Colorado Legislative Council Staff

STATE

REVISED FISCAL IMPACT

(Replaces fiscal impact dated February 10, 1999)

TITLE:            CONCERNING REVENUE FROM ANNUAL MOTOR VEHICLE REGISTRATIONS.

Summary of Legislation

            This fiscal note has been revised based on the receipt of additional information that an additional fee is included in the bill. The bill, as amended by the House Finance Committee, February 4, 1999, would reduce the amount of registration fees a person pays when registering their motor vehicle if the State Treasurer estimates that there will be a revenue surplus in that year. Motor vehicle registration fees would be reduced to $2.50 for passenger cars and certain trailers and for trucks and truck tractors the fees would be reduced by $20 but would never be less than $2.50. Sales and use taxes would be diverted from the General Fund to the Highway Users Tax Fund (HUTF) to offset any loss to the HUTF. This bill is considered a method for refunding excess state revenues under TABOR and is not a tax reduction.

State Revenues

            Since the registration fee change in this bill begins January 1, 2000, there would be a half-year impact in FY 1999-00. The bill would reduce HUTF registration fees collected on motor vehicles by an estimated $26,650,557 for the first year. The estimated HUTF revenue reduction in FY 2000-01 is $54,153,932. The bill provides for the State Treasure to divert sales and use taxes in an amount equal to the estimated revenue reduction. This would require a $26,650,557 diversion in FY 1999-00 and a $54,153,932 diversion in FY 2000-01.

            The amended bill would reduce motor vehicle registration fees and replace them with a diversion of state sales and use taxes from the General Fund. The amendment specifies that the General Fund revenues should be distributed from the HUTF 65 percent to the state, 26 percent to the counties, and 9 percent to the cities. As amended and including the additional fee that was not considered in the original fiscal note, this bill would change the HUTF distribution for the additional fee revenue. The State Highway Fund would receive an additional $610,841 in FY 1999-00 and $1,241,230 in FY 2000-01.

State Expenditures

            The Department of Revenue would need to reprogram the motor vehicle registration system to accommodate the reduced fees. This would require an estimated $210,000 Distributive Data Processing Funds (DDP) for 3,100 hours of computer programming at $68 an hour. The registration system would have to be modified to allow online calculation routines for multiple rates and tables, modify the accounting system, and registration renewal program modifications. These would be one-time costs. However, should the state revenue surplus not be large enough to divert sales and use taxes, the DOR would have approximately 1,000 hours of reprogramming to revert to the current higher fee structure. The DDP fund year-end balance for FY 1997-98 was $3.6 million.

Other State Impacts

            This bill will reduce the amount a corporate taxpayer may claim as a deduction for income taxes and increase the income tax liability in FY 2000-01. The state income tax revenue generated for FY 1999-00 through 2003-04 as a result of this change is estimated to be $7.67 million. The changes in Table 1 are changes from a base that includes continuing capital construction projects.

Table 1. Additional Impact of HB 99-1182 (millions of dollars)

Local Government Impact

            Cities receive nine percent and counties receive twenty-six percent of the registration fees deposited into the HUTF under current law. The bill, as amended, would apply the current distribution formula for the reduced registration fees to the General Fund diversion. This would change the distribution for the additional fee. Cities would lose $1.1 million in revenue and counties would gain $488,673 in HUTF distribution in FY 1999-00. For FY 2000-01, cities would lose $2.2 million and counties would receive and additional $992,984 in HUTF distributions.

State Appropriations

            This fiscal note implies that the Department of Revenue would require an appropriation of $210,000 in Distributive Data Processing funds in FY 1999-00 to implement this bill.

Departments Contacted

            Revenue