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F I S C A L I M P A C T R E P O R T

SPONSOR Komadina

DATE TYPED 03/14/05 HB

SHORT TITLE Motor Vehicle Service Fees & Distributions

SB 890/a SFl #1

ANALYST Padilla-Jackson

REVENUE

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY05

FY06

Indeterminate

(see Fiscal im-

pact Section

Similar

Recurring Motor Vehicle Sus-

pense Fund

(Parenthesis ( ) Indicate Revenue Decreases)

(See distribution table below)

Relates to: House Bill 39 and House Bill 201/a HTRC

SOURCES OF INFORMATION

LFC Files

Responses Received From

Department of Transportation (DOT) (none received for Senate Floor Amendment #1)

Department of Taxation and Revenue (TRD) (none received for Senate Floor Amendment #1)

SUMMARY

Synopsis of SFl #1

The Senate Floor amended Senate Bill 890. The proposed amendment strikes all of the proposed

amendments by the Senate Finance Committee. Another amendment authorizes a municipality

or a county that operates a motor vehicle field office to impose an administrative service charge

of up to $5.00 for each identification card or motor vehicle or motorboat registration issued by

the motor vehicle field office.

It is unclear from the amendment whether the municipal or county field office would remit the

newly imposed fee to the MVD, or whether the municipality would retain the fee.

DOT cautioned, based on the similar SFC amendment, that a municipally-imposed fee may

lessen the ability of MVD to raise their fee as much as they might otherwise. They note that the

Senate Bill 890/aSFl #1 -- Page 2

result of a somewhat lower MVD-imposed fee would be:

•

a decrease in self-generated revenue to MVD; therefore an increased reliance on the Gen-

eral Fund to support MVD operations; and

•

a threat to the State Road Fund if the MVD-imposed fee is not at least at the $2.00 level

or higher (at $2 the Road Fund shows a small loss).

According to DOT, currently, municipal fee agents are getting about $1,552 thousand to conduct

345,000 transactions ($4.50 per transaction average). The original bill adds approximately $1

thousand to the municipal fee agents for a total of $2,564 thousand ($7.43 per transaction aver-

age). The SFC amendment appears to indicate the municipal fee agents think they deserve some-

thing on the order about $10.00 per transaction. DOT questions the reasonableness of this trans-

action cost.

Synopsis of Original Bill

Senate Bill 890 proposes several changes in motor vehicle administration fees and distributions.

It also proposes a new distribution of revenue from royalties for the use of Motor Vehicle Divi-

sion (“MVD”) databases. Lastly, it proposes to allow MVD to retain excess amounts collected

under the Mandatory Financial Responsibility Act to defray operating expenses.

MVD Administrative Fee and Distributions:

Senate Bill 890 would increase motor vehicle administrative fee on all transactions. Fees, which

are collected to defray the costs the costs of operations, are increased from $0.50 to an amount

not to exceed $5.00.

Revenue from the fee increase would be distributed as follows:

•

Municipalities or counties, other than a class A county with a population exceeding

300,000 (Bernalillo County) or a municipality with a population exceeding three hundred

thousand (Albuquerque) that has been designated as an agent would receive an amount

equal to each administrative fee remitted;

•

MVD would receive $0.50 on transactions performed by municipal fee agents. For all

other transactions, $1.25 is distributed to the MVD and

•

Remaining amounts would flow under present statutes to the State Road Fund and to lo-

cal governments for road maintenance.

Senate Bill 890 also increases the disposition of other revenues as follows. The distribution to

municipalities, counties or fee agencies operating a field office increases $2.00 (from $3.00 to

$5.00) for each motor vehicle or motorboat registration, title transaction, or identification card

performed. This increased distribution would come from revenues already collected and depos-

ited in the Motor Vehicle Suspense Fund.

Royalties from MVD Database Use

The Division is permitted to charge a fee for the use of such databases under section 14-3-15.1 of

present law. Senate Bill 890 creates a new distribution that would transfer amounts paid by

commercial users of motor vehicle databases to the Motor Vehicle Suspense Fund for use by

MVD to cover operating expenses.

Senate Bill 890/aSFl #1 -- Page 3

Retention of Excess Revenue from the Mandatory Responsibility Fund

Under present law section 66-6-6.1, a $2.00 fee is assessed on each registration transaction.

Revenue from the fee is distributed to MVD to enforce the provisions of the Mandatory Finan-

cial Responsibility Act and to implement a multi-language non-commercial driver’s license test-

ing program. Senate Bill 890 would provide that any revenue remaining after these expenses

have been met would be distributed to MVD to cover operating costs of the Division.

The effective date of the provisions of this bill is July 1, 2005.

FISCAL IMPLICATIONS

Note, since an analysis on the Senate Floor amendments had not been received by DOT or TRD

at the time this amended FIR was written, it is unclear what impact the inclusion of “county” will

have on the total number of transactions per year, and thus the fiscal impact. Assuming that this

will not increase the number, the following fiscal impact still holds. This FIR will be updated, if

necessary, when the analysis is received from these agencies.

Fiscal Implications of Amended Bill

The municipal field offices are assumed to conduct approximately 345,000 transactions per year.

DOT notes that if they are allowed to impose a fee of up to $5.00 on their own, this would be an

additional positive impact to the “Municipal Fee Agent”. (See Table below) DOT provided the

following illustrations:

345,000 * $1.50 = $517.5 thousand additional

345,000 * $2.50 = $862.5 thousand additional

345,000 * $5.00 = $1,725 thousand additional

Fiscal Implications of Original Bill

Since the total fiscal impact depends on the amount of the increase in transaction fees (could in-

crease as much as $4.50), an assumed $2.00 increase would be expected to generate approxi-

mately $4.8 million to the Motor Vehicle Suspense Fund in FY06. See the following paragraphs

for more information.

Administrative Fees

TRD estimates that approximately 2.4 million motor vehicle-related transactions are performed

annually and that about 345 thousand of these transactions are handled by municipalities that op-

erate field offices (“Municipal fee agents”). An assumed increase (which could be as much as

$4.50) of $2.50 per transaction will generate approximately $4.8 million, with about $1,150.0

(345,000 transactions times an assumed $3.33 increase in disposition) of this amount going to the

municipalities. The bill would distribute $0.50 for administrative transactions performed by mu-

nicipal fee agents and $1.25 for all other transactions to the Motor Vehicle Department, giving

the MVD approximately $2.7 million. The residual amount of $950.0, calculated by subtracting

the Municipal fee agent and the MVD portions ($4.8 million minus $1,150.0 and $2.7 million)

would be distributed to the State Road Fund (74.65 percent, or approximately $700.0) and to lo-

cal governments (24.35 percent, or $230.0) under existing statute. See the table below provided

by the Department of Transportation.

Senate Bill 890/aSFl #1 -- Page 4

The amendment would raise total revenue generated from $4.8 million to $6.5 million, assuming

a $5.00 newly imposed administration fee by the municipal fee agent. (See estimates in DOT

provided table below).

FY05

FY06

Fund Affected

none

696

similar

Recurring

State Road Fund

none

237

similar

Recurring

Counties and Municipalities

none

-24

similar

Recurring

Local Govt.s Road Fund (ID Cards)

none

1,150

similar

Recurring

Municipal & Fee Agents

none

1,725

similar

Recurring

Municipal & Fee Agents

none

2,741

similar

Recurring Motor Vehicle Division (administrative fees)

none

*

similar

Recurring

Motor Vehicle Division (see note below)

none

6,525

similar

Recurring

Total (Administrative Fee Increase)

Estimated Revenue

Subsequent

Years Impact

Recurring or

Nonrecurring

*Note: Revenue Table excludes any revenue from royalties imposed on commercial users of

MVD databases (Section 2 ), and the revised provisions relating to the Mandatory Financial Re-

sponsibility fees (Section 3, page 6, lines 19 through 21.)

ADMINISTRATIVE IMPLICATIONS

DOT notes that significant changes to the MVD computer system would have to be made in re-

gard to any fee revisions and the revenue distribution changes.

CONFLICT, DUPLICATION, COMPANIONSHIP OR RELATIONSHIP

House Bill 39 includes similar but less extensive revisions in this area. House Bill proposes

similar provisions but with differing fees, revenue distributions and a different fiscal impact.

OTHER SUBSTANTIVE ISSUES

DOT notes that allowing the flexible administrative fee of up to $5 would lessen the need for

legislative maintenance of the rate of the fee for inflation, but since the distribution to MVD is

specified as a fixed amount increasing the fee would not contribute to MVD resources. Con-

versely, since the distribution to MVD is specified as a fixed amount increasing the fee only

slightly (to $2 or less) would not affect MVD resources, but could result in revenue losses to the

State Road Fund and local governments.

OPJ/yr:lg:yr