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

SPONSOR Sanchez, M.

ORIGINAL DATE

LAST UPDATED

2-20-09

HB

SHORT TITLE Environmental Conservation Tax Initiatives

SB 952

ANALYST Aubel

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

$150.0 Non-Recurring

General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

Duplicates HB 889

Relates to HB 318 and HB 386

SOURCES OF INFORMATION

LFC Files

Responses Received From

New Mexico Environment Department (NMED)

Energy, Minerals and Natural Resources Department (EMNRD)

Department of Finance Administration (DFA)

No Response

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of Bill

Senate Bill 952 appropriates $150.0 thousand from the general fund to the New Mexico

Environment Department for the purpose of studying the feasibility of a program entitled “Green

Both Ways", which is a market-based approach to environmental conservation and protection

through property tax incentives.

FISCAL IMPLICATIONS

The appropriation of $150.0 thousand contained in this bill is a non-recurring expense to the

Senate Bill 952– Page

2

general fund. Any unexpended or unencumbered balance remaining at the end of fiscal year

2008 shall revert to the general fund.

SIGNIFICANT ISSUES

The bill does not specify what type of market-based approaches “Green Both Ways" program

would include. Other states have primarily used property tax incentives to encourage renewable

energy and “green" construction of buildings. Such incentives include property tax exemptions,

special assessments, or reduced property tax rates for renewable energy systems or facilities that

produce or transmit renewable energy.

According to EMNRD, 26 states have property tax incentives for renewable energy. Most

provide that renewable energy equipment cannot be valued at a higher rate than conventional

equipment, even if the renewable energy equipment cost more. Other states, such as Indiana and

Louisiana, do not include the value of a renewable-energy system in the assessment of buildings

or other structures to which the equipment is attached.

In June 2005, the Nevada Assembly passed a law that provides for partial abatement of property

taxes for property that has a building or structure that meets or exceeds the United States Green

Building Council’s LEED Silver rating system.

Other types of programs that might be studied under this bill are pollution-trading programs or

green or pollution offsets or property tax structures that give preference to agricultural or

conservation use. In Georgia, property devoted to agricultural, timber or conservation use

through a 10-year covenant is taxed at 75 percent of fair market value. Green-offsets occur

where a developer takes action outside a development site but near to it to reduce pollution. The

developers either take the action themselves or pay others to conduct it on their behalf. They

include such measures as re-vegetating and stabilizing river banks, building better road surfacing

and drainage to reduce the flow of sediments and nutrients into waterways, installing pollution

control equipment at other off-site sources, installing vapor recovery units at gas stations, or

assisting small businesses to install cleaner technology to reduce emissions.

NMED maintains that from a policy perspective, creating economic incentives to achieve

environmental compliance is an effective approach and concludes that studying the issue of

market-based environmental conservation is a valid approach in tailoring such incentives to New

Mexico. The study would also assess the idea of creating a "bank" for publicly trading

environmental credits, such as the program conducted nationally at the Chicago Climate

Exchange.

PERFORMANCE IMPLICATIONS

Because of the broad and open-ended nature of a feasibility study, performance implications are

indeterminate beyond the production of a study. DFA notes it is not clear how the

“environmental bank" concept may either complement or conflict with the Governor’s Chicago

Climate Exchange initiative; however, any efforts that would reduce greenhouse gas emissions

would benefit both this initiative and New Mexico’s environmental and public health.

If the study resulted in property tax incentives that encouraged green building or installation of

renewable energy systems, the study would promote EMNRD’s mission to encourage renewable

energy use and increased energy efficiency.

Senate Bill 952– Page

3

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

Duplicates HB 889.

Relates to HB 318 (mercury emissions reduction) and HB 386 (greenhouse gas emission

reduction.)

ALTERNATIVES

Because EMNRD is the lead agency on implementing the executive initiatives in making New

Mexico a leader in energy efficiency, and also appears to be the most knowledgeable regarding

the issues this study may involve, one option would be to make the appropriation to EMNRD.

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

Market-based incentives will not be studied and the possible benefits derived from implementing

a market-based approach to environmental conservation and protection through property tax

incentives would be left unrealized.

MA/mt