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December 18th, 2013 NIGEL JAQUISS | News Stories
 

The Driving Records Racket

The state diverts higher fees from Oregon’s roads to the information superhighway.

news1_4007ILLUSTRATION: Fred Noland
     
Tags: ODOT, Driving
About 2 million times a year, Oregon companies small and big, from family-owned trucking firms to major insurers, pay for information from the state’s files of driver’s licenses. The companies need the driving records to obtain or renew insurance for drivers and to check whether potential employees are safe drivers.

Until recently, such transactions were cheap. The Oregon Department of Transportation charged $2 a record. Sales of the information generated about $4 million a year, which by law went into the state’s highway fund.

But in 2010, ODOT decided to jack up the cost of obtaining driving records, to nearly $10 a pop. The companies who got stuck with the bill say the department’s move was highway robbery—gouging them with higher costs and breaking state law while they were at it.

Kelsey Wood is president of Gordon Wood Insurance & Financial Services Inc., a seven-employee firm in Roseburg. Wood says he and other insurance agents can’t fully pass on the higher costs to their customers. 

“It sticks the turd in my pocket,” says Wood, who’s been in the insurance business for 31 years.  

Wood’s firm and seven other companies and professional associations, including the Oregon Trucking Association, Associated General Contractors and the Property Casualty Insurers of America, have sued the state in Marion County Circuit Court. They allege ODOT is illegally funneling money collected from the higher fees away from road projects toward the development of state websites.

The case reveals how state agencies, left unchecked, wheeled out a plan to scrape millions more from businesses and consumers, despite the fact the Legislature had refused to authorize the move.

 

In some ways, state government acted like a business, responding to demand by charging more for its information.

From the perspective of those who regularly buy the drivers’ records, the decision was illegal. 

“The unauthorized increase in cost of driving records and the unconstitutional diversion of the revenues from the sale of the driving records sacrifice Oregonians’ jobs and motoring safety so that state agencies may have nicer websites,” says the complaint filed by Greg Chaimov, the plaintiffs’ attorney. (The Oregon Department of Justice, which represents state agencies in court, declined to comment.)

In 2010, ODOT, facing a budget crisis after years of heavy borrowing, decided to jack up its fee for driving records to nearly $10. That decision is costing the companies that depend on driver’s license information dearly—an additional $15 million annually.

ODOT decided to raise prices through a clever arrangement with another state agency, the Department of Administrative Services. Under the plan, ODOT would lease records from its Driver and Motor Vehicle Division to the Department of Administrative Services, which would then allow a private company to resell them for a substantially higher price. In return, the company would provide $3 worth of Web consulting services for each record.

Problem is, money from selling those records is supposed to go into the highway trust fund, not state bureaucracies’ budgets.

The Oregon Department of Justice warned the two agencies in writing about the questionable legality of the plan at the time.

“Net income generated from the sale of those [DMV] records must accrue to the Highway Fund and cannot lawfully be diverted to other purposes,” wrote Associate Attorney General David Leith in a letter dated Aug. 10, 2010. “A court would likely scrutinize such a transfer to make sure the Highway Fund receives the amount to which it is entitled.”

Despite the warning, the two agencies took their plan to the 2011 Legislature. Lawmakers didn’t approve it.

That didn’t stop the agencies from carrying out the plan anyway. One month after the Legislature adjourned, the Department of Administrative Services signed a 10-year contract with a Kansas data vending company, NICUSA, to sell Oregon driving records for $9.68 per record. 

That meant trucking companies and other buyers of large numbers of driver’s license records faced a nearly fivefold increase in costs.

In court filings, state lawyers say there’s nothing wrong with the new fee schedule. What’s more, they say, the Kansas company will provide the state with valuable Web consulting. “These services will help provide much needed upgrades to, and expansion of, the state of Oregon’s Web presence, including ODOT’s Web presence,” David Kramer, a state attorney representing ODOT, wrote earlier this year.

State lawyers say ODOT comes out ahead—getting $6.68 per record, instead of $2—and any other benefit the state derives off the sales doesn’t have to go for highways.

Wood says the state’s decision to hike the costs of obtaining the records has a real impact: He and his customers, including one that employs 100 commercial drivers, are ordering fewer driving records for background checks because neither wants to eat the higher cost.

“That’s going to mean more unsafe drivers,” Wood says. “That’s bad for society.” 

 
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