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

SPONSOR Feldman

ORIGINAL DATE

LAST UPDATED

1/31/07

HB

SHORT TITLE Residential Energy-Efficiency Loan Program

SB 404

ANALYST Leger

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

$2,500.0 Nonrecurring

General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Department of Finance and Administration (DFA)

New Mexico Mortgage Finance Authority (MFA)

SUMMARY

Synopsis of Bill

Senate Bill 404 appropriates $2.5 million from the general fund to Department of Finance and

Administration (DFA) for disbursement to the New Mexico Mortgage Finance Authority (MFA)

to create and implement a residential energy-efficiency improvement loan program for low and

moderate income households. Energy-efficiency improvements may include conversion of

existing utility systems to solar systems and other energy-efficient retrofits. No more than ten

percent of the appropriation may be used by the MFA for administrative expenses.

FISCAL IMPLICATIONS

The appropriation of $2.5 million contained in this bill is a nonrecurring expense to the general

fund. Any unexpended or unencumbered balance remaining at the end of 2010 shall revert to the

general fund.

Senate Bill 404 – Page

2

SIGNIFICANT ISSUES

Analysis by MFA indicates that energy costs comprise up to 30% low and moderate income

homeowners’ monthly budgets. It is estimated average households spend between $1,300 and

$1,500 annually on energy bills, roughly half of which is attributable to heating and cooling

costs. By year 2010, residential energy use is expected to increase by 9%.

MFA provided the following statistics:

.

In New Mexico’s climate, spectrally selective low-e windows can cut cooling costs by as

much as 38%.

.

Appropriate insulation for your climate (based on R-ratings) can increase your comfort

and reduce your heating and cooling costs up to 30%.

.

An Energy Star furnace or air conditioning system, when properly sized and installed,

can save consumers 30 - 40% on heating and cooling bills.

In addition to helping state homeowners New Mexico’s environment will too realize significant

benefits:

.

The U.S. Environmental Protection Agency estimates an average house releases 22,000

pounds of carbon dioxide (CO2) annually compared to a typical car’s 11,500 pounds of

CO2.

.

Energy production and use account for nearly 80 percent of air pollution, more than 88

percent of greenhouse gas emissions, and more environmental damage than any other

human activity.

.

Every kilowatt-hour (kWh) of electricity a consumer avoids using saves more than 1-1/2

pounds of CO2 from being pumped into the atmosphere. If Americans bought only

Energy Star products over the next 15 years, we would shrink our energy bills by more

than $100 billion and eliminate as much greenhouse gas pollution as is produced by 17

million cars for each of those 15 years.

PERFORMANCE IMPLICATIONS

MFA has indicated the appropriation would be used to work with valued lender and builder

partners to administer the funding through three different loan pools:

.

One pool will be available to new low- and moderate income home buyers

-

Home Energy Rating System (HERS) certification rebates for newly constructed and

existing homes under contract

-

Interest rate buy-downs on energy efficient mortgages

-

Low-interest rate loans for new energy efficient systems and/or energy efficiency

retrofits (in conjunction with Fannie Mae’s Homestyle loan product)

.

A second pool will be available to current low- and moderate income homeowners

-

Low-interest rate loans for energy efficiency retrofits

.

A third pool will be available to builders

-

Low-interest rate loans for new energy efficient systems for affordable single family

for-sale housing development

-

Low-interest rate loans for new energy efficient systems for affordable rental housing

development

Senate Bill 404 – Page

3

As loans are repaid, funds will be recycled back into the loan program to provide future loans to

builders, homebuyers, and homeowners.

MFA recognizes the obstacles in enacting a new program. The agency indicates the program

will be unable to launch until it received appropriated funds from DFA. Marketing and outreach

efforts will be needed to target audiences. Once launched however, MFA anticipates the various

types of loans will complement existing products MFA offers; what is more, MFA has an

extensive network of lenders, builders, and housing rehabilitation providers that will be anxious

to utilize this program. It also complements federal and state tax credit incentives for solar

energy system installation and conversion, etc.

ADMINISTRATIVE IMPLICATIONS

Senate Bill 404 states no more than ten percent of the appropriation may be used by MFA for

administrative expenses.

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

Low and moderate income families in New Mexico will continue to spend a significant amount

of their income on home energy costs, and the state will forgo an opportunity to realize

environmental benefits.

JL/csd