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 02/07
/2025
SHORT TITLE Taxation of Agricultural Land
BILL
NUMBER House Bill 294
ANALYST Faubion
REVENUE*
(dollars in thousands)
Type FY25 FY26 FY27 FY28 FY29
Recurring or
Nonrecurring
Fund
Affected
Property
Tax
($15,690.0) ($19,660.0) ($24,980.0) ($30,730.0) ($38,410.0) 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
TRD
Indeterminate
but minimal
Indeterminate
but minimal
Indeterminate
but minimal
Indeterminate
but minimal
Recurring General Fund
Total
Indeterminate
but minimal
Indeterminate
but minimal
Indeterminate
but minimal
Indeterminate
but minimal
Recurring General Fund
Parentheses ( ) indicate expenditure decreases.
*Amounts reflect most recent analysis of this legislation.
Relates to House Bill 28.
Sources of Information
LFC Files
Agency Analysis was Solicited but Not Received From
Taxation and Revenue Department (TRD) New Mexico Association of Counties Department of Finance and Administration (DFA)
SUMMARY
Synopsis of House Bill 294
House Bill 294 (HB294) proposes that certain lands under conservation easements be valued as
agricultural land for property tax purposes.
The bill defines agricultural use broadly to include not only traditional farming and livestock
activities but also land preserved under conservation easements that protect important habitats,
open spaces, or historic resources. Landowners can qualify for agricultural valuation if their land House Bill 294 – Page 2
maintains the capacity to produce agricultural products, even if it is resting or not actively
farmed due to conservation efforts. The bill requires landowners to apply for this valuation and
mandates reporting of any changes in land use that would disqualify the property from
agricultural assessment. Additionally, it introduces an affidavit requirement for conservation
easement deeds to be filed with the county assessor for record-keeping and valuation purposes.
This bill does not contain an effective date and, as a result, would go into effect 90 days after the
Legislature adjourns, or June 20, 2025, if enacted. The provisions apply to tax years 2025 and
after.
FISCAL IMPLICATIONS
The fiscal implications of this bill for local governments primarily involve a potential reduction
in property tax revenues to local governments. By allowing land with conservation easements to
be valued as agricultural land—which typically has a lower assessed value compared to
residential or commercial properties—local governments may collect less in property taxes from
affected properties. However, the extent of the revenue loss would depend on the number and
size of properties qualifying for this valuation.
This bill provides significant changes to the valuation of conservation districts, reducing the net
taxable value of these properties and reducing revenue to local governments. This bill gives
preferential valuation to these properties over other kinds of properties, shifting the tax burden to
other property owners and renters especially after yield control. This would reduce the amount of
property taxes collected by local governments, potentially impacting funding for public services
such as schools, infrastructure, and emergency services.
The yield control statute (7-37-7.1 NMSA 1978) adjusts operating tax rates to offset revenue
losses or gains from outsized changes to the aggregate property taxable values within each tax
district. When taxable property values grow too much within a district, yield control will reduce
the tax rate to maintain “reasonable” revenue growth. If aggregate property values decline, as
would be the case if this bill were to be adopted, the tax rate can be increased for the entire tax
district to maintain revenue. County, municipal, and school operating mill levies are subject to
yield control, and those entities can offset losses to net taxable value by increasing the mill rate,
if there is sufficient “space” between their imposed rate, the rate approved by their local
governing bodies, and the current yield-controlled rate, the actual rate levied as calculated by the
Department of Finance and Administration (DFA). The magnitude of this offsetting in this case
is difficult to calculate without access to very specific tax information for these types of
properties.
Most yield-controlled levies across the state have ample room to increase rates because yield
control has suppressed their actual rate levied over time. However, some entities do not have any
space to increase mills because their imposed and actual mill levies are the same and at or close
to the constitutional limit. They may not have enough room to cover the estimated impact on
their revenues. For example, Catron and Torrance counties have maxed their mill imposition and
have no yield-control space to recoup lost revenue. Roughly 15 municipalities may also be at risk
of being unable to recoup revenues. This analysis averages municipal mill levies and does not
examine each of the municipality’s financial position within each county. There is some debate
of whether local governments can increase revenues by imposing additional mills if they have
not imposed all the constitutionally allowed mills. House Bill 294 – Page 3
Debt mills, including the state general obligation bond debt mills, can be adjusted to fulfill debt
obligations as approved by voters; voters do not approve mills, only debt issuance, so local
governments and the state can increase the mills to fulfill those obligations without other
approvals. This analysis assumes no net revenue loss for debt mills. However, some districts may
not choose to raise their debt mills and will experience a revenue loss on those mills. Bond
capacity could also decrease as a result of this bill; the state, many schools, and municipalities
issue debt periodically rather than every two years, which could create challenges in servicing
debt with reduced revenues.
Some special mills, such as those for conservation districts, some hospitals, higher education
institutions, etc., are not subject to yield control and may not have the ability to be adjusted if net
taxable value decreases. This is the majority of the revenue loss forecasted.
LFC used 2024 property tax certificates from DFA to analyze residential taxable values, mill
rates, tax obligations, and yield-control effects for counties, municipalities, school districts, and
special districts. LFC assumed mill rates would be adjusted for all debt mills and adjusted
operating mills as yield-control space allowed. First, the total net taxable value loss is estimated
for the change in valuation. Then, the analysis applied that taxable value loss to each type of mill
in the district, aggregated at the county level, to find the pre-yield control revenue loss across
types. Then, mill levy adjustments and yield control are applied to find total net loss, post yield
control and post debt mill adjustment.
According to the Land Trust Alliance, 906.3 thousand acres of private land, nearly 3 percent of
total private acreage in the state, is currently under a conservation easement in New Mexico.
Using property tax valuation data from DFA and TRD, average property values, and estimated
valuation impacts from the provisions in the bill, LFC estimates the total estimated taxable value
loss at over $1.1 billion statewide. Reducing the valuation of these properties results in a pre-
yield-control estimated loss of $36.8 million across all beneficiaries, mostly to local
governments. However, after yield control, most county and municipal operating revenue, school
revenue, and revenue for debt obligations lost due to the exemption increase can be made up by
increasing the mill rate for those levies on all properties, essentially passing it to other
homeowners and renters, reducing the total revenue loss to approximately $15.7 million across
entities, mostly from lost revenue for special mill levies that cannot be adjusted by yield control.
This means approximately $20 million in property tax increases are paid by other homeowners.
This current-year estimate is grown each year by housing inflation estimates and to account for
increased number of conservation districts for out-year cost estimates. The estimate assumes this
provision would entice more large landowners to set up conservation easements, doubling the
acreage under conservation easements by 2030.
SIGNIFICANT ISSUES
Currently, conservation easements may lower property taxes by reducing the assessed value of a
property. Each county assessor handles conservation easements differently, and it is up to the
landowner to petition for a lower tax assessment once the easement is in place.
If large, non-working ranches in rural New Mexico, particularly those used for recreational
purposes like hunting, choose to establish conservation easements, the impact on local property
tax revenues could be severe. Currently, these properties are often taxed at market value, House Bill 294 – Page 4
reflecting their potential for development or recreational use. By reclassifying this land as
agricultural under the new law, their assessed value could drop by 70 to 80 percent, drastically
reducing the taxes owed. In rural counties where large landowners control significant acreage,
even a modest shift of land into conservation easements could result in a substantial loss of tax
revenue, potentially crippling budgets that depend heavily on property taxes to fund essential
services.
Rural counties are especially vulnerable because they have fewer alternative revenue streams
compared to urban areas. Property taxes are often the primary source of funding for local
governments. If a significant portion of large ranches or other large properties take advantage of
conservation easements, counties could face double-digit percentage reductions in property tax
revenue, forcing them to cut critical services or increase taxes on smaller landowners and
residents. The situation could be exacerbated if landowners use these easements strategically to
reduce taxes while continuing profitable, non-agricultural activities like hunting leases or luxury
tourism.
Furthermore, conservation easements are often permanent, meaning these reduced valuations
could be locked in indefinitely, creating long-term fiscal challenges for local governments. The
cumulative effect of this shift could decimate the financial stability of some rural counties. While
the bill aims to encourage land conservation, without careful oversight, it risks unintentionally
undermining the fiscal health of rural communities.
The applicability to property tax year 2025 may present an impossible timeline for TRD and
county assessors to implement this bill. County assessors send the notice of valuation to
homeowners by April 1
st
of each property tax year. This bill does not provide ample time for
assessors to do so or for homeowners to apply for this valuation. The Legislature should consider
moving the applicability to property tax year 2026.
ADMINISTRATIVE IMPLICATIONS
The Taxation and Revenue Department Property Tax Division would likely have some small
recurring and nonrecurring cost associated with implementing this bill.
CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP
Relates to House Bill 28 which also amends property tax valuation of agricultural land.
OTHER SUBSTANT IVE ISSUES
In New Mexico, conservation easements may have limited practical impact due to the state’s vast
open spaces, low population density, and minimal development pressures, especially in rural
areas. Much of the land, including large ranches and natural areas, is already undeveloped and
unlikely to face significant threats from urbanization. As a result, conservation easements could
be used more as a tax strategy than a conservation tool, allowing landowners—particularly those
with non-working ranches used for recreation—to secure property tax reductions without
meaningful changes to land use.
This shift could significantly reduce property tax revenues for rural counties, which rely heavily House Bill 294 – Page 5
on these funds for essential services. While conservation easements are designed to protect land,
in New Mexico they may offer minimal environmental benefit in areas where development was
unlikely to occur regardless. This dynamic underscores the need for policy oversight to ensure
these easements serve genuine conservation purposes rather than functioning primarily as tax
shelters.
JF/hj/SL2/rl
Attachments:
A. Loss to Local Government Post Yield Control
B. Post-Yield-Control Cost by Tax Entity
C. Pre-Yield-Control Cost by Tax Entity
D. New Mexico County Operating Rates
House Bill 294 – Page 6
Attachment A
HB 294 Operating Loss Special Districts
Total Revenue
Loss
Bernalillo 8,568,223$ -$ 8,568,223$ 8,568,223$
Catron 19,705$ 17,142$ 2,563$ 19,705$
Chaves 175,635$ -$ 175,635$ 175,635$
Cibola 37,110$ -$ 37,110$ 37,110$
Colfax 75,699$ -$ 75,699$ 75,699$
Curry 64,210$ -$ 64,210$ 64,210$
De Baca 2,815$ -$ 2,815$ 2,815$
Dona Ana 857,450$ -$ 857,450$ 857,450$
Eddy 307,618$ -$ 307,618$ 307,618$
Grant 81,286$ -$ 81,286$ 81,286$
Guadalupe 9,732$ -$ 9,732$ 9,732$
Harding 560$ -$ 560$ 560$
Hidalgo 1,339$ -$ 1,339$ 1,339$
Lea 197,985$ -$ 197,985$ 197,985$
Lincoln 375,799$ -$ 375,799$ 375,799$
Los Alamos 96,728$ -$ 96,728$ 96,728$
Luna 16,849$ -$ 16,849$ 16,849$
McKinley 79,502$ -$ 79,502$ 79,502$
Mora 13,286$ -$ 13,286$ 13,286$
Otero 144,920$ -$ 144,920$ 144,920$
Quay 11,817$ -$ 11,817$ 11,817$
Rio Arriba 154,648$ -$ 154,648$ 154,648$
Roosevelt 15,546$ -$ 15,546$ 15,546$
San Juan 429,383$ -$ 429,383$ 429,383$
San Miguel 64,228$ -$ 64,228$ 64,228$
Sandoval 1,161,171$ -$ 1,161,171$ 1,161,171$
Santa Fe 1,781,729$ -$ 1,781,729$ 1,781,729$
Sierra 48,515$ -$ 48,515$ 48,515$
Socorro 60,950$ -$ 60,950$ 60,950$
Taos 318,189$ -$ 318,189$ 318,189$
Torrance 82,857$ 58,555$ 24,301$ 82,857$
Union 8,243$ -$ 8,243$ 8,243$
Valencia 430,220$ -$ 430,220$ 430,220$
15,693,947$ 75,697.59$ 15,618,250$ 15,693,947$
Loss to Local Governments, Post Yield Control
House Bill 294 – Page 7
Attachment B
County
Operating
County
Debt
Muni Average
Operating
Muni Avg
Debt
School Avg
Operating
School
Avg Debt
Special
Average
State
GOB Total Cost
Bernalillo -$ -$ -$ -$ -$ -$ 8,568,223$ - $ 8,568,223$
Catron 17,142$ -$ -$ -$ -$ -$ 2,563$ -$ 19,705$
Chaves -$ -$ -$ -$ -$ -$ 175,635$ -$ 175,635$
Cibola -$ -$ -$ -$ -$ -$ 37,110$ -$ 37,110$
Colfax -$ -$ -$ -$ -$ -$ 75,699$ -$ 75,699$
Curry -$ -$ -$ -$ -$ -$ 64,210$ -$ 64,210$
De Baca -$ -$ -$ -$ -$ -$ 2,815$ -$ 2,815$
Dona Ana -$ -$ -$ -$ -$ -$ 857,450$ -$ 857,450$
Eddy -$ -$ -$ -$ -$ -$ 307,618$ -$ 307,618$
Grant -$ -$ -$ -$ -$ -$ 81,286$ -$ 81,286$
Guadalup
e -$ -$ -$ -$ -$ -$ 9,732$ -$ 9,732$
Harding -$ -$ -$ -$ -$ -$ 560$ -$ 560$
Hidalgo -$ -$ -$ -$ -$ -$ 1,339$ -$ 1,339$
Lea -$ -$ -$ -$ -$ -$ 197,985$ -$ 197,985$
Lincoln -$ -$ -$ -$ -$ -$ 375,799$ -$ 375,799$
Los Alamo -$ -$ -$ -$ -$ -$ 96,728$ -$ 96,728$
Luna -$ -$ -$ -$ -$ -$ 16,849$ -$ 16,849$
McKinley -$ -$ -$ -$ -$ -$ 79,502$ -$ 79,502$
Mora -$ -$ -$ -$ -$ -$ 13,286$ -$ 13,286$
Otero -$ -$ -$ -$ -$ -$ 144,920$ -$ 144,920$
Quay -$ -$ -$ -$ -$ -$ 11,817$ -$ 11,817$
Rio Arriba -$ -$ -$ -$ -$ -$ 154,648$ -$ 154,648$
Roosevelt -$ -$ -$ -$ -$ -$ 15,546$ -$ 15,546$
San Juan -$ -$ -$ -$ -$ -$ 429,383$ -$ 429,383$
San Migue -$ -$ -$ -$ -$ -$ 64,228$ -$ 64,228$
Sandoval -$ -$ -$ -$ -$ -$ 1,161,171$ - $ 1,161,171$
Santa Fe -$ -$ -$ -$ -$ -$ 1,781,729$ - $ 1,781,729$
Sierra -$ -$ -$ -$ -$ -$ 48,515$ -$ 48,515$
Socorro -$ -$ -$ -$ -$ -$ 60,950$ -$ 60,950$
Taos -$ -$ -$ -$ -$ -$ 318,189$ -$ 318,189$
Torrance 58,555$ -$ -$ -$ -$ -$ 24,301$ -$ 82,857$
Union -$ -$ -$ -$ -$ -$ 8,243$ -$ 8,243$
Valencia -$ -$ -$ -$ -$ -$ 430,220$ -$ 430,220$
75,698$ -$ -$ -$ -$ -$ 15,618,250$ - $ 15,693,947$
Post-Yield Control Cost by Taxing Entity
House Bill 294 – Page 8
County
Operating County Debt
Muni Average
Operating Muni Avg Debt
School Avg
Operating School Avg Debt Special Average State GOB Total Cost Cost to Locals Cost to State
Bernalillo
2,617,100$ 476,042$ 2,323,495$ 1,867,122$ 101,385$ 1,705,001$ 8,568,223$ 512,197$ 17,369,816$ 16,857,619$ 512,197$
Catron
17,142$ -$ 3,219$ -$ 723$ 4,321$ 2,563$ 1,967$ 26,389$ 24,422$ 1,967$
Chaves
104,575$ -$ 129,763$ -$ 5,124$ 116,192$ 175,635$ 26,804$ 515,640$ 488,836$ 26,804$
Cibola
36,296$ -$ 16,529$ 2,027$ 1,506$ 39,389$ 37,110$ 5,515$ 129,663$ 124,148$ 5,515$
Colfax
105,967$ -$ 63,301$ 46,748$ 4,012$ 56,165$ 75,699$ 15,130$ 301,531$ 286,401$ 15,130$
Curry
160,337$ -$ 75,727$ -$ 8,117$ 83,770$ 64,210$ 22,487$ 399,393$ 376,906$ 22,487$
De Baca
4,652$ -$ 878$ -$ 197$ 2,223$ 2,815$ 613$ 10,840$ 10,227$ 613$
Dona Ana
897,939$ 8,055$ 486,651$ 221,811$ 33,322$ 723,165$ 857,450$ 135,253$ 2,952,155$ 2,816,902$ 135,253$
Eddy
128,945$ -$ 104,412$ -$ 8,517$ 104,082$ 307,618$ 32,124$ 600,727$ 568,603$ 32,124$
Grant
77,717$ 13,112$ 36,259$ -$ 3,354$ 27,528$ 81,286$ 15,294$ 223,495$ 208,201$ 15,294$
Guadalupe
9,225$ -$ 4,954$ -$ 347$ 3,922$ 9,732$ 1,348$ 27,168$ 25,820$ 1,348$
Harding
1,218$ -$ 196$ -$ 54$ 1,217$ 560$ 193$ 2,957$ 2,764$ 193$
Hidalgo
7,017$ -$ 1,870$ -$ 287$ 4,495$ 1,339$ 910$ 13,544$ 12,634$ 910$
Lea
136,858$ -$ 78,872$ -$ 5,038$ 112,707$ 197,985$ 26,901$ 528,954$ 502,053$ 26,901$
Lincoln
132,670$ -$ 134,503$ 49,098$ 7,953$ 143,223$ 375,799$ 35,379$ 707,709$ 672,330$ 35,379$
Los Alamos
105,983$ -$ 71,274$ -$ 6,254$ 182,615$ 96,728$ 28,351$ 491,205$ 462,854$ 28,351$
Luna
71,840$ -$ 29,350$ 14,021$ 3,324$ 38,260$ 16,849$ 9,041$ 162,596$ 153,555$ 9,041$
McKinley
47,636$ -$ 45,572$ 9,845$ 2,210$ 54,921$ 79,502$ 8,998$ 235,090$ 226,092$ 8,998$
Mora
16,162$ 4,119$ 12,641$ -$ 614$ 13,969$ 13,286$ 2,843$ 38,929$ 36,085$ 2,843$
Otero
160,437$ -$ 119,386$ 43,389$ 7,296$ 160,092$ 144,920$ 32,856$ 565,676$ 532,820$ 32,856$
Quay
20,565$ -$ 13,666$ -$ 910$ 14,295$ 11,817$ 3,008$ 58,414$ 55,407$ 3,008$
Rio Arriba
74,269$ 22,911$ 50,211$ -$ 3,241$ 75,018$ 154,648$ 19,163$ 350,872$ 331,710$ 19,163$
Roosevelt
51,662$ -$ 20,777$ -$ 2,129$ 29,992$ 15,546$ 6,830$ 118,292$ 111,462$ 6,830$
San Juan
284,495$ -$ 115,496$ -$ 13,803$ 246,825$ 429,383$ 55,116$ 985,101$ 929,985$ 55,116$
San Miguel
62,588$ -$ 76,224$ -$ 2,314$ 105,416$ 64,228$ 15,073$ 255,769$ 240,696$ 15,073$
Sandoval
561,787$ 102,433$ 612,044$ 256,980$ 22,947$ 801,008$ 1,161,171$ 129,475$ 3,365,807$ 3,236,332$ 129,475$
Santa Fe
962,326$ 385,764$ 288,726$ 114,008$ 29,888$ 869,740$ 1,781,729$ 246,425$ 4,297,411$ 4,050,986$ 246,425$
Sierra
53,611$ -$ 16,491$ 23,259$ 2,513$ 28,983$ 48,515$ 6,975$ 151,993$ 145,018$ 6,975$
Socorro
41,017$ 4,431$ 22,102$ -$ 1,329$ 26,158$ 60,950$ 5,564$ 149,782$ 144,217$ 5,564$
Taos
166,081$ -$ 136,728$ 46,916$ 6,262$ 79,621$ 318,189$ 36,419$ 549,380$ 512,961$ 36,419$
Torrance
58,555$ 944$ 15,729$ -$ 2,129$ 37,018$ 24,301$ 6,720$ 124,574$ 117,854$ 6,720$
Union
9,946$ -$ 4,971$ -$ 396$ 4,384$ 8,243$ 1,389$ 26,752$ 25,363$ 1,389$
Valencia
220,995$ 22,790$ 198,836$ 53,529$ 6,969$ 258,998$ 430,220$ 44,089$ 1,095,259$ 1,051,171$ 44,089$
7,407,614$ 1,040,601$ 5,310,853$ 2,748,752$ 294,468$ 6,154,713$ 15,618,250$ 1,490,450$ 36,832,881$ 35,342,431$ 1,490,450$
Pre-Yield Control Cost by Taxing Entity
Attachment C House Bill 294 – Page 9
Attachment D