Business
11:19 am
Mon September 26, 2011

Oregon plans to charge for the convenience of online commerce

SALEM, Ore. – When you renew a professional license or pay a government fee, you’re more likely these days to do it online. Now, the state of Oregon is banking on your willingness to pay extra for that convenience.

The state is getting ready to shift to a new model of funding many of its online services. But it's not clear yet who will pay the new fees, or how much they'll cost.

Oregon pays a high-tech company more than $2.5 million a year to run the state's website. But Oregon is switching to a different company, and the state won't pay it one dime.

Who will? You will. That is, if you conduct business with the state online.

You can see an example of this in a place you might not expect to find in a story about technology: Silver Falls State Park, in the Cascade foothills east of Salem. The falls are a bit low at this time of year, but the campground is still fairly full.

Like most people here, Kristen Swafford of Forest Grove made a reservation for her family.

"We did that a while ago to make sure that we got a spot," she said.

Swafford made her reservation online. And she paid an $8 fee for the privilege of having a reserved spot. That's above and beyond the actual cost of the campsite. She says she's okay with the fee, but not all campers are.

"It's already $24 to $28 a night, depending on where you go," says Allen Shive, who brought his RV here from Canby. "So another $8 on top of that, it's kind of... I don't even know why they do it."

They do it because that's what the contract calls for. The Oregon state park system has a deal with a California-based company called Active Networks to run the online reservation system. Of that $8 reservation fee, the state keeps $2 and the company gets the other $6.

In a nutshell, that's the model the state is moving toward for many other online transactions.

"Most of the transactions will have no fee whatsoever," says Wally Rogers, the E-government manager for the state of Oregon. But as many as 30 percent will, he says.

He's overseeing the transition from the old contract -- which saw the state shelling out millions of dollars a year to Hewlett-Packard -- to the new contract. It will cost the state nothing.

The company that got the contract is called NIC, which runs so-called e-government portals in about two dozen other states. The Kansas-based NIC employs what Rogers calls "the self-funding model."

That means the company makes its money entirely from convenience charges levied on online transactions. Rogers says that model means NIC has the incentive to make all aspects of the state's web portal better, not just the ones that generate income.

"Because the more traffic that comes online, the more likely then they're also to say 'Oh, I want to renew my license here and I know I can do it online and it works real well and I like this site,'" he says.

So if you live in Oregon, you might be wondering, what does this mean to me? Well, it's not really clear yet.

NIC spokeswoman Angela Skinner declined to reveal what fees the company hopes to charge in Oregon. She cited ongoing negotiations with the state.

I then asked her about the fees NIC charges in Idaho, which has contracted with NIC for more than a decade for professional license renewals and other items. The state of Idaho doesn't maintain a central list of what convenience fees NIC charges, and Skinner wouldn't reveal those, either.

But Bill Farnesworth who works for Idaho's Chief Information Officer says the deal with NIC allows the state to offer online services it couldn't otherwise afford.

"We've been doing this for quite a while with them, and it's been really, as far as I'm concerned and the state I think is concerned, really successful," he says. "We definitely couldn't have the budget to do all this stuff up front."

In Oregon, like in Idaho, the state will technically get the final say on what kinds of convenience fees will be charged. And while Oregon officials haven't yet settled on those fees, a list circulated to members of an advisory panel includes more than 100 possible types of transactions that NIC has dubbed "revenue generating applications."

This list includes everything from business license renewals to charging funeral homes a convenience fee to register a death online. But state officials say the bulk of online convenience fees will come from sales of DMV records.

Alex Hageli is with the insurance industry trade group Property Casualty Insurers Association.

"We don't have a problem with companies making money or profit or whatever," Hageli says.

But he says the fees NIC has levied in other states adds up to millions of extra dollars a year that insurers pay for public records.

"Yeah, it's free to the state, but these costs will be eventually passed on to consumers in the form of higher insurance costs," Hageli says.

And it's not just large insurance companies that would pay more in convenience fees, says Oregon Republican state representative Kim Thatcher.

"I know that there are a lot of small businesses that also use these records and their cost would be going up substantially," she says. "And that would be a burden on them of course and increase their cost of doing business."

The new contract with NIC is set to take effect in July of next year.

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