LEGISLATIVE BUDGET BOARD
                              Austin, Texas
                                     
                    FISCAL NOTE, 77th Regular Session
  
                            February 21, 2001
  
  
          TO:  Honorable Rodney Ellis, Chair, Senate Committee on Finance
  
        FROM:  John Keel, Director, Legislative Budget Board
  
       IN RE:  SB248  by Carona (Relating to the exemption from ad
               valorem taxation of motor vehicles leased for personal
               use.), As Introduced
  
**************************************************************************
*  Estimated Two-year Net Impact to General Revenue Related Funds for    *
*  SB248, As Introduced:  impact of $0 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.                                                             *
**************************************************************************
  
General Revenue-Related Funds, Five-Year Impact:
  
          ****************************************************
          *  Fiscal Year  Probable Net Positive/(Negative)   *
          *               Impact to General Revenue Related  *
          *                             Funds                *
          *       2002                                   $0  *
          *       2003                                    0  *
          *       2004                         (20,520,000)  *
          *       2005                         (38,794,000)  *
          *       2006                         (54,212,000)  *
          ****************************************************
  
All Funds, Five-Year Impact:
  
***************************************************************************
*Fiscal      Probable        Probable        Probable        Probable     *
* Year    Savings/(Cost)     Revenue         Revenue         Revenue      *
*           to General    Gain/(Loss) to  Gain/(Loss) to  Gain/(Loss) to  *
*          Revenue Fund  School Districts     Cities         Counties     *
*              0001                                                       *
*  2002                $0              $0              $0              $0 *
*  2003                 0    (20,520,000)     (5,596,000)     (5,063,000) *
*  2004      (20,520,000)    (18,274,000)    (10,580,000)     (9,573,000) *
*  2005      (38,794,000)    (15,418,000)    (14,785,000)    (13,377,000) *
*  2006      (54,212,000)    (10,884,000)    (17,753,000)    (16,063,000) *
***************************************************************************
  
Fiscal Analysis
  
The bill would amend Chapter 11 of the Tax Code to provide an ad valorem
tax exemption for motor vehicles leased for personal use.
  
  
Methodology
  
Data on leased motor vehicles were obtained through a Comptroller's
Office survey of county appraisal districts.  The survey identified
approximately 250,000 personal use leases with an average value of
approximately $15,000.  Under current law, leased motor vehicles are
rendered for property taxation to independent school districts, cities,
counties, and special districts.  This bill would reduce revenues to
these taxing districts.  Under the current school finance system, there
is a relatively complete offset for school districts for their losses
after a one-year lag.  This state offset would begin in fiscal 2004.

The Texas percentage of personal lease vehicles to new motor vehicles
sold is about 17 percent.  To arrive at the estimated fiscal impact, it
was assumed that, as a behavioral response to the property tax reduction,
the ratio of personal use leases to new vehicle sales would increase to
the national average of approximately 23 percent.

The Comptroller's office has stated that leased autos are "turned round,"
or disposed of by the lessee, on average about every 42 months, while
purchased autos are "turned around" on average about every 53 months,
which could lead to a secondary fiscal impact.  The secondary effect of
this bill could be to generate an increase in motor vehicle sales and use
tax collections.  This increase may appear immediately after the
effective date of the bill (and before the first property tax losses
would occur), and it could continue as a reflection of the increased
turn-over in the Texas motor vehicle fleet.

The secondary effects show up only with respect to the losses incurred by
General Revenue Fund 0001.  Based on the secondary fiscal impact, the
Comptroller's office has estimated a positive offset impact to General
Revenue beginning in 2002 at $7.7 million, growing to $26.1 million by
2006.
  
  
Local Government Impact
  
The impact on local taxing units is reflected in the above tables.  The
first losses to units of local government reflect a one-year lag, and a
two-year lag in state reimbursement to independent school districts,
given the mechanics of property taxation and school finance provisions.
  
  
Source Agencies:   304   Comptroller of Public Accounts, 701   Texas
                   Education Agency
LBB Staff:         JK, SD, BR, WP