LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
May 26, 2001
TO: Honorable Bill Ratliff, Lieutenant Governor
Honorable James E. "Pete" Laney, Speaker of the House
FROM: John Keel, Director, Legislative Budget Board
IN RE: SB317 by Sibley (Relating to continuation and functions
of the Office of Consumer Credit Commissioner and the
regulation of certain financial businesses; providing a
penalty.), Conference Committee Report
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* SB317, Conference Committee Report: negative impact of *
* $(2,714,000) through the biennium ending August 31, 2003. *
* *
* The bill would make no appropriation but could provide the legal *
* basis for an appropriation of funds to implement the provisions of *
* the bill. *
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General Revenue-Related Funds, Five-Year Impact:
****************************************************
* Fiscal Year Probable Net Positive/(Negative) *
* Impact to General Revenue Related *
* Funds *
* 2002 $(825,000) *
* 2003 (1,889,000) *
* 2004 (2,111,000) *
* 2005 (2,195,000) *
* 2006 (2,283,000) *
****************************************************
All Funds, Five-Year Impact:
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*Fiscal Probable Probable Probable Probable *
* Year Revenue Revenue Revenue Revenue *
* Gain/(Loss) Gain/(Loss) to Gain/(Loss) to Gain/(Loss) to *
* from General Cities Transit Counties *
* Revenue Fund Authorities *
* 0001 *
* 2002 $(825,000) $(269,000) $(104,000) $(32,000) *
* 2003 (1,889,000) (366,000) (141,000) (43,000) *
* 2004 (2,111,000) (381,000) (147,000) (45,000) *
* 2005 (2,195,000) (396,000) (153,000) (47,000) *
* 2006 (2,283,000) (412,000) (159,000) (49,000) *
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*Fiscal Probable Probable Revenue Change in Number of *
* Year Savings/(Cost) from Gain/(Loss) from State Employees from *
* General Revenue Fund General Revenue Fund FY 2001 *
* 0001 0001 *
* 2002 $(1,029,835) $1,029,835 1.5 *
* 2003 (536,840) 536,840 6.0 *
* 2004 (536,840) 536,840 6.0 *
* 2005 (536,840) 536,840 6.0 *
* 2006 (536,840) 536,840 6.0 *
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Technology Impact
Computers and software for the additional Full-time Equivalent positions
(FTEs) and database enhancements would be needed for the Office of
Consumer Credit Commissioner (OCCC) for coordination with the Texas
Department of Transportation (TxDOT) totaling $57,000 in fiscal year
2002.
Fiscal Analysis
The provisions of the bill amend the Finance Code and would authorize the
Finance Commission (FC) to set annual license fees for regulated lenders
and pawnshops to include the cost of examinations, and it would repeal
the stated annual license fees for regulated lenders and pawnshops. The
bill would allow the FC to base fees on a licensee's loan volume.
The OCCC would have to license rather than register the financing
activities of motor vehicle dealers and third-party contract holders.
The bill would authorize fees for these entities to cover initial
investigation, annual license, and examination and administrative costs.
The bill would authorize criminal background checks of motor vehicle
dealers and third-party contract holders.
The provisions of the bill would require the FC and the OCCC to conduct a
study of mortgage lending practices and report their findings before
December 1, 2002.
The bill would continue the OCCC until September 1, 2013.
The bill would take effect September 1, 2001.
Methodology
According to the Comptroller's Office, Section 9 of the bill which would
define the terms, "sale-leaseback transaction" and "loan," would decrease
limited sales and use tax collections. Under current law, pursuant to a
sale-leaseback transaction, payments related to certain lease
arrangements known as "operating leases" are subject to the sales tax.
("Operating leases" are instances where lease payments are made, but
payment does not lead to ownership.) If, at the end of a lease term, an
item were repurchased that sale would be subject to the sales tax as
well. The bill would redefine such transactions as loans, thus making
such lease payments/repurchases exempt from the sales tax.
Similar sale-leaseback arrangements involving automobiles currently
generate motor vehicle sales taxes when automobiles are sold, leased, and
subsequently resold to the original owner. Generally, and for periods
of less than six months, there is no tax due on the sale portion of the
sale-leaseback. The subsequent rental payments are subject to motor
vehicle rental tax. A resale, following the cessation of rental
payments, is subject to the motor vehicle sales tax. The bill would
delineate these activities as a loan. Neither the rental payments nor
the resale would be subject to tax.
According to the Comptroller's Office, this analysis assumes that
sale-leaseback transactions involving items other than household items or
personal-use automobiles would not be affected. Any sales of tangible
personal property or of automobiles outside of a sales-leaseback
transaction would continue to be taxable in the present manner.
It is estimated that the provisions of the bill would require six FTEs
within the OCCC starting in fiscal year 2003. The OCCC anticipates
hiring the six FTEs in the fourth quarter of fiscal year 2002 equating to
1.5 FTEs in the first year. The provisions of the bill require the OCCC
to do periodic on-site examinations of licensees. With a total of 5,700
businesses and an examination cycle of approximately four years, about
1,425 examinations would be conducted every year which would require five
examiners each year. The new licensing and examination activity would
also require the addition of an attorney for review of contracts, rules,
and contested cases and other expenses for an administrative law judge
and court reporter services.
Car dealers and third-party contract holders would be required to obtain
a license from the OCCC which requires an FBI criminal background check.
The total cost for the criminal history background check for each
applicant is $39. The OCCC anticipates fingerprinting approximately 4
principals from each of the 5,700 car dealer and third-party holder
businesses in fiscal year 2002. The cost in fiscal year 2002 for 22,800
individuals is $889,200 and the OCCC estimates future costs for
fingerprinting to be about $100,000 per year.
The estimated cost of regulation is $1,029,478 in fiscal year 2002, with
almost $900,000 of that being fingerprint costs to the Department of
Public Safety. OCCC will recover these costs from fingerprint fees
submitted by applicants. The cost of regulation in fiscal year 2003 and
each year thereafter is $536,840.
It is assumed the OCCC would adjust its fees to off-set the cost of the
regulation of financing activities and third party holders from
registration to licensure and the periodic on-site inspections.
Local Government Impact
Local units of government would have a corresponding fiscal impact from
sales tax revenue as indicated in the table above.
Source Agencies: 304 Comptroller of Public Accounts, 449 Finance
Commission of Texas, 116 Sunset Advisory
Commission, 466 Office of Consumer Credit
Commissioner
LBB Staff: JK, JO, RT, DE