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

SPONSOR Balderas

DATE TYPED 03/04/05 HB 862

SHORT TITLE YIELD CONTROL NET NEW VALUE SCOPE

SB

ANALYST Padilla-Jackson

REVENUE

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY05

FY06

NFI

NFI

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

New Mexico Public Education Department (PED)

SUMMARY

Synopsis of Bill

House Bill 862 amends current property tax rate statutes by providing for the inclusion of prop-

erty annexed into a governmental unit as a net new value. The new language proposed in the bill

applies to property annexed into a governmental unit on or after January 1, 1978 and that has not

already been included as net new value for the purpose of determining a base year value. The

Property Tax Division of the Taxation and Revenue Department, upon request by the annexing

governmental unit, would be responsible to determine a net new value that includes the annexed

property.

This bill invokes an emergency clause, so that the provisions would take effect immediately.

Significant Issues

PED notes that recalculating the net new value for the property tax years from 1978 to 2005 may

increase the base year value and allow for additional revenue to be derived from the imposition

of property taxes subject to yield control.

They note that many school districts in New Mexico rely heavily on selling bonds or imposing

House Bill 862 -- Page 2

mill levies in order to erect, remodel, purchase and improve school grounds. Higher land valua-

tions of counties in which school districts reside could mean a potential increase in funds gener-

ated through mill levy elections. However, yield controls are put in place to limit growth in as-

sessed valuation from one year to the next so property owners are not burdened to pay excessive

tax increases. Yield controls are applied to the calculation of all property tax rates, except those

new rates that were levied by an election held during the year. Thus, due to the yield controls,

districts will not generate the extra dollars due to higher property values until the current mill

levy expires.

Lastly, PED cautions that increase in land valuations within a district could also have a potential

negative effect. The higher the land values the higher the taxes for property owners. This may

affect the willingness of voters to approve mill levies, which school districts rely on due to the

fear of further tax increases. They note that this situation could have a dramatic effect on school

districts if they are not able to pass a bond election.

PERFORMANCE IMPLICATIONS

PED notes that it is responsible for the calculation of all the property tax rates using the property

values provided by the Taxation and Revenue Department. PED must compile and sort the prop-

erty values by school district because many districts are often in more than one county. Once

school districts’ taxable values are compiled, the yield control rates are calculated for each

property category. If this bill is enacted, PED and TRD will need to recalculate all of these rates

due to the inclusion of new property values.

FISCAL IMPLICATIONS

The fiscal impact of this bill is undeterminable. Any change in the amount of property taxes col-

lected would depend on which local government entities request the new valuation from the

Property Tax Division and how those properties are valued.

OPJ/yr