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

SPONSOR Miera

ORIGINAL DATE

LAST UPDATED

1/29/08

1/30/08 HB 435

SHORT TITLE County Correctional Facility Gross Receipts

SB

ANALYST Schardin

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY08

FY09

FY10

(See Narrative)

Recurring

County

Governments

(See Narrative)

Recurring General Fund

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of Bill

House Bill 435 increases the maximum rate at which a county correctional facility gross receipts

tax may be imposed from 1/8 to 1/4 percent. Counties will still be able to impose the tax in any

one-sixteenth percent increment.

Under current law, up to 1/8 percent may be imposed with an optional county referendum. The

bill would allow leave a referendum optional for the first two 1/16 percent increments but require

a vote to impose the third or fourth 1/16 percent increments.

Since the bill has no effective date it is assumed to become effective on May 14, 2008, 90 days

after the 2008 legislative session adjourns.

FISCAL IMPLICATIONS

The fiscal impact of this bill depends on if and when county governments choose to impose

county correctional gross receipts tax rates above the current limit of 0.125 percent. The table

below, based on data provided by TRD, indicates the potential revenue increase to each county if

House Bill 435 – Page

2

an additional 1/8 percent tax were imposed in FY09. If all counties chose to impose an additional

1/8 percent tax, about $58.9 million in revenue would be generated.

The table below also indicates the potential general fund revenue loss that would occur if all

counties imposed an additional 1/8 percent tax in FY09. The food and medical gross receipts tax

deductions enacted in 2004 include “hold harmless" provisions to protect local governments

from associated revenue losses. In 2007, legislation froze the tax rate at which some local

governments are held harmless from the food and medical deductions. However, in smaller cities

and counties, the general fund hold harmless distribution grows larger when higher local option

taxes are imposed. The general fund revenue loss would be about $668 thousand in FY09 if all

local governments chose to impose the tax.

County

Potential Revenue: 1/8%

County Correctional

Facility GRT Increment

Potential General Fund Loss Due

to Hold Harmless Distribution:

1/8% County Correctional Facility

GRT Increment

Bernalillo

21,839,781

Hold Harmless Rate Frozen

Catron

42,862

(1,706)

Chaves

1,443,105

Hold Harmless Rate Frozen

Cibola

362,968

(35,947)

Colfax

422,248

(19,188)

Curry

991,230

(90,796)

De Baca

30,070

(2,811)

Dona Ana

4,181,818

Hold Harmless Rate Frozen

Eddy

2,754,956

Hold Harmless Rate Frozen

Grant

654,731

(69,526)

Guadalupe

192,720

(7,867)

Harding

15,563

(460)

Hidalgo

117,692

(4,153)

Lea

3,608,488

Hold Harmless Rate Frozen

Lincoln

629,369

(46,926)

Los Alamos

2,081,426

(62,054)

Luna

418,578

(43,400)

McKinley

1,330,096

Hold Harmless Rate Frozen

Mora

31,594

(2,994)

Otero

1,024,484

Hold Harmless Rate Frozen

Quay

176,566

Hold Harmless Rate Frozen

Rio Arriba

769,790

(67,516)

Roosevelt

321,051

(30,850)

San Juan

5,105,325

Hold Harmless Rate Frozen

San Miguel

429,856

(51,451)

Sandoval

2,275,493

Hold Harmless Rate Frozen

Santa Fe

4,965,236

Hold Harmless Rate Frozen

Sierra

186,755

(10,503)

Socorro

248,880

(26,358)

Taos

802,158

(76,190)

Torrance

268,732

(10,361)

Union

153,394

(7,062)

Valencia

979,739

Hold Harmless Rate Frozen

Total

58,856,751

(668,118)

Source: Taxation and Revenue Department, Office of Research and S tatistics

Illistration of Potential Revenue from Additional County

Local Option Increments - Fiscal Year 2009

House Bill 435 – Page

3

SIGNIFICANT ISSUES

Any county in New Mexico may impose the county correctional facility gross receipts tax.

Imposition of this tax does not require approval by a majority of county voters, although voters

may petition an election to approve or disapprove the tax.

County revenue collected due to a county correctional facility gross receipts tax is restricted for

use in operating, maintaining, constructing, purchasing, furnishing, equipping, rehabilitating,

expanding, or improving a judicial correctional or county correctional facility. Revenue may also

be used to transport or extradite prisoners or to pay principal and interest on county correctional

facility gross receipts tax bonds.

Currently, counties are experiencing escalating costs to extradite and transport prisoners. For

example, Bernalillo County reports that the county jail’s operating budget grew by an average of

9.5 percent per year from 1995 to 2007.

New Mexico’s municipalities and counties are authorized to impose over 4 percent of local

option gross receipts taxes (that figure excludes several additional local option taxes that have

been authorized for selected local governments). Due to increasing imposition of local option

taxes, the statewide gross receipts tax rate is increasing steadily. On average, a local option gross

receipts tax of about 1.9 percent will be imposed by local governments statewide by FY09.

Combined with the state gross receipts tax of 5 percent, the statewide tax rate is therefore 6.9

percent.

ADMINISTRATIVE IMPLICATIONS

The administrative impact on TRD will be minimal.

TECHNICAL ISSUES

TRD notes technical issues with existing statute that could be fixed in this bill:

On page 3, line 3, cite Section 7-20F-1 NMSA 1978.

On page 3, line 8, add the words “Paragraph (1)" before the words “Subsection A" to clarify that

these first two increments are subject to the optional referendum, as distinguished from an

election.

On page 4, line 8 add a comma after, “the redemption fund" to indicate these three separate

items.

SS/bb