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

SPONSOR Rainaldi

DATE TYPED 3/09/05

HB

SHORT TITLE McKinley County Property Transfer

SB SJR 16

ANALYST Geisler

REVENUE

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY05

FY06

.01, See narrative

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

General Services Department (GSD)

Rehoboth-Red Mesa Foundation (RRMF)

SUMMARY

Synopsis of Bill

Senate Joint Resolution 16 authorizes transfer of real property located in McKinley County near

Gallup, New Mexico. The Rehoboth-Red Mesa Foundation transferred the property by warranty

deed to the State of New Mexico in 1963 for the State Police headquarters. The property would

return to the Rehoboth-Red Mesa Foundation (RRMF) for one dollar.

The Resolution stipulates that the property has no value to the state; that the property contributes

negatively to the value of surrounding property; that McKinley County cannot realize property or

gross receipts taxes while the property is held by the state; and that the state and the Foundation

agree that an amicable settlement is less costly to the taxpayers than court action.

Significant Issues

A new state police headquarters was built in 1999 on land purchased from the RRMF for

Senate Joint Resolution 16 -- Page 2

$250,000. According to GSD, that negotiation included the RRMF purchasing the old headquar-

ters building (title currently held by GSD) and other improvements for $255,000, which has not

been completed. The RRMF disagrees with the assertion that they had agreed to purchase the

headquarters building, noting that copies of the purchase agreement, the settlement statement and

the warranty deed for the land sale make no reference to any agreement. RRMF believes they

have no obligation to purchase the building and property from the State of New Mexico.

GSD suggests an amendment to allow a property exchange for land adjacent to the new State Po-

lice building of value equal to the improvements on the land (the old District 6 State Police

headquarters) that will revert to the RRMF. Failure to receive fair compensation for the building

located on the property could be a violation of the “anti-donation clause” of the state constitu-

tion.

The RRMF provided the following rationale for the return of the property:

1.

The state has an obligation, per the warranty deed, to return the property to the donor if it is

not being utilized for State Police purposes. The Warranty Deed for the property from the

Christian Reformed Church Board of Home Missions in 1963 contains the provision “that the

parcel of land hereby conveyed be used for state police purposes only and that no other busi-

ness or subleasing be permitted.” Since the building is currently not being utilized for State

Police purposes, the state has an obligation to return the property to the donor.

2.

The RRMF has reason to believe that the understanding among the parties involved in the

original transaction was that the property was deeded to the State Police of New Mexico in

order to construct a temporary State Police building and that the property would be returned

to the board of Home Missions when the site was no longer needed. Furthermore, the RRMF

believes that the financial remuneration for the sale was nominal. Thus, the return of the

property would allow the State to honor the undocumented understanding that surrounded

this sale.

3.

The RRMF, as a New Mexico non-profit, and the owner of the adjacent property is in a posi-

tion to develop the property and bring in jobs and revenue to McKinley County. The deed

restrictions as well as the purposes of the organization require it to develop property in ways

that are beneficial, not harmful to the community.

FISCAL IMPLICATIONS

The appraised value for the improvements is $255,000. Senate Joint Resolution 16 results in a

gain for RRMF of $255,000, and a loss to the State of New Mexico of $255,000. If the joint

resolution is amended and the foundation purchases the property from the state, the revenue

would accrue to the Property Control Reserve Fund, which can only be used by legislative au-

thorization to acquire new property, thereby reducing recurring lease payment costs in agency

operating budgets. Unknown costs to GSD are mandated in the resolution to provide an envi-

ronmental assessment and fund any identified remediation caused by state police occupancy.

RRMF provides that putting the property back into use will provide property tax revenue and

perhaps gross receipt tax revenue to the county.

Senate Joint Resolution 16 -- Page 3

OTHER SUBSTANTIVE ISSUES

A State Police field office was constructed on this site in the mid-1960s. The building was ap-

praised in 1999 at $255,000 as part of a transaction with Red Mesa Foundation that involved

them selling 3+ acres appraised at $250,000 to GSD on which to locate the new State Police of-

fice in Gallup (authorized in Laws 1998, Chapter 7, Section 10, Subsection E and Chapter 118,

Section 14, Subsection O).

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL.

Property will remain on state inventory and unused.

AMENDMENTS

GSD suggests that on page 3, line 22, replace “consideration of one dollar ($1.00)” with “the ap-

praised value of improvements or an exchange of land with a comparable appraised value”.

GGG/yr