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-668

SPONSOR:  Representative Martinez

BILL SHORT TITLE: Correctional Facility Gross Receipts Tax

CONFLICTS, DUPLICATES, COMPANIONS:  SB-188, HB-224

DESCRIPTION:  This bill adds Cibola County to the list of counties eligible to impose the County Correctional Facility Gross Receipts Tax, and allows Cibola County to impose a tax rate of up to 1%.  Imposition of the tax would not require voter approval as in other counties.

EFFECTIVE DATE:  July 1, 2001.

FISCAL IMPACT (Thousands of dollars)   Parenthesis ( ) indicate a revenue loss:

Estimated Impact on Revenues	Recurring or		
			Nonrecurring	Funds	
Half Fiscal Year	First Fiscal Year	Full Fiscal Year	     Impact     	         Affected         	
970	2,221	2,425	Recurring	Cibola County Corrections	
30	69	75	Recurring	TRIMS/NMFA Administrative Fees (1)	

The “Half Fiscal Year” fiscal impact assumes implementation of the tax at a rate of 1% on January 1, 2002, generating 5 months of accrued revenue in fiscal year 2001-2002.  The “First Fiscal Year” impact assumes implementation of the tax on July 1, 2002, generating 11 months of accrued revenue in fiscal year 2002-2003.  The “Full Fiscal Year” impact shows 12 months of revenue at fiscal year 2002-2003 levels.  The revenue at the assumed tax rate of 1% should be able to support approximately $19 million in bonds for a Cibola County corrections facility (assuming 10 year bonds at 5% and a coverage ratio of 1).

1)  The 3% TRD Administrative Fees are directed to TRIMS bonds issued through the NMFA through December 2006 or the date the bonds are fully discharged.  After that date, TRD Administrative Fees are directed to the State General Fund.

TECHNICAL ISSUE:
•	Page 5, line 21 specifies the tax may be imposed on January 1 or July 1 at least 3 months following the date the tax is “adopted by resolution of the county board”.  The phrase has probably been inserted at the wrong point in the sentence.  In order to properly implement a new local option tax, the department must be allowed 3 months from the time it is notified, not 3 months from the date the resolution is adopted.  The phrase could be inserted on line 23 following the word “that” and rephrased to “the county (board) has adopted a resolution imposing the tax or”.

ADMINISTRATIVE IMPACT:  No significant administrative impact on the department.  The local option tax could be implemented with existing resources as part of the department’s routine duties.

OTHER IMPACTS AND ISSUES:

•	The tax may be imposed only once for repayment of revenue bonds for a period of no more than 10 years.  The tax may be used for constructing, purchasing, furnishing, equipping, rehabilitating, expanding or improving a facility or the grounds of the facility, including parking lots and landscaping.

•	This bill’s expansion of eligible counties and increase in the allowed tax rate of the County Corrections Facility Gross Receipts Tax illustrates how local option gross receipts taxes tend to proliferate in an ad hoc manner, sometimes without much review of long term policy considerations.  The expansion of local option taxes of this sort inhibit the ability of the state to raise revenue from the gross receipts tax, assuming there is a maximum tax rate the public will tolerate.

OTHER IMPACTS AND ISSUES (continued):

•	The statewide weighted average gross receipts tax rate is about 5.89%.  The tax rate in Albuquerque, one of the lower tax rates in the state at 5.8125%, has a strong influence on that weighted average, and the majority of municipal locations have tax rates in excess of 6%.  The current total Gross Receipts Tax rates in Cibola County are 6.8125% in Grants and Milan, and 6.25% in the unincorporated areas of the county.  Addition of a 1% tax would make tax rates in Cibola County, even in the unincorporated areas, the highest in the state.