SB0511FCS

SENATE FINANCE COMMITTEE SUBSTITUTE FOR

SENATE BILL 511

54th legislature - STATE OF NEW MEXICO - first session, 2019

AN ACT

RELATING TO PUBLIC FINANCE; CONSOLIDATING THE INDUSTRIAL REVENUE BOND STATUTES APPLICABLE TO COUNTIES AND THOSE APPLICABLE TO MUNICIPALITIES; CHANGING THE TYPES OF PROJECTS ELIGIBLE FOR INDUSTRIAL REVENUE BOND FINANCING; REDEFINING THE AREAS IN WHICH LOCAL GOVERNMENTS MAY ACQUIRE INDUSTRIAL REVENUE BOND PROJECTS; PROVIDING A PROCESS FOR LOCAL GOVERNMENTS AND OTHER LOCAL TAXING ENTITIES TO AGREE TO RECEIVE PAYMENTS IN LIEU OF TAXES OR OTHER CONSIDERATION FOR CERTAIN PROJECTS; PROVIDING FOR PAYMENTS IN LIEU OF TAXES TO THE STATE FOR CERTAIN PROJECTS; ALLOWING CERTAIN CONTRIBUTIONS BY LOCAL GOVERNMENTS TOWARD INDUSTRIAL REVENUE BOND PROJECTS; REPEALING AND ENACTING SECTIONS OF THE NMSA 1978.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

SECTION 1. A new Section 5-20-1 NMSA 1978 is enacted to read:

"5-20-1. [NEW MATERIAL] SHORT TITLE.--Chapter 5, Article 20 NMSA 1978 may be cited as the "Industrial Revenue Bond Act"."

SECTION 2. A new Section 5-20-2 NMSA 1978 is enacted to read:

"5-20-2. [NEW MATERIAL] PURPOSE.--The purpose of the Industrial Revenue Bond Act is:

A. to authorize local governments to acquire, own, lease or sell self-liquidating projects for the promotion of industry and trade by:

(1) inducing manufacturing, industrial and commercial enterprises to locate to or expand in the state;

(2) promoting the use of the state's agricultural products and natural resources; and

(3) promoting the balance of agricultural, commercial and industrial activity in the state; but

B. not to authorize a local government to operate its own manufacturing, industrial or commercial enterprise."

SECTION 3. A new Section 5-20-3 NMSA 1978 is enacted to read:

"5-20-3. [NEW MATERIAL] DEFINITIONS.--As used in the Industrial Revenue Bond Act:

A. "local government" means a county or municipality in New Mexico;

B. "mortgage" includes a deed of trust and the hypothecation of assets as collateral security;

C. "project" means the acquisition of land and buildings or other improvements on that land and the acquisition of real and personal property for use by a manufacturing, industrial or commercial enterprise:

(1) for the manufacture, processing or assembly of agricultural or manufactured products;

(2) for the operation of a mine, not otherwise in operation, for which an operation permit from the energy, minerals and natural resources department has been issued to the enterprise;

(3) for the operation of an energy product refinery, treatment plant or processing plant, not otherwise in operation, for which the state permits, if any, necessary to operate have been issued to the enterprise;

(4) for the storing, warehousing, distribution or sale of goods:

(a) including a telecommunications sales enterprise that makes the majority of its sales to persons outside the state and a water service utility enterprise; but

(b) not including an enterprise associated with a facility designed for the sale of goods or commodities at retail or for the distribution to the public of electricity, gas, telephone or other type of service, except water, commonly classified as a public utility;

(5) except as otherwise provided in this section, for a commercial enterprise in which all or part of the enterprise's activity involves the provision of entertainment to the general public or the supplying of services to the general public, governmental agencies or a specific industry or customer;

(6) for the operation of a water distribution or irrigation system;

(7) for the operation of an electricity generation or transmission facility, except for one for which location approval and a certificate of convenience and necessity are, under the Public Utility Act, prerequisites to the facility's construction or operation;

(8) for the operation of a 501(c)(3) corporation; and

(9) for:

(a) a private institution of higher education;

(b) a nonprofit corporation engaged in health care services, including nursing homes;

(c) office facilities for physicians in a municipality having a population of fewer than fifteen thousand as shown by the most recent federal decennial census;

(d) a mass transit or other transportation activity involving the movement of passengers;

(e) an industrial park;

(f) an office headquarters;

(g) a research and development facility; or

(h) urban transit buses, whether or not already in existence, that are: 1) manufactured or assembled in New Mexico; 2) equipped to hold at least thirty passengers; and 3) suitable for use by a commercial enterprise for leasing; and

D. "501(c)(3) corporation" means a corporation that demonstrates to the taxation and revenue department that it is exempt from the federal income tax because it is organized as provided in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended or renumbered."

SECTION 4. A new Section 5-20-4 NMSA 1978 is enacted to read:

"5-20-4. [NEW MATERIAL] INDUSTRIAL REVENUE BOND PROJECTS--LOCAL GOVERNMENT POWERS AND RESTRICTIONS.--

A. A local government may issue industrial revenue bonds to acquire, whether by construction, purchase, gift or lease, one or more projects, including a project of a 501(c)(3) corporation, subject to the following limitations:

(1) a local government may acquire an electricity generation or transmission facility only:

(a) with the approval, which shall not be unreasonably withheld, of the board of education of the school district in which the project is situated; and

(b) if the local government, the board of education of that school district and the person proposing the project agree for the person to make annual payments in lieu of taxes to the school district during the period that the local government owns and leases the project;

(2) for a project or projects under common ownership or control that is or are proposed to be situated in more than one county, each county assessor, each local government and each entity authorized to levy an ad valorem tax on property on which the project or projects is or are proposed to be situated may be provided with notice by certified mail return receipt requested or by email with delivery receipt confirming that the message was delivered to the recipient's email server, from one or more of the local governments proposing to issue industrial revenue bonds of the opportunity to commence negotiations among the local government, each local taxing entity and the person proposing the project regarding an annual amount in lieu of taxes that the person will pay or other consideration that the person will give to the local government and each local taxing entity for the period that the local government owns and leases the project; provided that, if a local government, one or more of those local taxing entities and the person proposing the project fail to agree in writing as described in this paragraph to that payment or giving of consideration, then each local taxing entity that fails to agree shall forfeit its right to that remuneration. The state shall receive annual payments in lieu of taxes or other consideration in the amount of five percent of the total amount of payments in lieu of taxes paid to local governments and other local taxing entities and five percent of the value of other consideration applicable to any project for which notice is provided pursuant to this paragraph. Written notice of an agreement made pursuant to this paragraph shall be provided to the secretary of state and the department of finance and administration within thirty days of written approval of the agreement by the parties;

(3) a municipality may acquire a project only if:

(a) the project is situated within a perimeter fifteen miles past the municipality's boundaries, as those boundaries are shown in the records of the county clerk of the county in which the municipality is located;

(b) for a project that is situated outside the boundaries of the municipality proposing to issue industrial revenue bonds, as those boundaries are shown in the records of the county clerk, the municipality provides notice, by certified mail return receipt requested or by email with delivery receipt confirming that the message was delivered to the recipient's email server, to the county in which the project is proposed to be situated at least sixty days prior to adoption of an ordinance authorizing the issuance of industrial revenue bonds. The county shall have the opportunity to submit to the municipality and the person proposing the project a proposal for the person proposing the project to make payments in lieu of taxes or pay other consideration to the county, but such payments in lieu of taxes or other consideration shall not be required unless agreed to by the municipality and the person proposing the proposed project; and

(4) a class B or an H class county may acquire a project only if the project is situated entirely within the county and not situated within the boundaries of a municipality, as those boundaries are shown in the records of the county clerk of the county;

(5) a class A county with a population of five hundred thousand or more according to the most recent federal decennial census may acquire a project only if the project is situated entirely within the county; and

(6) a class A county with a population of less than five hundred thousand according to the most recent federal decennial census may acquire a project only if the project is situated entirely within the county and, if the project is situated within the boundaries of a municipality as those boundaries are shown in the records of the county clerk of the county, only if:

(a) the county provides notice, by certified mail return receipt requested or by email with delivery receipt confirming that the message was delivered to the recipient's email server, to the municipality of its proposal to issue industrial revenue bonds at least sixty days prior to the adoption of an ordinance authorizing the issuance of industrial revenue bonds;

(b) the municipality shall have the opportunity to submit to the county and the person proposing the project a proposal that payments in lieu of taxes or other consideration be made to the municipality during the period that the county owns or leases the project, but payments in lieu of taxes or other consideration shall not be required unless agreed to by the county and the person proposing the project; and

B. A local government may lease, sell or otherwise dispose of a project, including a project of a 501(c)(3) corporation, on terms and conditions not in conflict with the Industrial Revenue Bond Act.

C. A local government shall not operate a project, including a project of a 501(c)(3) corporation, in any way except as lessor.

D. A local government may refinance one or more projects of 501(c)(3) corporations.

E. As used in this section, "refinance" means issuing bonds and using all or substantially all of the proceeds from that issuance to liquidate the obligations incurred in financing or aiding in the finance of a project.

F. A municipality that issues industrial revenue bonds shall timely notify the board of county commissioners and the county assessor of each county in which the municipality is located of the bonds' maturity, expiration or replacement by refunding bonds.

G. A county that issues industrial revenue bonds shall timely notify each entity that levies a tax on property in the county of the bonds' maturity, expiration or replacement by refunding bonds."

SECTION 5. A new Section 5-20-5 NMSA 1978 is enacted to read:

"5-20-5. [NEW MATERIAL] APPROVAL NOT REQUIRED.--Except as provided in the Industrial Revenue Bond Act, the notice to, consent of or approval by a governmental body, public officer or voters is not required as a condition of the sale or issuance of industrial revenue bonds or the making of a mortgage under that act."

SECTION 6. A new Section 5-20-6 NMSA 1978 is enacted to read:

"5-20-6. [NEW MATERIAL] ISSUANCE OF BONDS.--

A. A local government that issues industrial revenue bonds shall issue them and interest coupons, if any, associated with the bonds not as a general obligation of the local government, nor as an indebtedness of the local government within the meaning of any state constitutional or statutory provision, nor as constituting or giving rise to a pecuniary liability of the local government or a charge against its general credit or taxing powers, but, rather, as payable solely out of the revenue derived from the projects for which they are issued. The local government shall cause to have plainly stated on the face of each industrial revenue bond it issues the limitations required in this subsection.

B. Subject to the limitations of the Industrial Revenue Bond Act, and as provided by the ordinance and proceeding under which the issuance of the bonds is authorized, a local government may:

(1) have industrial revenue bonds executed and delivered at any time and sold at public or private sale; and

(2) issue the bonds:

(a) in any form and denomination;

(b) in any tenor;

(d) as payable in any installment and at any time or times equal to or less than thirty years from the issuance date;

(e) as payable at any place;

(f) as bearing interest at any rate;

(g) as evidenced in any manner; and

(h) otherwise, as subject to any provisions.

C. A local government may pay expenses, including architect's, attorney's and engineer's fees, premiums and commissions, it deems necessary or advantageous in connection with the authorization, sale and issuance of industrial revenue bonds.

D. A local government that issues industrial revenue bonds shall ensure that the bonds and interest coupons, if any, associated with the bonds are construed to be negotiable."

SECTION 7. A new Section 5-20-7 NMSA 1978 is enacted to read:

"5-20-7. [NEW MATERIAL] SECURITY FOR BONDS.--

A. A local government that issues industrial revenue bonds may have the principal of and interest on them secured by a mortgage covering all or part of the project for which the bonds are issued or secured by a pledge of the lease of the project. The principal of or interest on bonds issued under the authority of the Industrial Revenue Bond Act shall also be secured by a pledge of the revenues out of which the bonds shall be payable.

B. Except as otherwise provided in the Industrial Revenue Bond Act:

(1) the ordinance and proceedings under which a local government authorizes the issuance of industrial revenue bonds or a mortgage securing the bonds may contain agreements and provisions customarily contained in instruments securing bonds, including agreements and provisions concerning the:

(a) collection of revenue from the project;

(b) lease of the project;

(d) creation and maintenance of special funds in which to deposit revenue from the project; and

(e) rights and remedies available in the event of default to the bondholders or, under a mortgage, the trustee;

(2) in making those agreements and provisions, the local government shall not obligate itself except with respect to the project and the application of the revenue from the project, and its obligation shall be limited as provided in Subsection A of Section 5-20-6 NMSA 1978; and

(3) in the proceedings under which a local government authorizes the issuance of industrial revenue bonds or a mortgage securing the bonds, the local government may provide the procedure and remedies available in the event of default in payment of the principal of or interest on the bonds or in the performance of an agreement, but it shall not provide in the agreement that a breach of the agreement imposes a pecuniary liability on the local government or a charge on its general credit or against its taxing powers."

SECTION 8. A new Section 5-20-8 NMSA 1978 is enacted to read:

"5-20-8. [NEW MATERIAL] PROJECT LEASING OR SALE.--

A. Before a local government leases a project financed with industrial revenue bonds, it shall determine:

(1) the amount necessary each year to pay the principal of and interest on the bonds issued to finance the project; and

(2) the amount necessary each year to pay into reserve funds, if any, the local government establishes in connection with the retirement of the bonds and, unless the terms of the project lease require the lessee to maintain the project and assume the responsibility for having the project properly insured, the estimated costs of maintaining the project in good condition and having it properly insured.

B. A local government shall set forth the determinations it makes in accordance with Subsection A of this section in the proceedings under which it issues industrial revenue bonds. Before issuing those bonds, the local government shall lease or sell the project to a lessee or purchaser under an agreement conditioned on the completion of the project and providing for payment to the local government of rentals or payments in amounts based on the local government's determinations and sufficient to:

(1) pay the principal of and interest on the bonds issued to finance the project;

(2) build and maintain the reserve, if any, the local government establishes in connection with the retirement of the bonds; and

(3) if the terms of the project lease do not require the lessee to pay the costs of maintaining the project in good condition and having it properly insured, pay for that maintenance and insurance."

SECTION 9. A new Section 5-20-9 NMSA 1978 is enacted to read:

"5-20-9. [NEW MATERIAL] SALE OF BONDS--USE OF

PROCEEDS.--A local government shall apply the proceeds from the sale of industrial revenue bonds only as follows:

A. to the extent that the proceeds constitute accrued interest and premiums, then to the payment of the principal of and interest on the bonds sold;

B. for the purpose for which the bonds were issued; and

C. to the extent that the proceeds are not needed for the purpose for which the bonds were issued, then to:

(1) the payment of the principal and interest on the bonds; or

(2) investment in short-term, interest-bearing securities."

SECTION 10. A new Section 5-20-10 NMSA 1978 is enacted to read:

"5-20-10. [NEW MATERIAL] REFUNDING OF BONDS.--

A. A local government may have industrial revenue bonds it has issued refunded through its issuance of refunding bonds:

(1) whose principal amount is equal to, less than or greater than the principal amount of the original bonds;

(2) regardless of whether the original bonds have matured; and

(3) either by sale, the application of the proceeds of which are applied to the payment of the original bonds, or by exchange of the original bonds, but only if the holders of the original bonds are not compelled to surrender their bonds for payment or exchange before the date on which they are payable or, if they are called for redemption, before the date on which, by their terms, they are subject to redemption.

B. In issuing industrial revenue refunding bonds, a local government:

(1) may:

(a) pay all unpaid accrued and unaccrued interest on the original bonds to the normal maturity date of the bonds or to selected prior redemption dates;

(b) pay redemption premiums, commissions and estimated costs incidental to the issuance of the original and refunding bonds; and

(2) shall:

(a) have the bonds payable solely from the revenue out of which other industrial revenue bonds are payable or solely from those amounts derived from an escrow as provided in this section, including amounts derived from the investment of refunding bond proceeds and other legally available amounts also as provided in this section or from any combination of those sources; and

(b) make the bonds compliant with Section 5-20-6 NMSA 1978.

C. A local government that issues industrial revenue refunding bonds shall immediately apply the proceeds of the refunding bonds to the retirement of the original bonds or place the proceeds, which, notwithstanding any other provision of law to the contrary, may be invested in short-term securities, long-term securities or both, in escrow in a commercial bank or trust company that possesses and exercises trust powers. Except as otherwise provided expressly by the Industrial Revenue Bond Act, the ordinance and proceedings under which a local government authorizes the issuance of industrial revenue refunding bonds or a mortgage securing the refunding bonds govern the establishment of escrow, if any, connected with the refunding bonds and the investment or reinvestment of escrowed proceeds, if any."

SECTION 11. A new Section 5-20-11 NMSA 1978 is enacted to read:

"5-20-11. [NEW MATERIAL] CONTRIBUTION BY A LOCAL GOVERNMENT.--

A. Except as allowed by the Local Economic Development Act, a local government shall not have the power to pay out of its general funds or otherwise contribute part of the costs to acquire a project, nor shall it have the power to use any part of property it owns or in which it has an equity for the construction of any part of a project unless the local government is fully reimbursed for the value of that property, as determined by a current appraisal, or unless the local government leases the property at an annual rental fee of at least five percent of the appraised value. A local government that acquires a project shall pay the cost of that acquisition out of the proceeds from the sale of industrial revenue bonds it issues. This section shall not be construed as prohibiting a local government from accepting donations of property for use in any part of a project or money for use in defraying the cost of a project.

B. As used in this section:

(1) "cost of that acquisition" includes:

(a) for a constructed project, the actual cost of the project's construction, including architect's, attorney's and engineer's fees;

(b) for a project acquired by purchase, the project's purchase price;

(c) the actual cost of the extension of any utility to the project site and all expenses connected with the authorization, sale and issuance of the bonds to finance the acquisition; and

(d) the interest on the bonds for a reasonable time before construction, during construction and for no more than six months after the completion of construction; and

(2) "property" means the land, improvements on the land, buildings, improvements to the buildings, machinery, equipment, operating capital and other types of personal property necessary to a project."

SECTION 12. A new Section 5-20-12 NMSA 1978 is enacted to read:

"5-20-12. [NEW MATERIAL] INDUSTRIAL REVENUE BONDS--LEGAL INVESTMENTS.--Industrial revenue bonds issued under the Industrial Revenue Bond Act are legal investments for savings banks and insurance companies organized under the laws of the state."

SECTION 13. A new Section 5-20-13 NMSA 1978 is enacted to read:

"5-20-13. [NEW MATERIAL] EXEMPTION FROM TAXATION.-- Industrial revenue bonds issued under the Industrial Revenue Bond Act and the income from them, all mortgages or other security instrument executed as security for the bonds, all lease agreements made under that act and revenue derived from a lease or sale by a local government of a project are exempt from all taxation by the state and its subdivisions."

SECTION 14. A new Section 5-20-14 NMSA 1978 is enacted to read:

"5-20-14. [NEW MATERIAL] CONSTRUCTION OF ACT.--The Industrial Revenue Bond Act shall be construed liberally to promote its purpose."

SECTION 15. TEMPORARY PROVISION.--The repeal of and changes made by this 2019 act to the Industrial Revenue Bond Act and the County Industrial Revenue Bond Act shall not impair the validity of or otherwise apply to outstanding bonds issued under the Industrial Revenue Bond Act or the County Industrial Revenue Bond Act or impair the validity of or otherwise apply to proceedings of any local government that has adopted resolutions or ordinances with respect to an industrial revenue bond project prior to the effective date of this 2019 act.

SECTION 16. REPEAL.--Sections 3-32-1 through 3-32-16 and 4-59-1 through 4-59-16 NMSA 1978 (being Laws 1965, Chapter 300, Section 14-31-1; Laws 1967, Chapter 84, Sections 1 and 2; Laws 1965, Chapter 300, Section 14-31-2; Laws 1967, Chapter 84, Section 3; Laws 1981, Chapter 45, Section 4; Laws 1965, Chapter 300, Section 14-31-3; Laws 1997, Chapter 216, Section 2 and Laws 1997, Chapter 226, Section 2; Laws 1965, Chapter 300, Sections 14-31-4 through 14-31-13; Laws 1975, Chapter 286, Sections 1 through 4; Laws 1997, Chapter 216, Section 4 and Laws 1997, Chapter 226, Section 4; Laws 1975, Chapter 286, Sections 5 through 9; Laws 1992, Chapter 11, Section 2; and Laws 1975, Chapter 286, Sections 10 through 16, as amended) are repealed.

SECTION 17. EFFECTIVE DATE.--The effective date of the provisions of this act is July 1, 2019.