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

SPONSOR Rawson, L.

ORIGINAL DATE

LAST UPDATED

1/26/05

2/2/06 HB

SHORT TITLE Regional Spaceport District Act

SB 348a/SFC

ANALYST Earnest

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

NFI

(Parenthesis ( ) Indicate Expenditure Decreases)

ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)

FY06

FY07

FY08 3 Year

Total Cost

Recurring

or Non-Rec

Fund

Affected

Total

($0.1)

($0.1)

($0.1) Recurring General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

Relates to: House Bill 88, House Bill 89, and Senate Bill 354

Companion to: House Bill 473

SOURCES OF INFORMATION

LFC Files

Responses Received From

Economic Development Department (EDD)

State Land Office (SLO)

New Mexico Finance Authority (NMFA)

Tourism Department (TD)

Office of the Attorney General (AGO)

Department of Finance and Administration (DFA)

Taxation and Revenue Department (TRD)

Senate Bill 348/aSFC – Page

2

SUMMARY

Synopsis of Senate Finance Committee Amendment

The Senate Finance Committee amendment makes technical corrections and two substantial

changes. Under the amendment, the revenues of a district are no longer exempt from state taxa-

tion and Spaceport Authority revenue bonds may mature any time not exceeding 20 years after

issuance if secured by revenue from the county or municipal regional spaceport gross receipts tax

or 30 years if secured by revenue from other sources.

Synopsis of Bill

Senate Bill 348 amends the Spaceport Development Act to:

1.

permit the creation of Regional Spaceport Districts and define the powers and duties of

the districts, provide for the powers and responsibilities of the board of directors, and

provide for county and municipal regional spaceport gross receipts taxes;

2.

authorize municipalities and counties to impose, upon voter approval, a regional space-

port gross receipts tax, in increments of one-sixteenth percent, not to exceed one-half

percent; and

3.

allow the Spaceport Authority to contract with and issue bonds on behalf of regional

spaceport districts and receive municipal and county regional spaceport gross receipts

taxes.

FISCAL IMPLICATIONS

The revenue impact to the state is indeterminate. According to TRD, the actual fiscal impact of

the proposal is uncertain because it depends on which jurisdictions elect to participate in a

spaceport district. The revenue potential associated with each jurisdiction is presented in the at-

tached table.

There would be a reduction in general fund revenue associated with any new local option ap-

proved for the spaceport district because of the hold harmless distributions to local governments

for any food and medical deduction reported in their jurisdiction. On average statewide, these

deductions equal about 7 percent of the gross receipts tax base

According to the AGO, SB 348 imposes a duty on the Attorney General to investigate and prose-

cute violations of a certain provision of the Regional Spaceport District Act relating to conflicts

of interests by members of a district’s board of directors. This duty may have a fiscal impact on

that portion of this office’s budget dedicated to investigating and prosecuting violations of the

Governmental Conduct Act (NMSA 1978, §§ 10-16-1 through 10-16-18), although the amount

of any impact is difficult to calculate

SIGNIFICANT ISSUES

SB 348 is one of several introduced bills to further enable and promote the creation a spaceport

in southern New Mexico. Construction of the Southwest Regional Spaceport, currently planned

to be built on 27 acres of mostly state land near Upham, New Mexico, is estimated to cost $225

million. The Governor has requested approximately $100 million in capital outlay funding.

Senate Bill 348/aSFC – Page

3

This legislation would authorize the other major funding mechanism – the imposition of local

option gross receipts taxes – which according to DFA, may generate new revenue in the range of

$26 million (at the 1/16 percent increment) to $210 million (at the full 1/2 percent increment).

At least 75 percent of the new revenue would be dedicated to financing, planning, designing, en-

gineering, and construction of a regional spaceport. Up to 25 percent of the revenue may be re-

tained by the local government for local spaceport-related projects. EDD indicates that $30 mil-

lion is a reasonably conservative estimate of local government funding for spaceport construc-

tion.

Regional spaceport districts may be created by contract by two or more governmental units (the

state, a county or municipality, or an Indian nation, tribe or pueblo) and are to be governed by a

board composed of representatives of district members. The regional spaceport districts would

be political subdivisions of the state. Any city or county can join the district if it imposes a re-

gional spaceport gross receipts tax.

PERFORMANCE IMPLICATIONS

There are no performance measures to gauge the activities of the Spaceport Authority.

ADMINISTRATIVE IMPLICATIONS

SB348 will impose additional responsibility on the Spaceport Authority. The bill enables the

Spaceport Authority to enter into contracts with spaceport districts for the purpose of financing

the purchase, construction, renovation, equipping or furnishing of a regional spaceport. Under

this legislation the Authority may also receive municipal and county gross receipts tax revenues.

Under separate legislation, EDD has requested the transfer of personnel and resources from the

Office of Space at EDD to the Spaceport Authority, which is administratively attached to the de-

partment.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

Relates to:

•

House Bill 88, “Expenditure of Spaceport Development Funds”

•

House Bill 89, “Abolish Space Commission and Transfer Funds

•

Senate Bill 354, “Spaceport Development Fund”

Companion to:

•

House Bill 473, “Regional Spaceport District Act”

OTHER SUBSTANTIVE ISSUES

According to the AGO, section 5.E of SB 348, relating to the conflict of interests of a director or

employee of a regional spaceport district board, does not exempt the officers or employees from

the Governmental Conduct Act (NMSA 1978, §§ 10-16-1 through 10-16-18). It also duplicates

only certain provisions of the Governmental Conduct Act, i.e.:

•

a public officer shall disqualify himself from engaging in any official act directly affecting

his financial interest (NMSA 1978, § 10-16-4),

Senate Bill 348/aSFC – Page

4

•

no legislator, public officer or employee shall use confidential information acquired by vir-

tue of his state employment or office for his or another’s private gain (NMSA 1978, § 10-16-

6), and

•

a state agency shall not enter into any contract with a public officer or employee of the state

or with a business in which the public officer or employee has a substantial interest unless

the public officer or employee has disclosed his substantial interest and unless the contract is

awarded pursuant to the Procurement Code (NMSA 1978, § 10-16-7).

More problematic is that Section 5.E of SB 348 not only prohibits a director of a regional space-

port district board from voting on an issue when the director has a conflict of interest, consistent

with NMSA 1978, § 10-16-4 of the Governmental Conduct Act, but also prohibits a director, of-

ficer, or employee of a regional spaceport district board from acquiring a financial interest in a

new or existing business venture of any kind when the person believes or has reason to believe

the financial interest will be directly affected by an official act of that director, officer or em-

ployee. This particular clause may be too broad and viewed as a form of prior restraint on an in-

dividual’s property interests.

Even though the Attorney General is charged with investigating and prosecuting violations of

Section 5.E, it does not carry a civil or criminal penalty. The Governmental Conduct Act author-

izes the Attorney General or District Attorney to initiate enforcement action for violations of that

Act, but under Section 5.F of SB 348, only the Attorney General may initiate actions for viola-

tions of Section 5.E. This raises the question whether the Legislature intends that a director, of-

ficer, or employee of a regional spaceport district board may be subject to prosecution under both

the Governmental Conduct Act and Section 5.E for the same violation.

TECHNICAL ISSUES

TRD indicates that, in most cases, local option tax statutes stipulate that any new option would

take effect on a January 1 or July 1 so that these changes can be incorporated into the regular

CRS system mailings and workshops. The term “district” should be more strictly defined. The

term “district” is a “body politic and corporate” but it is also being used when discussing land

mass, property and territory. Section 5, Subsection D (page 6) provides that each governmental

unit shall have a board member and that such director shall be an “elected official or his desig-

nee.” But Section 5, subsection B (page 6) provides that only an “elected official” may vote on

land acquisition or bonding issues. It is unclear what would happen to the assets of the district if

the district would dissolve at the end of the contract.

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

If SB 348 is not enacted, a significant element of the funding package for the spaceport project

will not materialize. If local funding is not available, the funding of this project will be in jeop-

ardy and other financial resources will have to be identified.

BE/nt:mt