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Chapter 9: Transportation
Eliminate the Issuance of Non-Negotiable Titles
Summary
When a vehicle is purchased through a loan, the Texas Department of
Transportation (TxDOT) issues the original title to the lender or lien holder
and a duplicate, non-negotiable title to the vehicle owner. Texas also issues
Registration Purpose Only titles, another type of non-negotiable title, for
vehicles registered in Texas but titled in another state. Other states do not
issue non-negotiable titles to owners, instead allowing them to use their
registration card or other paperwork as proof of ownership. Doing so in Texas
would save a considerable amount of state revenue.
Background
As required by state law, all Texas vehicles have titles issued by the Texas
Department of Transportation (TxDOT). The original title is a negotiable
document that proves ownership of the vehicle. When borrowed funds are used to
buy a vehicle, the original title goes to the lien holder (typically a financial
institution) and a duplicate, non-negotiable title goes to the purchaser. In
some cases, vehicles may be titled in another state, but must be registered in
Texas. TxDOT issues a non-negotiable, Registration Purpose Only (RPO) title for
these vehicles. Without an RPO title, the owner could not register the vehicle
without first titling it in Texas. All titles must be mailed first class
mail.[1] Each year, TxDOT issues about 5 million
original titles, 2.6 million duplicate original titles, and 105,000 RPO
titles.[2]
When a vehicle is sold, the title is transferred to the new owner, who must
present an application of title form and other supporting documentation to the
county assessor-collector. The county assessor-collector collects a $13 title
fee, enters the information into the automated Registration and Titling System
(RTS), and issues a receipt to the new owner. The county assessor-collector
mails the paperwork to TxDOT, sending $8 of the fee to the state. TxDOT verifies
that the payment was sent, processes the application and releases the title for
printing. RTS automatically prints original titles and, when the record shows a
lien on the vehicle, duplicate original titles. TxDOT uses an outside contractor
to put the titles in envelopes and mail them to the lien holders and
owners.[3]
To obtain an RPO title, the owner presents the application for title and a
form stating that the vehicle was last registered or titled out-of-state. The
county assessor-collector collects a $13 title fee, enters the information into
RTS, and issues the owner a receipt. The process remains the same, except RTS
only prints one non-negotiable title that states it is for registration purposes
only.[4]
If an owner loses a non-negotiable duplicate or RPO title and needs to prove
ownership of the vehicle, TxDOT issues a certified copy of duplicate original
(CCDO). To receive a CCDO by return mail, the owner mails an application to
TxDOT’s Austin headquarters with a $2 fee. To receive a CCDO immediately,
the owner can turn in the application and pay a $5.45 fee at one of the 17
Vehicle Titles and Registration regional
offices.[5] TxDOT issues about 5,500 CCDOs each
year.[6]
Although non-negotiable titles are used to show proof of ownership, they are
rarely needed. The receipt issued by the county assessor-collector is, in fact,
sufficient to prove ownership. The owner can get a duplicate receipt from the
county or TxDOT for a $2 fee.[7]
Other states issue original titles to the lien holder, but do not issue
duplicate original, non-negotiable titles to the owners. Instead, the owners use
their registration card, called a registration receipt in Texas, as proof of
ownership until the lien is removed, and they receive a lien free original
title. Twenty-five states issue the original title to the lien
holder.[8] Of those states, at least California,
Maine, North Carolina, Oregon, Pennsylvania and South Carolina use the
registration card as proof of ownership.[9]
If Texas no longer issued non-negotiable titles or CCDOs and allowed the
registration receipt to serve as proof of ownership, RTS would require some
modification. According to TxDOT estimates, the cost of these changes, would be
minimal compared to the savings-a one-time cost of
about $41,000, compared to annual savings of about
$841,000.[10]
Recommendations
- State law should be amended to remove the
requirement for TxDOT to issue non-negotiable titles and to clarify that other
documents may be used to prove ownership.
The requirement to issue non-negotiable titles and references to
non-negotiable titles should be removed. In addition, the Transportation Code
should specify that other documentation, including the receipt issued when the
title is applied for and the registration receipt, are adequate proof of
ownership. Texas Department of Transportation (TxDOT) should modify its rules,
procedures and forms to reflect this change.
- State law should be amended to clarify that the
Texas Department of Transportation may issue registration purposes only
documents and charge a fee.
This recommendation does not change the current practice or fee structure;
however, removing the sections of law related to non-negotiable titles would
eliminate TxDOT’s authority to continue this practice. To maintain the
current practice and fee structure, the Transportation Code should be changed to
clarify that TxDOT may issue registration purpose only documents and collect the
$13 fee. However, as with duplicate original titles, similar documents would be
used to prove ownership instead of an RPO non-negotiable title.
Fiscal Impact
TxDOT would realize a gross savings of about $856,000 annually from reduced
paper, printing and mailing costs. The estimated savings below represent the
amounts of the State Highway Fund revenue that could be redirected to other
Texas Department of Transportation programs or budget items.
However, in fiscal 2002 the department would incur a one-time cost of about
$41,000 to modify RTS. Since CCDOs would no longer be issued, TxDOT would also
realize an annual revenue loss of about $26,000. This revenue loss would be
reduced by a revenue gain of about $11,000 annually for increasing the number of
receipts, which would be accepted as proof of ownership.
|
Fiscal Year
|
Savings/(Cost) to RTS
Restricted Amounts in
the State Highway Fund
|
Net Savings to the
State Highway Fund
Available to Redirect
|
|
2002
|
($41,000)
|
$841,000
|
|
2003
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$0
|
$841,000
|
|
2004
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$0
|
$841,000
|
|
2005
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$0
|
$841,000
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|
2006
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$0
|
$841,000
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[1 ]Interview with Sue Mainzer,
branch manager, Title Control Systems, Vehicle Titles and Registration, Texas
Department of Transportation, Austin, Texas, June 15, 2000; telephone interview
with Sue Mainzer, branch manager, Title Control Systems, Vehicle Titles and
Registration, Texas Department of Transportation, Austin, Texas, August 9, 2000;
and V.T.C.A., Transportation Code §501.027.
[2] Memorandum from Jerry Dike,
director, Vehicle Titles and Registration, Texas Department of Transportation,
to Richard Mudge, BBP Consultant Study, April 12, 2000; Texas Department of
Transportation, “Vehicle Title Report by County, Year End August 31,
1997,” Austin, Texas. (Computer printout.); Texas Department of
Transportation, “Vehicle Title Report by County, Year End August 31,
1998,” Austin, Texas. (Computer printout.); and Texas Department of
Transportation, “Vehicle Title Report by County, Year End August 31,
1999,” Austin, Texas. (Computer printout.).
[3] Interview with Sue Mainzer,
branch manager, Title Control Systems, Vehicle Titles and Registration, Texas
Department of Transportation, Austin, Texas, June 15, 2000.
[4] Interview with Sue Mainzer,
branch manager, Title Control Systems, Vehicle Titles and Registration, Texas
Department of Transportation, Austin, Texas, August 9, 2000.
[5] Interview with Sue Mainzer,
branch manager, Title Control Systems, Vehicle Titles and Registration, Texas
Department of Transportation, Austin, Texas, June 15, 2000.
[6] Memorandum from Jerry Dike,
director, Vehicle Titles and Registration, Texas Department of Transportation,
to Richard Mudge, BBP Consultant Study, April 12, 2000.
[7] Interview with Darryl Hunt,
deputy director; Steve Elsner, chief, Administrative Operations;
Danny Garza, assistant director, Field Operations; Bob Tanner, director,
Technical Operations, Duane Pufpaff, chief, Headquarters Operations,
Vehicle Titles and Registration, Texas Department of Transportation, Austin,
Texas, March 28, 2000, and Memorandum from Jerry Dike, Vehicle Titles and
Registration, Texas Department of Transportation, to Richard Mudge, BBP
Consultant Study, April 12, 2000.
[8] American Association of
Motor Vehicle Administrators, The Fast Track to Vehicle Services Facts, 1999
Edition (Dubuque, Iowa: Kendall /Hunt Publishing Company, 1999), p.
25.
[9] Texas Comptroller of Public
Accounts, Telephone Survey of Other States, conducted June to August
2000.
[10] Memorandum from Jerry
Dike, director, Vehicle Titles and Registration, Texas Department of
Transportation, to Richard Mudge, BBP Consultant Study, April 12,
2000.
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