Fiscal impact reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for standing finance
committees of the NM Legislature. The LFC does not assume responsibility for the accuracy of these reports
if they are used for other purposes.
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F I S C A L I M P A C T R E P O R T
SPONSOR Boitano
ORIGINAL DATE
LAST UPDATED
2/1/08
2/14/08 HB
SHORT TITLE Property Tax Valuation and Reassessment
SB 450/aHHGAC
ANALYST Earnest/Francis
REVENUE (dollars in thousands)
Estimated Revenue
Recurring
or Non-Rec
Fund
Affected
FY08
FY09
FY10
See narrative Recurring
General
Obligation
Bonding
Capacity
*
*
* Non-recurring Property Tax
Recipients
(Parenthesis ( ) Indicate Revenue Decreases)
*see narrative
Conflicts with SB333
SOURCES OF INFORMATION
LFC Files
Responses Received From
Taxation and Revenue Department (TRD)
Department of Finance and Administration (DFA)
SUMMARY
Synopsis of the HHGAC Amendment
The House Health and Government Affairs Committee amendment changes the effective date of
the legislation to January 1, 2010, and extends until 2009 the period of time in which transferred
property is revalued at the 2004 assessment level. The amendment also changes the stipulation
that transferred property must be
, instead of must not exceed, the higher of 103% of the value in
the prior tax year or 106.1% of the value in the tax year two years prior to the tax year in which
the property is being valued.
Synopsis of Bill
Senate Bill 450 would amend the Property Tax Code to require revaluation of residential
pg_0002
Senate Bill 450/aHHGAC – Page
2
property that transferred between 2005 and 2008 at the property’s 2004 assessed value for
property taxation purposes. Once reassessed, the assessed value of the property would be subject
to the 3% limitation on assessed value increases currently required by Section 7-36-21.2.
FISCAL IMPLICATIONS
The HHGAC amendment shifts the fiscal impact of the legislation to FY11. According to the
Board of Finance, the decrease in property valuation identified by TRD of $1.8 billion in the
original bill may result in lower general obligation bonding capacity of $18 million in FY09. A
similar impact to bonding capacity would exist in FY11 under the amendment.
As TRD reports, Article IX of the New Mexico Constitution governs debt obligations approved
by voters that may be issued by counties, municipalities, school districts. Article IX, Section 8
prevents the State of New Mexico from imposing debt obligations funded by property taxes in
excess of 1% of statewide net taxable value. Article IX, Section 13 limits debt obligations
serviced by issued by counties and municipalities to 4% of net taxable value. Section 11 of
Article IX imposes a 6% limit on school district debt that may be financed by property taxes. By
limiting growth in net taxable value, the proposed limitation may, at some point, cause some
jurisdictions to be impacted by these limits.
The property tax recipients in the table include counties, school districts, municipalities and
similar entities receiving revenues from property tax levies.
TRD reports that the data necessary to accurately estimate effects of the proposed measure is not
available to the agency. However, general effects of the proposed measure would consist of 1)
revenue losses to some property tax recipients that could not be offset by discretionary rate
increases; and 2) rate increases among residential and nonresidential property owners – including
taxpayers of transferred properties that would benefit from assessed value decreases. Hence the
property tax burden would be redistributed among residential and nonresidential property owners
in very complex ways that depend on a number of factors that vary widely with property
location.
TRD provided the following discussion of the fiscal implications:
“Statewide residential net taxable value
1
grew from roughly $19.4 billion in 2004 to $25.7 billion
in tax year 2007 – approximately $6.3 billion. The 33% increase was due to a combination of
factors, including 1) new construction, 2) the 3% increase typically applied to all residential
properties, and 3) increases due to reassessment that occurred when properties were sold.
Substantial variation in these components occurred among counties, municipalities and school
districts during the 2004 to 2007 time period. Very rough estimates performed by the
Department suggest that about $1.8 billion of the increase was due to increased assessed values
of properties that were sold. Hence reducing net taxable values to 2004 tax year levels would
reduce net taxable statewide by approximately 30%. If this were to occur, property tax rates
would generally adjust upward. Essentially all rates that are dedicated to paying debt service
would increase – on residential and nonresidential property. Residential operating rates and all
1
For rate setting purposes.
pg_0003
Senate Bill 450/aHHGAC – Page
3
such rates that are subject to the yield control statute would typically increase also. In some cases
-- DeBaca County as shown in the illustration on page 3, however, the rates could not increase
because the actual rate – imposed rate after operation of yield control – is the same as the
imposed rate, and the rate imposed is the maximum rate allowed by law. Hence, DeBaca County
would experience operating revenue losses under the proposed statute. In cases where rate
adjustments did not offset revenue shortfalls, governing bodies of property tax recipients would
be able to impose rate increases up to the maximum amounts allowed by law – 11.85 mills for
counties, 7.65 mills for municipalities and .5 mills among school districts. As shown on the
attached table, however, only 14 of the state’s counties would be allowed to increase their rates
because they have no remaining authority. The rate increases they imposed would apply to
residential and nonresidential property. Estimating probable impacts of the proposal would
require detailed data on the numbers of properties that transferred in each county municipality,
school district and jurisdictions of other property tax recipients -- and the extent that the transfers
increased residential property values. This information is not available to the Taxation and
Revenue Department."
SIGNIFICANT ISSUES
Transferred property is not subject to the 3% limitation on assessed value increases that was
enacted by Laws, 2000, Ch 21, Section 1 -- applicable to the 2001 and successive tax years.
Hence increases in housing values between when the law was enacted and when many properties
transferred created a condition where owners of transferred properties are faced with much
higher tax bills than owners that remain their existing homes, and are protected to a great extent
from property tax increases by the 3 percent valuation increase limit. The proposed measure is
intended to remedy this problem.
TECHNICAL ISSUES
TRD notes that the effect of the third HHGAC amendment would be to require the value of
transferred properties to increase at 3% annually, rather than limit the increases to 3% annually.
This language may create conditions where assessed values of properties exceed market value
and thus be the basis of protests – when, for example, market values are declining.
ADMINISTRATIVE IMPLICATIONS
No significant administrative implications were identified.
CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP
Relates to Senate Bill 448.
BE:NF/mt:nt
pg_0004
Senate Bill 450/aHHGAC – Page
4
Attachment to Fiscal Impact Report of Senate Bill 450
Illustration: Tax Year 2007 County Operating Rates
Non- Rate Maximum Remaining
County Residential Residential Imposed Allowed Authority
Bernalillo
6.183 10.800 10.900 11.85
0.950
Catron
10.850
8.583 10.850 11.85
1.000
Chaves
6.766 10.350 10.350 11.85
1.500
Cibola
8.131 11.850 11.850 11.85
0.000
Colfax
6.195
7.913 10.350 11.85
1.500
Curry
9.544
9.850 9.850 11.85
2.000
DeBaca
11.850 10.868 11.850 11.85
0.000
Dona Ana
7.812 11.850 11.850 11.85
0.000
Eddy
6.598
7.500 7.500 11.85
4.350
Grant
6.108 11.850 11.850 11.85
0.000
Guadalupe
7.949 11.850 11.850 11.85
0.000
Harding
8.075 10.850 10.850 11.85
1.000
Hidalgo
11.456 11.850 11.850 11.85
0.000
Lea
8.688 10.600 10.600 11.85
1.250
Lincoln
4.795
8.850 11.600 11.85
0.250
Los Alamos
4.406
7.610 8.850 11.85
3.000
Luna
8.227 11.850 11.850 11.85
0.000
McKinley
5.209 11.850 11.850 11.85
0.000
Mora
6.723 10.866 11.850 11.85
0.000
Otero
7.126 11.850 11.850 11.85
0.000
Quay
5.274 10.350 11.850 11.85
0.000
Rio Arriba
4.314 10.222 11.850 11.85
0.000
Roosevelt
9.793 10.850 10.850 11.85
1.000
Sandoval
5.116
5.354 10.350 11.85
1.500
San Juan
5.951
8.000 8.500 11.85
3.350
San Miguel
5.447 11.850 11.850 11.85
0.000
Santa Fe
4.415
9.989 11.850 11.85
0.000
Sierra
9.256 11.850 11.850 11.85
0.000
Socorro
7.772 11.721 11.850 11.85
0.000
Taos
4.911
9.450 11.850 11.85
0.000
Torrance
11.156 11.814 11.850 11.85
0.000
Union
7.051
9.150 9.150 11.85
2.700
Valencia
6.379 11.850 11.850 11.85
0.000
Information source: DFA Local Government Division