SENATE BILL 1142
48th legislature - STATE OF NEW MEXICO - first session, 2007
INTRODUCED BY
Shannon Robinson
AN ACT
RELATING TO STATE FINANCE; ALLOWING DIRECT INVESTMENT OF THE SEVERANCE TAX PERMANENT FUND IN NEW MEXICO OWNED AND OPERATED FINE ART AND FINE MUSICAL INSTRUMENT PRIVATE EQUITY FUNDS; PROVIDING AND QUALIFYING LIMITATIONS.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
Section 1. A new section of the Severance Tax Bonding Act is enacted to read:
"[NEW MATERIAL] INVESTMENT IN FINE ART AND FINE MUSICAL INSTRUMENT PRIVATE EQUITY FUNDS OWNED AND OPERATED IN NEW MEXICO.--
A. No more than three percent of the market value of the severance tax permanent fund may be invested in New Mexico fine art and fine musical instrument private equity funds.
B. Not more than sixty million dollars ($60,000,000) of the amount authorized for investment pursuant to Subsection A of this section shall be invested in one or more fine art private equity funds. Not more than forty millions dollars ($40,000,000) of the amount authorized for investment pursuant to Subsection A of this section shall be invested in one or more fine musical instrument private equity funds.
C. The state investment officer shall make investments pursuant to this section only upon approval of the state investment council after a review by the private equity investment advisory committee. The state investment officer may make investments pursuant to this section only in fine art or fine musical instrument private equity funds that:
(1) are managed by reputable investment companies with sufficient expertise in fine art or fine musical instruments; and
(2) meet the following conditions:
(a) representations and warranties made in the funds' private equity offering memoranda, subscription agreements and any other offering documents have been approved by the state investment council;
(b) the fund managers have provided to the state investment council audited statements on a quarterly basis reflecting the activities of the funds;
(c) all bank accounts of the fund managers, whether used for operations or asset acquisition, reside in banking institutions operating in New Mexico;
(d) the fine art is placed with the museum of New Mexico or in a traveling exhibit within the state of New Mexico, and the fine musical instruments are placed at the academy of the arts at the university of New Mexico, at New Mexico state university, with the New Mexico symphony or at the Santa Fe opera; and
(e) the fund managers fully insure all acquisitions for all circumstances of use, show or loan, including against theft or any damage for any cause.
D. As used in this section:
(1) "New Mexico fine art private equity fund" means any limited partnership, limited liability company or corporation organized and operating in New Mexico that:
(a) has as its primary business activity the use of funds to acquire fine art, which is defined as art that has demonstrated that it has: 1) a secondary market; 2) either been sold at auction or been produced by an artist whose other work has sold at auction; and 3) a value not less than fifty thousand dollars ($50,000) or more than five million dollars ($5,000,000);
(b) will hold the fine art acquisitions for sale opportunistically, not later than ten years from the date of acquisition, with the objective of capital appreciation; and
(c) accepts investments only from accredited investors as that term is defined in Section 2 of the federal Securities Act of 1933, as amended, and rules adopted pursuant to that act; and
(2) "New Mexico fine musical instrument private equity fund" means any limited partnership, limited liability company or corporation organized and operating in New Mexico that:
(a) has as its primary business activity the use of funds to acquire fine musical instruments, which are defined as musical instruments that: 1) are stringed, unfretted instruments; 2) were made in the seventeenth, eighteenth or nineteenth century in Italy, France, Germany or England; 3) have a maker whose instruments have sold at auction; 4) have demonstrated that they have a secondary market; and 5) have a value not less than one hundred thousand dollars ($100,000) or more than eight million dollars ($8,000,000);
(b) will hold these acquisitions for sale opportunistically, not later than ten years from the date of acquisition, with the objective of capital appreciation; and
(c) accepts investments only from accredited investors as that term is defined in Section 2 of the federal Securities Act of 1933, as amended, and rules adopted pursuant to that section."
Section 2. Section 7-27-5 NMSA 1978 (being Laws 1983, Chapter 306, Section 7, as amended) is amended to read:
"7-27-5. INVESTMENT OF SEVERANCE TAX PERMANENT FUND.--The severance tax permanent fund shall be invested in separate differential rate and market rate investment classes. "Differential rate investments" are permitted in Sections
7-27-5.3 through 7-27-5.5, 7-27-5.13 through 7-27-5.17, 7-27-5.22 and 7-27-5.24 through 7-27-5.26 NMSA 1978 and the investments permitted for fine art and fine musical instruments provided in this 2007 act are intended to stimulate the economy of New Mexico and to provide income to the severance tax permanent fund. "Market rate investments" are investments that are not differential rate investments and are intended to provide income to the severance tax permanent fund. All market rate investments and differential rate investments shall be invested in accordance with the Uniform Prudent Investor Act and shall be accounted for in accordance with generally accepted accounting principles."
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