Speech to Executives and Sales Force of Gulf States Toyota


Good morning. It is great to be here.

I wanted to give you a short update on some of the big issues this session that impact and hopefully interest you.

By now you might have heard about an $8.8 billion budget “surplus”. Well, don’t get too excited. This “surplus” is pretty much already spent, covering bills we didn’t pay last session. the biggest chunk will go to paying our overdue $4.7 billion tab for Medicaid.

We also have to give Texas schools $1 billion, and we kind of fudged the numbers on $3 billion more with delaying tactics. Basically, in your world, we fudged our loan application to make it look like we qualified for a better car than we could really afford.

So the surplus is essentially gone, and if anyone tells you we are in great shape, they’re pulling your leg.

We do face a much better budget situation than last time, so we are not going to have a bloodletting like last session. We also have $12 billion in our rainy day fund, and there appears to be support to use at least a billion of that to work on our transportation woes.

The top ideas appear to be rededicating sales tax revenue on vehicle purchases to TxDOT or adding $50 to the annual vehicle registration fee. Others include ending diversions from the gas tax revenue and taking $1 billion from the “rainy day fund” to create a highway infrastructure bank.

The issue with rededicating the sales tax is of course, it leaves another hole in general revenue. An increase on fees is regressive and could actually hurt the economy negatively impacts our poorest constituents. Ending diversions from Fund 6 would be great, but it is not enough to account for our increasing needs. The gas tax hasn’t increased in over 20 years and indexing it is another idea that’s been floating around. But, cars are getting better mileage, even that may not be a sustainable source of funding.

This will take some creativity and hard decisions on our part, so you may not have better leverage and more of a voice on transportation issues than you will this session.

Actually investing in transportation is, apparently, finally going to be a top of the agenda item and none too soon. We have neglected our roads and transportation planning for the last decade, even as Texas grows rapidly and the number of heavy trucks and trade increases just as fast.

Since the turn of the century, the 20 percent population increase — centered on the state’s largest metropolitan areas — has translated to almost 3 million additional cars and trucks. We have not come close to keeping up with the need.

This isn’t just a “waiting in traffic” issue. Texas currently has over 9,000 structurally deficient, functionally obsolete or substandard bridges. Forty-eight percent of our bridges were built prior to 1970. Think about that when you are behind a big truck while on a test drive in a nice, brand new hybrid Toyota Camry.

Texas continues to have the most auto dealerships in the nation, with over 400 more than California. So the competition for you guys is even tougher. But the continually growing economy should continue to help boost sales in Texas and across the nation. Nationwide, over 943,000 new and used — I mean “pre-owned” — were sold, totaling $14.6 billion.

The auto industry is a huge part of the Texas economy. It is typically the second biggest tax contributor to state revenues — just shy of $3 billion in motor vehicle sales and rental taxes was generated in fiscal 2011 and more than $3.2 billion is expected in fiscal 2012. Retail sales and use tax is the biggest tax source of tax revenue for Texas state government, raising $21.4 billion in fiscal 2011. Overall, Texas auto sales have continued to increase, but are still slightly short of 2007/pre-Great Recession levels.

Auto dealers represent 20 percent of overall Texas retailers, and 16.5 percent of all retail sales.

Toyota has led the way in growth, with a 26.6% increase in sales in 2012, the biggest of any major auto company operating in the U.S. And that isn’t a fluke, as sales grew 27% in January.

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