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Fiscal Note & Local Impact Statement

127 th General Assembly of Ohio

Ohio Legislative Service Commission

77 South High Street, 9th Floor, Columbus, OH 43215-6136 ˛ Phone: (614) 466-3615

˛ Internet Web Site: http://www.lsc.state.oh.us/

BILL:

Am. Sub. H.B. 293

DATE:

April 30, 2008

STATUS:

As Enacted – Effective August 14, 2008

SPONSOR:

Rep. Goodwin

LOCAL IMPACT STATEMENT REQUIRED:

No —

Possible indirect local effects

 


CONTENTS:

"Ohio Agriculture," "Ohio Sustainable Agriculture," and "Ohio's Horse" license plates

 

State Fiscal Highlights

 

STATE FUND

FY 2008*

FY 2009 – FUTURE YEARS

State Bureau of Motor Vehicles Fund (Fund 4W4)

     Revenues

- 0 -

Potential annual gain of up to $15,000 or more,
magnitude dependent on license plate sales

     Expenditures

- 0 -

Potential annual increase,
magnitude dependent on license plate sales

Ohio Agriculture License Plate Scholarship Fund (New Fund)

     Revenues

- 0 -

Potential annual gain of up to $10,000 or more,
magnitude dependent on license plate sales

     Expenditures

- 0 -

Potential annual increase, up to available revenues

License Plate Contribution Fund (Fund 5V1)

     Revenues

- 0 -

Potential annual gain of up to $20,000 or more,
magnitude dependent on license plate sales

     Expenditures

- 0 -

Potential annual increase, magnitude dependent on "Ohio's Horse" license plate sales

Agro Ohio Fund (Fund 490)

     Revenues

- 0 -

Potential annual gain of up to $10,000 or more,
magnitude dependent on license plate sales

     Expenditures

- 0 -

Potential annual increase, up to available revenues

Department of Agriculture Fund(s)**

     Revenues

- 0 -

- 0 -

     Expenditures

- 0 -

Potential annual increase to establish and then maintain scholarship program

Note:  The state fiscal year is July 1 through June 30.  For example, FY 2008 is July 1, 2007 – June 30, 2008.

*   This analysis assumes that the bill's state fiscal effects would occur no sooner than FY 2009.

** The source of funding for any expenses that the Department of Agriculure might incur in assisting with or managing the scholarship program is uncertain.

 

·         State Bureau of Motor Vehicles Fund (Fund 4W4).  The bill requires the state's Registrar of Motor Vehicles to collect an additional administrative fee of $10 to compensate the Bureau of Motor Vehicles (BMV) for the additional services required in the issuing of "Ohio Agriculture," "Ohio Sustainable Agriculture," and "Ohio's Horse" license plates, and to deposit the administrative fee in the state treasury to the credit of the existing State Bureau of Motor Vehicles Fund (Fund 4W4).  The demand and production costs for these license plates are uncertain.  This means that the potential magnitude of the annual gain in Fund 4W4 license plate revenues and any related increase in operating expenses is uncertain.  These uncertainties aside, one can estimate the license plate registration revenues simply based on the minimum annual sales threshold that would apply for the purposes of issuing new "Ohio Agriculture," "Ohio Sustainable Agriculture," and "Ohio's Horse" license plates, the applicable threshold of which in this case is 500 registrations for each of these special license plates.  Annual sales of 1,500 such plates (500 for each of the three plates) would generate $15,000 per year for deposit in Fund 4W4 ($10 contribution x 1,500 plates sold).

·         Ohio Agriculture License Plate Scholarship Fund (new fund).  The bill requires the Registrar to collect a related contribution in the amount of $20 to issue "Ohio Agriculture" license plates, and to deposit the contribution in the state treasury to the credit of the newly created Ohio Agriculture License Plate Scholarship Fund.  From LSC fiscal staff's perspective, identifying and quantifying the market for "Ohio Agriculture" license plates is rather problematic.  We cannot forecast demand for this special license plate, or how its annual sales might compare with those of prior or current special license plates.  This means that the magnitude of the fund's annual revenues and expenditures are uncertain.  These predictive caveats aside, one can estimate the license plate registration revenues simply based on the minimum annual sales threshold that would apply for the purposes of issuing new "Ohio Agriculture" license plates, the applicable threshold of which in this case is 500.  Annual sales of 500 such plates would generate $10,000 per year for deposit in the Ohio Agriculture License Plate Scholarship Fund ($20 contribution x 500 plates sold).

·         Agro Ohio Fund (Fund 490).  The bill requires the Registrar to collect a related contribution in the amount of $20 to issue "Ohio Sustainable Agriculture" license plates, and to deposit the contribution in the state treasury to the credit of the existing Agro Ohio Fund (Fund 490).  From LSC fiscal staff's perspective, identifying and quantifying the market for "Ohio Sustainable Agriculture" license plates is rather problematic.  We cannot forecast demand for this special license plate, or how its annual sales might compare with those of prior or current special license plates.  This means that the magnitude of the fund's annual revenues and expenditures are uncertain.  These predictive caveats aside, one can estimate the license plate registration revenues simply based on the minimum annual sales threshold that would apply for the purposes of issuing new "Ohio Sustainable Agriculture" license plates, the applicable threshold of which in this case is 500.  Annual sales of 500 such plates would generate $10,000 per year for deposit in the Agro Ohio Fund ($20 contribution x 500 plates sold).

·         Ohio License Plate Contribution Fund (Fund 5V1).  The bill requires the Registrar, when issuing "Ohio's Horse" license plates, to collect a related contribution up to, but not to exceed, the amount of $40, and to deposit the contribution in the state treasury to the credit of the existing License Plate Contribution Fund (Fund 5V1).  From LSC fiscal staff's perspective, identifying and quantifying the market for "Ohio's Horse" license plates is rather problematic.  We cannot forecast demand for this special license plate, or how its annual sales might compare with those of prior or current special license plates.  This means that the magnitude of the fund's annual revenues and expenditures are uncertain.  These predictive caveats aside, one can estimate the license plate registration revenues simply based on the minimum annual sales threshold that would apply for the purposes of issuing new "Ohio's Horse" license plates, the applicable threshold of which in this case is 500.  Annual sales of 500 such plates would generate up to $20,000 per year for deposit in the License Plate Contribution Fund (maximum $40 contribution x 500 plates sold), to be distributed to the Ohio Coalition for Animals, Incorporated.

·         Ohio Department of Agriculture.  Arguably, although the bill does not clearly do so, it seems likely that the Department of Agriculture would be the entity responsible for paying various expenses of the Ohio Agriculture License Plate Scholarship Program, including the Ohio Agriculture License Plate Scholarship Fund Board, as the Director of Agriculture will serve as the chairperson.  The bill does not clearly authorize moneys in the Ohio Agriculture License Plate Scholarship Fund to be used for such program administration or management purposes, which means that, if the Department of Agriculture is in fact the responsible fiscal entity, the source of the moneys that would be used to pay for those expenses is uncertain.

·         Minimum registration requirement generally applicable to special license plates.  Presumably, as a result of modifying the minimum annual registration requirement generally applicable to special license plates from 1,000 to 500, certain special license plates that might otherwise have been terminated may not be terminated.  If that were in fact to happen, then:  (1) BMV may gain administrative fee revenue and incur some administrative cost, and (2) the sponsor(s) of the special license plate may collect additional contributions.  The annual magnitude of these potential revenue gains and cost increases is uncertain, as predicting what special license plates owners and lessees will opt to buy at some future date in time is problematic.

 

Local Fiscal Highlights

 

LOCAL GOVERNMENT

FY 2008 – FUTURE YEARS

Counties, Municipalities, and Townships

     Revenues

Potential minimal annual effect

     Expenditures

- 0 -

Note:  For most local governments, the fiscal year is the calendar year.  The school district fiscal year is July 1 through June 30.

 

·         Redistributed Public Safety revenues.  Whenever the state's BMV Fund 4W4 cash flow changes, local governments may also be affected in some manner.  As BMV's expenses or revenue sources increase or decrease, moneys available for redistribution to local governments may increase or decrease.  However, the manner in which the bill may affect that cash flow dynamic, if at all, is uncertain.  That said, LSC fiscal staff has not gathered any information suggesting that the potential magnitude of the annual fiscal effect on any local government would be more than minimal, if that.  In this context, "minimal" means an estimated annual revenue gain or loss of:  (1) no more than $5,000 for any affected county, city, or township with a population of 5,000 or more, and (2) no more than $1,000 for any affected village or township with a population of less than 5,000.


 


 

Detailed Fiscal Analysis

 

Overview

For the purposes of this fiscal analysis, the bill most notably:

·         Permits the owner or lessee of a passenger car or certain other vehicles to apply to the state's Registrar of Motor Vehicles for issuance of "Ohio Agriculture," "Ohio Sustainable Agriculture," or "Ohio's Horse" license plates.

·         Requires the Registrar to collect an additional administrative fee of $10 to compensate the Bureau of Motor Vehicles (BMV) for the additional services required in the issuing of "Ohio Agriculture," "Ohio Sustainable Agriculture," or "Ohio's Horse" license plates, and to deposit the fee in the state treasury to the credit of the existing State Bureau of Motor Vehicles Fund (Fund 4W4).

·         Requires the Registrar to collect a related contribution of $20 for every new and renewal registration pertaining to the "Ohio Agriculture" license plate, and directs the contribution for deposit in the state treasury to the credit of the Ohio Agriculture License Plate Scholarship Fund, which the bill creates to benefit certain students.

·         Creates the seven-member Ohio Agriculture License Plate Scholarship Fund Board to control the Ohio Agriculture License Plate Scholarship Program, which the bill also creates, to be financed by the Ohio Agriculture License Plate Scholarship Fund noted in the immediately preceding dot point.

·         Requires the Registrar to collect a related contribution of $20 for every new and renewal registration pertaining to the "Ohio Sustainable Agriculture" license plate, and directs the contribution for deposit in the state treasury to the credit of the existing Agro Ohio Fund (Fund 490) to be used for the benefit of sustainable agriculture markets across the state.

·         Requires the Registrar, when issuing an "Ohio's Horse" license plate, to collect a related contribution in an amount not to exceed $40, as determined by the Ohio Coalition for Animals, Incorporated, for every new and renewal registration, and directs the contribution for deposit in the state treasury to the credit of the existing License Plate Contribution Fund (Fund 5V1) to be distributed to the Coalition. 

·         Decreases the statutory numerical threshold generally applicable to the implementation and termination of special license plates from 1,000 registrations to 500 registrations.

 

State fiscal effects

 

Production costs and process

 

The Department of Public Safety's Bureau of Motor Vehicles (BMV) is responsible for the design, production, advertising, and issuance of specialty license plates.  The design process functions as a collaborative effort between the BMV and the organization(s) associated with the specialty license plate.  Only after the state's Registrar of Motor Vehicles and the organization(s) have approved the license plate's design can it advance to the advertising and production stage.  The availability of specialty license plates is advertised through various means, including the BMV's online catalog, a catalog available at all deputy registrar locations, and periodic inclusion as an insert in registration renewal notifications. 

 

The BMV currently produces special license plates via a digital "print on demand" process.  Although LSC fiscal staff has discussed the digital production and issuance process for specialty plates with departmental personnel, we have yet to identify a per unit cost for the issuance of specialty license plates.  Under the "print on demand" process, the BMV has no minimum number threshold for a daily special license plate order, and, as a result, the Bureau can theoretically produce any number of special plates per day, even, for example, if there is only a single order placed on a given day. 

 

Before transitioning to a digital process, the BMV ordered rolls of metal sheeting, some of which remained as unused inventory.  Under that prior production process, it appears that it could take up to seven years before the BMV fully recouped the design, production, advertising, and issuance costs for certain special license plates.  It seems likely that the current digital process has at a minimum shortened, or may have even eliminated, the amount of time that it takes for BMV to recoup such expenses.  The point at which BMV breaks even or potentially generates more in revenues than it expends in the issuing of a special license plate is unclear.

 

Demand for specialty plates

 

The bill's fiscal effect on the state, in particular the Department of Public Safety's Bureau of Motor Vehicles and its Fund 4W4, as well as the Ohio Agriculture License Plate Scholarship Fund, the Agro Ohio Fund, and the License Plate Contribution Fund, will be dependent on the number of "Ohio Agriculture," "Ohio Sustainable Agriculture," and "Ohio's Horse" license plates actually issued.  As discussed below, from LSC fiscal staff's perspective, identifying and making meaningful quantitative estimates as to the market for "Ohio Agriculture," "Ohio Sustainable Agriculture," and "Ohio's Horse" license plates is rather problematic.  This means that the potential magnitude of the annual gain in BMV's Fund 4W4 license plate revenues and any related increase in operating expenses, as well as the amount of moneys that would be distributed annually to benefit horses and certain agriculture-related activities is difficult to reliably predict and may be subject to significant year-to-year variation.

 

That said, LSC fiscal staff studied calendar year 2006 vehicle registration data obtained from the BMV to identify the range of demand for special license plates being issued during that timeframe in Ohio, with the hope that, by doing so, we would be creating for the reader a general frame of reference for potential revenue based on relatively current special license plate sales.  In studying the data, LSC fiscal staff omitted any special license plates that restrict their issuance to certain eligible persons, such as those exclusively available and issued to current or former members of the United States military. 

 

Approximately 106 types of special license plates were made available by the BMV to all persons registering a passenger car or certain other vehicles during the 2006 calendar year.  The lowest selling special license plate during that year was the "Cleveland Cavaliers" plate, which sold 59 units.  During that year, the "Wildlife" plate sold the highest number of units with 34,150.  The average number of units sold per specialty license plate during the 2006 calendar year was 1,582, though that number is notably pulled upward by the two most in demand plates – the aforementioned "Wildlife" plate with 34,150 units sold and the "Lake Erie" plate with 23,327 plates sold.  Clearly, special license plates have varying levels of appeal and each special license plate has its own, arguably unique, market.  In the case of the proposed "Ohio Agriculture," "Ohio Sustainable Agriculture," and "Ohio's Horse" license plates, LSC fiscal staff cannot accurately or reliably forecast demand nor be certain as to how its annual sales might compare with those of prior or current special license plates.

 

Plate registration revenues

 

The above predictive caveats aside, one can estimate the license plate registration revenues simply based on the minimum annual sales threshold that would apply for the purposes of issuing new "Ohio Agriculture," "Ohio Sustainable Agriculture," and "Ohio's Horse" license plates, the applicable threshold of which in this case is 500 registrations.  Annual sales of 500 such plates would generate:  (1) $10,000 per year for deposit in the state treasury to the credit of the Ohio Agriculture License Plate Scholarship Fund ($20 contribution x 500 "Ohio Agriculture" plates sold), (2) $10,000 per year for deposit in the state treasury to the credit of the Agro Ohio Fund ($20 contribution x 500 "Ohio Sustainable Agriculture" plates sold), (3) up to $20,000 per year for deposit in the state treasury to the credit of the License Plate Contribution Fund (maximum $40 contribution x 500 "Ohio's Horse" plates sold), and (4) $15,000 per year for deposit in the state treasury to the credit of the State Bureau of Motor Vehicles Fund ($10 administrative fee x 1,500 total plates sold, or 500 each of the three aforementioned newly created special license plates).

 

Minimum registration requirement generally applicable to special license plates

 

The bill contains a provision for the termination of all special license plates, including the "Ohio Agriculture," the "Ohio Sustainable Agriculture," and the "Ohio's Horse" license plates, if, during any calendar year, the total number of motor vehicle registrations for that plate is less than 500.  The applicable threshold under current law is 1,000 registrations.  Presumably, as a result of modifying the minimum annual registration requirement generally applicable to special license plates from 1,000 to 500, certain special license plates that might otherwise have been terminated may not be terminated.  If that were in fact to happen, then:  (1) BMV may gain administrative fee revenue and incur some administrative cost, and (2) the sponsor(s) of the special license plate may collect additional contributions.  The annual magnitude of these potential revenue gains and cost increases is uncertain, as predicting what special license plates owners and lessees will opt to buy at some future date in time is problematic.

 

In the event that a special license plate falls under the 500-plate annual threshold in future years, the Registrar of Motor Vehicles would be required to send, in January of the following year, a written notice to the sponsor informing the sponsor of this fact.  If, during the calendar year in which the written notice is sent, the vehicle registrations for a particular special license plate again total less than 500, the program for that particular license plate would be terminated on the thirty-first day of December of that year. 

 


LSC fiscal staff has discussed the termination provision with the BMV, and it appears the threshold is neither flexible nor subject to the Registrar's discretion.  If a special license plate fails to meet minimum sales threshold, it must be terminated according to the aforementioned terms and procedures.  If the program for any special license plate is terminated, those motorists who have previously purchased a newly terminated plate may in fact continue to renew that plate, with the BMV retaining any associated additional administrative fee and with any additional contribution remaining the same and distributed to the initially specified funding source.  It should be noted that it is arguably easy for a sponsor to reinstate a terminated plate.  For example, the BMV advised that a special plate falling 100 units short of the minimum threshold would simply require 100 signatures of support for it to be reinstated. 

 

Department of Agriculture

 

            The bill:  (1) creates the Ohio Agriculture License Plate Scholarship Program to benefit certain students with scholarships funded with moneys from the Ohio Agriculture License Plate Scholarship Fund, (2) creates the seven-member Ohio Agriculture License Plate Scholarship Fund Board to be chaired by the Director of Agriculture or their designee, and (3) places the former under control of the latter.

 

Board members will serve without compensation, but are required to be reimbursed for actual expenses incurred in performing their duties, for example, travel, parking, lodging, and meals.  LSC fiscal staff estimates that the Board might meet a few times in any given year and generate reimbursable expenses totaling less than $10,000 annually, with the actual cost being dependent upon the frequency of Board meetings and the ultimate scope of Board duties.  The bill is silent as to who is responsible for covering these reimbursable expenses.  The bill is also silent on the matter of who would provide the Board with any services and support necessary to manage the Scholarship Program.

 

Arguably, although the bill does not clearly so mandate, it seems likely that the Department of Agriculture would be the entity responsible for paying such Board and program management expenses, as the Director of Agriculture will serve as the chairperson.  Although LSC fiscal staff has discussed these issues with Department of Agriculture personnel, we cannot determine the potential magnitude of any annual Board-related or program management-related expenses.  The bill does not clearly authorize moneys in the Ohio Agriculture License Plate Scholarship Fund to be used for such program administration or management purposes, which means that, if the Department of Agriculture is in fact the responsible fiscal entity, the source of the moneys that would be used to pay for those expenses is uncertain.

 

Local fiscal effects

 

Redistributed Public Safety revenues

 

Whenever the BMV Fund 4W4 cash flow changes, local governments may also be affected in some manner.  Most collected local and state motor vehicle license taxes are deposited into a holding account within the Department of Public Safety.  Monthly, an assessment of Fund 4W4 occurs and cash is transferred from the holding account to Fund 4W4 in order to cover BMV's monthly operating expenses.  Any remaining funds in the holding account are then forwarded to local governments (counties, municipalities, and townships) to use for transportation-related needs such as roads and bridges.  As BMV's expenses or revenue sources increase or decrease, moneys available for redistribution to local governments may increase or decrease. 

 

However, the manner in which the bill may affect that cash flow dynamic, if at all, is uncertain.  That said, LSC fiscal staff has not gathered any information suggesting that the potential magnitude of the annual fiscal effect on any local government would be more than minimal, if that.  In this context, "minimal" means an estimated annual revenue gain or loss of:  (1) no more than $5,000 for any affected county, city, or township with a population of 5,000 or more, and (2) no more than $1,000 for any affected village or township with a population of less than 5,000.

 

 

LSC fiscal staff:  Jeffrey R. Kasler, Budget Analyst

 

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