Businesses see breaks from General Assembly

Car dealerships, rental companies benefit from carve-outs

April 17, 2011|By Annie Linskey, The Baltimore Sun

Car buyers will have to pay dealers as much as $200 in transaction fees starting July 1, because of a budget provision approved by the General Assembly in its final moments of lawmaking last week.

They'll pay more to title that car, too. Lawmakers also increased motor vehicle titling fees, to $100 — except for rental fleets, which are excused from the increase.

These sweeteners for auto dealers and rental car companies were carved out of the state's $14.6 billion budget in the final days of the 2011 legislative session, when a small group of lawmakers reconciled the House and Senate versions of the spending plan.

Other industries also made out in the budget reconciliation process, an annual exercise that gives lobbyists a final opportunity to win favorable treatment for their clients — and lawmakers a last chance to reward supporters or nurture local interests.

The film industry got an insurance policy written into the spending plan so producers would get a tax credit. And newspapers won back a $500,000 lifeline that the Senate and House had withdrawn.

Some of the changes reversed decisions that appeared to have been settled when the two chambers took their initial crack at the budget proposed by Gov. Martin O'Malley. Others never came up during budget hearings or floor debate, but appeared in the final rounds of negotiations.

"It is part of the magic of the 90-day session," said Neil Bergsman, director of the liberal-leaning Maryland Budget and Tax Institute. "Sometimes funny things happen in Annapolis as we get from the end of March to the beginning of April."

Lawmakers who worked the changes into the budget said the process worked as is should: It allowed several chances for groups to make their cases when broad policy changes included unintended consequences.

But because the last-minute changes aren't vetted by the regular committee process, it can also appear haphazard. And in many cases, few lawmakers realized the altered contents of the budget they approved. Consumers, meanwhile, might not find out until they make a purchase.

Deal for dealerships

The giveaway to car dealers slid into the budget in the final round of negotiations, as exhausted senators and delegates huddled around a table in an Annapolis conference room making deals on pension benefits, funding for embryonic stem cell research, higher education formulas and land preservation programs.

Del. Tawanna P. Gaines suggested that the committee allow dealerships to double the administrative fees they are allowed to charge customers. The new limit rises from $100 to $200 for the next three years. Then it increases to $300.

The change is expected to net the industry $100 million next year alone. The state would see about $6 million from higher sales tax revenue from the increased cost to consumers who buy cars and trucks.

"Sometimes things work a little unusually," Gaines said.

The Prince George's County Democrat said she would have preferred to make the change through regular legislation. She'd hoped to include it as part of a transportation package that also included an increase in the gasoline tax, but that measure stalled when it became clear there was little enthusiasm to raise that tariff this year.

She expressed sympathy for the state's car dealers, who she said have suffered in the sluggish economy.

"We want to be sure that the dealers are kept whole," she said.

Peter Kitzmiller, president of the Maryland Automobile Dealers Association, said the fee helps car dealers offset "significant costs" associated with selling vehicles. He estimated that 70 different documents, including an onerous identity-theft prevention requirement, must be completed during the transaction.

"It is like buying a house," said Kitzmiller, whose group represents 300 Maryland dealerships.

Also persuasive for lawmakers was that the car dealers were willing to give something up: They'll accept a lower fee for collecting excise taxes, a change projected to return $3.7 million to the state.

Fleet exemption

Lawmakers don't want to inadvertently clobber an industry. That's what rental car companies said the increase in the motor vehicle titling fee would do.

The fee was part of a $65 million revenue package pulled together by the House for bridge and road maintenance. The package doubled the fee from $50 to $100.

Enterprise Holdings, the largest rental car company in the state, complained on fairness grounds. Enterprise renews its Maryland fleet every eight months to 14 months, and it is required to title at least 60 percent of the new cars in the state.

Surrounding states charge less: Pennsylvania charges $22.50 to title a car; Virginia charges $10. Maryland, meanwhile, was raising its fee for the second time in four years. Lawmakers approved an increase from $23 to $50 during the 2007 special session.

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