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

SPONSOR Campos

ORIGINAL DATE

LAST UPDATED

1/31/07

HB

SHORT TITLE Capital Projects Act

SB 639

ANALYST Kehoe

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

NFI

NFI

N/A

(See Fiscal Impact

Narrative)

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

SUMMARY

Synopsis of Bill

Senate Bill 639 enacts the Capital Projects Act; establishes a capital projects council; and

provides procedures for evaluating and prioritizing proposed capital projects by December 1,

2008, to recommend funding priorities to the 2009 Legislature and each year thereafter.

FISCAL IMPLICATIONS

Senate Bill 639 does not contain an appropriation. However, the bill allows the council, subject

to appropriation, to appoint and employ the necessary professional, technical and clerical

assistance to support the Council in its duties and further requires the Council to prepare an

annual operating budget for submission to the Legislature. In addition, a provision of the bill

allows the public members of the proposed Council to receive per diem and mileage pursuant to

the Per Diem and Mileage Act. The bill allows the Council to apply for and receive grants, gifts,

donations, and bequests.

SIGNIFICANT ISSUES

Senate Bill 639 creates the Capital Projects Act for the purpose of creating a council of experts to

evaluate and prioritize proposed statewide and local capital outlay projects and to monitor and

oversee projects authorized by the Legislature to ensure appropriations are expended in the most

Senate Bill 639 – Page

2

cost-effective manner.

The Capital Projects Council would consist of twelve members, six appointed by the governor

who may be cabinet secretaries or public members; one member representative of Indian nations,

tribes or pueblos. Public members appointed by the governor are required to have expertise in

capital financing, planning or construction. Other members of the council would consist of the

state engineer, executive directors of the Commission of Higher Education, New Mexico

Municipal League, New Mexico Association of Counties, and the New Mexico Finance

Authority, or their designees. The Council may also appoint such committees and

subcommittees as necessary to carry out its duties.

The purpose of the Council is to coordinate all planning, oversight, monitoring and reporting

functions of state government regarding capital projects authorized by law. Capital projects and

capital improvements funded pursuant to the Public School Capital Outlay Act and the Public

School Capital Improvements Act are exempted from the council’s authority and those capital

projects authorized by legislation enacted after July 1, 2008 that specifically exclude capital

projects from the provisions of the Act. The Council would begin to organize, perform its duties

and accept proposals for capital projects and prioritize the proposals after July 1, 2008--the

effective date of the Act; and by December 1, 2008 and each year thereafter, make

recommendations to the Legislature for funding the prioritized projects.

After July 1, 2008, any agency, political subdivision, instrumentality or institution of the state

may submit a proposal for a capital project to the Council. Each proposal would be required to

contain the following: 1) a detailed description; 2) an explanation of need; 3) a description of the

prime beneficiaries; 4) the estimated total cost and an explanation of how the cost was derived;

5) the amount and source of any matching funds; 6) an explanation of how the project will be

implemented and maintained, and the amount and source of estimated maintenance costs; and 7)

any other information required by the rule of the Council. Upon receipt of the proposal, the

Council will conduct site visits and public hearings, as necessary, and then list all proposals in

order of priority. The prioritized projects, methodology, and the Council’s recommendations

will be submitted to the 2009 Legislature for proposed legislation and consideration.

The bill requires all agencies, institutions, instrumentalities, and political subdivision of the state

to assist the council with its duties. In addition, all entities receiving government-funded capital

projects would be required to assist the council in carrying out the provisions of the Capital

Projects Act. Specific duties of the Council include improving the process used to plan and

prioritize capital projects and the use of available capital funding; establish criteria for

evaluating, monitoring and overseeing capital project requests and developing reporting

requirements to ensure cost-effective implementation consistent with funding authorizations.

OTHER SUBSTANTIVE ISSUES

The State of New Mexico has allocated over $4 billion in the last ten years for special, state and

local capital improvements statewide. Traditionally, funding for capital outlay is derived from

various sources: severance tax bonds, general obligation bonds, general fund, state road fund and

other state funds (Miner’s Trust Fund, Irrigation Water Construction Fund, Penalty & Interest

Fund, et. al). Total capital appropriations have varied from less than $50 million in 1991 to in

excess of $700 million in 2006. Given the disparity between capacity and needs from year to

year, projects should be carefully prioritized and selected based on emergency situations, public

Senate Bill 639 – Page

3

health and safety issues, federal mandates, preservation of the state’s assets, continuation

projects requiring additional funding for completion, and projects with other funding sources to

maximize state dollars.

The proposed Council would consolidate capital planning into a comprehensive statewide

function. With so many critical capital needs and limited resources, the proposed Council could

provide valuable insight into priorities, especially on a local level. With a standardized request,

review and reporting process, there could be better utilization of scarce capital funds and more

accountability for appropriate and timely expenditures. It is a responsible approach to capital

planning, which would be enhanced by encouraging coordination on a local and regional level to

surface community priorities and ensure all capital needs are adequately considered.

The Property Control Division of the General Services Department (GSD) is the major recipient

of capital project appropriations which support new construction and renovation, and repair and

equipment replacement at the state’s almost 850 buildings throughout New Mexico. Projects for

state-owned public facilities compete with other local projects for capital dollars, but

coordination at a local level to surface community priorities is not part of the process. In order to

protect the public’s real estate assets, a more comprehensive approach to recognizing problems

and evaluating priorities is needed.

GSD and DFA currently and jointly administer the four-year plan which requires agencies to

submit by July 1

st

each year their projected capital program for the next four year period, and by

mid-September the specifics of requests for the upcoming legislative session. The review and

recommendation process each autumn includes DFA/GSD hearings with agencies and results in

the Governor’s capital budget. It is unclear whether this process would continue or be replaced

by the Capital Projects Council.

The State Board of Finance (BOF) maintains a report by agency reflecting sold, expended and

balances for each project authorized for funding from general obligation and severance tax

bonds. A separate report provides the amount, in aggregate, of unexpended bond proceeds for

each series of bonds. A direct correlation between the DFA and BOF reports is impractical due

to a number of factors. Bond sales are issued in multiple series and may contain partial amounts

sold in separate issues. The DFA monitoring system relies on agency reported data that is not

audited. Also, bond expenditures are made on a reimbursement basis of actual expenditures, but

expenditures reported in the monitoring system may include payments from other funds that

have not been submitted for reimbursement.

The Local Government Division (LGD) serves as a clearinghouse for all state and federal grant

or loan programs for local community infrastructure development. The LGD administers a Local

Infrastructure Capital Improvements Plan (ICIP) to assist local governments in submitting data to

support their requests for appropriations. The plan is not statutorily created and requires

“volunteer" participation by municipalities, counties, and special districts (Native Americans,

water associations, fire districts and soil and water districts). Only a small percent of all planned

priorities listed on the ICIP are funded by direct legislative appropriations.

Each year, the LGD develops a list of the top five planned and supported project priorities of all

municipalities, counties, tribal entities, and several water associations and special districts and

provides a copy of the report to legislators at the beginning of each legislative session.

LK/mt