Five months into the problematic rollout of Minnesota's new vehicle licensing system, some state lawmakers are calling for a bailout for licensing offices that have faced major financial losses as they've tried to keep up with demand for plates, tabs and titles.

As legislators heard new testimony about long wait times at licensing offices and monthslong processing delays for car titles, there was renewed focus on the surging expenses for the 174 deputy registrars' offices run as private businesses or by cities and counties around the state. Some of those offices' operators say they're pulling money out of their personal savings accounts or relying on their retirement or Social Security accounts to keep their doors open.

While state officials said they are working hard to iron out bugs in the Minnesota Licensing and Registration System (MNLARS), lawmakers are increasingly concerned that the glitches will persist well into 2018 — and that licensing offices could be forced to shut down if the state doesn't step in.

Rep. Rick Hansen, DFL-South St. Paul, said he and a handful of other lawmakers will introduce a bill next year that would set aside $10 million to help compensate the deputy registrars' offices for lost revenue. He likened the debut of MNLARS to hitting an iceberg — and said he's worried the impact will be particularly destructive for local offices that rely on the system.

"I think it's really important that we make the deputy registrars whole for their costs that have been incurred through no fault of their own," he said in a House committee hearing on MNLARS last week. "They got hit by the iceberg, too."

Other solutions mulled

Other lawmakers are pondering additional solutions. Rep. Dave Baker, R-Willmar, said he's drawing up a bill that would do more to redistribute to deputy registrars' offices the tens of millions of dollars in licensing fees collected by the state.

"Your voice is loud and clear: you should not have gone through what you are going through," he said after listening to testimony from deputy registrars. "For that, the state of Minnesota owes you a great apology."

The state spent a decade preparing to replace its 30-year-old licensing system with MNLARS, an upgrade officials said would speed transactions and improve customer service. But almost immediately after the late July rollout, offices around the state were reporting regular system slowdowns and logging a growing list of problems. Deputy registrars found they couldn't help customers transfer specialty license plates or ensure that auto dealers could quickly get paperwork processed after a sale.

For months, officials with the state Department of Public Safety and Minnesota IT Services, along with Gov. Mark Dayton, maintained that many of the problems were isolated and that the vast majority of transactions were running smoothly. But by mid-November, still facing a barrage of complaints from residents, deputy registrars, auto dealerships and lawmakers, those leaders began offering apologies and promising change.

With one top developer on leave, the state's technology office hired a new director to better connect deputy registrars with the state and decided to work with an outside firm for the second phase of the MNLARS rollout. Under a $26 million contract with Fast Enterprises, much of the work around upgrading the system for driver's licenses — including the shift to licenses that comply with the federal Real ID law — will be led by that company, rather than state workers.

The state has spent almost $84 million on the project so far and has access to a total of $106 million in funds, according to the Department of Public Safety.

Speaking at the recent hearing of the House Select Committee on Technology and Responsive Government, the state's top tech official, Minnesota IT Services Commissioner Thomas Baden, said recent system updates have helped resolve some problems, including the inability to transfer specialty plates.

But those comments were almost immediately challenged by others at the hearing, including Gaye Smith, a manager at the deputy registrar's office in South St. Paul.

"That is not functioning," Smith said. "There are several of the updates that have been done from [recent] so-called fixes that are not working."

Losses mount

Jeff Lenarz, deputy registrar of the office in St. Paul and president of the Minnesota Deputy Registrar's Association, said a recent survey of his group's members found that more than 80 percent reported having to pay for extra overtime because of the MNLARS problems. About 40 percent had lost business from vehicle dealerships, and more than half were operating at a loss.

He provided two examples, without naming the deputy registrars or their specific offices: a southern Minnesota office that spent $12,000 on new equipment to prepare for MNLARS and is now losing up to $3,500 per month; and a northern Minnesota deputy registrar running deficits of $1,700 per month while having to hire additional workers.

Lawmakers pushed Baden and Public Safety Commissioner Mona Dohman for a firm estimate of when the problems would be fixed and growing backlogs of work completed. (The state now has a backlog of 374,00 unprocessed vehicle titles, among other delays.)

Baden said he's convinced the state is taking the right steps to make faster progress, including bringing in experts from Microsoft to assess the system and hiring outside help for the driver's licensing rollout. But he had no firm dates for when customers and deputy registrars could expect to return to business as usual.

"It will be next year before we've got all the functionality we want in place," he said.

Erin Golden • 612-673-4790