ORDERS:
PUBLIC HEARING REPORTOF THE ADMINISTRATIVE LAW JUDGE
Pursuant to S. C. Code Ann. §§ 1-23-110 and 1-23-111 (Supp. 2000), a public hearing was held on
April 19, 2001, at the Administrative Law Judge Division, Columbia, South Carolina to determine the
"need and reasonableness" of Proposed Regulation 71-5600. The proposed regulation is intended to
increase fees for (1) all classes of construction permits and initial annual operating certificates; (2)
temporary permits; and (3) processing reports submitted by licensed special inspectors in conjunction
with issuing annual operating certificates. In addition, the Department proposes a new fee for
reinspection of deficiencies noted during annual inspections. This regulation is proposed by the
Department pursuant to S.C. Code Ann. § 41-16-140 (Supp. 2000), which requires the Department to
promulgate regulations to charge and collect fees for inspections, permits, and licenses. According to
the statute, fees shall be based on the costs of administering the program, giving "due regard to the time
spent by department personnel in performing duties and to any travel expenses incurred."
At the public hearing, the Department and interested persons were given the opportunity to present
written materials and oral testimony, all of which were incorporated into the record of the hearing.The following Proponents of the proposed regulation participated in the public hearing:
Sharon Dantzler, Deputy General Counsel
South Carolina Department of Labor, Licensing and Regulation
J. Michelle Childs, Deputy Director
South Carolina Department of Labor, Licensing and Regulation
Jerry Butler, Administrator, Office of Elevator and Amusement Ride Safety
South Carolina Department of Labor, Licensing and Regulation
The following Opponent of the proposed regulation participated in the public hearing:
Michelle Taylor, President, Taylor Technologies Group
FINDINGS
1. Proposed Regulation 71-5600 is proposed by the Department pursuant to S.C. Code Ann. § 41-16-140 (Supp. 2000), which requires the Department to promulgate regulations to charge and collect fees
for inspections, permits, and licenses.
2. The purpose of Proposed Regulation 71-5600 is to increase fees for (1) all classes of construction
permits and initial annual operating certificates, (2) temporary permits, and (3) processing reports from
licensed special inspectors in conjunction with issuing annual operating certificates. Additionally, the
regulation imposes a new fee for reinspection when deficiencies are noted during an annual inspection
and the owner fails to send documentation verifying corrective action to the Department.
4. The Notice of Drafting of the proposed regulation was published in the State Register on January 26,
2001.
5. The Department filed an Agency Transmittal Form with the Administrative Law Judge Division on
February 1, 2001, requesting a public hearing on the proposed regulation.
6. The Notice of the Proposed Regulation was published in the State Register on February 23, 2001,
which included a synopsis of the proposed regulation and the Notice of Opportunity for Public
Comment and Hearing.
7. A public hearing to allow the Department's presentation and public comment on the proposed
regulation was conducted on April 19, 2001, pursuant to S.C. Code Ann. § 1-23-111 (Supp. 2000).
8. The public hearing was attended by agency representatives and Ms. Michelle Taylor, President of
Taylor Technologies Group. Ms. Taylor prefiled with the Department authorizations from 43 of her
customers to represent their interests at the hearing. Both sides presented testimony relating to the
proposed regulation. In addition, all prefilings were incorporated into the record of the hearing.
9. Elevator fees have not been increased since 1986, except turn-over fees, which were increased in
1995. Amusement ride fees were adjusted in 1993. See History to S.C. Code Ann. Regs. 71-4700
(Supp. 2000).
10. Inspection fees for all classes of construction permits and initial annual operating certificates are
proposed to increase by $50 per elevator charged to the contractor for new construction. (1) The
Department has experienced increased travel costs and salaries due to legislatively mandated increases.
In addition, training costs have increased as a result of the increasing complexity of elevators. This fee
covers the construction inspection, plan review, and mailing and issuance of the initial annual operating
certificate.
11. Within proposed Regulation 71-5600 pertaining to fee schedules, it is unclear from the record how
Section (2)(A)'s fee provisions for operating certificates would apply when read in conjunction with
Section (1)(A)'s provisions. That is, Section (2)(A) governs "[t]he fee for an annual operating
certificate, after registration, whether initial or renewal. . . ." (Emphasis added.) Whereas, Section
(1)(A) provides that the construction permit fee "shall include . . . the first annual operating certificate. .
. ." (Emphasis added.) Specifically, it is unclear when an "initial" operating certificate under (2)(A)
would apply, since the first certificate is included under the construction permit provision of (1)(A).
Presumably, a construction permit under Section (1)(A) would be required any time an elevator would
also require an initial permit under Section (2)(A) upon entering service.
12. Temporary permits are proposed to increase by $50, increasing from $200 to $250 under Section
(1)(C). These permits are granted by the Department upon request of the construction company after an
elevator is operational but before it is open to the public. A reinspection before the operating certificate
is issued is included in the temporary permit fee. The reinspection process usually takes three to four
hours.
13. In addition, the Department proposes implementing a new $75 per hour fee for reinspections. See
Section (2)(C). There is currently no fee charged. Instances of noncompliance are only a few cases per
year. The reinspection is not automatic but is done only when deficiencies are noted during the annual
inspection and the owner fails to send documentation verifying corrective action to the Department.
With this fee, owners who comply with the regulations are not made to subsidize reinspections for
noncomplying owners. Thus, the new fee would be imposed directly on those who cause the additional
costs to the Department. The reinspection fee includes travel costs.
14. The Department proposes a $10 increase in the fee it charges to the special inspectors for reviewing
their reports and issuing annual operating certificates resulting from their inspections under Section
(2)(B). This increase is the only item opposed in the proposed regulation. There are two groups of
inspectors: (1) those employed by the State and (2) special inspectors, who are licensed by the
Department and privately employed. See S.C. Code Ann. § 41-16-20(15) (1986). Both groups produce
the same report, which takes approximately 30 minutes for the Department to review. Built into this
annual inspection fee are 20-25 quality control reinspections of elevators which are privately inspected
to ensure that the standards used by special inspectors are the same as those used by state inspectors.
The Department's cost for reviewing these reports, conducting quality checks, and mailing certificates
is approximately $35 for each report.
15. When a special inspector inspects an elevator, he turns over his paperwork to the Department and
currently remits $25 to the Department. This fee is proposed to increase from $25 to $35 for all classes
of elevators.
16. The Department currently employs 12 field inspectors to administer the elevator and amusement
ride regulations. The Office of Elevator and Amusement Ride Safety is small and has already reduced
its staff by one administrator and one clerical position in the face of impending budget cuts.
17. Of the 7,500 elevators in existence statewide, about 1,000 are inspected by special inspectors. The
proposed $10 increase to special inspectors would produce an annual revenue increase of $35,000 for
the Department. The total administrative cost of the special inspector program to the Department is
$35,328. See Exhibit 4C. For fiscal year 2000, the Department's expenditures for administration of the
elevator and amusement ride provisions were $983,000, and revenues were $919,000. See Exhibit 4A.
The other proposed fee increases would not effectively close this gap because those fee increases are
based on new construction or temporary permits, which are by request only, or reinspections in the few
instances of noncompliance. It is evidently that the Department administers and oversees the various
inspections, permits, and licenses at a loss.
18. Ms. Taylor operates a small business which employs special inspectors and provides consulting and
maintenance as additional services. Ms. Taylor's company charges the same inspection fees as the State
fees, which are set by regulations, even though she is not legally precluded from setting her fees as she
deems appropriate. Ms. Taylor suggested that the Department's method of imposing fees unevenly
impacts small businesses such as hers that employ special inspectors. Ms. Taylor asserted that, instead
of billing the special inspectors to review their reports, the Department should instead bill elevator
companies at an hourly rate for the costs of inspection because it costs the Department $35 to review
each report of both State and special inspectors. In essence, she contends that because the costs of
inspection have gone up across-the-board, the fees charged should go up across-the-board to allocate the
costs to the elevator owners who benefit from the inspections. Under Ms. Taylor's proposal, a modest
increase in overall inspection fees would generate more revenue for the Department than would the
proposed increase to special inspectors. Ms. Taylor stated that to continue doing business in South
Carolina, her small company will have to absorb $10,000 in increased fees, based on the 1,000 elevators
its employees inspect. Because the State has chosen not to increase its inspection fees for renewals of
annual operating certificates, Ms. Taylor contends that she cannot increase her inspection fees to pass
along to her customers the increase in the Department's charge for reviewing special inspectors' reports
and remain competitive.
19. The Department replied that the fee increases are targeted to where the actual costs are being
incurred. The Department's costs to perform routine annual inspections have not increased. Rather,
the increased costs experienced by the Department due to increased complexity of new elevators are
primarily associated with new construction permits and their accompanying initial operating certificates.
The State is currently subsidizing special inspectors, in essence, because the $25 charged for reviewing
their reports is $10 less than the actual $35 review cost. This program has been operating at a loss. The
proposed fee increases will not completely close the gap between revenues and expenditures.
Nonetheless, the proposed fee increases will narrow the gap while targeting costs.
20. Based on the record, the proposed regulation will have no detrimental effect on the environment or
public health.
CONCLUSIONS
1. S.C. Code Ann. § 1-23-111(B) (Supp. 2000) provides that the Administrative Law Judge shall
conduct a public hearing and issue a written report on the need and reasonableness of a proposed
regulation, which "shall include findings as to the need and reasonableness of the proposed regulation
based on an analysis of the factors listed in Section 1-23-115(C)(1) through (11), except items (4)
through (8), and other factors as the presiding officer identifies. . . ." Generally, this report should
evaluate the effects on public health, environmental welfare, and economic activities. The findings
should address the purpose and description of the regulation, determination of need, reasonableness,
cost-benefit analysis of the means used to achieve the stated purpose, uncertainties of any benefits,
qualitative and quantitative analysis, and the effect on the environment and public health.
2. To determine if a regulation is reasonable, inquiry must be made as to whether the regulation has a
rational basis or is rationally related to the end sought to be achieved and the purpose of the enabling
legislation. Hunter & Walden Co. v. S.C. State Licensing Bd. for Contractors, 272 S.C. 211, 251
S.E.2d 186 (1978); Young v. S.C. Dep't of Highways and Public Transportation, 287 S.C. 108, 336
S.E.2d 879 (Ct. App. 1985). That is, a regulation is valid as long as it is reasonably related to the
purpose of the enabling legislation. Young v. SCDHPT, 287 S.C. 108, 336 S.E.2d 879 (Ct. App. 1985).
A regulation which is beyond the authorization of the agency's enabling legislation or which materially
alters or adds to the law is invalid. Society of Professional Journalists v. Sexton, 283 S.C. 563, 324
S.E.2d 313 (1984); Banks v. Batesburg Hauling Co., 202 S.C. 273, 24 S.E.2d 496 (1943).
"Reasonable" is defined as "[f]air, proper, or moderate under the circumstances." Black's Law
Dictionary, 1272 (7th ed. 1999). The word has been further defined to mean "agreeable to reason under
the facts and circumstances." Ellis v. Taylor, 311 S.C. 66, 427 S.E.2d 678 (Ct. App. 1992). Proposed
Regulation 71-5600 does not lessen or enlarge the powers of the Department, but is reasonable and
necessary for the Department to lessen the gap between its revenues and the expenses directly related to
processing inspections and permits.3. The Department proposes this regulation pursuant to its authority to charge and collect fees as set
forth in S.C. Code Ann. § 41-16-140 (Supp. 2000). This section provides:
The commissioner shall promulgate regulations to charge and collect fees for inspection, permits, and
licenses. Fees may be set by regulation not more than once each year. Fees established by the
commissioner must be based upon the costs of administering the provisions of this chapter and shall
give due regard to the time spent by department personnel in performing duties and to any travel
expenses incurred. (Emphasis added.)
4. The fees proposed by the Department correlate with the administration costs of the elevator
inspection program. Through the proposed fee increases, the Department is tailoring fees more closely
to cost drains within the administration of the program rather than proposing blanket increases. Thus,
the Department's experience since fees were initially set in 1986 has resulted in more precise targeting
of fees to costs.
5. Pursuant to S.C. Code Ann. § 41-16-140 (Supp. 2000), the proposed regulation increases inspection
and permitting fees in a targeted manner based on the Department's processing costs. Specifically, the
Department proposes (1) to increase inspection fees for all classes of construction permits and initial
operating certificates, (2) to increase inspection fees for temporary permits, (3) to increase the fee for
processing reports from licensed special inspectors in conjunction with issuing annual operating
certificates, and (4) to implement a new fee for reinspection due to failure to document corrective action
after deficiencies are noted during the annual inspection.
6. The Department has not increased fees during the one-year period prior to the proposed regulation.
In fact, the Department has not increased elevator fees in fifteen years. The fees are based on the costs
of administration with due regard to the time spent by Department employees in executing its duties.
The regulation is needed because the current fees do not cover the costs of administering the program.
As the program has evolved, the Department has gained a better understanding of where the costs
actually are and where time is spent by its employees. The Department has chosen to implement
targeted fee increases based on actual costs rather than an across-the-board increase, so as to make the
regulation more reasonable. The targeted fee increases are aimed at those areas that do not pay for
themselves under the current fee structure.
7. The special inspector fee increase is the only portion of the proposed regulation which was opposed
at the public hearing. The Department's cost for processing a report is $35, whether from a State
employee or from a privately employed special inspector. Because the $25 fee charged to special
inspectors is currently $10 less then the actual review cost, the $10 increase in this fee is reasonable and
necessary. Appropriations have not increased to keep up with costs. Since at least 1996, the Office of
Elevator and Amusement Ride Safety has been constantly operating at a loss but has chosen to make up
the difference by redistributing funds from other programs. This is no longer feasible. The fee increase
for processing reports of special inspectors and issuing annual operating certificates resulting from their
inspections is narrowly tailored to the costs of the program. Thus, it is both needed and reasonable.
8. Moreover, the evidence demonstrates that the proposed regulation rationally achieves the mandate
with which the Department was charged and enables the Office of Elevator and Amusement Ride Safety
to narrow the gap between the fees charged and the costs of administering the elevator inspection
program. While this tribunal understands and respects Ms. Taylor's concerns that the proposed
regulation will increase her costs of doing business, she offered no evidence that the fee increase for
reviewing special inspectors' reports was not based upon the costs of administering the program.
9. The Department complied with all notice and procedural requirements of the APA and the ALJD
Rules of Procedure. Ms. Taylor raised concerns that the end users who will ultimately pay the fee
increases and be most impacted by the proposed regulation did not have adequate notice and
opportunity to voice their concerns. She stated that the building owners and business managers whose
elevators are inspected did not realize and had no reason to know they would be affected. Thus, those
who would likely oppose fee increases filed no comments with the Department. Notice was, however,
properly published in the State Register in compliance with the procedural requirements of the APA,
which provided an opportunity for any interested persons to respond.
10. The promulgation of the proposed regulation complies with the express mandate of S.C. Code Ann.
§ 41-16-140 (Supp. 2000). The proposed regulation is not beyond the authorization of and does not
materially alter or add to the enabling statute, S.C. Code Ann. § 41-16-140 (Supp. 2000). Rather, the
proposed regulation lies within the scope of the authority conferred to the Department and is targeted
based on actual costs and the time spent by Department employees in performing their duties.
Therefore, the proposed regulation is valid under the "need and reasonableness" analysis.
11. Nonetheless, it is recommended that the Department modify the regulation to eliminate the
confusion surrounding initial operating certificates, as set forth in Finding of Fact 11. If there are
situations where an initial operating certificate would be required independently of a new construction
permit, the regulation should be modified to make this distinction clear. Alternatively, if there are no
circumstances when an initial operating certificate would be required separately from a new
construction permit, then the regulation should be modified to delete the reference to initial operating
certificates under Section (2)(A). Notwithstanding the suggested modifications, I conclude that
Proposed Regulation 71-5600 is consistent with S.C. Code Ann. § 41-16-140 (Supp. 2000), and
reasonable and necessary for the Department to execute its charge under the South Carolina Elevator
Code, S.C. Code Ann. §§ 41-16-10 et seq. (Rev. 1986 and Supp. 2000).
____________________________________
JOHN D. GEATHERS
Administrative Law Judge
Post Office Box 11667
Columbia, South Carolina 29211-1667
May 8, 2001
Columbia, South Carolina
1. Inspection fees for construction permits are set by a progressive scale based on the contract price of
the project. Thus, the Department proposes a $50 incremental increase for each class. See Section
(1)(A). |
