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

SPONSOR Garcia

ORIGINAL DATE

LAST UPDATED

01/25/07

02/13/07 HB

SHORT TITLE NMFA Public Project Revolving Fund

SB 80/aSPAC/aSFC

ANALYST Hanika Ortiz

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

NFI (See narrative)

Public Project

Revolving Loan Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

New Mexico Finance Authority (NMFA)

Environment Department (ED)

Public Education Department (PED)

SUMMARY

Synopsis of SFC Amendment

The Senate Finance Committee Amendment strikes the SPAC amendment and expands the

purpose of projects for the Town of Carrizozo and Lincoln County to include road projects;

expands the purpose of projects in Torrance County to include water, wastewater, land, and road

projects; requests authorization for NMFA to provide refinancing assistance to Torrance County;

and, qualifies an additional 115 entities to pursue loans, including refinancing assistance, for

public projects from the PPRF.

Synopsis of SPAC Amendment

The Senate Public Affairs Committee Amendment qualifies 108 additional entities to pursue

loans from the public project revolving fund.

Synopsis of Original Bill

Senate Bill 80 authorizes the NMFA to make loans for 32 public projects from the public project

revolving fund (PPRF) to certain state and local government entities, as defined in the bill, based

Senate Bill 80/a SPAC/a SFC -Page

2

on certain terms and conditions including the desire to continue to pursue a loan by FY09.

SB 80 contains an emergency clause that the Act takes effect immediately.

FISCAL IMPLICATIONS

Senate Bill 80 does not appropriate funds; however, loans made in the interim as a result of

passage of this bill will result in reducing the current loan capacity of PPRF. The bill will

support borrowers in receiving fixed “AAA" insured interests rates with the NMFA. Borrowers

may also qualify for disadvantaged funding which provides 0% and 3% interest rates with

maximum funding of $75,000 per equipment loan and $200 thousand per infrastructure loan. To

date, PPRF has financed 451 projects statewide totaling $628 million.

A significant source of capital for infrastructure projects administered by NMFA, approximately

$18 million per year, is derived from an annual distribution of 75% of the state’s Governmental

Gross Receipts Tax (GGRT). In addition to GGRT, NMFA raises capital through the issuance of

tax-exempt pooled bonds and direct loan repayments. The following chart demonstrates the

annual distribution of GGRT for FYO6:

FY06 GGRT Di stribution

(Total $25.9 million-Unaudite d)

$3.6

$2.6

$0.3

$1.8

$17.6

$-

$5.0

$10.0

$15.0

$20.0

Demand for PPRF funding has increased significantly from fiscal year to fiscal year. The graph

below provided by NMFA depicts the growth of senior lien lending activity and shows the

demand trend for PPRF funding.

PPRF Annual Activity

by millions of dollars and numbers of projects

0

50

100

150

200

FY 96 FY 97 FY 98 FY 99 FY 00 FY 01 FY 02 FY 03 FY 04 FY05 FY 06

0

20

40

60

80

100

Millions

Number of projects

Senate Bill 80/a SPAC/a SFC -Page

3

SIGNIFICANT ISSUES

Loans from PPRF allow eligible entities to borrow for infrastructure projects at below market

costs, based on terms and conditions established by NMFA. NMFA reports SB 80 is not a

guarantee that any project will receive a PPRF loan. Loans will only be made to those borrowers

that can identify a sufficient repayment source and meet other financial criteria.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

Duplicates HB 24

OTHER SUBSTANTIVE ISSUES

Public school districts have a great need to update their facilities and may have access to below

market rates. In addition, ED reports that other proposed public projects loan requests involve the

reuse of water. Well designed reuse initiatives can provide greater water quality protections of

groundwater resources in the state.

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

Entities requesting PPRF financing from the NMFA will be required to seek alternative

financing which could increase borrowing costs.

AHO/nt