HB0075

HOUSE BILL 75

55th legislature - STATE OF NEW MEXICO - second session, 2022

INTRODUCED BY

Patricia Roybal Caballero and Jeff Steinborn

AN ACT

RELATING TO PUBLIC FINANCE; ENACTING THE PUBLIC BANKING ACT; CREATING THE PUBLIC BANK OF NEW MEXICO; ESTABLISHING A BOARD OF DIRECTORS AND THE STRUCTURE OF THE PUBLIC BANK OF NEW MEXICO; PROVIDING DUTIES; PERMITTING CERTAIN INVESTMENTS; PROHIBITING CONFLICTS OF INTEREST; CREATING THE STATE BANKING FUND; REQUIRING THE STATE TREASURER TO DEPOSIT AND MAINTAIN A CERTAIN AMOUNT OF PUBLIC MONEY IN THE PUBLIC BANK OF NEW MEXICO; PROVIDING PENALTIES; MAKING AN APPROPRIATION.

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

SECTION 1. [NEW MATERIAL] SHORT TITLE.--Sections 1 through 7 of this act may be cited as the "Public Banking Act".

SECTION 2. [NEW MATERIAL] DEFINITIONS.--As used in the Public Banking Act:

A. "bank" means the public bank of New Mexico;

B. "board" means the board of directors of the bank;

C. "director" means a member of the board; and

D. "fund" means the state banking fund and shall include all assets, liabilities, equity, income and expenses of the bank.

SECTION 3. [NEW MATERIAL] PUBLIC BANK OF NEW MEXICO--ESTABLISHED--BOARD OF DIRECTORS.--

A. The "public bank of New Mexico" is created as a public body politic and corporate, constituting a governmental instrumentality, which shall be chartered pursuant to the laws of the United States.

B. The bank shall constitute a public body corporate by the name set forth in the incorporation certificate and by such name may sue and be sued, have the capacity to make contracts, acquire, hold, enjoy, dispose of and convey property real and personal, accept deposits, borrow and lend money, incur indebtedness, impose fees and assessments and do any other act necessary or proper for carrying out the provisions of the Public Banking Act. The bank may serve as a fiscal agent of the state and any agency or instrumentality of the state, and the bank may serve as a fiscal agent for any local government or municipality.

C. The bank shall be governed, and all of its functions, powers and duties shall be exercised, by the board of directors, who shall be appointed with input from the public. The board consists of eleven voting members as follows:

(1) two members appointed by the New Mexico legislative council who have successful management experience in banking finance or banking operations in a regulatory environment; provided that the two members shall not be members of the same political party;

(2) one member appointed by the New Mexico legislative council who has successful community economic development experience, which may be evidenced by experience with organizations, including chambers of commerce, community foundations, tribal entities, economic development districts and councils of governments;

(3) one member appointed by the New Mexico legislative council with at least five years of community development experience working to address community needs, including infrastructure, food systems and sustainable, regenerative agriculture, public facilities installation, alternative and renewable energy, community centers, housing rehabilitation, public services, microenterprise assistance, code enforcement and homeowner assistance;

(4) one member appointed by the governor who has successful management experience in banking finance or banking operations in a regulatory environment or who is an entrepreneur with successful, sophisticated business borrowing experience;

(5) two members appointed by the governor who have successful community economic development experience, which may be evidenced by experience with organizations, including chambers of commerce, community foundations, tribal entities, economic development districts and councils of governments;

(6) one member appointed by the governor with at least five years of community development experience working to address community needs, including infrastructure, food systems and local sustainable agriculture, public facilities installation, renewable energy, community centers, housing rehabilitation, public services, microenterprise assistance, code enforcement and homeowner assistance;

(7) the chief executive officer of the New Mexico finance authority;

(8) the state treasurer; and

(9) the secretary of economic development.

D. The directors appointed pursuant to Subsection C of this section shall be residents of the state and shall serve for terms of four years and shall not serve more than two consecutive terms, except as provided in Subsection E of this section.

E. The initial board shall establish membership terms for the directors appointed pursuant to Subsection C of this section so that:

(1) four of the initial appointed members are appointed for an initial term of two years; and

(2) four of the initial appointed members are appointed for an initial term of four years.

F. Any person currently serving as a board member, or equivalent position, for a community development financial institution, credit union, trust or other banking institution or an employee of a community development financial institution or credit union shall not be eligible to serve as a director.

G. Directors shall receive per diem and mileage as provided in the Per Diem and Mileage Act and shall receive no other compensation, perquisite or allowance.

H. Directors, officers and employees of the bank shall be governed by the provisions of the Governmental Conduct Act.

I. Directors shall elect a chair of the board.

J. If a vacancy occurs among the directors, the appointing authority of the former director shall appoint a replacement to serve out the term of that director. If a director's term expires, the director shall continue to serve until another member is appointed.

K. The board shall meet quarterly and at the call of the chair.

L. The board shall maintain minutes of all meetings of the board and maintain other appropriate records, including financial transaction records in compliance with state and federal law and adequate to provide an accurate record for audit purposes pursuant to the Audit Act.

M. Members of the board shall be subject to the Financial Disclosure Act.

N. The bank shall be subject to all applicable regulatory and reporting requirements that allow access to the federal reserve and shall obtain a blanket bond on all employees of the bank.

SECTION 4. [NEW MATERIAL] CHIEF EXECUTIVE OFFICER--CHIEF RISK OFFICER--DUTIES--STAFF.--

A. The chief executive officer of the bank shall be hired by the board. The position of the chief executive officer shall be a full-time position, and the chief executive officer shall not engage in any other occupation or profession or hold any other public office, appointive or elective.

B. The chief executive officer shall be an individual qualified by experience in the field of investment management, investment risk management, corporate governance, investment accounting or finance. The chief executive officer of the bank shall direct the affairs and business of the bank, subject to the policies, control and direction of the board. The chief executive officer shall have substantial experience successfully running a financial institution of a comparable asset size or greater and shall be responsible for achieving the community and economic development purposes as described in the Public Banking Act. The chief executive officer shall be responsible for the management of the bank; its relations with creditors, banking and credit union partners and local communities; maintaining and improving the financial health and the internal operations and overall performance of the bank; and maintaining compliance of the bank with fiscal and regulatory requirements.

C. The chief executive officer shall receive a salary to be determined by the board and shall report to the board on all matters pertaining to the bank.

D. The chief risk officer of the bank shall be hired by the chief executive officer. The chief risk officer shall report to the board and to the chief executive officer and shall assist the chief executive officer in strategic planning to achieve the corporate objectives and regulatory expectations of the bank. The chief risk officer shall hold the credential of a certified risk manager or an equivalent credential within that professional field.

E. The chief executive officer shall:

(1) annually prepare a budget for the bank that shall be reviewed and approved by the board. Any funds provided for the operating budget of the bank shall be provided from bank income and equity;

(2) hire all employees of the bank;

(3) keep accurate and complete records and accounts concerning all transactions involving the bank; and

(4) report quarterly to the board on the investments made pursuant to the Public Banking Act and on the available and encumbered funds of the fund. Annually, a report shall be submitted no later than October 1 each year to the legislative finance committee, the revenue stabilization and tax policy committee and any other appropriate interim legislative committees. The bank shall make the report available to the public by publishing the report on the internet.

SECTION 5. [NEW MATERIAL] INVESTMENTS--LENDING.--

A. Subject to the limitations, conditions and restrictions provided by law or policy adopted by the board, the bank may:

(1) make purchases, sales, exchanges, investments and reinvestments of the assets of the fund; provided that all transactions be in accordance with the Public Banking Act and the Uniform Prudent Investor Act;

(2) make, purchase, guarantee or hold loans:

(a) to state-chartered or federally chartered lending agencies or institutions;

(b) that are insured or guaranteed in whole or in part by the United States or its agencies or instrumentalities or the federal deposit insurance corporation or other agencies or instrumentalities;

(d) to an organization that has been granted exemption from the federal income tax by the United States commissioner of internal revenue as an organization described in Section 501(c)(3) of the federal Internal Revenue Code of 1986 and subject to the provisions of the Nonprofit Corporation Act;

(e) obtained as security pledged for, or originated in the restructuring of, any other loan properly originated or participated in by the bank; and

(f) originated by local financial institutions authorized to do business in this state;

(3) buy and sell federal bonds;

(4) lease, assign, sell, exchange, transfer, convey, grant, pledge or mortgage real and personal property;

(5) purchase bonds, lend to other state financing programs, acquire securities or make loans to political subdivisions of the state for the purpose of providing financing for any public project;

(6) purchase participation interests in loans made or held by state-chartered or federally chartered financial institutions; and

(7) enter into agreements or develop memoranda of understanding with credit unions, community development financial institutions or community banks for the purpose of facilitating lending opportunities and carrying out the provisions of the Public Banking Act.

B. The bank shall not make loans to a private individual or private legal entity.

C. The bank shall pursue a policy of developing loan programs for public benefit to further agriculture, commerce and industry, including new and growing enterprises in New Mexico, that are approved by the board, that ensure a diversified loan portfolio and that make financing accessible and equitably available to communities throughout the state as evidenced by outcomes including more jobs with sustainable wages. In pursuit of this policy the bank shall:

(1) cooperate with small business development centers, regional economic development districts and parties that have demonstrated abilities and relationships in providing financial services to new and emerging businesses;

(2) make equity or debt investments in New Mexico businesses through local financial institutions; provided that the investments are made pursuant to policies adopted by the board; and

(3) evaluate loan performance on the basis of both risk analysis and public benefit.

D. The chief executive officer of the bank and the board are trustees of all funds under their control.

SECTION 6. [NEW MATERIAL] CONFLICTS OF INTEREST--PENALTY.--

A. If any director, officer or employee of the bank has an interest, either direct or indirect, in any contract to which the bank is or is to be a party, such interest shall be disclosed to the board in writing. The director, officer or employee having such interest shall not participate in any action by the bank with respect to that contract.

B. Any person who has a conflict of interest as provided in this section and participates in any transaction involving that conflict of interest or knowingly fails to notify the bank of that conflict is guilty of a misdemeanor and upon conviction shall be sentenced pursuant to the provisions of Section 31-19-1 NMSA 1978.

SECTION 7. [NEW MATERIAL] STATE BANKING FUND--CREATED.--

A. The "state banking fund" is created within the bank. The fund shall be administered by the bank as a separate account, but may consist of such subaccounts as the bank deems necessary to carry out the purposes of the fund. The board shall establish procedures and policies as required to administer the fund in accordance with the Public Banking Act and all other applicable state and federal law and banking regulatory requirements. The fund consists of appropriations, capital, retained earnings, deposits and investment income of the fund. Money in the fund shall not revert to the general fund at the end of a fiscal year. The fund shall be used in accordance with the provisions of the Public Banking Act, and all income earned on the fund shall be credited to the fund.

B. All money credited to the fund is appropriated to and retained by the bank for the purpose of carrying out the provisions of the Public Banking Act.

C. Except as otherwise provided in the Public Banking Act, money from payments of principal of and interest on loans and payments of principal of and interest on securities held by the bank shall be deposited in the fund and shall not revert to the general fund.

D. Money in the fund shall be disbursed on vouchers signed by the chief executive officer of the bank or the chief executive officer's authorized representative.

SECTION 8. A new section of Chapter 6, Article 10 NMSA 1978 is enacted to read:

"[NEW MATERIAL] PUBLIC BANK OF NEW MEXICO--DEPOSITS--EXCEPTED.--

A. Chapter 6, Article 10 NMSA 1978 is not applicable to deposits made to the public bank of New Mexico expect as provided in this section.

B. Within thirty days of the incorporation of the public bank of New Mexico and the bank receiving its formal charter, the state treasurer shall make a deposit into the public bank of New Mexico in an amount of sixty million dollars ($60,000,000). The state treasurer shall not withdraw the funds from the initial deposit provided for in this section, but may deposit and withdraw additional funds in the public bank of New Mexico."

SECTION 9. APPROPRIATION.--Fifty million dollars ($50,000,000) is appropriated from the general fund to the state banking fund for expenditure in fiscal year 2023 and subsequent fiscal years to capitalize the public bank of New Mexico for the purpose of carrying out the provisions of the Public Banking Act. Any unexpended or unencumbered balance remaining at the end of a fiscal year shall not revert to the general fund.

SECTION 10. EFFECTIVE DATE.--The effective date of the

provisions of this act is July 1, 2022.

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