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

SPONSOR Maestas

ORIGINAL DATE

LAST UPDATED

2/17/2007

2/23/2007 HJR 12/a HHGAC

SHORT TITLE Constitutional Purposes for County Debt, CA

SB

ANALYST Schuss

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

NFI

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Attorney General’s Office (AGO)

Department of Finance and Administration (DFA)

SUMMARY

Synopsis of HHGAC Amendment

The amendment proposed by the House, Health and Government Affairs Committee re-instates

the provision that disallows the use of General Obligation Bond money for maintaining existing

buildings.

DFA had concerns with the use of General Obligation Bond money for the purpose of

maintaining existing buildings and this amendment addresses that concern.

Synopsis of Original Bill

House Joint Resolution 12, if approved by the voters, would amend Article IX Section 10 of the

New Mexico Constitution to delete provisions describing specific purposes for which counties

may incur debt, and would allow them to borrow money for purposes “authorized by law". The

resolution would also delete language prohibiting the use of general obligation bond money for

maintaining existing buildings.

House Joint Resolution 12/a HHGAC – Page

2

FISCAL IMPLICATIONS

DFA notes that HJR 12 directly affects the current debt structure policy that is in effect for local

public bodies and could be detrimental to sound financial management; unrestrained debt may

exceed politically acceptable or financially sustainable levels of debt. In particular, using long-

term general obligation bond money for maintenance means that there is no enduring value

behind the general obligation bond.

SIGNIFICANT ISSUES

AGO states that Article IX Section 10 of the New Mexico Constitution prohibits counties from

borrowing money except for erecting, remodeling and making additions to necessary public

buildings; constructing or repairing public roads and bridges and purchasing capital equipment

for such projects; constructing or acquiring a system for supplying water, including the

acquisition of water and water rights, necessary real estate or rights-of-way and easements;

constructing or acquiring a sewer system, including the necessary real estate or rights-of-way and

easements; constructing an airport or sanitary landfill, including the necessary real estate;

acquiring necessary real estate for open space, open space trails and related areas and facilities;

or the purchase of books and other library resources for libraries in the county. This resolution

would delete those specific provisions and would allow the legislature to designate purposes for

which counties may incur debt in state law.

DFA reports that the rationale behind the restrictions outlined in Article 9, Section 10 of the

Constitution is directed towards General Obligation (property tax) debt. The uses of general

obligation bond proceeds have previously been limited to enduring, long term purchase and

building.

ADMINISTRATIVE IMPLICATIONS

DFA lists the following implications:

HJR 12 contains potential administrative implications to DFA. Due to the language

restricting the type of allowable expenditures, many counties that possess the ability to incur debt

will create an increase in the number of requests for bond certification.

The general obligation bond certification process consists of the comparison of net bond

capacity to all current outstanding debt generating the entity’s allowable bond capacity. Net

capacity is limited to 4% of the total property valuation of the entity. Currently this process is

managed by the Financial Management Bureau in the Local Government Division.

BS/mt