HOUSE TAXATION AND REVENUE COMMITTEE SUBSTITUTE FOR

HOUSE BILL 634

48th legislature - STATE OF NEW MEXICO - second session, 2008

AN ACT

RELATING TO ECONOMIC DEVELOPMENT; AMENDING AND ENACTING SECTIONS OF THE SEVERANCE TAX BONDING ACT TO PROVIDE FOR INVESTMENT OF STATE MONEY IN INDEPENDENT FILM PRODUCTIONS.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

     Section 1. Section 7-27-5 NMSA 1978 (being Laws 1983, Chapter 306, Section 7, as amended) is amended to read:

     "7-27-5. INVESTMENT OF SEVERANCE TAX PERMANENT FUND.--The severance tax permanent fund shall be invested in separate differential rate and market rate investment classes. "Differential rate investments" are permitted in Sections

7-27-5.3 through 7-27-5.5, 7-27-5.13 through 7-27-5.17, 7-27-5.22 and 7-27-5.24 through [7-27-5.26] 7-27-5.27 NMSA 1978 and are intended to stimulate the economy of New Mexico and to provide income to the severance tax permanent fund. "Market rate investments" are investments that are not differential rate investments and are intended to provide income to the severance tax permanent fund. All market rate investments and differential rate investments shall be invested in accordance with the Uniform Prudent Investor Act and shall be accounted for in accordance with generally accepted accounting principles."

     Section 2. A new section of the Severance Tax Bonding Act, Section 7-27-5.27 NMSA 1978, is enacted to read:

     "7-27-5.27. [NEW MATERIAL] INVESTMENT IN INDEPENDENT FILMS PRODUCED IN NEW MEXICO.--

          A. No more than one-half of one percent of the market value of the severance tax permanent fund may be invested in New Mexico resident independent or underrepresented minority filmmakers pursuant to the provisions of this section.

          B. If an investment is made under this section, not more than five million dollars ($5,000,000) of the amount authorized for investment pursuant to Subsection A of this section shall be invested in any one New Mexico resident independent or underrepresented minority filmmaker.

          C. The state investment officer shall make investments pursuant to this section only upon approval of the council pursuant to the advice of a professional film advisor knowledgeable about the New Mexico resident independent and underrepresented minority filmmaking community, film financing and distribution.  The state investment officer may make debt investments pursuant to this section only in New Mexico resident independent or underrepresented minority film projects pursuant to rules developed and adopted by the private equity investment advisory committee and the council.

          D. In return for a negotiated percentage participation in any profits generated by the film and any and all derivative properties, the state investment officer may make a loan at a below-market rate of interest, with respect to an eligible New Mexico resident independent or underrepresented minority film project and pursuant to rules developed and adopted by the private equity investment advisory committee and the council that:

                (1) are based on a point system to prioritize productions developed by and subject to yearly review by the governor's council on film and media industries;

                (2) allow producers the option to select a pre-approved agreement for the state's post break-even revenue participation in the project of a contingent deferral of one hundred basis points per year of the outstanding loan amount until repayment to be paid prior to any net profits to third parties and five percent of post break-even revenue or to negotiate an agreement with the state;

                (3) require a full guaranteed repayment of one hundred percent of the principal, pursuant to a letter of credit from a banking institution rated A- or better, by entities with a BBB credit rating or better or by cash-equivalent instruments held in an interest-bearing secure account;

                (4) include default provisions that are limited to fraud and material misrepresentation, nondelivery of film, nonpayment of loan when due and nonpayment of profit participation when collected, earned and due;

                (5) require completion bonding; and

                (6) require that at least:

                     (a) eighty percent of the principal photography be made in New Mexico;

                     (b) sixty percent of the payroll be New Mexico payroll; and

                     (c) two of the three principal above-the-line participants be New Mexico residents or underrepresented minorities.

          E. As used in this section, "minority" means African Americans, Hispanic Americans, Asian Americans or Native Americans."

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