THE NEWS SERVICE OF FLORIDA: Department of State effort to deprivatize UCC filing system quietly ready for floor votes

Apr 9, 2009


THE CAPITAL, TALLAHASSEE, April 8, 2009……..In a reverse of the usual scenario – where government looks to shed costs by privatizing what it does – the state may be on the verge of “deprivatizing” something that it used to do and wants to do again because it actually makes money.

A proposal that has quietly worked its way through the legislative process and is ready for a vote in both chambers would put an early end to a contract with a private vendor that processes Uniform Commercial Code filings in Florida. UCC filings are lien records, filings made by creditors to declare their interest in the property of a debtor.

Since 2001, those filings in Florida have been recorded and maintained by a private vendor, Tallahassee-based Image API, Inc. While the contract doesn’t expire until 2011, the Department of State has proposed moving the work back in-house, a move included in an agency bill (SB 1780) approved Tuesday evening by the Senate Ways and Means Committee and ready for the Senate floor. A similar House version also cleared its last committee Tuesday.

In a Republican-led Legislature where privatization is the norm – just this week the House’s top budget committee moved forward with an effort to approve a state mental hospital in Baker County – why the move to deprivatize?

Because the UCC filing processing makes money for Image API and the Department of State figures it could use the roughly $1.1 million in net new revenue it estimates it could generate by running the system itself. The contract pays Image API by allowing it to keep just under 38 percent of receipts.

“We were asked to look for areas to create efficiencies, and in evaluating that contract we felt that we could deliver those services in-house,” said Department of State spokeswoman Jennifer Krell Davis.

Image API is obviously not simply sitting by, and while the company didn’t speak against the bill in the Ways and Means Committee, a representative of the Florida Bankers Association did.

That’s partly because the association gets a cut of the money too – as a quality control agent making sure the system works well, an arrangement that was seen as logical because it’s mostly bankers who use the UCC system and they have an interest in making sure it functions efficiently. But it’s also because the privatized system does work well, said Anthony DiMarco, director of government affairs for the Florida Bankers Association.

“If there was a problem with the system, we’d jump all over that,” DiMarco said Wednesday. “There’s been no showing that this doesn’t work.”

DiMarco said the company and the bankers believe that the state has dramatically overestimated how much it will bring in if it takes over the contract – because, DiMarco said, state officials have underestimated the cost of running it. Department of State officials say they think they can run the system for about $500,000. If they were to collect $1.7 million, that leaves a net positive impact to general revenue of $1.1 million, the agency told lawmakers.

DiMarco said that isn’t likely – and banking officials note that Image API recently spent a lot of money on a large upgrade that the state couldn’t match.

DiMarco said it’s not clear the state has the computer capabilities to take it over anyway – and bankers are terrified that the system might have glitches if the state can’t get a new system up and running quickly. The bill would have the state take the system back July 1.

“We’re afraid it’s not something they could get ready by July, this isn’t something where you can just turn a switch,” DiMarco said. “If this system gets messed up, it may affect lien filings … and loans.”

The Senate bill is now ready for the calendar. A similar House bill (HB 5017) is already on the full House calendar with a unanimous vote by the full appropriations council Tuesday.