Fiscal impact reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for standing finance

committees of the NM Legislature. The LFC does not assume responsibility for the accuracy of these reports

if they are used for other purposes.

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

SPONSOR SFC

ORIGINAL DATE

LAST UPDATED

2/4/08

HB

SHORT TITLE Public Peace, Health, Safety & Welfare

SB 536/SFCS

ANALYST Schardin

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY08

FY09

FY10

(41.1)

(257.8)

(269.3) Recurring General Fund

41.1

257.8

269.3 Recurring Ruidoso Downs

(Parenthesis ( ) Indicate Revenue Decreases)

Conflicts with HB484

SOURCES OF INFORMATION

LFC Files

SUMMARY

Synopsis of SFC Committee Substitute

The Senate Finance Committee substitute for Senate Bill 536 would create a new distribution of

12 percent of the gaming excise tax receipts attributable to a casino located in a Class B county

with PTY06 net valuation between $700 million and $1 billion. The only municipality that will

qualify for the proposed distribution is Ruidoso Downs.

The distribution would affect revenues between July 1, 2008 and June 30, 2018, when the

distribution would sunset. The bill also provides that Ruidoso Downs will use the revenue

distributed for planning, designing, acquisition, construction or improvement of local

government infrastructure.

The bill has a July 1, 2008 effective date (see Technical Issues).

FISCAL IMPLICATIONS

LFC anticipates that gaming excise tax receipts from Ruidoso Downs casino will total $2.1

million in FY08, $2.1 million in FY09, and $2.2 million in FY10. Starting in the last two months

of FY08, the bill would redirect 12 percent of those amounts from the general fund to the

municipality of Ruidoso Downs.

Senate Bill 536/SFCS – Page

2

SIGNIFICANT ISSUES

Ruidoso Downs, located in the municipality of Ruidoso Downs, is one of five racetracks with a

casino currently operating in New Mexico.

Local governments in which racetrack casinos are located have often requested distributions

from the state share of gaming excise tax in recent years. The rationale for these requests is that

casinos cause local governments to incur infrastructure costs. Unlike most other businesses,

which pay a share of gross receipts tax to the local jurisdictions in which they are located,

racetrack casinos pay only the gaming excise tax.

During the 2005 Legislative Session, Senate Bill 837 increased the gaming excise tax rate on

racetrack casinos from 25 to 26 percent.

As shown in the figure below, net win, the amount of revenue taken in less payouts, has fallen at

Ruidoso Downs in recent years. Net win is most likely suffering at Ruidoso Downs due to

increased competition. Zia Park in Hobbs opened around the beginning of 2005, and tribal

casinos in the area also draw large crowds. In addition, some gaming establishments have found

a loophole around the prohibition of gaming in Texas, leading to a small number of gaming

establishments in El Paso drawing business away from nearby casinos in New Mexico.

Rui doso Downs Monthly Net W in

$0. 3

$0. 6

$0. 9

$1. 2

$1. 5

2004

2007

Sources: TRD, LFC Files.

ADMINISTRATIVE IMPLICATIONS

Administrative impacts on TRD will be minimal.

CONFLICT

The Senate Finance Committee substitute for Senate Bill 536 conflicts with House Bill 484,

which also amends Section 60-2E-47 NMSA 1978 to decrease the gaming excise tax rate on

Ruidoso Downs from the current level of 26 percent to 10 percent.

TECHNICAL ISSUES

Because the state operates on a modified accrual basis, gaming excise tax revenues distributed in

July 2008 will accrue back to May 2008, resulting in the bill having a fiscal impact in the last

two months of FY08. To avoid a FY08 fiscal impact, the bill could be amended to state that

provisions of the bill are applicable to revenue earned on a modified accrual basis after June 30,

2008.

SS/mt