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

SPONSOR Papen

ORIGINAL DATE

LAST UPDATED

1/31/06

2/3/2006 HB

SHORT TITLE NMFA Public Project Revolving Fund Changes

SB 360/aSEC

ANALYST Earp

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

NFI

See Fiscal Impact

Narrative

(Parenthesis ( ) Indicate Expenditure Decreases)

Duplicates House Bill 290

SOURCES OF INFORMATION

LFC Files

Responses Received From

New Mexico Higher Education Department (HEC)

New Mexico Finance Authority (NMFA)

SUMMARY

Synopsis of SEC Amendments

The Senate Education Committee amendments address two issues:

1.

A new section 2 is added to the bill which amends Section 6-21-4 NMSA 1978 to change

the title of the chief administrator of the New Mexico Finance Authority from “Executive

Director” to “Chief Executive Officer”.

2.

Section 6-21-6 is further amended to provide authority for NMFA to grant final approval

for “small loans” (defined as public projects not to exceed $1,000,000) without specific

authorization by law. NMFA indicates that this provision will streamline the current two-

step approval process which results in the NMFA providing interim financing for such

projects and then adjusting interest rates when the project is granted final approval fol-

lowing legislative authorization. Borrowers could benefit from lower financing costs in a

rising interest rate environment.

Senate Bill 360/aSEC – Page

2

These amendments were proposed by NMFA but were not recommendations from the New

Mexico Finance Authority Oversight Committee. The amendments reduce direct legislative in-

volvement in the small loan approval process. While not specifically required in the bill, a rou-

tine reporting process on such loans to the NMFA Oversight Committee would assure that the

Legislature is fully informed about these smaller loans.

Synopsis of Original Bill

Senate Bill 360, sponsored by Senator Papen on behalf of the New Mexico Finance Authority

Oversight Committee, amends sections of the New Mexico Finance Authority Act to:

1.

Include nonprofit foundations and other support organizations affiliated with a public

university, college or other higher education institution as a qualified entity;

2.

Extend the sunset provisions providing legislative authorization for urgent economic de-

velopment projects from 2006 to 2009;

3.

Allow for money in the public project revolving fund to capitalize other programs spe-

cifically authorized by law. Examples of such programs include the Energy Efficiency

Bonding Act and State Building Bonding Act bonds.

The bill contains the emergency clause.

FISCAL IMPLICATIONS

This bill provides institutions of higher education with an alternative source of debt financing

that does not impact institutional bonding capacity since the debt would be held by the support

organization (such as a non-profit foundation). NMFA reports that making use of the credit rat-

ing and size of the Public Projects Revolving Fund (PPRV) could result in potential savings on

the interest rate, the cost of insurance and the cost of issuance for these bonds.

SIGNIFICANT ISSUES

This bill is proposed by the New Mexico Finance Authority Oversight Committee.

ADMINISTRATIVE IMPLICATIONS

No significant administrative impact is anticipated.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

House Bill 290 and Senate Bill 360 are duplicate measures.

OTHER SUBSTANTIVE ISSUES

NMFA indicates that utilizing the public project revolving loan fund to capitalize other programs

allows the NMFA to fund these programs at lower interest rates than could potentially be

achieved on a stand-alone basis. By utilizing the credit rating and size of the PPRF there could

potentially be a savings on the interest rate, the cost of insurance and the cost of issuance for

these bonds. Two programs that could see immediate benefit are the Energy Efficiency Bonds

and the State Building Bonds.

Senate Bill 360/aSEC – Page

3

POSSIBLE QUESTIONS

Have proposals from non-profit foundations affiliated with higher education institutions been

presented to or considered by the NMFA board.

What “urgent economic development projects” would be impacted by the proposed extension of

the sunset period for projects reference in Laws 2003, Chapter 325.

DKE/yr