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

SPONSOR Sanchez, B

ORIGINAL DATE

LAST UPDATED

1/28/08

2/4/08 HB

SHORT TITLE Monthly Property Tax Prepayments

SB 177/aSCORC/aSF#1

ANALYST Francis

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY08

FY09

FY10

NFI

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Response Received From

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of SF#1

Senate Bill 177 was amended on the Senate floor to remove the Class A county restriction. This

would allow all counties to change the methodology to accept monthly payments for property tax

payments.

Synopsis of SCORC Amendment

Senate Corporations and Transportation Committee Amended SB177 to clarify some of the

language and to ensure that the bill does not require a change if the taxpayer pays property taxes

through the owner’s monthly mortgage payment.

Synopsis of Original Bill

Senate Bill 177 creates a new section of the property tax code to allow an optional prepayment of

property taxes in monthly payments in Class A counties (Bernalillo, Dona Ana, Santa Fe, and

San Juan are the only Class A counties). The change would allow taxpayers to pay in ten

monthly payments with the first nine months being 10 percent of the prior year tax bill and the

tenth payment the balance of property tax due. The tax bill will include the total amount of

Senate Bill 177/aSCORC/aSF#1 – Page

2

monthly payments made plus the amount of the final payment. Under current law, taxpayers pay

in two portions due in November and April.

The change would be effective for tax years beginning on or after January 1, 2009.

FISCAL IMPLICATIONS

SB177 changes the methodology of payment and not the amount of payments so there is not

expected to be a fiscal impact. TRD points out below that there may be minor interest benefits to

the counties.

TRD:

Fiscal impacts would probably be minor. Property tax recipients would presumably be

able to generate interest on revenues they would receive, on average, earlier than what

occurs under the current system. The incidence of delinquent payments would probably

diminished as taxpayers made a series of small payments rather than several large ones.

The extent of final payments on March 1 would depend on what happened to rates and

assessed values between the current and prior years. In some cases taxpayers would be

entitled to refunds on March 1.

SIGNIFICANT ISSUES

SB177 would allow taxpayers more flexibility in the payment of property taxes. Those

taxpayers who do not pay their property tax through their mortgage payments pay in two

payments each year. By allowing monthly payments, the total bill can be spread out more.

DFA reports SB 177 allows the tax payer of limited means a more flexible payment structure.

Essentially, this provides a monthly tax payment option similar to that offered to most

homeowners with mortgages. The homeowner makes a monthly payment to escrow and once a

year, the escrow trustee pays the homeowner’s property tax bill.

However, the amendment excludes homeowners that make monthly payments to escrow from

this direct monthly payment option. The revenue impact to local governmental entities during the

first 9 months is diminished by the volume of mortgages that require escrowed taxes. Most

escrow managers are required to pay a nominal interest on the funds for the period between col-

lection and disbursement. The county treasurers are not required to pay interest on the prepaid

taxes.

TECHNICAL ISSUES

TRD:

1) The property tax bill, with the additions required by this bill in paragraph H, p.2, lines

19-22, may be confusing to taxpayers. This paragraph appears to require the property tax

bill to contain the total amount of prepayments made from June 1 to the date of the

property tax bill (which must be mailed no later than November 1 of each year pursuant

to § 7-38-36), and the property tax bill must have the amount that will be due in the

March 1 payment, presuming that all the prepayments are properly made between

October and March. It might be clearer to require the property tax bill to also include the

monthly prepayment amounts that are due for November through February, and then the

Senate Bill 177/aSCORC/aSF#1 – Page

3

possibly larger amount that will be due in March.

2) Provisions of the proposal should probably be more specific regarding when county

treasurers would be required to transfer the funds they collect to other property tax

recipients – school districts, municipalities and other entities.

3) It is unclear what would occur when, for example, a taxpayer fails to make several

payments. At some point the associated property would presumably need to be placed on

the delinquency list and offered for public auction.

ADMINISTRATIVE IMPLICATIONS

There will likely be significant costs to counties, particularly smaller ones, associated with

changing the forms and the processing procedures to accommodate monthly payments and

calculating the final payment.

NF/mt