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F I S C A L I M P A C T R E P O R T

SPONSOR Gonzales

ORIGINAL DATE

LAST UPDATED

2/8/06

HB 811

SHORT TITLE Health Equipment Property Tax Exemption

SB

ANALYST Francis

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

FY08

NFI

Recurring Local Governments

See narrative for details

(Parenthesis ( ) Indicate Expenditure Decreases)

Duplicates SB417

SOURCES OF INFORMATION

LFC Files

Responses Received From

Department of Finance and Administration (DFA)

Economic Development Department (EDD)

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of Bill

House Bill 811 makes health-related equipment at qualified facilities exempt from property tax

liability. This exempts from property taxation health-related equipment purchased, acquired,

leased, financed or re-financed with bonds issued under the Hospital Equipment Act. The ex-

emptions can only be used consecutively if subsequent exemptions are for new projects or new

health-related equipment. The exemption applies to tax year 2006 and subsequent years.

FISCAL IMPLICATIONS

The fiscal impact of exempting from property tax projects financed with industrial revenue

bonds or similar financing instruments mostly falls on local governments, particularly counties

and school districts. Taxation and Revenue Department has estimated that the amount financed

by the Hospital Equipment Loan Council for health equipment is approximately $100 million, 70

House Bill 811 – Page 2

percent of which is for private for-profit hospitals. Using an average property tax rate of 30 mills

(dollars per thousand dollars), the property tax decrease is $700 thousand. However, due to the

way property tax is set and collected, the “yield control” provision resets rates across other tax-

payers to make up the difference of the $700 thousand. Thus, there is no net fiscal impact but

the tax liability is shifted amongst taxpayers.

SIGNIFICANT ISSUES

When property tax exempt financing is approved by a county or a municipality, there is little or

no input from the other governments—municipalities in the case of a county issuing the financ-

ing, school districts, special districts—and their revenue is impacted as well as the issuing gov-

ernment.

In small communities, the property tax on hospital equipment may constitute a significant por-

tion of the local governments’ tax base and so exempting the equipment may impose a burden on

the remaining tax base.

EDD:

The property tax exemption would allow health facilities to be exempt from property taxes

under this expansion of the Industrial Revenue Bond Act. Currently, the law does not allow

the hospital council to issue IRBs that exempt health facilities from property taxes. The use

of the IRBs would allow New Mexico communities to attract new or expand existing health

care facilities in New Mexico. This exemption would provide New Mexico communities

with the tools to increase their health care infrastructure.

NF/yr