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F I S C A L I M P A C T R E P O R T

SPONSOR Berry

ORIGINAL DATE

LAST UPDATED

3/09/07

HM 85

SHORT TITLE Study Property Tax Value Inequities

SB

ANALYST Schuss

ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)

FY07

FY08

FY09 3 Year

Total Cost

Recurring

or Non-Rec

Fund

Affected

Total

$75.0*

$75.0*

Non-

Recurring General

Fund

(Parenthesis ( ) Indicate Expenditure Decreases) * TRD estimate

SOURCES OF INFORMATION

LFC Files

Responses Received From

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of Bill

House Memorial 85 requests the Taxation and Revenue Department’s Property Tax Division

(PTD) to review assessment processes “actually carried out by county assessors" and the status

of “current and correct" values in all New Mexico counties and report results of the review to the

Interim Revenue Stabilization and Tax Policy Committee no later than September 15 regarding

the extent of inequities in New Mexico property valuation. It also requests that the Interim

Revenue Stabilization and Tax Policy Committee develop recommendations for statutory

changes based on the report produced by TRD.

FISCAL IMPLICATIONS

TRD notes that the study requested could easily require the services of one full time employee at

a cost of $75,000, including salary, equipment and benefits.

SIGNIFICANT ISSUES

House Memorial 85 states that Section 7-36-21.2 NMSA 1978 provides for a limit on increases

in valuation for property tax purposes of three percent per year for property that remains in the

same ownership but allows for radical changes in valuation whenever property is transferred.

House Memorial 85 – Page

2

The statutorily mandated property valuations process has created inequities in valuation between

substantially identical properties in the same county and has increased the inequities among

property tax values in different counties. This system of property valuation gives a tax advantage

to persons able to remain in their homes while putting at a disadvantage first-time home buyers

and many elderly home buyers and creates a hardship for persons who need to relocate to another

home.

HM 85 states that the higher tax level resulting from the higher valuation makes it difficult to

develop affordable housing projects and creates difficulty for some homeowners in meeting

monthly mortgage payments. County assessors do not uniformly use sales price disclosure data

in revaluing property upon transfer but employ various individual approaches and the differing

valuation standards make it hard to determine if assessors are valuing all properties fairly. There

is no clearly defined standard of “current and correct" value by which to judge the compliance of

the various county assessors.

The House of Representatives of the State of New Mexico requests that the Property Tax

Division of the Taxation and Revenue Department undertake a review of the assessment process

as it is actually carried out by county assessors and the status of "current and correct" values in

all counties of the state and present a report no later than September 15, 2007 to the Interim

Revenue Stabilization and Tax Policy Committee on the presence or absence of inequities in

property tax valuation in New Mexico. HM 85 also requests that the Interim Revenue

Stabilization and Tax Policy Committee, using the report from the Taxation and Revenue

Department, develop recommendations for statutory changes to make the residential property

valuation system in New Mexico more equitable and present these recommendations to the

second session of the forty-eighth legislature.

ADMINISTRATIVE IMPLICATIONS

TRD states that the study would require one full time employee.

BS/csd