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Assessor Will Roll Back Tax Values

By Dan McKay
Copyright © 2009 Albuquerque Journal
Journal Staff Writer

          Bernalillo County Assessor Karen Montoya plans to roll back property values for homes sold since 2002, a move that could save some homeowners thousands of dollars on future tax bills.
        But the change might also reduce income to government agencies already facing budget shortfalls.
        Montoya said she decided to roll back values after two judges ruled the state's property-tax law is unconstitutional. The court decisions, however, applied only to the plaintiffs in those cases, raising the question of whether other residents would have to sue to get a proper tax bill.
        "The current system is inequitable," Montoya said Friday in a written statement released to the Journal.
        Tens of thousands of homeowners will be affected by the rollback, she said.
        It's not clear how her decision will affect tax bills. State administrators could offset the lower values by raising tax rates. Also unknown is how the change might affect government revenue.
        An initial analysis suggested the rollback could reduce Albuquerque's tax base by roughly 4.5 percent, according to Lou Hoffman, City Hall's director of finance and administrative services.
        That, in turn, would reduce how much the city has to spend on road and other construction projects through the general-obligation bond program, which is backed by property taxes. A $120 million bond package, for instance, might have to shrink by around $5.4 million.
        The impact on municipal operating budgets is less clear, because the state sets those tax rates through a complicated process called "yield control."
        Rick Homans, secretary of the state Taxation and Revenue Department, said Montoya's decision could have serious consequences.
        "A massive rollback in property taxes, as suggested by the county assessor, raises several complex legal questions and has potentially serious fiscal implications that need to be studied more closely in the weeks ahead," he said.
        Montoya's decision stems from legal problems with New Mexico's tax policy, which is set by state officials but carried out by county assessors. The controversy centers on a phenomenon known as "tax lightning."
        A 2001 state law says most people are subject to a 3 percent limit on how much their property values can climb each year for tax purposes. But the cap doesn't apply if the home changes ownership.
        That means new homeowners are often hit with property tax bills much higher than their neighbors' — sometimes three times as much. Critics call it "tax lightning" because the tax bill for the property jumps abruptly when it changes ownership.
        In August, state District Judge Theresa Baca ruled the system violated the state constitution by creating a class of people who are taxed more based on when they bought their homes. Baca said the law would be constitutional if the 3 percent cap applied to everyone.
        Judge Nan Nash made a similar ruling in a separate case in October.
        Montoya said rolling back values to match the court rulings was the best option available. Tens of thousands of homeowners will be affected by the rollback, she said.
        "It has been a complicated process," Montoya said. "However, this solution is practical and consistent with the rulings made in the two previous court decisions."
        The rollback goes into effect in 2010.
        She said she will go back to when the home was sold — triggering the unconstitutional "tax lightning" — and apply the 3 percent cap for each subsequent year to determine what the value should be in 2010.
        State Sen. Mark Boitano, R-Albuquerque, has been pushing for a statewide fix to the tax law. Montoya's decision, he said, should be a big relief in Bernalillo County.
        "If Karen's able to do that," he said, "that's a significant step forward."
        Clinton Marrs, an attorney who has successfully fought tax lightning in court, said he's interested to see the details of Montoya's plan.
        But, he added, "I think she should be commended. Obviously, she's struggling with a difficult situation."

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