HELENA – People who buy new luxury vehicles and expensive motor homes would have to pay at least $1,500 more to register them under a bill working its way through the Montana Legislature.
The Ferrari tax, as some are calling it, would tack on a fee of 1 percent of price of a new vehicle or motor home with a suggested price of more than $150,000. That would go to 0.9 percent when the vehicle is 2 years old and 0.8 percent the next year before dropping off. It's expected to bring in about $3.1 million a year.
There are 984 vehicles and 42 motor homes over that price point registered in the state now that would fall under the new fee, though most say the majority of those vehicles are not used in Montana. The state has long been a haven for nonresidents who set up a limited liability company to purchase an expensive vehicle in another state and register it here to take advantage of lower fees. There's a handful of dealers in the state that sell Mercedes and Corvettes.
The new fee is part of a package of ways the Legislature is looking to make up for a shortfall in the fund that pays for highway improvement projects.
That account is filled by the state's 27-cents-a-gallon gas tax. The gas tax also pays for operations at the Motor Vehicles Division and Montana Highway Patrol.
On Wednesday the Senate Finance and Claims Committee, which signed off on the Ferrari tax unanimously, also approved changes to make the Motor Vehicles Division and Highway Patrol less dependent on the gas tax. The changes were made to House Bill 650.
“We’re trying to get them a little more autonomous,” said Sen. Ryan Osmundson, R-Buffalo.
The gas tax and highway projects account have been one of the main issues this session.
In January, the Department of Transportation and Highway Patrol said there wasn't enough money in the gas tax account and that they'd have to postpone 30 highway projects and lay off 27 troopers.
Expenses paid from the account have outpaced revenues since 2011, and by July the fund is projected to be in the red. The drop is attributed to more fuel-efficient vehicles and a slowdown in industries such as oil drilling, which heavily use diesel fuel.
In 2015 the tax generated $294.2 million, but the agencies that draw from it – mainly the Department of Transportation, along with the Department of Justice in a far smaller amount, and a few others – spent $308.5 million.
That spurred a discussion on raising the gas tax, a charge led by Rep. Frank Garner, R-Kalispell.
On Tuesday the Senate Finance and Claims Committee changed a proposed increase in the gas tax to 4.5 cents a gallon, down from Garner's original 8 cents.
Adding the Ferarri tax is just one way to make up for dropping the gas tax increase. On Wednesday the committee also approved new fees on transactions with the motor vehicles division, such as renewing a vehicle's registration.
If the gas tax increases pass, the fee on transactions with the Motor Vehicles Division will be 3 percent, but if the gas tax does not pass it will be 9.6 percent. A 3 percent fee is estimated to bring in about $4.2 million a year.
That increase is necessary for the state to collect enough money to put up cash to leverage federal funds. The state gets about a 7-to-1 federal match for highway projects.
The increase in fees concerns the Montana Automobile Dealers Association, said Bruce Knudsen.
“We don’t want any fees to go up.”
Knudsen said some dealers pay document fees themselves, he said.
“It will affect us. How much we don’t really know yet.”
Another change Wednesday diverts 4 cents of the gas tax just to the Highway Patrol in another effort to separate its operations from highway construction projects.
“One of the challenges we had in the last years is everyone eats first and the Department of Transportation gets left over,” Osmundson said, referencing the shortfall in the highway projects account.
When the state sets its budget, it separates out departments into sections. Section D, which House Bill 650 is related to, includes the Department of Justice, which encompass the Motor Vehicles Division and the Highway Patrol. It also includes the Judicial Branch, the Crime Control Division, the Public Service Regulation, Office of the Public Defender and Department of Corrections.
Other changes made Wednesday include directing some money from temporary vehicle registration fees to help pay for operations and improvements at the Montana Law Enforcement Academy.
An amendment also puts a $10 surcharge on people convicted of certain crimes and uses the money to pay for the Court-Appointed Special Advocate program, known as CASA. The program will be paid for with general fund money if the surcharge is not enough.
The committee unanimously supported getting rid of the Board of Crime Control and putting its function under the Department of Corrections. The 18-member board administers millions in grant dollars.
“We’re just trying to find a way to be a little bit more efficient,” Osmundson said.