BILL ANALYSIS AND FISCAL IMPACT REPORT	Page 1 of  2

DATE: March 8, 2001	Submitted by: TAXATION AND REVENUE DEPT.
	T. GLENN ELLINGTON, SECRETARY
BILL NUMBER: House Judiciary Committee Substitute for HB-498

SPONSOR:  

BILL SHORT TITLE: Allowing counties to collect delinquent property taxes on real property

CONFLICTS, DUPLICATES, COMPANIONS: HB-138

DESCRIPTION: This measure would allow counties to enter into contracts with private attorneys for collecting  delinquent property taxes. Currently, properties are turned over to the Taxation and Revenue Department for collection and sale for delinquent taxes after taxes have been delinquent for about three years. The proposed measure would allow counties to assume the Department's role in collecting delinquent taxes and selling associated properties. Counties would also be given authority to enter into installment agreements for payment of delinquent taxes.
	The method whereby the decision to sell properties at the county level is a little unusual. County commissioners must adopt a resolution assuming authority to sell properties, but they may not do so without "...the express concurrence in writing of the county treasurer...". Hence, even when commissioners favor retaining the right to sell properties for delinquent taxes, county treasurers would be allowed to prevent them from doing so under the proposed measure.
	The proposal would also impose an additional penalty against delinquent taxpayers -- of up to 30 percent of the amount of penalty, interest and taxes due under current statutes. Counties would be required to notify taxpayers that private attorneys have been retained for the purpose of collecting taxes, and that as a result, the owners will be subject to the additional penalties. The new penalties would be paid to private attorneys that collect delinquent taxes. The measure would allow counties to collect various costs associated with collecting delinquent taxes, including court costs, expenses of a tax sale and similar costs. 
	Under the proposal, a county commission electing the option may subsequently decide to return authority for selling properties for delinquent taxes to the Department -- without approval of county treasurers. However, they must notify the Department at least 18 months prior to the tax year in which the return of authority to sell properties is to apply. 
	The HJC substitute added conforming amendments to Section 7-38-48 and 7-38-60 and deleted a subsection in what is now Section 9 that purported to grant immunity to the county or its retained attorney for court costs and the like when it loses a suit.  

EFFECTIVE DATE: July 1, 2001.

FISCAL IMPACT: The measure would impose no significant impacts on state or local tax sources. However, since some penalty and interest associated with collecting delinquent taxes goes to the agency collecting the revenues, funding would shift from the state to counties electing the option provided by the proposal.

ADMINISTRATIVE IMPACT: The proposal would probably decrease total expenses of collecting delinquent property taxes by the Taxation and Revenue Department. Administrative functions and costs borne by counties would increase, however. Whether the net cost of administrating property taxes would increase or decrease is uncertain. It would depend on fees charged by private attorneys under the proposed system, as well as how efficient counties would be at selling properties on which taxes are delinquent.

TECHNICAL ISSUES: 
1)	The measure does not seem to specify whether private attorneys will be liable for title research mistakes they make, or whether counties bear these responsibilities. 
2)	Section 7-38-71 NMSA 1978 specifies how money received by the Department from the sale of property for delinquent taxes is distributed. The proposed measure makes no change to this portion of statute and thus contains no similar provisions for cases when counties sell properties for delinquent taxes. Section 15 of the  proposal does, however, provide for distribution of taxes in cases where counties enter into installment agreements for payment of delinquent taxes.
3)	Real properties are not sold until they are between 3 and 4 years delinquent. Hence the sales conducted in 2001 stem from delinquencies in 1997. It would be good to clarify what year’s delinquencies this bill is to first apply to. If it is meant to apply to all outstanding delinquencies, counties should be required to reimburse the state for all costs the state has incurred with respect to accounts turned over to them.

OTHER IMPACTS AND ISSUES: 
1)	Some counties have delinquent accounts with high amounts of delinquent tax. To prevent "cherry-picking" by the counties, the Department interprets the change in 7-38-62 (Section 12 of the proposal, page 13) to mean that if a county accepts responsibility for collecting delinquent tax on any property, it accepts responsibility for all properties.  
2)	Imposing a 30 percent penalty in addition to current penalties imposed under statute simply because a county decides to make use of private collection agents is arbitrary and may conflict with Article II, Section 18 of the New Mexico Constitution requiring equal protection of the law.   It also demonstrates that privatization does not always lower costs or increase efficiency.
3)	Since property taxes fund almost nothing but local governments, it is probably appropriate that local governments collect delinquent property taxes. A major advantage the state's doing the collecting, however,  --aside from economies of scale-- is that someone outside county government regularly reviews activities in county property tax accounts. 
4)	For accountability, a specific authority should be granted to the Department to audit county efforts to sell real property for delinquent taxes and to revoke the county’s authority if the county does not offer properties for sale in accordance with the provisions of the Property Tax Code.