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committees of the NM Legislature. The LFC does not assume responsibility for the accuracy of these reports

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

SPONSOR Altamirano

ORIGINAL DATE

LAST UPDATED

2/7/06

HB

SHORT TITLE Short-Term Tax Bonds for Colleges

SB 717

ANALYST Kehoe

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

NFI

NFI

NFI

NFI

(Parenthesis ( ) Indicate Expenditure Decreases)

Relates to Appropriation in the General Appropriation Act

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

FY08

($30,000.0)

Non-Recurring Severance Tax

Permanent Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Higher Education Department (HED)

New Mexico Finance Authority (NMFA)

SUMMARY

Senate Bill 717 authorizes the Board of Finance to issue and sell short-term severance tax bonds

and authorizes the proceeds to be expended for heating and utility systems for the New Mexico

Institute of Mining and Technology and for New Mexico Highlands University.

FISCAL IMPLICATIONS

Senate Bill 717 authorizes the Board of Finance to issue and sell severance tax bonds in fiscal

Senate Bill 717 – Page

2

year 2006 with a term that does not extend beyond the fiscal year in which they are issued in an

amount not to exceed $15 million each for the New Mexico Institute of Mining and Technology

and New Mexico Highlands University when the Board of Regents of each institution certifies

the need.

Short-term severance tax bonds are commonly referred to as the “sweep.” The revenues to repay

the bonds authorized in this bill, estimated between $11l million to $120 million in 2006, would

normally flow to the severance tax permanent fund. In the last two years, the “sweep” has been

used to address deficiencies at public schools.

It should be noted that the expenditure of short-term severance tax bonds proposed in this bill

will not impact public school construction funding. Supplemental severance tax bonds are statu-

torily dedicated for public school construction and improvements.

SIGNIFICANT ISSUES

In recent months, NMHU and NMIMT have experienced an inordinate number of utility disrup-

tions and major infrastructure failures that interrupted essential services to their campus facilities

impacting both the student population and the faculty. The campus structures and infrastructure

at both institutions are 50 to more than 100 years old and require extensive infrastructure re-

placements or improvements for heating and cooling, water and sewer improvements, metering

and energy management systems, electrical distribution systems, fiber optic cabling and other

communications systems, and other improvements to eliminate fire and safety code deficiencies.

It should be noted that the buildings and infrastructure at all higher education campuses require a

substantial investment to address the slow deterioration of facilities along with a backlog of nec-

essary repairs and maintenance. Most campuses, in particular four-year institutions, require ex-

tensive infrastructure replacements or improvements. The backlog of repairs and renovations

along with the lack of adequate funding has resulted in the minimum performance of repairs and

maintenance necessary to keep buildings at a “safe and healthy” level for students and staff.

More and more campuses are suffering from frequent utility outages, unusable classrooms, a loss

of students, and discouraged faculty members.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

The 2006 General Appropriation Act, as passed by the House of Representatives, contains a spe-

cial appropriation of $60 million for “deferred maintenance” at all higher education institutions.

LMK/yr