Lawmakers pump brakes on DMV plan to pay back $1 technology fees that were ruled unconstitutional

The Nevada DMV’s plan to pay back millions of collected $1 fees — charges declared unconstitutional by the state Supreme Court — is temporarily on ice after state lawmakers said they want additional buy-in on the plan.

Members of the Interim Finance Committee on Wednesday opted to not accept the agency’s plan to transfer $6 million in collected technology fee payments into a new refund budget account and attached disbursement plan. IFC Chair Sen. Chris Brooks (D-Las Vegas) lauded the proposal as a “creative solution” but said the committee wanted explicit approval from the court and state Senate Republicans (who filed the initial legal challenge over the fees).

“Once we pull the trigger on this, this work program, then it's out of our hands until it falls in our lap,” Brooks said.

The required payments are the result of a May decision by the Nevada Supreme Court finding that two taxes — the DMV $1 fee and a higher payroll tax rate — were unconstitutionally extended in 2019 beyond their set-in-statute expiration dates without a two-thirds vote, required for any tax bill passed by legislators. The lawsuit was filed by all members of the state Senate Republican caucus shortly after the close of the 2019 legislative session.

But while the Department of Taxation has made progress on refunding unconstitutionally collected payroll tax — reporting last week that it had refunded a total of $30.6 million to more than 22,600 businesses — the DMV has faced more roadblocks in its task to return millions of $1 transaction fees to customers.

Multiple legislative solutions to pay back the fees were proposed but ultimately dropped in the final days of the 2021 legislative session, with exasperated lawmakers finally deciding to give the DMV a $7.8 million check to pay back $5.9 million in transaction fees and related costs.

Nevada DMV Director Julie Butler briefed lawmakers on the agency’s plan — it would run a customer query and send postcards or a letter to all individuals who paid the technology fee in the 2021 fiscal year, giving them instructions on how to claim their refund. Those individuals could log onto a “secure website” and select their refund preference — either receiving it through an electronic transfer (Zelle), or opting for a paper check. 

Individuals also could opt out of receiving a refund and allow the DMV to keep the technology fee as a “donation,” and customers who did not respond within a certain amount of time would have their refunds kept in the state’s Unclaimed Property system. Those who paid multiple installments of the $1 fee (such as for multiple vehicles or trailers) would receive their refund and interest in a single payment.

Butler said those steps were necessary because the cost of simply sending a $1 paper check to affected customers in the state could end up costing close to $50 or $60 per check, and the agency wanted to give customers the option to opt-out after receiving several calls from customers indicating they were not interested in receiving a refund.

Asked whether the plan had the blessing of the court or attorneys for the state Senate Republicans who filed the initial lawsuit, Butler said their approval wasn’t necessary. She said she made an error in telling legislators in the final days of the 120-day session that any repayment plan needed the court or GOP buy-in, and that the agency wanted to move quickly to “get these refunds out to our customers as quickly as possible.”

“I do know our attorney has talked about our plan with opposing counsel, (but) whether or not they like the plan, it's really the department’s plan to comply with the court order,” Butler said. “We believe it's a good plan, and the more that we dither around with this, the longer it's going to take us to effectuate these refunds.”

But that course of action was questioned by Assemblywoman Maggie Carlton (D-Las Vegas), who said she wanted the buy-in from the Republicans who challenged the initial tax extension, lest they bring another lawsuit forward for not following the terms of the state Supreme Court’s order.

“I think we need to get everybody on the same page saying, ‘This is the way to move forward,’ so that we can get this finished and over and done with,” Carlton said. “We're already spending more money on it than we probably should, money that could be going to a lot of other places.”

Butler said she had spoken with Republican Senate Leader James Settlemyer (R-Minden) in May, but that his suggestions were untenable — issuing a credit on future transactions could end up benefiting new residents or other individuals who did not pay the fee, and the programming costs of adding a $1 credit to existing charges would cost “significantly more” than the plan proposed to legislators.

“We feel that this is the best solution in a bad situation,” she said.

Ultimately, Brooks instructed the DMV to bring the item back during the next IFC meeting, saying that more “conversations” needed to take place before he was comfortable moving forward with the plan.

“I think there is more work that needs to be done to give us the level of comfort we need to make sure that we're all on the same page, and that we are going to satisfy all parties involved, including the taxpaying Nevadans,” he said.

Lawmakers introduce last-minute budget maneuvers for more financial flexibility as session draws to a close

Despite the sound and fury that accompany the end of every legislative session, lawmakers only have one actual constitutional requirement to fulfill before the end of the 120 days of session — pass a balanced state budget.

Closing a roughly $9 billion budget is rarely an easy task, and 2021 has brought a host of new challenges — better-than-expected tax revenue forecasts, a coming windfall of $2.7 billion in federal American Rescue Plan dollars and a major state Supreme Court ruling on extended payroll tax and DMV fees blowing a roughly $200 million hole in the budget. 

During the final week of the legislative session, budget committees have introduced several bills aimed at providing more financial flexibility for legislative priorities — measures sometimes derided as budget “gimmicks” aimed at freeing up tens of millions of dollars to help balance the budget. These include measures extending a $1-per-DMV-transaction technology fee until 2026 after a previous iteration was ruled unconstitutional, and suspending a required money transfer to the state’s Rainy Day Fund.

Here’s a closer look at the last-minute budget moves being considered by lawmakers:

DMV fee extension, Highway Fund extension

Members of the Assembly Ways and Means Committee on Tuesday discussed AB488, which extends the $1 DMV technology fee through June 2026 and retroactively permitting the fee from the end of June 2020 onward.

The previous extension in 2019 was recently ruled unconstitutional by the Nevada Supreme Court because it increased collection of public revenue but did not pass out of each house of the Legislature with a two-thirds majority. It fell one vote short of that threshold in the Senate back in 2019.

Following that ruling, the DMV now lacks a dedicated revenue source to fund IT upgrades meant to shift more transactions online and make DMV interactions easier for the public. The state also has to refund the technology fees assessed during the time that the fee was unconstitutionally extended. During the Tuesday hearing, legislative staff said the state owes approximately $5.5 million in refunds.

Through AB488, lawmakers are seeking to (with a two-thirds majority in each house) reinstate that funding source for the IT upgrades and eliminate the need to refund the millions of $1 fee charges to motorists. Assemblywoman Maggie Carlton (D-Las Vegas), who chairs the money committee, noted that processing and disbursing the refunds could be more expensive than the refunds themselves.

“It's a $5 million refund, and it's going to cost us $8 million to give it back. And that impacts other services in the state,” she said. “I believe it is our responsibility to weigh those as we move forward and make the best decision that we need to make for the people of the state.”

Carlton also said that the refunds could be especially costly if the department were to use a back-credit process programmed through its own systems, following a suggestion from Assemblywoman Jill Tolles (R-Reno).

“The programming involved, in the investigations that we have done, could cost even more than the actual refund itself,” Carlton said. “You're basically putting the refund on steroids by trying to do all the programming … so don't ever go down the programming road with DMV because it is a very long, twisty, dark, scary road.”

However, the measure faces steep opposition from some Senate Republicans, who filed the lawsuit against the original extension of the fee.

In an atypical move, Sens. James Settelmeyer (R-Minden) and Keith Pickard (R-Henderson) both testified against the bill during the contentious Tuesday hearing.

“Judgment has been entered by the District Court in favor of the plaintiffs in the two-thirds case and, in particular, the judgment in favor of the taxpayers and the fee payers,” Settelmeyer said. “I don't want to belabor this point. I'm tired of litigation. People deserve their money back.”

At roughly the same time on Tuesday, members of the Senate Finance Committee discussed and unanimously passed SB457, a measure that allows the DMV to use a greater percentage of highway funds to replace the DMV’s current technology and bring the majority of DMV services online over the course of the next four years.

The bill would increase the percentage of highway funds the DMV could use for administrative costs from 22 to 27 percent, and though the bill originally would have applied to the 2020-2026 fiscal years, a conceptual amendment made it so the bill only applies to fiscal years 2022-2026.

“During the pandemic, it became clear to us that [bringing DMV services online] needed to be our number one goal, as was the same with many businesses and state agencies,” said Julie Butler, the Director of Nevada Department of Motor Vehicles. “This bill is needed to continue our progress on this critical project for the department and for the state of Nevada.”

But, when DMV representatives said they did not expect to go above the 22 percent threshold for fiscal year 2020-2021, Sen. Ben Kieckhefer (R-Reno) noted that the retroactive provision seemed unnecessary.

“I would understand the need to increase it to 27 percent in the upcoming biennium, but for our current biennium. If we weren't going across over 22 percent the retroactive piece seems unnecessary,” Kieckhefer said.

Rainy Day Fund transfer suspension 

Members of the Assembly Ways & Means Committee on Tuesday also discussed AB487, which suspends an automatic transfer of 1 percent of the state’s projected revenue to the Rainy Day Fund for each of the next two fiscal years.

The suspension is intended to give lawmakers more financial flexibility ahead of the finalization of the state’s budget as the state awaits federal funds from the American Rescue Plan.

“We know there are dollars coming,” said Carlton. “But we also know that we have to fund the government by May 31, so we can't pretend that money is going to be there. We have to actually use real money that is available right now.” 

According to projections from the Economic Forum in May, the amount of money that would no longer be transferred to the Rainy Day Fund if the bill is passed is $43.4 million in the upcoming fiscal year and $46.4 million in the following year, meaning lawmakers could have approximately $90 million in additional funds to spend before the session ends.

Lawmakers will be unable to backfill the fund with federal dollars, though. Spending guidance from the U.S. Treasury released earlier this month indicates that states will not be allowed to deposit American Rescue Plan funds into their reserve accounts.

Shortly after the hearing, the bill was voted out of the committee on Tuesday and awaits a vote on the Assembly floor.

Reporter Riley Snyder contributed to this report.

DMV to ask for four-year extension on $1 transaction fee to help fund shift to more online services, system upgrades

The Nevada Department of Motor Vehicles plans to again ask the Legislature for an extension of a $1 per transaction “technology fee,” for at least four years, in part to help transition the agency to a new online-focused approach.

DMV leadership briefed state lawmakers on an interim state budget panel Monday on their plans for an estimated $54.3 million initiative establishing a “Virtual Field Office,” designed to transition the bulk of DMV operations and customer services over the next four years to a primarily online platform.

DMV Director Julie Butler said continuation of the $1 technology fee — which brings in about $7 million a year — was a necessary funding component given expected reductions in agency funding over the next two years of the budget cycle.

Although the technology fee and planned system upgrade have been in the works since 2015 — derailed by a failed multi-million dollar contract with a private vendor — Butler said that the DMV was taking a “new effort and new approach” to the project, setting a four-year implementation timeline to not just update the department’s internal computer software, but also to redirect the agency toward an online-first approach.

“The staffing challenges coupled with the COVID-19 pandemic have spotlighted the need for the department to radically change its service delivery,” she said during the meeting. “No longer can we be a brick and mortar operation that happens to have a website for a few transactions. We need to be an online operation where customers only come into the office as the exception rather than the rule.”

The planned transition away from in-person services to online has been hastened by the COVID-19 pandemic — Butler presented information showing that the DMV served more than 1.1 million customers in the last two quarters of 2019, but only 561,000 through the last two quarters of 2020. She said long wait times and difficulties in making appointments was caused by an abnormally high number of no-shows to appointments, estimating that about half of appointments ended with customers not showing up.

In an interview, Butler said that the DMV’s software systems “are still ancient by technology standards,” but that the department had opted to shift course in 2019 and go in a different direction than the planned system upgrade first proposed in 2015 — when lawmakers initially granted approval of the $1 “technology fee” assessed on all transactions from car registration to license renewals to help fund a planned five-year system modernization project.

But a state audit in 2018 found that a contractor, Tech Mahindra, was months behind schedule and not fulfilling its requirements under the contract, such as providing inadequate staffing levels and missing deadlines for project documentation. The contract was ended by the state in early 2018, four days after release of the audit report.

Butler said she opted to not put the contract out to bid in 2019 (shortly after coming aboard as new DMV director under Gov. Steve Sisolak) to instead focus on a holistic approach toward how the agency approached its mission, ending up with a four-year “roadmap” of seven initiatives that Butler said would transform the agency from “custom developed software and into modern technologies that support the department's vision of customer service.” 

The initiatives include moving to a cloud-based technology system, several operational and organizational changes, a replacement backend mainframe, a thorough data cleansing of information kept by the system and creation of a “Virtual Field Office” to direct the bulk of customer transactions and needs online, as opposed to in person.

The estimated $54.3 million price tag over the two years of the budget cycle are included as a proposed “one-shot” appropriation, meaning that it isn’t directly built into the agency’s specific budget account and would instead be introduced as part of a larger appropriations bill near the end of the session. Though Sisolak and state lawmakers have urged flexibility on the budget owing to uncertainty related to the COVID-19 pandemic, Butler said she hoped lawmakers included funding for the project in the final budget.

“The way that the department does its business has been based on face to face interaction for many many years, and what the pandemic has shown us is it can't continue,” she said. “And so you know I'm really hoping that the Legislature understands that and sees that and sees fit to fund it.”

Unlike most state agencies, the DMV isn’t funded out of the state’s “general fund,” which is the main budget account funded by sales, gaming, payroll and other familiar types of tax. It’s instead funded through the state’s Highway Fund, the primary budget account for the agency funded through gas taxes, federal transportation dollars, bonds and other highway-focused revenue sources.

The Nevada Department of Transportation and a handful of other state agencies and operations are funded out of the Highway Fund, but that source of funding has been increasingly squeezed in recent years.

“The cost of construction materials has gone up over time, cost of labor has gone up over time, and fuel taxes have stayed the same for many, many years,” she said. “And as those inflationary pressures creep up, fuel taxes are not keeping up with that. It is definitely a concern to those budget accounts.”

The DMV anticipates receiving about $148 million from the state’s Highway Fund over the two years of the budget cycle, but that could vary based on the actions of the 2021 Legislature. 

It’s complicated, but dollars from the Highway Fund that can be allocated to the DMV every year are capped at a certain percentage, which was raised in recent years to account for the computer system upgrade. But lawmakers in the 2020 special session opted to balance the budget in part by transferring all proceeds from the car registration tax to the state’s normal budget fund, which is usually split 75-25 between the two budget accounts.

As it stands now, state law will reset the car registration tax balance back to normal on July 1. If lawmakers again tap into that tax to help balance the budget but also move it out of the Highway Fund, the DMV says its share of those dollars will decrease to a level that will either require an increase in its spending cap or the closure of DMV office facilities to stay within that limit.

The department’s budget requests (which also include the elimination of 64 vacant positions department-wide) are assisted by the existence of the $1 technology fee — but its future could be in jeopardy.

At the end of the 2019 Legislature, state Senate Republicans filed a lawsuit challenging what they alleged were unconstitutional votes to extend the deadline of otherwise soon-to-expire rates in both the state payroll tax and the DMV transaction fee. That case is still pending before the state Supreme Court.

Butler said the agency could theoretically implement the project without a continuation of the technology fee, but that the roughly $7 million annually raised by the fee helps diversify funding sources and lessens budgetary pressures on other operations of the agency.

“Realistically speaking, IT systems cost money,” she said. “And the changes that we need to make to support our business, those don't just happen without a funding source. So, I guess you can kind of read between the lines there, but to maintain and do the business that we need to do is tremendously expensive, and we need our dedicated funding source for that.”

New same-day and automatic voter registration laws helped drive record participation in Nevada election

People wait at the DMV office in Henderson on Tuesday, Jan. 2, 2018

In October, the secretary of state reported there were more than 1.8 million active registered voters in Nevada, a record number for the state. Record registration numbers coincided with record participation, as the state has reported more than 1.3 million Nevada voters cast ballots in this year’s election.

And those October numbers aren’t a complete picture of how many active registered voters had the opportunity to participate in Nevada’s election, as thousands registered in-person on Nov. 3 through the state’s new same-day registration system.

Same-day voter registration and automatic voter registration were two major changes that took effect this year, compounding changes brought on by the pandemic-driven shift toward mail-in voting and making this past election unlike any other in Nevada.

But with these new opportunities for registration there still came inconveniences.

Physical DMV offices closed in the state on March 17 as a result of the coronavirus pandemic and remained largely closed through June 15, limiting transactions that are necessary for many individuals in the state to register to vote. The Nevada Republican Party has pointed to individuals who say they were prevented from voting because they were new residents and were unable to obtain IDs needed to register on Election Day.

Representatives of the department said they aren’t aware of anyone who was turned away or denied service. They noted they’ve been working to provide services for anyone who hadn’t been able to access DMV services during closures.

In Nevada, Oct. 6 was the deadline for registering to vote in-person or by mail, and Oct. 29 was the deadline to register to vote online. To register online or in-person during early voting or on Election Day, individuals must have a Nevada state ID. 

From Oct. 10 to Nov. 3, the DMV in Nevada expanded walk-in hours for new residents. Typically, without an appointment, new residents are able to walk in on Saturdays from 7:30 a.m. to 3:30 p.m., but the schedule change added two-hour walk-in periods every morning, Monday through Friday. On Election Day, the DMV also allowed new residents to walk-in all day as long as they surrendered an out-of-state license or ID.

DMV Director Julie Butler said these decisions were made to help address a “backlog” of new residents who were unable to access the DMV during office closures.

Automatic Voter Registration

Tens of thousands of new voters were registered through the state’s new automatic voter registration (AVR) process this year, although reduced DMV transactions appear to have dampened the impact of the new system.

AVR took effect in January 2020, implementing a system where individuals who complete certain DMV transactions, such as driver’s license renewals, are registered to vote or update their registration information unless they manually opt-out. The deadline for registration through this process was Oct. 6, the same as the deadline for other forms of in-person voter registration.

Based on data submitted to the Legislature’s Interim Finance Committee by the secretary of state’s office, the state has reported 359,603 covered transactions occurring at the DMV from January through September that allowed for new registrations or changes to existing registrations. Of those, 101,723 resulted in a new registered voter. 

Some customers who completed transactions online were still able to be automatically registered during DMV closures from March through June, but the numbers drastically decreased, limiting the number of new Nevadans who could be registered.

January and February brought more than 60,000 covered transactions each month, but in April, when offices fully closed, only 12,319 covered transactions occurred. The AVR process can still take place online through the MyDMV system, but there are fewer transactions that can be completed online than can be completed in-person. Additionally, deadline extensions for registration renewals and other transactions reduced the number of transactions necessary during the spring and summer months.

Automatic registrations increased again once when physical DMV offices were able to resume more operations, with nearly 56,000 covered transactions occurring in August and 72,000 occurring in September. 

Beyond pandemic-related barriers, gaining access to the DMV in Nevada in order to secure a state ID can be difficult for many, including elderly residents and others who do not drive and don’t have transport to get to an office. Additionally, people of color and individuals who live below the poverty line are more likely to live a long distance away from a DMV office.

Post-election, and even before the measure passed in 2019, some have claimed that automatic registration enables non-citizens to register, allowing them to receive mail-in ballots this year, but the DMV says it has multiple safeguards in place to ensure that non-citizens are not registered through the system.

Any customer who checks the box indicating they are not a citizen on a DMV application is automatically excluded from the system, whether or not they opt out. Additionally, any paperwork such as a permanent resident card which must be submitted to receive a license deems a customer ineligible to vote, and that customer will be excluded from the system and provided with a Notice of Ineligibility print-out. The same system is used to ensure that individuals who will not be 18 by the next election are not registered.

Driver Authorization Cards, which authorize driving for people who cannot meet the proof of identity requirements for a driver’s license or state ID and are commonly utilized by non-citizens, are also excluded from covered transactions.

New residents

New Nevadans’ participation in the election also hinges on DMV operations, as those residents must obtain Nevada IDs in order to register online or in-person during early voting or on Election Day.

DMV officials told The Nevada Independent that 54,441 new residents surrendered out-of-state IDs and received temporary or permanent Nevada identification from January through October of 2020. That’s below the typical pace — between 2017 and 2019, the average number of new residents who surrendered IDs statewide each year was 101,362. 

The number of new residents able to take advantage of DMV services was affected by the shutdown of in-person services this year, and follows a similar trend to the covered AVR transactions.

In January and February, more than 8,000 new residents surrendered out-of-state IDs each month. In March, that number was cut in half, and in April, the state was not able to provide any services to new residents as these transactions cannot occur online and must happen in-office.

Limited operations resumed in May for those seeking commercial driver’s licenses, and the DMV offices reopened for in-person services June 15. While July and August were still relatively slow compared to pre-pandemic operations, on Sept. 19, the DMV began offering new residents services on Saturdays.

In October, with expanded hours to cater to a wave of new residents hoping to secure state IDs prior to the election in order to register and vote, more than 12,000 residents surrendered out-of-state IDs.

Among other allegations included on the Nevada Republican Party’s Twitter account regarding voter fraud and disenfranchisement were stories from new residents in Nevada who said they were denied temporary IDs when they visited the DMV on Election Day. In a series of tweets from Nov. 5, the Nevada GOP account listed new residents who said they had attempted to get IDs but were unable to get appointments.

The DMV pushed back on those reports.

“To our knowledge, DMV offices did not turn away any new resident due to a lack of appointments or capacity to process their transactions,” said Kevin Malone, a spokesman for the DMV.

Of the 12,686 ID surrenders during the month of October, 6,273 happened during the early voting period from Oct 17-30. Additionally, the DMV reported receiving 908 surrendered IDs from new residents on Election Day alone.

Same-day registration

Tens of thousands of voters were able to participate because of same-day voter registration, a policy passed in 2019 that first took effect during the primary election this June. The new law  allows individuals to register or update their registration even after the in-person and online deadlines in October.

During early voting and on Election Day, 64,286 Nevadans participated in same-day voter registration, 35 percent of whom registered as Democrats, 36 percent as Republicans, and 29 percent as nonpartisan or with smaller parties. These registrations resulted in 27,646 newly registered voters, including 10,878 Republicans and 9,368 Democrats, and 36,640 voters with updated information such as a new address or party affiliation.

Voters who register through this method cast provisional ballots, which are filled out in person and look like regular ballots but cannot be counted until election officials verify a voter is qualified to vote, has not already voted in the election, and provided all necessary proof of residency, including a current state ID.

These provisional ballots have lengthened the time it has taken to fully report results in the state, something election officials warned would result from the measure before it passed. Advocates for the measure acknowledge that issue, but maintain that the extra opportunity it allows for those who miss initial deadlines outweighs a delay in results.

“With same-day registration, vote centers, restoration of voting rights to the formerly incarcerated, and other updates to our voting system, Nevadans were able to make their voices heard like never before,” Emily Zamora, executive director of the voting rights advocacy group Silver State Voices, said in a press release the night of the election. “Now that voting is over, we must ensure that our registrars and statewide election officials are able to count every single ballot.”

Drivers soon must report odometer readings to DMV as state studies mileage-based tax

A sport utility vehicle driving on the road at sunset

Nevadans will soon have to report their odometer readings to the state when they sell, register or renew registration for a vehicle.

The change, which is set to take effect Oct. 1, stems from AB483, a bill passed this session that aims to collect information about how much Nevadans drive. Lawmakers said the bill emerged during discussions about the challenges the state faces in funding the highway system and roadways.

“There are many factors that are part of those challenges: there is the state aspect and the federal aspect, the growing increase of efficiency in our vehicles, the impacts of inflation, and the rise of alternative fuel vehicles all playing a role,” Democratic Assemblyman Howard Watts testified this spring. “One of the concepts that has been discussed is a form of vehicle-miles-traveled-based funding for our roadways.”

But Watts said more data is needed to understand how a tax based on vehicle usage would be set up. He noted that the data collection is a pilot program and the bill did not propose any specific plan for a miles-traveled tax.

The DMV plans to use the odometer readings from smog tests required in Clark and Washoe counties to increase efficiency. Others will need to submit odometer readings on every vehicle they own, although motorcycles and mopeds are exempt. 

“We’re making the process as efficient as possible,” “Just remember to write down your mileage before you get started,” DMV Director Julie Butler said in a statement. The DMV’s online services and kiosks will accept readings and we encourage everyone to continue using them.”

The data will be used only to compile reports for the Legislature about total miles driven. There are no penalties prescribed for failing to report mileage.

The pilot data collection project is set to run through Dec. 31, 2026.

$1 fee on DMV transactions likely to continue into 2022 amid troubled system upgrade

Customers at DMV

Nevadans are likely to continue paying a $1 fee on all transactions with the Department of Motor Vehicles for at least another two years to help pay for a delayed multimillion dollar computer system modernization project that has no timetable for completion.

Members of a legislative budget subcommittee on Tuesday granted initial approval to the department’s budget for the modernization effort now re-christened as the “System Technology Application Redesign” project, with lawmakers introducing a separate bill last week (SB542) that would extend the fee’s current sunset date of June 2020 to June 2022.

It’s part of an acknowledgement that the DMV’s efforts to update its decades-old computer system over the last four years have fallen flat, with a troubled contract to an outside vendor resulting in more than $12 million in unrecoverable sunken costs leading to a realization that the project will not be completed by its intended 2020 start date, despite previous statements by DMV leaders.

“We are at a critical juncture within the Department of Motor Vehicles, in that we have had two attempts at our modernization effort, and neither one of those has been successful,” DMV Director Julie Butler — appointed to the job in January — told lawmakers last month. “And so we are forced at this point to take a step back and reexamine our approach.”

The DMV is asking lawmakers to approve a budget allowing for a “baseline analysis” of the department’s current technology system and processes, with a handful of planned improvements and the intention to figure out next steps and timeline for implementation by June 2020. But the budget nonetheless requests continuation of the $1 fee paid for by Nevada drivers — which brings in an estimated $7 million per year — and which the DMV said was necessary to ensure available funding for the project in the future.

“Without a dedicated source of funding to modernize, the Department will continue to fall farther behind in its technological capabilities, ability to recruit staff to work on our antiquated IT platforms, and make positive changes that benefit Nevada’s citizens,” DMV spokesman Kevin Malone wrote in an email.

The continued delays on the project have irked some lawmakers, including Republican Assemblywoman Robin Titus, who cast the lone vote against the Department’s budget request on Tuesday. Titus said she was particularly bothered by the millions of dollars lost in a failed contract with an outside contractor and didn’t think the DMV’s new budget proposal had enough safeguards built in to avoid a similar situation.

“Now we’re going to have a new program, and I just didn’t see in that document that they gave us enough accountability, and how we’re going to track that that doesn’t happen again,” she said. “And it just wasn’t acceptable.”

The modernization effort began in 2015 when state lawmakers approved a request by the DMV to upgrade the department’s decades-old computer system through creation of a $1 “technology fee” assessed on all transactions from car registration to license renewals. At the time, the Department said the funds would go to a system-wide effort aimed at updating the department’s “antiquated” technologies based on decades-old technologies such as PowerBuilder and COBOL (Common Business Oriented Language).

The DMV awarded a $75 million contract to upgrade its system to a contractor, Tech Mahindra, in June 2016, but a scathing audit released last year found the modernization effort was months behind schedule and severely understaffed. The department dropped the contract with Tech Mahindra in January 2018.

The system modernization effort was rebranded as the “System Technology Application Redesign,” later in 2018 and again put out to bid, but only one company responded to the request issued by the DMV and was ultimately rejected by the department’s evaluation committee.

Although Gov. Steve Sisolak’s budget originally allocated $50 million over the budget cycle for the system modernization project, the department revised their budget request down to roughly $6.6 million over the budget cycle, with an excess $5.9 million in reserve dollars in the 2021 fiscal year in case the DMV needs the funds immediately to contract with an outside vendor to take up the modernization contract.

Instead, the DMV is asking to spend over the biennium:

  • $118,375 for customer-facing improvement to the DMV’s website, including a redesign and allowing the holders of driver authorization cards — given to individuals not legally in the country — to use the department’s website
  • $2.86 million for data cleansing efforts, including staffing and contractors to conduct a system-wide cleaning and ordering of all of the department’s records
  • $550,000 to contract with an outside vendor for a baseline assessment and “path forward” for the project
  • A $200,000 loan from the state’s Highway Fund (vehicle registration fees) as start-up costs for the other budget items -- to be paid back in the 2021 fiscal year

Butler said during the April hearing on the budget that she was cautious to operate off of any definitive timetable, but said generally the department expected the baseline assessment to occur sometime around January 2020 and to have a request for proposal issued sometime in late 2021.

Extending the $1 fee will likely be easier than might have been thought given the recent opinion by Legislative Counsel Bureau attorneys that extending a scheduled-to-expire tax does not require the typically required two-thirds vote for any tax increase.

The budget account also includes a requirement that the department semi-annually update the Interim Finance Committee on the status of the project. Democratic Assemblywoman Dina Neal, who chaired the budget sub-committee that recommended approval of the DMV’s budget account, said that aspect was important to her and that she was overall happy with the steps the agency is taking.

“They’re taking baby steps to make sure they can get this right, and they can make good decisions. I think the first wise decision was asking for $7 million versus $50 (million), and then trying to figure out what do you need and how do you get to your end result,” she said. “All I know is, I just want accountability for the money. I don’t want money to be wasted for another go-around.”

Butler said earlier this week that she planned to dedicate herself fully to the project — telling lawmakers that the project would have a dedicated team as opposed to assigning it as one of several tasks to DMV employees — while promising personal accountability.

“I cannot afford to take a hands off approach to this project and leave it in the hands of just the office and the contractors we solicit," she said. “We cannot afford to get complacent. We also cannot afford to do things like we’ve always done them.”