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

SPONSOR Silva

ORIGINAL DATE

LAST UPDATED

2/01/2006

2/16/2006

HB 833/aHTRC/aSFC

SHORT TITLE

Severance Tax Bond Projects

SB

ANALYST Moser/Hadwiger

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

$30,000.0

Non-Recurring

Severance Tax Bonds

(Parenthesis ( ) Indicate Expenditure Decreases)

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

FY08

$30,000.0

Non-Recurring

Severance Tax

Bonds

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

NM Department of Transportation (NMDOT)

SUMMARY

Synopsis of the SFC Amendment

The Senate Finance Committee amendment to HB833 reduces the total amount of severance tax

bond authorization from $250 million to $30 million and deletes the $25 million appropriation

for the spaceport. The authorization to issue the bonds would expire in April 2007. The

amendment also changes the amount the NMDOT could use for engineering and design services

for the remaining projects from $500 thousand to “an amount equal to one-half percent of the

project distributions from the fund.” The $30 million in authorized bond funds would be used to

pay for the remaining $225 million in local government projects identified in the original bill as

amended by HTRC “to the extent the money is available in the fund.”

House Bill 833/aHTRC/aSFC – Page

2

This amendment also deletes language that was considered ambiguous in the FIR on the original

bill whereby “any amount not certified for issuance in a fiscal year may be carried forward and

credited against the amount to be certified in subsequent fiscal years.”

Synopsis of HTRC Amendment

The House Taxation and Revenue Committee amendment to HB 833 expanded the scope for

which the funding for the spaceport could be used beyond acquiring right of way and building a

road to also include “transportation infrastructure improvements.” Additionally, the HTRC

amendment allows the NMFA to issue payment to local government once the project has been

certified by the NMDOT rather than waiting for submittal of invoices by NMDOT. This will al-

low the local governments to receive payment from NMFA prior to the actual completion of the

project. A major change in scope was made to project 55 from constructing a new bus terminal

for Navajo transit in McKinley County to “reconstruction and construction of Ramah (RN) 122

in Cibola County.

The HTRC amendment additionally increased/decreased funding on the following projects:

# Description Original Amended

9 C-41, Pie Town rd and south Bloomfield rd to Ramah HS in

Cibola County

$450.0 509.4

17 Maxwell Avenue in Springer, Colfax County

$5,600.0 $4,000.0

54 County Road 001-A in McKinley County

$3,840.6 $3,840.6

110 Various roads in San Miguel County

$0

$1,600.0

Additional technical corrections were made throughout the bill. These were largely related to

correcting how communities were referenced (city rather than village).

Synopsis of Original Bill

House Bill 833, creates the Severance Tax Transportation Fund and authorizes the State Board of

Finance to issue and sell two hundred and fifty million dollars ($250,000,000.00) in severance

tax bonds at a rate of no more than fifty million dollars ($50,000,000.00) per year from FY 2006

to FY2011. The proceeds of bond sales and earnings are to be deposited in the Severance Tax

Transportation Fund. The purpose of the bonds is to partially fund transportation access to pro-

vide funding for only the 109 local government transportation projects specifically identified in

the bill. The bill specifically states that “…money in the fund shall be distributed to the local

governments for projects specifically authorized by the legislature.” Unlike the GRIP legislation

this bill identifies projects and the maximum dollars allowed for each project. The bill declares

an emergency and will take effect immediately.

FISCAL IMPLICATIONS

The appropriation of $30 million contained in this bill is a non-recurring expense to the Sever-

ance Tax Bond Fund. The authorization would expire in at the end of FY07. The amount au-

thorized in this bill is not sufficient to pay for all of the appropriations in Section Three; how-

ever, the amendment states that the funds are appropriated to the extent available. To some de-

gree, this may reflect the provisions in Section Two requiring local government matches for

these funds as some local governments may be unwilling or unable to provide timely matching

funds.

House Bill 833/aHTRC/aSFC – Page

3

SIGNIFICANT ISSUES

The bill establishes that the NMDOT is responsible for establishing funding priorities and quali-

fications for the transportation projects. Projects may only qualify for funding if submitted

through NMDOT’s regional or metropolitan planning organizations.

The NMDOT indicates that the bill provides funding to integrate the state and local transporta-

tion network. The projects were identified and proposed as critical projects for safety, economic

development and mobility by local and tribal governments.

The NMDOT asserts that the 109 locally-identified projects contained within the bill were sub-

mitted through the Regional and Metropolitan Planning Organizations with active participation

from local and tribal governments.

The local match, which NMDOT indicates may be in-kind services, federal funds, local govern-

ment road fund appropriations, grants, or loans, required for these projects depends on the total

project cost as follows:

•

a project of one million dollars ($1,000,000) or less requires a ten percent match;

•

a project greater than one million dollars ($1,000,000) but less than or equal to six mil-

lion dollars ($6,000,000) requires a twenty percent match; and

•

a project with a total cost greater than six million dollars ($6,000,000) requires a 30%

match.

The NMDOT has indicated that it is also reviewing and developing criteria for hardship match-

ing options.

The Department of Transportation may use earnings from investing the fund to pay for adminis-

trative costs associated with the fund and engineering costs. The bill does not identify what

these administrative costs are or who would be eligible to receive them. Nor, does the bill differ-

entiate between the engineering costs eligible under this language from the engineering and de-

sign services for specified projects as outlined in the prior paragraph.

The bill specifies the local projects, listing the dollar amount, purpose, and location. The attached

table provided by NMDOT lists the projects, provides a brief description, dollar amounts and

match requirements (See Attachment). The costs associated with these projects total $225 mil-

lion with local matching requirement of about $64 million.

The NMDOT acknowledges that there is no schedule for these projects. Funds will be disbursed

dependent upon project readiness and the availability of match. The bill allows for any amount

not certified by the NMDOT for issuance in a fiscal year to be carried forward and credited

against the amount to be certified in subsequent years.

PERFORMANCE IMPLICATIONS

NMDOT is charged with certification of project readiness to the New Mexico Finance Authority

for disbursement of funds. Disbursement of funds will be based on project readiness and project

financing match availability.

House Bill 833/aHTRC/aSFC – Page

4

TECHNICAL ISSUES

In the original bill, there was concern that the following language in Section 1 A was unclear as

to intent: “Any amount not certified for issuance in a fiscal year may be carried forward and

credited against the amount to be certified in subsequent fiscal years” is unclear as to its intent.

Does this mean that the amount certified in the following years may be increased by that amount

or that the amount to be certified is reduced by that amount. It is suggested that the term “cred-

ited against” needs clarification. The SFC amendment deletes that language.

GM/DH/mt:yr