Fight Back Against Tax Lightning

Click on the title to link. This is an article about how property taxes have been increasing as home values are decreasing. But folks are fighting back, and often winning. The key here is you have to protest the increase within a certain period of receiving your tax bill. There is alot of info about this on our blog, so do a search and we can help answer any questions you may have.

Albuquerque Foreclosures Surge

Not sure if you saw it or not, but there was an interesting article in the Albuquerque Journal on Sunday about how foreclosures in the metro area have doubled from where they were at this time last year. Again, the sound our broken record, this should be expected by anybody reading this blog regularly. It could get worse because 2011 is supposed to be the peak of foreclosures nationally. Here are some interesting points:

* There were 4,970 foreclosures in Albuquerque in 2009.
* There have been 4,574 foreclosures in Albuquerque between Jan and June of 2010.
* There were 2,688 in all of 2008.
* The unemployment rate in Albuquerque has doubled to 9.2% since 2008 (22,000 jobs).
* Albuquerque is one of 154 metros nationwide to see foreclosures increase this year.
* One out of every 80 households is in foreclosure in Albuquerque.

Mark Boitano , who has been instrumental in fighting against tax lightning, said Albuquerque has seen the "perfect storm" leading to our current economic problems. We totally agree; it is more than just foreclosures. Many of those foreclosures are a result of the other contributing factors. They are home depreciation, a stupid appraisal law that has brought in values lower than reality (at times), unrealistic lending guidelines, a dysfunctional federal hom loan modification system (to say the least), and tax lightning.

All of this then contributes to folks hunkering down, which depresses the real estate market even more, which drepresses the economy even more, and so on. It's a vicious cycle. And all signs point to the fact that it is going to loom for the foreseeable future. As Boitano said in the article, "We're not even at half-time yet."

Overtaxed Homeowners Start To Fight Back

Click on the title to link. It appears that Albuquerque is not the only place dealing with over taxed properties. Check out this article about how owners are tired of it and fighting back.

Property Tax Lightning Update

We just received this email from Mark Boitano. He is one of the main State Legislators who has been fighting this issue. As we read through this we were reminded of several things:

1. Our government (both State and Federal) continues to demonstrate an inability to project what consequences will arise from their half thought out, uneducated decisions. Shame on every one of them, and shame on us if we put up with it.
2. Our government continues to demonstrate a slowness and cluelessness on fixing the problems they created in the first place. As we always say, "You can't help stupid."

That said, we credit Mark for his persistence to try and fix something that was clearly bad, unfair, and unwise from the start. We can hear his frustration in his note; and who could blame the guy when he has to deal with these ignoramuses daily. Fight the good fight, Mark.

Dear Friends of Tax Fairness,
It's 1:45 am and we're still debating bills on the Senate floor. Tonight, we passed two bills aimed at fixing property tax lighting. One bill is better than the other, but neither of them is the perfect solution. Unfortunately, I don't think we are going to pass an ideal bill. So I've decided to support both bills.

SJC Sub SB 160 - Sen.
Neville. This bill brings all properties to a current and correct valuation within 5-years through a phase up for those under accessed and phase down for those hit by tax lightning. After working on this issue for three years and seeing 12+ bills attempting to fix the problem, I believe this is the best we can do to equalize values. The "correct" fix for those hit by tax lightning is *not* something that the entire legislature will pass (plain and simple).

SB 46 - Sen. Eichenberg. This bill says that beginning in 2011 the 3% cap would stay in place regardless of a change in ownership. This bill does nothing to equalize the present disparity, but would prevent future tax lightning.

These bills passed the Senate and are going to the House. Presently, they are positioned to pass a memorial that says we should "study the problem". Please contact the House and strongly encourage them to act on a tax lightning fix and support Sen. Neville's bill. It is the best bet for a tax lightning fix.

Mark Boitano

Update on Property Tax Lightening

Below is an editorial submitted to the Albuquerque Journal by but Mark Boitano, a State Senator from Bernalillo County. It's a bit long, but does a nice job of explaining the challenge of fixing our property tax delima. Interesting to note it is primarily an issue for the larger communities (such as the Albuquerque area), which has effectively resulted in a subsidy for most of the other communities around New Mexico. This is going to make a statewide solution, i.e. new law, quite difficult.


Here's the editorial:


The inequity of property tax lightening has created an uproar among thousands of homeowners statewide. Two District Courts have ruled sections of our property tax code unconstitutional and there are hundreds of additional lawsuits in progress, including a class action. The Bernalillo County Assessor has stated she will roll back values. Governor Richardson reportedly wants to amend the Constitution and study the problem further.

Taxation and Revenue Secretary Rick Homans says, "We are in the middle of a minefield right now,"and he is absolutely right. In past legislative sessions lawmakers have been unable to agree on a solution but must act now to solve this exasperating, and growing, problem. There is only one way to proceed through a minefield - with eyes wide open.

Some history. In 1998 voters were asked to, "amend Article 8 (relating to taxation), Section 1, of the Constitution of the Sate of New Mexico to authorize the legislature to limit increases in valuation of residential property for property tax purposes." Short and sweet, it passed overwhelmingly. The change applied only to residential values, not commercial or vacant land which is considered non-residential.

Based on that voter sanction, the 2000 legislature passed HB 336 which said the value of property shall not exceed 103% of the value in the previous tax year. This was a cap on value, not taxes. (The formula is: Total valuation, divided by 3 = net taxable value, x the mill rate = property tax.)

But, there were exclusions to the cap (which was not reported to the voters in the amendment) that included new construction and changes in ownership. These exceptions have created the phenomena known as tax lightning, where an ever increasing number of property owners are paying steep property taxes even though they receive the same basic services as their lower paying neighbors.

An extremely important - but little reported - provision of HB 366 required all county assessors to increase values to a sales ratio of 85% or higher beginning in 2001 (a sales ratio is a relationship between actual sales prices and subjective valuations). Unfortunately that never happened and, seven years later, a 2008 report from the Property Tax Division estimated that, statewide, the sales ratio is around 65%.

So, property values and subsequent taxes in many counties are disproportionately low. A recent article in the Santa Fe New Mexican reported that figure in Santa Fe County to be "significant." Herein lays one of the problems with a statewide fix. Many homeowners, assessors, and legislators simply do not have a problem in their counties.

Coupling this under assessment with the opposite extreme when tax lightening strikes creates recipe for legislative confusion and inaction. A recent Department of Finance report stated, "because of inequitable assessment practices state debt is unfairly paid by Bernalillo County," yet assessors and legislators statewide are concerned that any change will "shift" the tax burden to properties in their counties.

In the larger counties, like Bernalillo, which has more new construction and change of ownership, the property tax rates for under assessed homeowners have been "subsidized" by those hit with tax lightning. Some proposed changes to the law would result in these homeowners - finally - paying the equitable property tax share that was originally required in 2001. This is one of the largest obstacles facing legislators when considering a fix. Naturally, they hesitate at raising taxes on their constituents who are "subsidized" homeowners.

A further dilemma facing lawmakers is a growing reliance on property taxes, a stable income stream, for government operating budgets. Historically, property taxes paid for debt service and operations were financed, primarily, through gross receipts taxes. Tax lightning has been a revenue windfall in recent years. For instance, in 2008 Albuquerque spent $47 million in property taxes for operations. In 2009 that number was $73 million - a 35% increase!

When considering revenues, an additional hitch lies in "yield control" being applied to operations, but not debt service. This is where property tax law gets extremely confusing. Yield control is a mechanism (applied to the mill rate, not valuation) designed to limit revenue yields from property taxes. Most tax experts, and many assessors, say that if statewide values were equalized, the 3% cap temporarily removed, and yield control was applied to operating and debt service this is the best fix to the problem.

Finally, some property tax obligation is voter approved mill rate increases. So, voters can be part of the solution. The legislature can modify state law to equalize valuations but voters need to restrict the ferocious appetite of the taxing entities.

Lawmakers must fix this inequity by navigating out of the minefield now. Proposed solutions include a total rewrite of our laws, phasing in an equalization of valuations, and increasing low-income and household exemptions.

Further, any resolution must include tax increase controls for everyone including purchasers of new construction, revenue stability, a board of equalization for multi-jurisdictional entities like community colleges, and - possibly - a local option allowing counties to decide whether a solution is needed.

But, a larger question is - should legislators have the political courage to pass a solution which equalizes values statewide, will the "subsidized" homeowners understand why we changed the status quo? I hope so.

Senator Mark Boitano (R-Bernalillo) owns a real estate business and serves on the Tax Policy and Revenue Stabilization Committee.