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

SPONSOR Madalena

ORIGINAL DATE

LAST UPDATED

2-14-06

HJM

SHORT TITLE

JICARILLA APACHE RESERVATION IN ONE

COUNTY

SJM 58

ANALYST Hadwiger

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

None

(Parenthesis ( ) Indicate Expenditure Decreases)

Duplicates HJM70.

SOURCES OF INFORMATION

LFC Files

Responses Received From

Department of Indian Affairs (DIA)

Department of Finance and Administration (DFA)

Department of Taxation and Revenue (DTR)

SUMMARY

Synopsis of Senate Joint Memorial 58

Senate Joint Memorial 58 would ask the Department of Finance and Administration (DFA) to

evaluate the potential costs and benefits of redrawing county lines to place all Jicarilla Apache

reservation lands within Sandoval county or to create a new county; to identify revenues derived

by Rio Arriba county and Sandoval county from the Jicarilla Apache reservation, including tax

revenues, payments in lieu of taxes and state and federal grants and program funds, including

impact aid; and to quantify expenditures by Rio Arriba county and Sandoval county for provid-

ing services on the Jicarilla Apache reservation. DFA would be asked to report its findings to the

interim Indian Affairs Committee and other appropriate interim committees by September 1,

2006.

FISCAL IMPLICATIONS

The Department of Indian Affairs (DIA) noted that SJM58 does not allocate any funds for the

Senate Joint Memorial 58 – Page

2

requested study; however, DFA might have to realign a FTE to complete the requested study by

September 1, 2006 as the study should include:

1.

potential costs and benefits of redefining county lines to place all Jicarilla Apache

reservation lands within Sandoval county or to create a new county;

2.

to identify revenues derived by Rio Arriba county and Sandoval county from the

Jicarilla Apache reservation, including tax revenues, payments in lieu of taxes and

state and federal grants and program funds, including impact aid; and

3.

quantified expenditures by Rio Arriba county and Sandoval county for providing

services on the Jicarilla Apache reservation.

According to the Taxation and Revenue Department (TRD), primary revenue sources that would

be affected by this bill in Rio Arriba County are the gross receipts tax on non-Indian owned

businesses and two taxes imposed on the value of oil and gas produced on the reservation – the

Oil and Gas Ad Valorem Production Tax (“Production Tax”) and the Oil and Gas Production

Equipment Ad Valorem Tax (“Equipment Tax”). TRD does not have immediate access to in-

formation on which gross receipts taxpayers are doing business on the reservation. To develop

this information, a survey would be needed that identified all such businesses, ideally with their

associated CRS identification number. TRD reviewed its records to identify taxes paid under the

two oil and gas ad valorem taxes. Total Production Tax payments from production on the reser-

vation were approximately $2.6 million during the 12-month period from November of 2004

through October of 2005. Total Equipment Tax payments from production on reservation land

were $470 thousand during the 2005 property tax year. The following table shows the approxi-

mate distribution of these revenues among the various beneficiaries of the taxes, which are dis-

tributed in proportion with the components of the property tax levy in the school district where

the production takes place.

Approximate Revenue Distributions of Oil and Gas Ad Valorem Taxes from Jicarilla

Apache Reservation Lands<1>

Recipient:

Property Tax

Levy:

($ per $1,000)

Production

Tax:

($ Thousand)

Equipment

Tax:

($ Thousand)

Total:

($ Thousand)

State debt service

1.234

$149.1

$26.9

$176.0

County

11.85

$1,431.6

$258.8

$1,690.4

School district

4.188

$505.9

$91.5

$597.4

Other*

4.25

$513.4

$92.8

$606.2

Total

21.522

$2,600.0

$470.0

$3,070.0

<1> Estimates based on collection during the period November 2004 through October 2005 for

the Production Tax and during the 2005 property tax year for the Equipment Tax.

SIGNIFICANT ISSUES

DIA indicated that, unfortunately, the problem faced by the Jicarilla Apache Tribe - receiving

services from two New Mexico counties - is not unique. Many of the State’s twenty-two Indian

Nations, Tribes, and Pueblos’ reservation boundaries encompass property that straddles two or

more counties. For example, Navajo Nation reservation lands are located in seven New Mexico

counties – San Juan, McKinley, Cibola, Bernalillo, Socorro, Sandoval, and Rio Arriba. Any

study that would assist counties in New Mexico to streamline and make more their services more

Senate Joint Memorial 58 – Page

3

responsive and cost-effective is welcome. However, it should be noted that any redefining of

county borders would necessarily create debate (and possible change) as to representation in the

legislative process, county tax bases, and other important issues. Perhaps it would be wise for

DFA to include input from the coalitions of counties that would be affected by any change in

borders. One such coalition would be the Mid-Region Council of Governments, which serves

Bernalillo, Sandoval, Torrance, and Valencia counties.

DFA noted that SJM58 requests the agency to study the fiscal impact of enclosing the Jicarilla

Apache Reservation within the boundaries of one county. In doing so, the delivery of services to

the population living on the reservation may be more effective. However, there are several con-

siderations to be made in this study. The Jicarilla Apache reservation is not the only reservation

in the state that straddles multiple county boundaries; therefore, perhaps a statewide study should

be done to understand the current delivery of services to the populations that inhabit reservation

territory.

DFA added that there will be an revenue impact to Rio Arriba and Sandoval counties if the Ji-

carilla Apache Reservation is absorbed by Sandoval or if it becomes its own sovereign county.

Revenue sources such as tax revenues, payments of lieu of taxes, federal grants, state grants and

other program funds will be affected. Consideration would have to be given to the re-structuring

of current reservation government if it would become its own county.

ADMINISTRATIVE IMPLICATIONS

According to TRD, if a new county were established or if the boundaries of the reservation

moved totally to Sandoval County, major changes would be required of the oil and gas produc-

tion tax information system. The land boundaries of the new county or the boundaries associated

to Sandoval and Rio Arriba counties would need to be manually tracked and programmed.

Changes in the computer system would include establishing new school district codes and mu-

nicipality codes if necessary with the counties, defining new tax rates associated to the ad

valorem tax programs, and doing a complex conversion of updating production unit records with

an effective date recognizing the current county information and the new county or adjusted

county boundaries and related data elements. A major impact to the oil and gas taxpayers that

produce on the reservation and pay the related taxes would occur because all their systems would

need to be updated to recognize the new or adjusted county elements on the production units af-

fected with an effective date and possible new ad valorem tax rates. Taxpayers have stated to

TRD that any changes to their system would require at least 6 months advance notice.

TECHNICAL ISSUES

DIA suggested the bill be amended on page 3, line 4 to assure that a copy of the memorial is de-

livered to President of the Jicarilla Apache.

ALTERNATIVES

DFA suggested that a productive alternative might be to conduct a statewide study to understand

the current delivery of services to the populations that inhabit reservation territory in circum-

stances such as that addressed in this memorial.

DH/nt