BILL ANALYSIS AND FISCAL IMPACT REPORT	Page 1 of  2

DATE:  February 19, 2001	Submitted by: TAXATION AND REVENUE DEPT.
	T. GLENN ELLINGTON, SECRETARY
BILL NUMBER: HB-623 -- revised estimate

SPONSOR: Representative Lujan

BILL SHORT TITLE: Amendments to the Property Tax Code

DESCRIPTION: The limitation on increases in valuation of residential property is revamped.  Now counties where median sales assessment ratios are under 80 percent (the cut-off was 85 percent formerly) in the 2000 tax year must reassess until they reach sales ratios of at least 80 percent by tax year 2005. In counties where insufficient data exists to determine a statistically valid sales/assessment ratio, the Department must determine a ratio based on appraisals.
	The proposed measure also indexes the modified gross income (MGI) cap used in qualifying elderly low-income owners of single-family residential for the 0% valuation increase limitation by consumer price index for urban consumers. 
	The proposal further clarifies that new improvements to properties by individuals subject to the elderly low-income value limitation are not subject to the limitation. 

EFFECTIVE DATE: The measure's emergency clause would make it effective immediately upon enactment.

FISCAL IMPACT:  No significant impacts on state or local revenue sources would result from passage of the proposed measure. Fiscal Year 2000 sales/assessment ratios for New Mexico counties are shown in the illustration below. The number of counties in which the Department would be required to assess properties to determine sales/assessment ratios would depend on what is assumed to be an adequate sample size. Six counties would fall into this category on the basis of figures shown in the table. Six counties -- Cibola, Colfax, Hidalgo, Quay, Rio Arriba and Socorro -- would not qualify for the 3 percent limitation and be required to continue reassessing until their median ratio of sales price to assessed value reached at least 80 percent.

ADMINISTRATIVE IMPACT: The proposed changes could be administered with resources currently available to the Department. However, significant costs will probably result from the provisions requiring appraisal in cases where insufficient sales data exist to determine sales/assessment ratios.

TECHNICAL ISSUES:
The monthly consumer price index published by the Department of Labor is cumulative by nature. It measures  inflation occurring between the month in question and the base year period. Hence, rather than specifying the average change in the consumer price index for four successive quarters, as is done in the proposed measure, an easier method of accomplishing the same task would be to simply specify the ratio of, say the consumer price index in June of 2000 to the consumer price index in June of each successive year.

OTHER IMPACTS AND ISSUES:  
1) The proposal would generally improve equity associated with New Mexico's property tax system by allowing improved uniformity in assessment among counties where sales/assessment ratios are currently low. 
2) Indexing the MGI figures would prevent inflation from causing some low-income taxpayers to fail to qualify for the valuation freeze. Nonetheless, allowing a person with an income of $18,000 to qualify for the freeze, while a person whose income is $18,001 does not, may not be perceived as fair by some taxpayers. 
3) Under the proposed and current statute if an assessor did not reassess and, as a result, the county average sales/assessment ratio fell to, say 60 percent, no legal mechanism exists that would require assessments to be returned to approximate market values.

Illustration: 2000 Tax Year Sales Assessment Ratio Summary 	

County	Mean Ratio: Assessed Value to Sales Price (%)	Median Ratio: Assessed Value to Sales Price (%)	
Coefficient of Dispersion	Price Related Differential	
Sample Size	
Bernalillo	86.7	85.6	12.24	1.01	1491	
Catron	98.9	98.8	5.17	1.01	83	
Chaves	84.7	84.5	13.12	1.00	480	
Cibola	77.4	74.7	23.09	0.97	52	
Colfax	73.1	68.5	28.91	1.10	119	
Curry	98.5	97.0	15.30	1.04	338	
De Baca	NA	NA	NA	NA	ISS*	
Dona Ana	91.0	94.0	12.89	0.98	1252	
Eddy	86.6	84.7	12.07	1.01	246	
Grant	84.0	84.0	22.63	1.03	41	
Guadalupe	NA	NA	NA	NA	ISS*	
Harding	NA	NA	NA	NA	ISS*	
Hidalgo	79.7	73.3	25.29	1.10	37	
Lea	90.0	86.0	17.38	1.02	257	
Lincoln	95.0	92.0	12.39	1.03	508	
Los Alamos	81.0	80.3	9.34	0.99	158	
Luna	94.0	94.0	10.79	0.97	195	
McKinley	89.0	88.7	13.20	1.01	82	
Mora	NA	NA	NA	NA	ISS*	
Otero	85.0	86.0	16.07	1.00	1030	
Quay	73.8	72.9	22.07	0.99	46	
Rio Arriba	75.0	73.0	23.34	1.05	236	
Roosevelt	86.4	88.5	8.04	0.99	62	
San Juan	82.0	81.0	9.97	1.01	646	
San Miguel	89.9	89.8	19.36	1.04	58	
Sandoval	84.3	86.8	15.31	1.01	192	
Santa Fe	86.5	86.7	10.70	1.01	337	
Sierra	82.2	81.1	19.62	1.02	251	
Socorro	NA	NA	NA	NA	ISS*	
Taos	77.4	74.2	23.34	1.02	230	
Torrance	84.0	84.0	7.99	1.01	89	
Union	NA	NA	NA	NA	ISS*	
Valencia	86.5	84.2	10.98	1.01	231	
  Average	85.3	84.2	15.71	1.02	324	
*Insufficient sample size. Notes: 1) Bold print indicates insufficient sample size or median ratio below 80 percent. 2) Ratios shown in columns 2 and 3 reflect 1999 sales and 2000 tax year assessed values.