Fiscal impact
reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for
standing finance committees of the NM Legislature. The LFC does not assume
responsibility for the accuracy of these reports if they are used for other
purposes.
Current FIRs (in
HTML & Adobe PDF formats) are available on the NM Legislative Website (legis.state.nm.us). Adobe PDF versions include all attachments,
whereas HTML versions may not.
Previously issued FIRs and attachments may be obtained from the LFC in
|
SPONSOR |
Coll |
DATE TYPED |
|
HB |
575 |
||
|
SHORT
TITLE |
Make NMFA a State Agency |
SB |
|
||||
|
|
ANALYST |
Gilbert |
|||||
APPROPRIATION
|
Appropriation
Contained |
Estimated
Additional Impact |
Recurring or
Non-Rec |
Fund Affected |
||
|
FY04 |
FY05 |
FY04 |
FY05 |
||
|
|
|
|
$3,024.0 |
Recurring |
General
Fund |
|
|
|
|
$429,738.8 |
Non-Rec |
General
Fund |
(Parenthesis
( ) Indicate Expenditure Decreases)
Conflicts with: HB 100, HB 123, HB 124, HB
125, HB 200, HB 249, HB 358, HB 355, SB 110, SB 150, SB 194, SB 201, SB 202 SB
248, and SB 260
LFC Files
Response
Received From
The
Modrall Sperling Law Firm
Sutin,
Thayer & Browne Law Firm
SUMMARY
Synopsis of Bill
House Bill 575 amends the Finance Authority Act,
§6-21-2 NMSA 1978 (being Laws 1992, Chapter 61, Section 2), to change the legal
status of the New Mexico Finance Authority (NMFA) from a governmental instrumentality
to a state agency and transfers all
funds held by the NMFA to the state treasury.
Significant Issues
As
a governmental instrumentality, the NMFA has the flexibility to achieve the
purposes set forth under the Finance Authority Act. As such, its actions do not directly
implicate the state, its credit or the general fund.
The
NMFA public project revolving fund (PPRF) bonds are issued under the NMFA’s
credit as special revenue fund bonds payable from and guaranteed by NMFA
assets.
If
the NMFA is converted to a state agency, the credit of the state and the
general fund will potentially become aligned with NMFA debt, thus converting
NMFA bonds into unconstitutional debt and undermining the tax-exempt status of
PPRF bonds.
Currently
the NMFA holds it funds separately from all other state funds, has its own bond
issuance authority, and is expressly independent from control by other state
agencies. If the NMFA becomes a state agency, past bond issues may become
constitutionally susceptible to attack and the NMFA may be precluded from
future statutorily authorized projects, such acquisition of the PERA building.
FISCAL IMPLICATIONS
HB 575 recreates all NMFA programs within the State Treasurer’s Office. This transfer of programs would shift the
cost of operations to the general fund.
The NMFA states that the general fund fiscal impact for FY 05 would be
approximately $3,024.0 and NMFA operations would require recurring
appropriations in future years.
Also due to the constitutional and non-impairment issues, all of the NMFA
outstanding bonds would most likely be defeased. The FY 05 fiscal impact would be a one-time
appropriation of $429,738.8 from the general fund to finance a defeasance
escrow for the outstanding principal balance of all NMFA bonds.
Litigation costs arising from passage from HB
575 could also be significant.
ADMINISTRATIVE IMPLICATIONS
Currently, the NMFA handles all financial administration related to NMFA
programs. HB 575 would move the
administrative function to the Department of Finance and Administration (DFA). HB 575 would require re-classification of
NMFA employees as state employees impacting PERA and the established benefit
programs already functional and operational for NMFA employees.
The NMFA believes it can more effectively operate and achieve the
purposes stated in the NMFA Act if it is clearly separated from the state’s
credit and the state general fund.
According to the Sutin,
Thayer & Browne law firm, “the changes proposed by HB 575 could have
unexpected and potentially serious consequences in terms of the market’s acceptance
of the NMFA bonds, both outstanding and future.”
TECHNICAL ISSUES
According to the
Modrall, Perling law firm, HB 575 clearly violates the non-impairment clause of
the New Mexico Constitution, Article II, Section 19, and the non-impairment
provisions of the NMFA Act. The NMFA
currently has contractual relationships with its bond holders that would be
impacted if the bonds were subsequently found unconstitutional upon implementation
of HB 575.
The New Mexico Constitution expressly forbids
the Legislature from taking action that impairs existing contractual
relationships. Therefore, holders of
outstanding bonds issued by the NMFA during the past twelve years may file suit
to prevent HB 575 from taking effect.
OTHER SUBSTANTIVE ISSUES
The NMFA’s status as a separate instrumentality was the key feature in
allowing the State Office Building Bonds in 2001 and the State Museum Building
Bonds in 2003 to be issued. Those
outstanding bonds may also become unconstitutional under HB 575 under the
principles set forth by the New Mexico Supreme Court in the
According to the NMFA,
HB 575 would
violate the non-impairment pledges made in NMFA bonds and result in drastic
municipal bond market consequences for the NMFA, the state and all political
subdivisions that participate in the municipal bond market. Municipal bond insurers and rating agencies
may withdraw from the
The
NMFA also feels HB
575 would impair the GRIP transportation financing program approved by the
Legislature during the 2003 special session.
As a separate instrumentality with established bond market credentials
and a team of qualified finance professionals, the NMFA is able to access the
bond capital markets at the lowest attainable interest costs. Those capabilities would be lost under HB
575.
RLG/njw