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F I S C A L I M P A C T R E P O R T

SPONSOR Griego

DATE TYPED 2/15/05

HB

SHORT TITLE Regional Housing Definitions and Bond Sales

SB 311

ANALYST Hadwiger

APPROPRIATION

(in $000s)

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

NFI

(Parenthesis ( ) Indicate Expenditure Decreases)

Duplicates HB154.

SOURCES OF INFORMATION

LFC Files

Responses Received From

Human Services Department (HSD)

Department of Finance and Administration (DFA)

New Mexico Mortgage Finance Authority (NMFA)

SUMMARY

Synopsis of Bill

Senate Bill 311 adds a definition of a “low-income person” as an individual, couple or family

who lacks the amount of income that is necessary, as determined by rule of the a regional hous-

ing authority, to enable that individual, couple or family, without financial assistance, to live in a

decent, safe and sanitary dwelling without overcrowding. SB311 eliminates the existing defini-

tion of a low-income person as any individual, couple or family whose gross income does not

exceed eighty percent of the resident’s particular county median income and who cannot afford

to pay more than thirty percent of his or her gross income for housing rent or mortgage pay-

ments. The bill authorizes the sale of bonds at no less than par at negotiated or public sale. Cur-

rently, bonds may be sold at public sale only, at no less than par. The bill also eliminates an ex-

isting requirement that the sale of bonds be advertised in a financial newspaper published in New

York City for public sales.

Senate Bill 311 -- Page 2

Significant Issues

The proposed change to allow for negotiated sales for the sale of bonds would give the regional

housing authorities an opportunity to secure better rates. Although not specified within the bill,

it should be noted that tax-exempt bonds, unlike other publicly funded affordable housing re-

sources, are subject to strict guidelines with regard to income eligibility and use.

DFA provided comments from regional housing directors as well as a bond consultant familiar

with this program. The regional housing directors indicated that SB311 would mirror a bill that

passed last year enabling MFA (through its HERO program) to serve families earning up to

140% of the area median income if a member of the household was a teacher, a police officer,

firefighter, or a nurse. By changing the definition of a low-income person, the Regional Housing

Authority will also be able to serve this population. The bond attorney noted stated that this lan-

guage will mirror the definition of a low income person in the Municipal Housing Law (Section

3-45-1). In the past, due to the restrictive language in the Regional Housing Law, it has been

difficult to work jointly with municipalities because they were able to serve a higher income

base. This change puts the municipalities and the regional authorities on equal footing.

NMFA indicated two major concerns. First, the current definition for a low-income person (a

household earning no more than 80% of the area median income) is consistent with the com-

monly accepted definition of low-income households eligible for most federal and state-funded

housing programs. Funds provided by the state to regional housing authorities are usually sub-

jected to the commonly accepted definition, as such funds are often used to match or leverage

HUD funds. In fact, funding sources used to fund affordable housing programs always prescribe

an income eligibility limit for households benefiting from the program. NMFA noted it is un-

clear why the regional housing authorities would want to depart from commonly accepted defini-

tions that describe income eligibility, and it is doubtful that many affordable housing funding

sources would submit to the authority’s discretion on this important issue.

NMFA was also concerned that, although the regional housing law does not specify whether the

bonds described therein are tax-exempt bonds or taxable bonds, it is important to note that tax-

exempt bonds—not unlike other publicly funded affordable housing resources—are subject to

strict guidelines with regard to income eligibility and use. If the regional housing law contem-

plates only the authorities’ use of taxable bonds or their own revenues, income eligibility and use

restrictions are not at issue.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

Duplicates HB154.

TECHNICAL ISSUES

HSD noted that the definition in Section 1 F— “low-income person” (2) a low-income person as

defined by the federal government,” is vague. The federal government allows for various per-

centages of the federal poverty guidelines.

Senate Bill 311 -- Page 3

OTHER SUBSTANTIVE ISSUES

DFA indicated the second substantive change, which adds negotiations as an acceptable means

of acquiring a bond underwriter, simply reflects reality. By using the negotiated sale process, the

authority should get the best terms because the underwriter is working with the authority

throughout the process.

DFA noted that the other change to eliminate the requirement that the sale be advertised in a

New York City financial paper eliminates an unnecessary and unproductive expense. Typically,

the notice of issuance is published in a local paper for 30 days. However, the New York paper

cost, at a minimum $850, per ad and if there are any changes to the notice of issuance (such as

the sale date), they have to readvertise and pay an additional $850. The cost saved could go back

into funding affordable housing.

DFA suggested that an amendment be considered to limit the revised low income definition

(similar to what the MFA has in place) that would still allow the Authorities to capture some of

teachers/cops/nurses market. The MFA capped the teachers/cops/nurses to 115% of the area

median income.

POSSIBLE QUESTIONS

1.

What are the possible disadvantages of defining “low-income” differently than common

definitions under federal law.

DH/njw