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

SPONSOR Silva

ORIGINAL DATE

LAST UPDATED

1/27/07

HB 252

SHORT TITLE Economic Development Revolving Fund

SB

ANALYST Kehoe

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

$30,000.0

Non-Recurring

General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

Duplicates,Relates to,Conflicts with, Companion to

Duplicates Appropriation in the General Appropriation Act

Relates to Appropriation in the General Appropriation Act

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

FY09

$30,000.0

Non-Recurring

Economic

Development

Revolving Fund

(Parenthesis ( ) Indicate Revenue Decreases)

Relates to House Bill 253.

SOURCES OF INFORMATION

LFC Files

Responses Received From

New Mexico Finance Authority (NMFA)

House Bill 252 – Page

2

SUMMARY

Synopsis of Bill

House Bill 252 appropriates $30 million from the general fund to the economic development

revolving fund to make loans to qualified businesses in New Mexico pursuant to the Statewide

Economic Development Finance Act.

FISCAL IMPLICATIONS

Laws 2003, Chapter 349, enacted the Statewide Economic Development Finance Act authorizing

creation of a Statewide Economic Development Finance Program (Smart Money), creation of the

economic development revolving fund, and authorizing NMFA to issue certain Economic

Development Bonds and make loan participation and loan guarantees on behalf of entities

engaged in qualifying economic development projects. The fund was not initially capitalized.

However, Laws of 2005, Chapter 347, appropriated $10 million for the “Smart Money" loan

participation program to capitalize the economic development revolving fund. The 2006

Legislature authorized 48 projects to potentially receive financial assistance from the economic

development revolving fund. To date, NMFA has obligated $4.3 million for business attraction,

retention and expansion projects in Alamogordo, Albuquerque and Raton. The NMFA indicates

it has ten additional projects in line for the remaining funds totaling $5.7 million.

House Bill 253, introduced for the New Mexico Finance Authority Oversight Committee,

requests legislative authorization for the New Mexico Finance Authority to provide financial

assistance for 69 private projects in 25 counties from the economic development revolving fund

in the form of loan participations with private lenders not to exceed five million dollars

($5,000,000) per project subject to certain terms and conditions as set forth by NMFA

House Bill 252 would provide the necessary funding for NMFA to provide financial assistance

for the projects authorized within House Bill 253 from the economic development revolving

fund. The executive capital outlay recommendation supports the $30 million to fund the Smart

Money program.

The appropriation of $30 million contained in this bill for expenditure in 2007 and subsequent

years is a non-recurring expense to the general fund. Any unexpended or unencumbered balance

remaining shall not revert to the general fund.

SIGNIFICANT ISSUES

The NMFA will leverage the capital by partnering with private banks and institutions so that

loans from the fund finance no more than 49 percent of a total project. The program is designed

to match the risk-need with appropriate financing arrangements. In a rural area, for example,

local lenders may be constrained by legal lending limits and out-of-area lenders may be

uncomfortable with the location. Regardless of the reason, the program will bridge the gap and

give businesses in all areas of the state access to affordable capital. Some projects may only

need introductions to lenders while others may need direct guarantees.

House Bill 252 – Page

3

The NMFA will estimate the overall economic impact of each project by analyzing the long-term

economic diversification, the increase in revenue to the state, job creation, and geographical

location to determine priority of funded projects. EDD expects the economic impact of the

original $10 million appropriation to create one thousand jobs, $75 million in new plant and

equipment, $420 million in new wages and salaries over the next decade, and $50 million in

added state income and gross receipts taxes

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

House Bill 253, introduced for the New Mexico Finance Authority Oversight Committee,

authorizes the New Mexico Finance Authority to provide financial assistance for 69 private

projects in 25 counties from the economic development revolving fund in the form of loan

participations with private lenders not to exceed five million dollars ($5,000,000) per project

subject to certain terms and conditions as set forth by NMFA

LMK/mt