Fiscal impact reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for standing finance
committees of the Legislature. LFC does not assume responsibility for the accuracy of these reports if they
are used for other purposes.
F I S C A L I M P A C T R E P O R T
SPONSOR Cates
LAST UPDATED
ORIGINAL DATE 1/25/2025
SHORT TITLE Valuation of Resting Land in Drought
BILL
NUMBER House Bill 28
ANALYST Faubion
REVENUE*
(dollars in thousands)
Type FY25 FY26 FY27 FY28 FY29
Recurring or
Nonrecurring
Fund
Affected
Property
Tax
Indeterminate
but minimal
loss
Indeterminate
but minimal
loss
Indeterminate
but minimal
loss
Indeterminate
but minimal
loss
Indeterminate
but minimal
loss
Recurring
Local
Governments
Parentheses ( ) indicate revenue decreases.
*Amounts reflect most recent analysis of this legislation.
ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT*
(dollars in thousands)
Agency/Program
FY25 FY26 FY27
3 Year
Total Cost
Recurring or
Nonrecurring
Fund
Affected
DFA No fiscal impact $124.8 $64.2 $189.07 Recurring General Fund
Total No fiscal impact $124.8 $64.2 $189.07 Recurring General Fund
Parentheses ( ) indicate expenditure decreases.
*Amounts reflect most recent analysis of this legislation.
Sources of Information
LFC Files
Agency Analysis Received From
Department of Finance and Administration (DFA)
Department of Agriculture (NMDA)
Agency Analysis was Solicited but Not Received From
Taxation and Revenue Department (TRD)
SUMMARY
Synopsis of House Bill 28
House Bill 28 extends the authority to determine drought conditions to qualify a property to be
valued for property tax purposes as land used for agricultural purposes to the New Mexico
Department of Agriculture, a conservancy district, or a soil and water conservation district. House Bill 28 – Page 2
This bill does not contain an effective date and, as a result, would go into effect 90 days after the
Legislature adjourns, or May 15, 2024, if enacted.
FISCAL IMPLICATIONS
This bill would likely result in more properties qualifying, and therefore receiving valuation, as
agricultural use properties. Agricultural use properties are taxed based on the value of their
products, not the underlying land value at market rate, typically resulting in much lower property
tax valuations. This bill could result in lower tax revenue from property tax, primarily affecting
rural local governments and schools as the primary recipients of property tax revenue from
agricultural properties. The fiscal impact is indeterminate without information on the number of
newly qualifying properties but is likely to be minimal. Additionally, most taxing entities will be
able to adjust the property tax mill rates of the district (yield control) to offset any loss of
revenue from a reduction of property valuation as a result of this bill.
SIGNIFICANT ISSUES
The U.S. Department of Agriculture (USDA) has consistent definitions for what constitutes
drought throughout the United States and is an authority on the matter nationwide. Allowing the
state Department of Agriculture or smaller conservancy or soil and water conservation districts
the authority to determine drought conditions introduces the possibility of uneven and
inconsistent parameters. It could also create perverse incentives for local jurisdictions to over-
determine drought to give property owners in their districts tax breaks that are not warranted.
The New Mexico Department of Agriculture notes the following:
The special method of valuation under Section 7-36-20 NMSA 1978 is intended to
maintain the continued use of agricultural lands in active production. For lands to qualify
for the special valuation method, there must be a bona fide primary agricultural use of the
land and the capacity to produce agricultural products. Section 7-36-20 NMSA 1978
currently allows for the resting of lands to count as agricultural use if it is “the direct
result of moderate drought conditions as designated by the United States department of
agriculture” and “drought conditions occurred in the county within which the land is
located for at least eight consecutive weeks during the previous tax year.”
Technically, the USDA does not make direct drought declarations but relies on the
United States Drought Monitor maps for its programs. The U.S. Drought Monitor is
produced jointly by the National Drought Mitigation Center at the University of
Nebraska-Lincoln, National Oceanic and Atmospheric Administration (NOAA), and
USDA. Technical experts update drought maps on a weekly basis based on a number of
drought indicators, including meteorological data, soil moisture levels, water resource
measurements, and vegetation conditions. NMDA participates in the New Mexico
drought monitor working group, which meets monthly to inform and advise
modifications to the current drought map. The U.S. Drought Monitor does not always
reflect water shortages for irrigators, who may experience prolonged and significant
reductions to their water supply even when local meteorological conditions do not
indicate drought.
House Bill 28 – Page 3
NMDA does not currently make drought designations and does not have an independent
process or methodology to do so. There are forty-seven soil and water conservation
districts and at least four conservancy districts across the state. If HB 28 is enacted, there
could potentially be fifty-plus distinct methodologies to determine drought for the
purposes of Section 7-36-20 NMSA 1978.
ADMINISTRATIVE IMPLICATIONS
The state Department of Agriculture currently does not conduct drought analysis or publish any
kind of drought determination. This would added to its scope of work and may require additional
software, data, or personnel.
The Department of Finance and Administration’s Local Government Division notes this bill
would increase its operating costs to consider determinations from other governmental agencies
regarding land's production capacity and to periodically review production capacities and
capitalization rates to ensure accurate valuations.
TECHNICAL ISSUES
This bill would go into effect in May 2025, in the middle of a property tax year and well after the
county assessors conduct valuation assessments and send out notices of valuation. This could
present challenges in implementation and result in tax contests. It is recommended to implement
this change for property tax year 2026.
JF/rl/hg