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

SPONSOR Hamilton

ORIGINAL DATE

LAST UPDATED

1/24/07

HB 177

SHORT TITLE Off-Highway Vehicle Insurance Requirements

SB

ANALYST Earnest

REVENUE (dollars in thousands)

Estimated Revenue*

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

FY09

0

($38.0)

($40.0) Recurring State Road

Fund

0

($13.0)

($10.0) Recurring

Local

Governments

0

($150.0)

($150.0) Recurring Trail Safety

Fund

(Parenthesis ( ) Indicate Revenue Decreases)

*The $30 distribution to the Trail Safety Fund, set by the Tourism Department, resulted from

legislation enacted in 2005 that became effective January 1, 2006. Hence the Taxation and

Revenue Department has limited experience with regard to the revenue flows associated with the

new law. Distributions to the Trail Safety Fund, however, are expected to total

approximately

$460,000 in the 2006 calendar year. Approximately 15,000 off-road vehicles were registered in

calendar year 2006. The fraction of this figure that constitutes renewals is uncertain. It is likely

that registrations will diminish as the total population of off-road vehicles (variously estimated at

50,000 to 60,000) becomes registered. The Motor Vehicle Division reports that approximately

43,000 off-highway vehicles are currently registered. The estimate above assumes 10,000

renewal registrations occur annually on an ongoing basis, and hence will generate, under present

law, $300,000 in funds flowing to the Trail Safety Fund, and $170,000 in funds to the state Road

Fund and Local Governments. Hence, reducing the $30 fees to $15 will decrease revenues to the

Trail Safety Fund by approximately $150,000, and funds subject to “formulaic distribution" by

approximately $50,000 ($5 x 10,000). It is likely, however, that the fee reductions will increase

registrations, but no estimate of an increase is available. These estimates should therefore be

considered rough approximations.

House Bill 177 – Page

2

ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)

FY07

FY08

FY09 3 Year

Total Cost

Recurring

or Non-Rec

Fund

Affected

Total

$50.0

$50.0

$100.0 Recurring

Trail

Safety

Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Taxation and Revenue Department (TRD)

NM Tourism Department (NMTD)

Department of Health (DOH)

SUMMARY

Synopsis of Bill

House Bill 177 amends the Off- Highway Motor Vehicle Act (Section 66-3-1001 through 1016

NMSA 1978).

1)

Off-highway motor vehicles would be exempted from the Mandatory Financial

Responsibility Act (Section 66-5-201 through 239 NMSA 1978);

2)

Off-highway vehicles that are registered in another state would be allowed to be operated

in New Mexico without additional user fees;

3)

Owners, operators, instructors, members of safety organizations and sponsors of off-

highway sporting events would be indemnified from lawsuits; and

4)

Technical changes are made to the statute, including the addition of a definition of “age-

appropriate size-fit" applicable under current law to drivers of off-road vehicles under 10

years of age. Section 66-3-1010.3 currently prohibits use of off-highway vehicles unless

the vehicles are “age- appropriate size-fit" – of a size allowing riders to safely operate the

vehicles.

FISCAL IMPLICATIONS

The proposed measure would reduce renewal registration fees currently charged for off-road

vehicles. Current statutes impose a $17 registration fee -- $5 of which is appropriated to MVD to

defray registration costs, and $12 is distributed by formula, with most of the money going to the

State Road Fund. Current statute also imposes a maximum $30 off-highway user fee that is used

to improve trails on state lands that is deposited in the Trail Safety Fund and administered by the

New Mexico Tourism Department. The fees must be renewed every two years. The proposed bill

would decrease the $17 registration fee to $12 and the $30 user fee to $15 when registration is

renewed. The $5 distribution (of the $12 renewal fee) to MVD would remain unchanged, while

the remaining $7 would, as under current law, be distributed through the formula described

above. The $15 user fee would continue to be distributed to the Tourism Department in the same

manner that the $30 fee it replaces.

House Bill 177 – Page

3

Continuing Appropriations language

This bill does not amend the original statute containing continuing appropriations. The LFC has

concerns with including continuing appropriation language in the statutory provisions for funds,

as earmarking reduces the ability of the legislature to establish spending priorities.

SIGNIFICANT ISSUES

House Bill 177 makes significant changes to the 2005 OHV Act, including liability exemptions

and protections for OHV safety training organizations, instructors, events and their owners and

operators provided that there is a signed motor sport release form.

According to NMTD, the limits on liability for OHV training organizations, instructors, riders,

operators and others purport to be modeled on the protections from liability established by the

Equine Liability Act, NMSA 1978 sections 42-13-1 et. seq. However, that Act was intended to

remove strict liability in tort from those involved with equine activities in recognition of the

essential nature of horses. Equine activities might otherwise be considered ultra-hazardous

activities justifying a strict liability standard for injuries.

The liability provisions of House Bill 177 are actually a broader waiver of liability. While the

Equine Liability Act does not immunize one from liability for harm caused by his own

negligence, gross negligence, recklessness or willful misconduct—thus maintaining traditional

tort law liability—the provisions in House Bill 177 would exempt a broad class of individuals

from liability for damages arising from an injury to or death of an operator or passenger of an

off-highway motor vehicle directly or proximately caused only by gross negligence, recklessness

or willful misconduct. That is, ordinary negligence would not be actionable. One concession is

made by requiring the use of a new “motor sport liability release" (created by the bill) by a

person who “owns, operates, promotes or sponsors an off-highway motor vehicle closed-course

sports facility, recreation area, sports training facility, sports event or tour" in order to perfect

protection from liability for ordinary negligence. Gross negligence and intentional injury remain

actionable.

Page 9, lines 13-17 in House Bill 177 provides a blanket exemption from legal liability to OHV

safety training organizations, their members, and instructors and guides approved and certified

by the OHV Safety Board.

House Bill 177 also exempts vehicles and their owners from the Mandatory Financial

Responsibility Act (page 16, line 8 through end; page 17, lines 1-9). Under this proposal, owners

and operators of off-highway vehicles would no longer be required to carry liability insurance for

off-highway vehicles.

House Bill 177 allows the Off-Highway Motor Vehicle Safety Board to collect fees for

processing applications for safety training organizations, instructors and guides. Currently, the

only funding source for the payment of administrative costs to process applications for board

certification is the Trail Safety Fund which was established by the Act. Examples of

administrative costs could include the processing of applications for completeness, evaluation of

curricula, evaluation of requests for exemption from the Safety Standards and background

checks (all required by NMAC 18.15.3). Permitting the board to set application fees is consistent

with standard administrative practice and will preserve Trail Safety Fund revenues for their

House Bill 177 – Page

4

intended purposes—the establishment of environmentally responsible sites for trails and their

maintenance.

PERFORMANCE IMPLICATIONS

NMTD finds that by taking money from the Trail Safety Fund in order to pay for administrative

costs associated with the application process, this bill would have an impact on the Tourism

Department’s ability to use the Trail Safety Fund to meet its performance measure of developing

trails.

ADMINISTRATIVE IMPLICATIONS

According to NMTED, implementation of the Off-Highway Vehicle Safety Board’s rule 18.15.3

is expected to be significant for the department if the Department of Transportation Traffic

Safety Bureau does not assume administrative responsibility for the safety certification process.

NMTD is not a regulatory or enforcement agency and has no safety certification capabilities of

its own. If the department were to assume administrative responsibilities, it would require at least

one (1) FTE to process and evaluate applications and ensure that training organizations are

complying with the rule (NMAC 18.15.3). House Bill 177 may generate increased revenue to

offset these new administrative costs but does not provide for increased budget or staff to meet

these increased administrative duties.

There will be enforcement of the safety regulations that went into effect on January 1, 2007.

This will have some impact on magistrate and municipal court case loads, since violations of the

Act and its rules are petty misdemeanors.

TECHNICAL ISSUES

NMTD states that it is not a regulatory or enforcement agency and has no safety certification

capabilities of its own. Asking NMTD to regulate the OHV training organizations changes the

role of the department. The department is working with other agencies with regulatory authority

and will ask them to assist in this process. If these agencies take on this responsibility then the

department will have to compensate them for their time and efforts. The department would do

this either through the existing trail fund or through the fees that are collected if this bill is

passed.

TRD finds that the apparent intent of the proposal is to replace off-road vehicle licenses with

stickers, as indicated in the definition section, pp 2-3. It is unclear how the proposed measure

accomplishes this.

BE/csd