COUNTY OF ALBEMARLE VEHICLE DECAL PROGRAM
The purpose of this report is to discuss the County of Albemarle Vehicle Decal Program, referred to in the report as the Motor Vehicle License Registration Program. Section I reviews the program as it is currently administered in Albemarle County. Section II discusses the program as modified in three other jurisdictions. Section III concludes the report by briefly summarizing the major issues for consideration in analyzing the program.
I. Albemarle County
Motor Vehicle License Registrations (decals) are renewed annually by January 31st of each year. All personal property taxes must be paid in full prior to the owner receiving a County decal. The current system issues decals automatically on those vehicles that were issued a decal or were titled in the preceding year, provided that all personal property taxes owed by the taxpayer are paid in full by the December 5th due date. The current decal fee ($25 or $30 depending on the vehicle’s weight) is then billed as a separate item on the June 5th personal property tax statement. If the personal property taxes are not paid by the due date or a decal was not purchased on a vehicle in the preceding year, the taxpayer must purchase the decal either in person or by mail.
Purpose of Motor Vehicle License Registration:
The Motor Vehicle License Registration Program serves three major purposes. First of all, it is a significant revenue source for the County. During FY 04, Motor Vehicle License Registration fees generated $ 2,058,847 in revenue. In addition, the Police Department enforces County decals through the issuance of parking tickets for failing to display a valid decal. During FY04, parking ticket fines for failing to display a valid decal generated $7,558 in local revenue. Secondly, as previously stated, the County decal serves as an enforcement tool for the collection of personal property taxes. In order to obtain the County decal, all personal property taxes owed by the taxpayer to the County must be paid in full. Finally, the decal provides an additional mechanism to assure vehicles garaged in the County are property registered for personal property tax purposes. Vehicle owners are required to register their vehicles in the appropriate locality and obtain a decal from that locality by the established due date. Although taxpayers are suppose to notify the Virginia Division of Motor Vehicles when they change their address or move from one locality to another, this is not always done.
As stated above, the decal program serves as an enforcement tool for the collection of personal property taxes. In addition to the decal program, the Finance Department actively participates in the following collection programs:
· Division of Motor Vehicle’s Vehicle Registration Withholding Program (VRWP)
This program allows localities to submit delinquent taxpayer information to DMV. DMV will place a “stop” on the taxpayer’s DMV record that prohibits the taxpayer from conducting any type of transactions with DMV until the stop is removed by the locality (after the taxes are paid in full). This includes renewal of license plates and transferring or titling of vehicles.
· Department of Taxation’s Set-Off Debt Program
This program allows localities to submit delinquent taxpayer information to the Virginia Department of Taxation. When the taxpayer files his or her Virginia State Income Tax and is due a refund, the refund is intercepted and held for a period of thirty days. The taxpayer has the option to pay the outstanding tax due or to allow his refund to be applied to the tax.
· Other Programs
Personal Property taxes are also collected through a variety of other mechanisms, including warrants in debt, tax liens, and bank liens.
In January 2005, the County processed approximately 67,000 decals through the automated decal issuing process. The tangible expenses relating to the 2005 Motor Vehicle Registration process, including the vehicle decals, envelopes, processing and postage was $46,780. In addition to the tangible expense, staff estimates that during the month of January and the first half of February approximately 65% of the Collection Division’s staff time is devoted to the decal renewal process either through telephone calls or walk-in customers. This includes resolving issues relating to delinquent personal property tax accounts.
II. Alternatives to Annual Motor Vehicle Registration Licensing
As noted in Attachment B, several jurisdictions have eliminated annual vehicle decals. An overview of the processes that three of these jurisdictions are currently using is provided below:
Process: In 2003 Virginia Beach became the first (and to date only) locality in the State to take advantage of legislation that provides that the Division of Motor Vehicles (DMV) may enter into an agreement whereby it collects the local license fee on behalf of the locality. The local license fee is included in each taxpayer’s renewal notice for the state vehicle registration and the taxpayer is not issued a City decal. Virginia Beach pays DMV $0.70 per transaction. At this time, DMV is not allowing other localities to participate in this program.
Advantages: Virginia Beach has found the DMV transaction fee paid is more cost effective than the former process when the City was running the decal process. Taxpayers no longer have to “scrape and stick” the decals.
Disadvantages: During the initial transition period, Virginia Beach experienced a slight drop in personal property tax collections. During this time, Virginia Beach also began to participate in the Division of Motor Vehicle’s VRWP. With the implementation of the VRWP, after the initial decrease, tax collections have since increased to prior levels. Revenue from parking ticket fines for failing to display a decal decreased as a result of this new process. Residents were also subjected to receiving parking tickets in other jurisdictions for not displaying a valid decal. This is a significant issue that is discussed later in the report.
Process: Effective January 1, 2004, James City County began issuing a multi-year (5-year) motor vehicle registration that has a one-time registration fee of $10 per vehicle. Upon payment of the registration fee, a decal is issued that is to be displayed on the vehicle windshield. During the initial conversion process, a mass mailing was done for all vehicles registered in the County. Vehicles that are added by the DMV are automatically generated a form with the $10 charge and mailed to the vehicle owner for payment. Upon receipt of the fee, a multi-year decal is sent to the vehicle owner for display.
Prior to January 1, 2004, James City County had an annual vehicle registration process. However, no fee was charged for the decal.
Advantages: As expected, James City County saw a decrease in the tangible costs associated with annual decals renewals including the decal cost, mailing expense, and postage. Taxpayers are no longer inconvenienced with long lines during renewal time.
Disadvantages: The annual decal renewal fee was used as a personal property tax enforcement tool. With the elimination of annual renewal, this enforcement tool is no longer effective. Therefore, alternative collection methods were put into place, including the VRWP.
Process: Effective January 1, 2004, York County eliminated the decal requirement. An annual fee, however, is still charged. The fee is currently billed separately from personal property tax billings. In the future, these may be combined. A receipt for the registration fee is retained by the taxpayer as evidence of payment. In addition, taxpayers are required to file a personal property tax return by February 15 of each year. Late filers are subject to a 10% penalty.
Advantage: Taxpayers do not have to purchase an actual decal and “scrape and stick”.
Disadvantages: During the initial switchover there was a large amount of confusion on the part of citizens. This resulted in an increase in the volume of telephone calls and some citizen apprehension about receiving a ticket for failing to display a decal. Citizens were also subject to receiving tickets in other jurisdictions.
The Treasurer of York County provided the following statistics relating to their delinquent personal property collections comparing the old decal process with the new:
Collection % in FY03 (with decals) – 90.69%
Collection % in FY04 (without decals) – 90.50%
Decrease in collection occurred in the January/February timeframe:
February 03 – 94.62%
February 04 – 93.84%
By the end of the calendar year, however, collections percentages had rebound:
12/31/2003 – 96.72%
12/31/2004 – 96.71%
Like the other jurisdictions using an alternative decal process, York County also began to more actively participate in the VRWP through DMV in the summer of 2003.
All three localities indicated that with the elimination of the decal or in the case of James City County’s multi-year decal, the enforcement of personal property tax collections reverts from law enforcement to the local collection officer. Resources in the offices surveyed for this report have shifted and additional staff time is now allocated to locating taxpayers who may have moved into the locality. Resources were also shifted to improving delinquent tax collection techniques.
III. Issues for Consideration
In conclusion, following are the four major issues that should be considered in the review of the program:
· Locating Taxpayers – The annual Motor Vehicle License Registration process is a significant tool that is used to ensure vehicles are properly registered in the County for personal property tax purposes.
· Collection of Delinquent Taxes – Although other methods are available, the annual Motor Vehicle License Registration process assists in the collection of delinquent personal property taxes.
· Revenue Source – This process provides approximately $2.0 million in net revenue.
· Ticketing - Most Virginia localities require vehicles to display a local vehicle registration decal. Eliminating the decal would most likely subject County taxpayers to ticketing in other jurisdictions.
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