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

SPONSOR Snyder

ORIGINAL DATE

LAST UPDATED

1/28/08

HB

SHORT TITLE Raise Property Tax Limitation Income Limit

SB 116

ANALYST Francis

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY08

FY09

FY10

*See Narrative

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Aging and Long Term Services (ALTS)

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of Bill

Senate Bill 116 changes the property tax valuation limit for low income homeowners who are 65

years and older. Current law freezes valuation on property if the homeowner is 65 years or older

and has a modified gross income of less than $18,000. SB116 would change the income

threshold to $32,000. The valuation freezes on 2008 if the taxpayer is over 65; freezes on the

year the taxpayer turns 65; or freezes on the tax year after the tax year a home is first occupied if

the owner is over 65.

The effective date is May 14, 2008.

FISCAL IMPLICATIONS

TRD reports that 7,500 currently benefit from the limitation and that with this change about

2,500 additional taxpayers will benefit. Since these taxpayers also benefit from the 3 percent

maximum valuation increase, the impact both individually and collectively is likely to be very

small. Any impact will be absorbed by other taxpayers as rates adjust to maintain the funding

level required for debt service.

Senate Bill 116 – Page

2

SIGNIFICANT ISSUES

Aging and Long Term Services:

The need for accessible, affordable housing in New Mexico is a serious issue for those

over the age of 65. Health and housing concerns are often interrelated. Increases in

property taxes may prevent a senior from being able to maintain community living. This

issue is frequently cited as a major concern among seniors on fixed incomes whose

disposable income is greatly reduced by increased housing costs. The Aging and Long-

term services department is committed to promoting lifelong independence and healthy

aging, and to supporting services being provided in home and community-based settings.

This bill would assist some seniors to remain in their own homes, in the community, and

to "age in place" instead of moving to unfamiliar surroundings, or being cared for in an

alternative setting such as a nursing home or assisted living facility.

Accessible and affordable housing is an equally significant issue for people living with a

disability. The Section of law that is being amended could extend this limitation on

increase in home value to the disabled population, but it does not. The Aging and Long-

Term Services Department serves the needs of all persons in need of long-term care

services and support, including those with disabilities. We would recommend amending

the bill to extend this important provision to people living with disabilities, as well as to

individuals over the age of 65.

TECHNICAL ISSUES

TRD notes that the effective date makes the valuation limitation applicable to tax year 2008 but

that assessors have already mailed out or will have by the time the law is effective on May 14,

2008. Making the law effective for tax year 2009 would avoid any confusion that may arise from

any difference between the valuation letter and the property tax bill.

OTHER ISSUES

TRD:

The Santa Fe County Assessor’s office reports 56 taxpayers qualified for the limitation in

tax year 2007. The individuals that qualified were mostly from older neighborhoods

where property values are relatively low. Bernalillo County reports that 2,464 taxpayers

are subject to the limitation. Dona Ana County representatives state that 457 taxpayers

are subject to it, while the total in San Juan County is currently 100 taxpayers. In Sierra

County, which has a relatively high concentration of retirees, only 53 taxpayers took

advantage of this exemption. Estimates made by the Property Tax Division in the

Taxation and Revenue Department indicate that approximately $200,000 in tax benefits

are provided statewide by the current limitation.

Taxpayers are probably not claiming the exemption because 1) the benefit is, in most

cases, minor, and 2) they are not aware of it. A low-income taxpayer whose tax bill is

$500 would receive a tax benefit totaling only approximately $15 the first year the

taxpayer receives the bill. The benefit from the limitation to any particular taxpayer

grows over time. The limitation does not insulate taxpayers from tax increases caused by

rate increases, however.

NF/bb