Colorado Legislative Council Staff
STATE and LOCAL
FISCAL NOTE
TABOR Refund Impact
State General Fund Revenue Impact
Local Revenue Impact
Drafting Number: Prime Sponsor(s): |
LLS 98-092 Rep. Agler Sen. Ament |
Date: Bill Status: Fiscal Analyst: |
January 26, 1998 House Finance Scott Nachtrieb (866-4752) |
TITLE: CONCERNING THE PROMOTION OF ALTERNATIVE FUEL USE FOR TRANSPORTATION PURPOSES, AND, IN CONNECTION THEREWITH, ELIMINATING THE AUTOMATIC REPEAL DATE FOR THE ALTERNATIVE FUELS INCOME TAX CREDIT, MODIFYING THE PROVISIONS OF SAID TAX CREDIT, ADDING AN INCOME TAX CREDIT FOR ALTERNATIVE FUEL REFUELING FACILITIES, ESTABLISHING A REBATE PROGRAM FOR GOVERNMENTAL AND TAX-EXEMPT ENTITIES THAT USE ALTERNATIVE FUEL VEHICLES, AND MAKING AN APPROPRIATION.
Summary of Legislation
STATE FISCAL IMPACT SUMMARY |
FY 1998/99 |
FY 1999/00 |
State Revenues General Fund (Sales Tax Transfer) AIR Account Transfer Alternative Fuels Rebate Fund |
($154,595) * ($500,000) $654,595 |
($154,595)* ($500,000) $654,595 |
State Expenditures Alternative Fuels Rebate Fund |
$654,595** |
$654,595** |
FTE Position Change |
None |
None |
Local Government Impact — Possible alternative fuel rebates |
* Does not include estimated income tax loss from tax credits (see State Revenues section)
** Includes the Department of Revenue one-time only expenditures of $34,000.
The bill would change the formula for calculating the amount of the income tax credit allowed for purchasing a motor vehicle using an alternative fuel or for converting a vehicle’s fuel system to alternative fuel. The definition of "alternative fuel" would be the same definition used in the clean vehicle fleet program. After July 1, 1998, the credit would be available only to businesses. The credit would double up to 100 percent for any motor vehicle purchased or engine replaced that permanently replaced a motor vehicle or engine that is 10 years old or older. The income tax credit may be carried forward for 5 years rather than 3 years. The existing July 1, 1998, repeal date would be eliminated. An income tax credit would also be allowed for a portion of the cost of constructing, reconstructing, or acquiring an alternative fuel refueling facility that is directly attributable to the storage, compression, or dispensation of alternative fuels for motor vehicles. The credit would increase for facilities that served more than one fleet or dispensed renewable alternative fuel. This income tax credit can be carried forward for 5 years. Credits would not be allowed for fleets purchasing vehicles to meet the minimum requirements of the clean fleet program. These fleet owners could get credits if they purchase vehicles that exceeded the minimum clean fleet requirements.
The bill would also create a cash rebate program in the Department of Revenue (DOR) to state and local governmental entities and to tax-exempt entities that purchase or convert to alternative fuel motor vehicles or that replace the engine in a vehicle with an engine that uses an alternative fuel. The rebate would be available for vehicles used for business or official activities of the entity. The rebate would double up to 100 percent for any motor vehicle purchase or engine replacement that permanently replaced a motor vehicle or engine that is 10 years old or older. DOR would promulgate rules for granting rebates. An Alternative Fuels Rebate Fund would be created to provide rebates to eligible recipients. Sales and use tax revenues generated from the sale of alternative fuel vehicles and fueling facility equipment in excess of the amount of sales tax collected on those items in FY 1997-98. In addition, funds remaining in the Air Account in excess of $500,000 would be transferred to the fund. The transfer would be capped at $500,000 annually. The bill would become effective upon the Governor’s signature.
State Revenues
The alternative fuel tax credit would be available to businesses and not be available to individuals after July 1, 1998. The number of businesses and governmental entities that would purchase, convert, or replace vehicles and be eligible for the credit can not be accurately determined at this time. However, an estimate has been provided of the potential impact. This scenario assumes that businesses will meet the requirements of the Colorado Clean Fleet Program by the year 2001.
The Colorado Clean Fleet Program requires each motor vehicle fleet owner to convert or replace a percentage of the vehicles they replace each year with vehicles meeting emissions standards. The Environmental Protection Agency has approved one alternative fuel conversion kit that meets the new EPA standards. It is assumed that there would be very few conversions and the best way of meeting the new standard would be to purchase a new vehicle. Based on the assumptions provided, the potential tax credit for replacing vehicles with alternative fuel vehicles may be as high as $2,643,196 over the next three years.
The bill also provides a tax credit for a portion of the cost of building, reconstructing, or purchasing a facility for alternative fuel refueling. The ability of current facilities to meet the needs of fueling alternative vehicles is not known. There may be an existing capacity at the existing facilities to accommodate any increased demand. For the purposes of this fiscal note, it is assumed that one fueling facility would be built for each alternative fuel for each class of vehicle. The estimated tax credit would be $384,975 over the next three years.
The bill also creates the Alternative Fuels Rebate Fund. The fund would receive moneys remaining in the AIR Account at the end of each fiscal year and sales tax revenues attributable to the sale of alternative fuel vehicles and alternative fuel facility equipment. It is estimated that the AIR Account would have approximately $500,000 remaining in the fund at the end of this fiscal year. The bill would transfer $500,000 from the AIR account to the new fund in FY 1998-99. The sales taxes attributable to the sale of alternative fuel vehicles and related facilities would generate an additional $154,595 that would be placed into the fund. The total transferred to the new fund is estimated to be $654,595 in FY 1998-99.
TABOR Refund Impact
Section 20 of Article X of the Colorado Constitution, limits the maximum annual percentage increase in state fiscal year spending. Once total state revenue from all sources that are not specifically excluded from fiscal year spending exceeds these limits for the fiscal year, the state constitution requires that the excess shall be refunded in the next fiscal year unless voters approve a revenue change as an offset. Based on the current Legislative Council economic forecast, it is projected that the state will be in a TABOR refund position during each of the next five fiscal years. Any increase or decrease in state revenue from changes in fees, fines, licenses, or other revenue sources will affect the amount of the state revenue to be refunded.
State Expenditures
The DOR would have a one-time fiscal impact of up to $34,000 to develop a computer program that would allow the department to track rebates to persons that applied and calculate the estimated sales and use tax to be transferred. The amount deposited into the Alternative Fuels Rebate Fund would vary from year to year and the number of persons applying for the rebate is unknown. However, it is assumed that the DOR would rebate all the funds annually. State agencies that purchase, convert, or replace vehicles would be eligible for rebates from the Alternative Rebate Fund. The amount of the rebates would partially offset the incremental cost of alternative fuel vehicles.
Local Government Impact
Local governments that purchase, convert, or replace vehicles would be eligible for rebates from the Alternative Rebate Fund. The amount of the rebates would partially offset the incremental cost of alternative fuel vehicles.
Spending Authority
This fiscal note implies that the Department of Revenue would require a $654,595 in spending authority from the Alternative Fuels Rebate Fund for FY 1998-99 to implement this bill.
Departments Contacted
Revenue Health and Environment
FACTS AND ASSUMPTIONS
Assumptions
1. The alternative fuel credit will only be available to businesses and not to individuals after July 1, 1998.
2. The number of businesses that will claim the credit can not be accurately estimated .
3. It is assumed that the driving force for business owners to purchase vehicles with higher emissions standards is the Colorado clean vehicle fleet program (C.R.S. 25-7-106.8 which requires businesses in the Denver-Boulder carbon monoxide nonattainment area with fleets of 10 or more vehicles to purchase a percentage of vehicles that meet higher quality air standards for model years 1998 and thereafter.) The program requires 30 percent (in 1999, 50 percent in 2000, and 70 percent in 2001) of the purchase of vehicles below 8,500 lbs. GVW to meet the Low Emitting Vehicle (LEV) standard or higher. Fifty percent of the purchase of vehicles between 8,500 and 26,000 lbs. GVW must meet at least LEV standards.
4. It is assumed that the additional number of businesses that purchase cleaner burning vehicles (who are not compelled to do so by statute) will be insignificant.
5. One conversion kit has been approved that meets new EPA emission standards. However, it appears that purchasing a vehicle from the manufacturer that meets the higher emission standard and burns an alternative fuel is the best method of meeting the conditions of the new regulations. Therefore, it is assumed that there will be an insignificant amount of vehicle conversions. (Additionally, the cost of conversion is approximately the same as the cost difference between purchasing a vehicle manufactured with the higher emission standard and a vehicle manufactured with current emission standards).
6. Since the higher emissions standard pertains only to the Denver-Boulder carbon monoxide nonattainment area, it is assumed that businesses that purchase vehicles for use in the metro area would predominantly claim the credit.
7. According to a 1995 Fleet Survey of Denver conducted by the U.S. Department of Energy, there were 34,434 light duty vehicles, 7,961 light trucks & step vans, 5,016 medium trucks, 17,622 heavy trucks, and 574 buses (only half of which are less than 26,000 GVW) that were in fleets of 10 or more vehicles.
8. The turnover rates provided by Natural Fuels Corporation are used. The source of this data is unknown. Light duty vehicles are assumed to be replaced at a 20 percent rate; light trucks and step vans, 14 percent; medium trucks, 10 percent; and buses, 8 percent. (Heavy trucks were not included as they are exempt from the new standards.)
9. Regulation 17 of the Colorado Clean Vehicle Fleet program requires a percentage of new vehicles in fleets with over 10 vehicles to be replaced with vehicles meeting higher emissions standards. For light duty vehicles, 30 percent must meet the higher standard for model year 1998 vehicles, 50 percent for 1999 vehicles , and 70 percent for model year 2000 vehicles. The remaining categories of vehicles must replace their vehicles at a rate of 50 percent over the same time period.
|
1999 |
2000 |
2001 |
Light duty vehicle |
2,066 |
3,443 |
4,821 |
Lt trucks & step vans |
557 |
557 |
557 |
Medium trucks |
251 |
251 |
251 |
Buses |
11 |
11 |
11 |
TOTAL |
2,885 |
4,262 |
5,640 |
10. The Natural Fuels Corporation came up with some incremental cost estimates of purchasing vehicles that meet the new standards by type of alternative fuel used by the vehicle. Additionally, they have provided estimates of the percent of vehicles that will be purchased of each type. The following table shows their estimates:
Type of Vehicle |
Type of Fuel |
||||||||
|
NG/LPG |
Reform Petroleum |
Alcohol fuel |
Electricity |
Avg Cost |
||||
|
Cost |
% of vehicles |
Cost |
% of vehicles |
Cost |
% of vehicles |
Cost |
% of vehicles |
|
Light duty |
$4,000 |
30% |
$500 |
45% |
$1,000 |
20% |
15,000 |
5% |
$2,375 |
Lt truck/step vans |
$8,500 |
30% |
$500 |
45% |
$1,000 |
20% |
20,000 |
5% |
$3,975 |
Medium trucks |
$18,000 |
30% |
$1,500 |
65% |
$10,000 |
5% |
N/A |
|
$6,875 |
Buses |
$30,000 |
30% |
$5,000 |
70% |
$20,000 |
0% |
N/A |
|
$12,500 |
11. The next table shows the resulting estimate of the number of vehicles that will be replaced by type of alternative fuel and resulting emission standard attained:
Type of fuel |
NPG/LPG ULEV |
Reform Petro LEV |
Alcohol LEV |
Electricity ZEV |
Total |
% of vehicles 8 yrs or older |
Light duty |
310 |
930 |
413 |
34 |
1,687 |
5% |
Lt trucks/step vans |
84 |
251 |
111 |
9 |
455 |
5% |
Medium trucks |
38 |
163 |
13 |
0 |
213 |
10% |
Buses |
2 |
8 |
0 |
0 |
9 |
20% |
Total |
434 |
1,352 |
537 |
44 |
2,364 |
|
12. Following is a table of the calculation of credits:
Type of Fuel |
NG/LPG |
Reform Petroleum |
Alcohol |
Electricity |
Total payments |
Old Vehicles |
TOTAL |
||||
|
% |
Credit Value |
% |
Credit Value |
% |
Credit Value |
% |
Credit Value |
|
|
|
Light duty |
75 |
$929,700 |
0 |
0 |
0 |
0 |
85 |
$433,500 |
$1,363,200 |
$19,320 |
$1,382,520 |
Light trucks /step vans |
75 |
$532,631 |
0 |
0 |
0 |
0 |
85 |
$153,000 |
$685,631 |
$10,227 |
$695,858 |
Medium trucks |
75 |
$508,275 |
0 |
0 |
0 |
0 |
85 |
$0 |
$508,275 |
$16,943 |
$525,218 |
Buses |
75 |
$37,125 |
0 |
0 |
0 |
$0 |
85 |
$0 |
$37,125 |
$2,475 |
$39,600 |
Total |
|
$2,007,731 |
|
0 |
|
0 |
|
$586,500 |
$2,594,231 |
$48,965 |
$2,643,196 |
13. Following is a table of the estimated tax credit if one alternative fuel pumping facility is built for each type of vehicle and each type of alternative fuel:
Type of fuel |
NG/LPG |
Reform Petro |
Alcohol |
Electricity |
Total Incremental Value |
Tax Credit @ 50% |
Renew Bonus |
|
Cost per site |
|
|||||
Light duty |
$100,000 |
$5,000 |
$5,000 |
$100,000 |
$411,150 |
$205,575 |
$15,418 |
Lt trucks/vans |
$150,000 |
$5,000 |
$5,000 |
$150,000 |
$157,600 |
$78,800 |
$5,910 |
Medium trucks |
$200,000 |
$10,000 |
$10,000 |
$200,000 |
$187,200 |
$93,600 |
$7,020 |
Heavy trucks |
$350,000 |
$20,000 |
$20,000 |
$350,000 |
n/a |
$0 |
$0 |
Buses |
$500,000 |
$50,000 |
$50,000 |
$500,000 |
$14,000 |
$7,000 |
$525 |
TOTAL |
|
|
|
|
$769,950 |
$384,975 |
$28,873 |
14. For rebates to governmental entities for the conversion to, or purchase of, vehicles with higher emissions standards, there will only be funds equal to 2.9 percent (after vendor's discount) of the cost of the private conversion or purchase of vehicles with higher emission standards. Under this scenario, 88,654 would be available for rebates.