NOTE: As provided in LFC policy, this report is intended for use by the standing finance committees of the legislature.  The Legislative Finance Committee does not assume responsibility for the accuracy of the information in this report when used in any other situation.

The LFC is only preparing FIRs on bills referred to the Senate Finance Committee, the Senate Ways and Means Committee, the House Appropriations and Finance Committee and the House Taxation and Revenue Committee. The chief clerks are responsible for preparing and issuing all other bill analyses.

Only the most recent FIR version, excluding attachments, is available on the Intranet. Previously issued FIRs and attachments may be obtained from the LFC office in Room 416 of the State Capitol Building.

(Parenthesis ( ) Indicate Revenue Decreases)

Duplicates/Conflicts with/Companion to/Relates to

SOURCES OF INFORMATION

Bonnie Yeckley, Nations Bank Customer Service Regional Administrator

Taxation and Revenue Department (TRD)

Bureau of Business and Economic Research (BBER)

SUMMARY

Synopsis of SFC Amendment

This Senate Finance Committee amendment narrows the definition of "rural area" by excluding class A and Class B counties that has a net taxable property value for any tax year of more than three billion dollars. What this effectively does, is exclude Santa Fe, Bernalillo and Doña Ana county. This does not however limit Los Alamos county which is Class H city/county.

Synopsis of Bill

The purpose of this bill is to make New Mexico more attractive to new or expanding call center companies. This would be accomplished by providing for a tax credit on new capital equipment purchases at a rate no greater than the applicable gross receipts tax rate. The effective date of this proposed legislation is July 1, 1999.

FISCAL IMPLICATIONS

The Taxation and Revenue Department has yet to provide a report as to the estimated impact of this amendment. Their estimated impact of the bill before amendment was a negative impact to the general fund of $460,000 (recurring). This analyst estimates only a slight decrease in this impact due to the fact that the primary factor in deciding where to locate a call center is the quality, availability, and cost of labor.

While the tax incentives of this bill are designed to entice companies to locate new call centers and encourage new expansion of existing call centers, the effectiveness of this incentive may be small. The largest expenditure of call centers are and will continue to be labor costs.

However, if a company locates in New Mexico because of this legislation that would not otherwise locate here, the impact is zero. If the call center would have located here regardless of this legislation, there will be a negative impact as reflected in this analysis.

It deserves mention that the creation of new jobs in rural areas, as this legislation would encourage, is a positive impact to the general fund, not to mention rural economic development.

OTHER SUBSTANTIVE ISSUES

It is worth noting that the latest figures from The Bureau of Business and Economic Research (BBER) report that Service sector employment growth in New Mexico was three percent over 1998. This growth is largely attributable to the establishment and relocation of call centers to the Albuquerque Metropolitan Statistical Area (MSA) which includes Rio Rancho.

This proposed legislation would support this trend in rural communities.

JBE/gm