BILL ANALYSIS AND FISCAL IMPACT REPORT	Page 1 of  2

DATE:  February 17, 2001	Submitted by: TAXATION AND REVENUE DEPT.       
	T. GLENN ELLINGTON, SECRETARY
BILL NUMBER:  SB-567

SPONSOR:  Senator Smith 

BILL SHORT TITLE:  Increase Local Hospital Gross Receipts Tax

CONFLICTS, DUPLICATES, COMPANIONS:  

DESCRIPTION:   This bill revises two different county hospital gross receipts tax programs which Sierra County is eligible to impose.  The tax rate allowed to be imposed by Sierra County or Torrance County under the Local Hospital Gross Receipts Tax  would be revised from 0.5% to 1.0%.

The uses for the 0.25% (Sierra County) Hospital Emergency Gross Receipts Tax are revised to include “remodeling or improvements necessary for the conversion of a county hospital facility to another local government use.”

EFFECTIVE DATE:  Not specified – assume 90 days following adjournment (approx. June 15, 2001).

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

	Estimated Impact on Revenues	Recurring or		
			Nonrecurring	Funds 	
	First Year	Full Year	     Impact     	         Affected         	
	1,245	1,358	Recurring	Sierra County Local Hospital Tax	
	38	42	Recurring	TRIMS/NMFA Administrative Fees (1)	

The fiscal impact illustrates a July 1 tax implementation of a 1% Local Hospital tax in Sierra County.  The level of revenue should be able to support approximately $17 million in bonds (assuming 20 year bonds at 5% and a coverage ratio of 1).

The same tax imposed in Torrance County would amount to about $1,800 thousand for a full year.  The tax base numbers used for the estimate were approximate fiscal year 2002 levels.  The change in the use of the Hospital Emergency Gross Receipts Tax in Sierra County has not been illustrated in the fiscal impact.

(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 ISSUES:
•	The change to the Local Hospital Gross Receipts Tax rate in Section 2, Subsection A, Paragraph 4 (page 14, lines 5 through 11) would leave Cibola County with no compiled statute allowing their current tax imposition.  The bill should have been crafted to allow a tax rate of one-half of one percent, unless imposed on or after July 1, 2001 in which case the rate could not exceed one percent.

Paragraph (4) of Subsection A of Section 7-20C-2 NMSA 1978 describes Cibola County, Sierra County and Torrance County.  Of those three, only Cibola County has imposed the tax (effective July 1, 1997).

ADMINISTRATIVE IMPACT:   No substantial administrative impact on the department.

OTHER IMPACTS AND ISSUES:

•	Cibola County has already imposed the Local Hospital Gross Receipts Tax at a rate of 0.5% effective July 1997 and is not allowed to impose the tax again.  In the counties of Cibola, Sierra and Torrance, the Local Hospital Gross Receipts Tax may be imposed only once, for a period of no more than 20 years.  The imposition of the tax requires voter approval.

OTHER IMPACTS AND ISSUES (continued):

•	Creation or expansion of local option taxes of this sort, particularly at the tax rate level of up to 1.00%, may 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.

•	Since this local option tax is designed to be pledged toward special obligation bonds, and no legislative action may interfere with existing bonds, the legislature might find its options somewhat more limited when dealing with gross receipts tax issues in the future.  Virtually every type of authorized local option gross receipts tax, as well as the 1.225% amount shared by the state with municipal governments, has been pledged toward bonds by one local government or another.

•	Currently, the tax rates in Sierra County are: 6.125% in Elephant Butte, 6.5625% in T. or C., 6.5% in Williamsburg, and 5.75% in the unincorporated areas of the county.  The addition of 1% would make the tax rate in T. or C. the highest in the state.

•	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%. 

•	Only Sierra County has imposed the 0.25% Hospital Emergency Gross Receipts Tax, although Hidalgo County is also authorized to impose the tax.