NOTE:  As provided in LFC policy, this report is intended only for use by the standing finance committees of the legislature.  The Legislative Finance Committee does not assume responsibility for the accuracy of the information in this report when used for other purposes.

 

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

 

 

 

SPONSOR:

Cordova

 

DATE TYPED:

2/1/03

 

HB

HJR 2

 

SHORT TITLE:

Veteran’s Property Tax Exemption

 

SB

 

 

 

ANALYST:

Neel

 

REVENUE

 

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY03

FY04

 

 

 

 

4,200.0

 

 

 

Veterans

 

(4,200.0)

 

 

Non-Veterans

 

0.0

 

 

State and Local Governments

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

 

Responses Received From

 

TRD

 

SUMMARY

 

     Synopsis of Bill

 

House Joint Resolution 2 proposes to eliminate the current stipulation that only honorably discharged veterans that served during periods of armed conflict are allowed to claim the exemption.  Hence all honorably discharged veterans, irrespective of when they served, would be eligible for exemption amounts described above.

 

     Significant Issues

 

Senate Joint Resolution 1, enacted in the 2001 legislative session, allowed voters to consider an amendment to the New Mexico Constitution increasing the current $2,000 veteran exemption to $2,500 in tax year 2003, $3,000 in 2004, $3,500 in 2005 and $4,000 in 2006, where it would remain. Voters approved it. 

 

FISCAL IMPLICATIONS

 

TRD notes that allowing all veterans to claim the exemption would expand the number of claimants from 80,000 to approximately 124,000, because, according to census figures, roughly 177,000 veterans currently live in New Mexico but, on average, 70 percent of New Mexico's residential property is owner-occupied (177,000 x .7 = 123,900). Hence, after increasing the exemption from $2,000 to $4,000 and simultaneously allowing all veterans to claim it, the resulting reduction in base would be approximately 124,000 x $4,000 = $496 million.  This is an increase over the baseline—assuming the adoption of the increase to $4,000—of $176 million.  With the proposed exemption, veterans would have total tax relief of approximately $12.9 million ($4,000 x $26/$1,000 x 124,000) -- an increase of roughly $4.5 million over present law plus the effects of 2002 Constitutional Amendment #1. 

 

The relief provided to veterans would be largely offset by rate increases for all residential taxpayers due to the loss in base. This would occur as the yield control mechanism increased operating rates due to loss in base referred to as "valuation maintenance", and as debt rates increased to offset base reductions.

 

Since the base reduction under this proposal would total $176 million or about 1 percent of the current $17.1 billion residential portion of the base, rates would, on average, increase by roughly 1 percent, and net relief provided to veterans would total $4.4 million, or 99 percent of $4.5 million. There are a few cases where rates would not be able to adjust, but they would be minor because 1) the base grows at about 2 to 3 percent annually, and 2) the exemption would increase gradually over a period of five years. Hence revenue losses to property tax recipients -- school districts, counties and municipalities -- would be insignificant.

 

Finally, it should be noted that, according to the Veterans Service Commission, approximately 8,000 disabled veterans will probably qualify for the total property tax exemption likely to emerge from this year’s legislative session due to the recently approved constitutional amendment. As a result, effects of the proposed measure would be slightly less because some portion of the disabled veterans would qualify for the partial exemption that is the subject of the proposed legislation.

 

OTHER SUBSTANTIVE ISSUES

 

TRD has provided the following table that details the impacts by county.

 

 

 

 

 

Estimated

 

 

All Vets Claim

 

 

Number of

Estimated

Claimants

Col (5)

Effect of

And Exemption

 

Residential

Veterans

Base

If All Vets

Adjusted for

Allowing

Increased to

 

Net Taxable

Exemption

Reduction

Claim*

Renters

All Vets to Claim

$4,000

County

Value

Claimants

Col (3) x $2,000

Col (3)x 177/80

Col (5) x.7

Col (6) x $2,000

Col (6) x $4,000

Bernalillo

6,563,709,450

28,193

56,385,666

62,377

43,664

86,249,185

174,654,600

Catron

                 34,040,089

236

471,048

521

365

720,529

1,459,071

Chaves

               316,698,862

                    2,818

5,636,748

6,236

4,365

8,622,137

17,459,827

Cibola

                 71,241,594

                       858

1,716,139

1,898

1,329

2,625,057

5,315,741

Colfax

               125,579,751

                       921

1,842,083

2,038

1,426

2,817,705

5,705,852

Curry

               232,012,832

                    1,864

3,727,496

4,124

2,886

5,701,688

11,545,919

DeBaca

                   8,533,316

                       150

300,561

332

233

459,747

930,988

Dona Ana

            1,282,824,463

                    6,640

13,279,245

14,690

10,283

20,312,327

41,132,461

Eddy

               282,715,330

                    2,198

4,395,605

4,863

3,404

6,723,648

13,615,386

Grant

               231,947,637

                    1,742

3,484,422

3,855

2,698

5,329,875

10,792,997

Guadalupe

                 21,817,535

                       217

433,116

479

335

662,507

1,341,577

Harding

                   3,323,453

                         65

129,515

143

100

198,110

401,173

Hidalgo

                 17,094,261

                       175

349,633

387

271

534,809

1,082,988

Lea

               219,482,471

                    1,718

3,435,483

3,801

2,660

5,255,017

10,641,409

Lincoln

               387,430,401

                    1,132

2,264,516

2,505

1,754

3,463,871

7,014,338

Los Alamos

               432,501,520

                       797

1,593,010

1,762

1,234

2,436,715

4,934,348

Luna

               125,886,977

                    1,121

2,242,465

2,481

1,737

3,430,141

6,946,035

McKinley

               186,141,370

                       921

1,842,540

2,038

1,427

2,818,404

5,707,268

Mora

                 33,466,768

                       312

624,986

691

484

955,997

1,935,894

Otero

               388,621,086

                    3,868

7,736,386

8,558

5,991

11,833,805

23,963,456

Quay

                 37,644,048

                       634

1,267,528

1,402

982

1,938,848

3,926,168

Rio Arriba

               261,004,441

                    1,374

2,747,791

3,040

2,128

4,203,103

8,511,283

Roosevelt

                 88,380,828

                       655

1,309,689

1,449

1,014

2,003,339

4,056,762

San Juan

               597,713,363

                    3,068

6,135,564

6,787

4,751

9,385,140

19,004,909

San Miguel

               214,966,404

                    1,321

2,641,388

2,922

2,045

4,040,345

8,181,699

Sandoval

            1,046,466,820

                    4,412

8,824,847

9,762

6,834

13,498,747

27,334,964

Santa Fe

            2,724,893,844

                    5,164

10,327,929

11,425

7,998

15,797,906

31,990,760

Sierra

               109,803,323

                    1,006

2,012,219

2,226

1,558

3,077,950

6,232,848

Socorro

                 61,860,174

                       790

1,580,130

1,748

1,224

2,417,014

4,894,453

Taos

               414,261,170

                    1,392

2,784,408

3,080

2,156

4,259,113

8,624,704

Torrance

                 97,736,814

                       785

1,569,575

1,736

1,215

2,400,868

4,861,759

Union

                 20,145,945

                       244

488,664

541

378

747,475

1,513,637

Valencia

               482,599,526

                    3,152

6,304,577

6,974

4,882

9,643,668

19,528,427

  Totals

          17,122,545,866

                  79,942

159,884,972

176,873

123,811

244,564,791

495,243,701

 

Information sources: Abstract Reports submitted by County assessors, rate certificates issued by Department of Finance & Administration and the U.S. Census Bureau. *Current census data is not available regarding the number of veterans on a county-by- county basis, nor are figures available on the total number of veterans in New Mexico from the 2000 census. Census estimates based on a sample population of the 2000 census suggest roughly 177,000 veterans live in New Mexico, however. Current claims for the $2,000 veteran exemption by county were therefore expanded as shown in columns (5) and (6) to provide estimates of claimants likely in each county if all veterans are provided with the exemption.

 

 

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