LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
March 26, 2001
TO: Honorable David Sibley, Chair, Senate Committee on
Business & Commerce
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.), As
Introduced
**************************************************************************
* Estimated Two-year Net Impact to General Revenue Related Funds for *
* SB317, As Introduced: negative impact of $(15,942,889) through *
* the biennium ending August 31, 2003. *
**************************************************************************
General Revenue-Related Funds, Five-Year Impact:
****************************************************
* Fiscal Year Probable Net Positive/(Negative) *
* Impact to General Revenue Related *
* Funds *
* 2002 $(8,212,478) *
* 2003 (7,730,411) *
* 2004 (7,872,411) *
* 2005 (8,166,411) *
* 2006 (8,471,411) *
****************************************************
All Funds, Five-Year Impact:
***************************************************************************
*Fiscal Probable Probable Probable Probable *
* Year Revenue Revenue Revenue Revenue *
* Gain/(Loss) to Gain/(Loss) to Gain/(Loss) to Gain/(Loss) to *
* General Revenue Cities Transit Counties/SPDs *
* Fund Authorities *
* 0001 *
* 2002 $(7,183,000) $(936,000) $(361,000) $(111,000) *
* 2003 (7,195,000) (1,274,000) (492,000) (151,000) *
* 2004 (7,337,000) (1,325,000) (511,000) (157,000) *
* 2005 (7,631,000) (1,378,000) (532,000) (163,000) *
* 2006 (7,936,000) (1,433,000) (553,000) (170,000) *
***************************************************************************
***************************************************************************
*Fiscal Probable Savings/(Cost) from Change in Number of State *
* Year General Revenue Fund Employees from FY 2001 *
* 0001 *
* 2002 $(1,029,478) 6.0 *
* 2003 (535,411) 6.0 *
* 2004 (535,411) 6.0 *
* 2005 (535,411) 6.0 *
* 2006 (535,411) 6.0 *
***************************************************************************
Technology Impact
Additional computers and software for six 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 bill would continue the OCCC until September 1, 2013.
The bill 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 bill would take effect September 1, 2001. The changes to the
regulation of the financing activities of motor vehicles would take
effect September 1, 2002.
Methodology
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 bill also requires 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. Five examiners would be required each year for a total cost
of $60,000 per year beginning in fiscal year 2003.
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.
The estimated cost of regulation is $1,029,478 in fiscal year 2002, with
almost $900,000 of that being fingerprint costs to DPS. OCCC will
recover these costs from fingerprint fees submitted by applicants. The
cost of regulation in fiscal year 2003, and each year thereafter is
$535,411.
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.
According to the Comptroller, Section 8 of the bill, which includes the
definition of 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 speaking, 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, as
above, delineate these activities as a loan. Neither the rental payments
nor the resale would be subject to tax.
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.
Local Government Impact
Local units of government would have a corresponding fiscal impact from
sales tax revenues, as indicated in the table above.
Source Agencies: 466 Office of Consumer Credit Commissioner, 449
Finance Commission of Texas, 344 Texas Commission
on Human Rights, 304 Comptroller of Public
Accounts, 116 Sunset Advisory Commission
LBB Staff: JK, JO, RT, DE, SM