“Tax Lightning” was first used to describe the shock a homeowner experiences upon receiving the initial property tax assessment from their respective county. It has since become more of an umbrella term to reference a larger problem: a severe property tax inequity among homeowners in New Mexico. When ownership of a property transfers, the property tax may be assessed by county assessors at current market value, pursuant to legislation passed in 2001 (HB 366). This has only become a hot topic in the past few years. People who purchased or developed properties at the height of the real estate bubble are paying inflated property taxes. Two property owners in the same district, perhaps even door-to-door, may be paying severely disproportionate property taxes. “Tax Lightning” remains an important issue; particularly with the 2009 state legislative session impending. This trend in property assessment at “current and correct” market value serves the budget concerns of county bureaucrats but chills our already weakened economy by penalizing home buyers.
While the weak housing market certainly makes it more difficult for potential home buyers to pull the trigger, the reality of “Tax Lightning” further hinders the market from returning to liquidity in New Mexico. A potential homeowner won’t enter the market because they face a significantly-increased property tax burden. While this is bad enough for those who are looking for bigger and better housing, the problem is even worse for current homeowner such as seniors, retirees, and those who simply need a lower house payment. Their incentive is not to downgrade to a smaller, more affordable house because they may wind up with a comparable monthly payment for a less valuable property, due to the new assessment and subsequent tax increase.
For some time now local newscasts, newspaper articles, and blogs have attempted to voice the concerns of those homeowners most directly affected by Tax Lightning. But the public outcry appears to have had little effect on this policy. Challenged assessments are continually shot down. The answer given to contesting parties has been the same, unaffected by public outcry: your property tax was assessed pursuant to the law. It follows then that new legislation is the only real means for change. Earlier this year, Senator Mark Boitano sponsored two bills addressing Tax Lightning which county assessors lobbied against. Bernalillo County Assessor Karen Montoya said that her office had considered the fiscal implications and determined that the State would lose too much revenue. The bills ultimately failed. In 2009, Senator Boitano and his colleagues will introduce new legislation that may be more amenable to the opposition. This new legislation may propose the following:
• Clarifying legal nuances regarding the formula to calculate property taxes and the definition of “current and
correct” and “valuation maintenance.” This may narrow the gap between those paying too much and those
paying too little.
• Applying yield control to debt service in addition to operating costs
• Maintaining a 3% cap regardless of a change in ownership
• Removing the 3% cap, reassessing all properties, and then imposing the cap again. Phase in the heavy
increase experience by some and the decrease experienced by others over a 4 year period.
It is clear that this issue is of great concern to those most directly affected. It should be of concern to everyone. It appears that legislation is the only way to interfere with the new trend in assessment. People are seeking shelter from the lightning storm. Concerns should be voiced to state legislators. The 2009 legislative session draws near, and with it a new opportunity to properly address this issue. The desperate state of our real estate market and the extreme dissatisfactions of property owners should be enough to influence legislation.