business. The private equity firm Accel-KKR is buying Motor Vehicle Software, and the company is expanding to other states. Few car buyers will notice the $29 fee. Those who do should consider it a tax, courtesy of our campaign finance system. Not that there’s any connection.