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

SPONSOR HJC

ORIGINAL DATE

LAST UPDATED

2/1/06

2/10/06 HJR 8/HJCS

SHORT TITLE Local Government Affordable Housing, CA

SB

ANALYST Lewis

APPROPRIATION (dollars in thousands)

Appropriation

FY06

FY07

Recurring

or Non-Rec

Fund

Affected

NFI*

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Mortgage Finance Authority (MFA)

SUMMARY

Synopsis of Bill

The House Judiciary Committee substitute for House Joint Resolution 8

proposes to amend Arti-

cle 9, Section 14 of the Constitution of New Mexico to permit the state, or the instrumentality of

the state designated by the Legislature as the state’s housing authority, or a county or local gov-

ernment to provide or pay:

a portion of the costs of land for the construction of affordable housing;

a portion of the costs of construction or renovation of affordable residential housing or the

costs of conversion or renovation of buildings into affordable housing; or

financing necessary to support affordable housing projects.

The enabling legislation for such affordable housing grants shall require that the governing body

of the instrumentality of the state designated by the Legislature as the state’s housing authority

give prior approval, by resolution.

SIGNIFICANT ISSUES

The Mortgage Finance Authority Act (Chapter

58, Article 18 NMSA 1978), designates the New

Mexico Mortgage Finance Authority as the state housing authority for all purposes.

According to the Mortgage Finance Authority (MFA), the existing affordable housing exception

House Joint Resolution 8/ HJCS – Page

2

to the anti-donation clause permits the state, counties, and municipalities to “donate” land and/or

buildings, and “provide or pay the costs of” infrastructure to support affordable housing projects.

Importantly, the exception permits governments only to donate land and existing buildings they

own; unlike infrastructure, which can be paid for or provided, the exception does not cover

monetary contributions or donations for land and buildings.

The MFA notes that this works for governmental entities that own land and/or buildings, but

does not work for the MFA and similar entities that do not “own” real property but wish to facili-

tate the donation or discounted sale of such property for affordable housing. Under the current

provision MFA cannot provide state-funded grants or loans that are significantly below market

rates to facilitate the acquisition or donation of real property for affordable housing, yet this is an

important mission of MFA, and presumably the intent of the legislature when it appropriates

state funding for affordable housing purposes (e.g., the $10 million appropriated in 2005 to im-

plement the Affordable Housing Act).

According to the MFA, in order for the authority to contribute to a real property transaction, it

would first have to acquire the property, presumably by lease or purchase, then re-lease or re-sell

(“donate”) it for the affordable housing purpose. This puts MFA in the position of having to be in

the chain of title, with the risks inherent in that position, such as potential liability for environ-

mental hazards (asbestos, radon, etc.), title defects, building condition, contractual obligations,

etc. MFA asserts that these are not risks the authority should have to assume. What is more, it

unnecessarily complicates the transaction and could double transaction costs (i.e., two title

searches, two closings, etc.).

MFA adds that the above restrictions also apply to local governmental entities that wish to use

state or local funds as grants or significantly below-market rate loans to facilitate the acquisition

of real property for affordable housing purposes.

According to the September 13, 2005 minutes of the New Mexico Mortgage Finance Authority

Act Oversight Committee, “Bruce Wiggins, MFA legal counsel, stated that until a few years ago,

MFA did not experience conflicts between providing affordable housing and the anti-donation

clause, but due to the recent need to provide assistance in current workforce needs, the anti-

donation clause has caused limitations for the MFA to use the funds it has been granted, particu-

larly the funds granted through the Affordable Housing Act. He noted recent MFA initiatives to

provide affordable housing have come up against the anti-donation clause and he proposed a

resolution to the clause to allow for the state, a county or a municipality to pay for the costs of

buildings for construction or the costs of land.”

POSSIBLE QUESTIONS

The proposed constitutional amendment represents an attempt to expand existing exceptions to

the anti-donation clause of the Constitution of New Mexico with regard to affordable housing

projects. Is it clear that:

1)

the proposed amendment would have the result sought by the Mortgage Finance Authority;

and that

2)

a constitutional amendment further diluting the anti-donation clause is both justified and

desirable.

ML/yr