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.

 

The most recent FIR version (in HTML & Adobe PDF formats) is available on the Legislative Website.  The Adobe PDF version includes all attachments, whereas the HTML version does not.  Previously issued FIRs and attachments may be obtained from the LFC in Suite 101 of the State Capitol Building North.

 

 

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

 

 

 

SPONSOR:

Griego

 

DATE TYPED:

03/04/03

 

HB

 

 

SHORT TITLE:

Delinquent Property Tax Collection

 

SB

497/aSCORC

 

 

ANALYST:

Gilbert

 

REVENUE

 

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY03

FY04

 

 

 

 

$187.50

$375.0

Recurring

County Funds

 

($187.5)

($375.0)

Recurring

General Fund

(Parenthesis ( ) Indicate Revenue Decreases)

 

SOURCES OF INFORMATION

 

Relates to HB 959

 

LFC Files

 

Response Received

Taxation and Revenue Department (TRD)

 

SUMMARY

 

     Synopsis of SCORC Amendment

 

The Senate Corporations and Transportation Committee amendment to Senate Bill 497 limits counties with the option to collect delinquent taxes and with authority to contract for delinquent tax collection to class A counties with populations of 350,000 or more.

 

Bernalillo County is currently the only class A county to meet the provisions of this amendment.  If Bernalillo County opted for 100 percent collection, the state would lose approximately $325,000 in annual revenues.

 

     Synopsis of Original Bill

 

Senate Bill 497 allows Class A counties (Bernalillo, Santa Fe, Dona Ana and San Juan) to supersede the Taxation and Revenue Department’s (TRD) role in selling tax delinquent properties. Instead, county commissioners could contract with private attorneys to engage in collection activities. Contracts with the attorneys would prevent their collecting taxes on certain owner-occupied residential properties based on property value, age and income of owners. County employees would perform collection efforts on properties excluded in contracts. Counties opting to engage in property sales would be allowed to rescind their decisions and return responsibility to the TRD.

 

     Significant Issues

 

SB 497 sets no limit on the fees Class A counties may impose for collecting delinquent property taxes. Currently, TRD imposes a $25 fee for these services.

 

County treasurers are elected officials responsible for collecting property taxes. However, SB 497 would grant county commissioners the authority to decide who will perform collections (the county treasurer or private attorneys).

 

County officials have authority to collect property taxes via contract with private attorneys, but, if they fail to accomplish collection after two years, the TRD is given authority to collect. The proposed measure would thus effectively eliminate limits on time allowed to counties to collect delinquent accounts – and on the time required for other property tax recipients to receive distributions.

 

The motivation of individuals collecting delinquent taxes under SB 497 may be very different than under the current system.  Sales of delinquent properties are currently the last resort to collect taxes.  TRD generally prefers that property owners pay taxes and avoid foreclosure and sale. Individuals working in Class A counties under the proposed system are likely to be motivated by potential profit.

 

FISCAL IMPLICATIONS

 

Approximately $17 billion, or 60% of the state’s assessed property value is in Class A counties. Collections of penalty, interest and other costs associated with delinquent properties averaged approximately $1.3 million in the past two fiscal years, 50% of which was in Class A counties. If all Class A counties opted for 100% collection activities, the state would lose approximately $650.0 in annual general fund revenues.

 

ADMINISTRATIVE IMPACT

 

About 57,000 properties were on delinquency lists during the past three years. TRD collects on, via sale or field collections, about 6,500 of these accounts. The Department imposes a flat fee of $25 in collection costs, and typically charges property owners a total of $160.0, of which $40.0 is paid by property owners in Class A counties. The number of people employed in the TRD Delinquent Property Tax Bureau would probably decrease by a proportionate amount. The Bureau currently employs 17 full-time employees.

 

TECHNICAL ISSUES

 

According to TRD, SB 497 may violate equal protection provisions of the U.S. and New Mexico Constitutions. First, property owners in Class A counties may receive different distributions due to collection fees imposed by private attorneys after sale of properties than similar owners in other counties. Secondly, taxpayers may be denied equal protection under law due to provisions in SB 497 allowing collection by private attorneys on the basis of age, income or property value.

 

OTHER SUBSTANTIVE ISSUES

 

SB 497 does not require counties to assume responsibility for mistakes in collecting taxes and conducting property sales. The TRD Legal Services Bureau may be responsible for intervening in these types of cases.

 

RELATION

 

House Bill 959 is similar to SB 497, except that it limits private attorney compensation for property tax collection to 30% of the total delinquent taxes, interest, and penalties.

 

RLG/yr/njw