Fiscal impact reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for standing finance

committees of the NM Legislature. The LFC does not assume responsibility for the accuracy of these reports

if they are used for other purposes.

Current FIRs (in HTML & Adobe PDF formats) are a vailable on the NM Legislative Website (legis.state.nm.us).

Adobe PDF versions include all attachments, whereas HTML versions may not. Previously issued FIRs and

attachments may be obtained from the LFC in Suite 101 of the State Capitol Building North.

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

SPONSOR Silva

ORIGINAL DATE

LAST UPDATED

1/24/08

2/6/08 HB 245/aHBIC/aHTRC

SHORT TITLE NMFA Economic Development Fund Projects

SB

ANALYST Kehoe, L.

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY08

FY09

(See Fiscal Implications)

NFI

N/A

N/A

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

New Mexico Finance Authority (NMFA)

SUMMARY

Synopsis of HTRC Amendment

The House Taxation and Revenue Committee amendment removes the legislative authority for

NMFA to provide financial assistance from the economic development fund for a solar panel

manufacturing facility in Bernalillo or Sandoval County.

Synopsis of HBIC Amendments

The House Business and Industry Committee amendments authorizes NMFA to provide

financial assistance from the economic development revolving fund to private entities for 11

projects in Bernalillo, Cibola, Taos, Roosevelt, Curry, Torrance, Sandoval, Dona Ana, Grant,

San Juan and Hidalgo counties.

Synopsis of Original Bill

House Bill 245, introduced for the New Mexico Finance Authority Oversight Committee,

authorizes the New Mexico Finance Authority (NMFA) to provide financing assistance for 38

private projects in 15 counties from the economic development revolving fund.

The bill contains an emergency clause.

House Bill 245/aHBIC/aHTRC – Page

2

FISCAL IMPLICATIONS

The economic development revolving fund was capitalized with a $10 million appropriation in

2005 and a $2 million appropriation in 2007. The executive capital budget recommends a $3

million appropriation for the loan participation program in 2008. To date, NMFA has obligated

$3.8 million for business attraction, retention and expansion projects located in Alamogordo, Las

Vegas and Raton. The NMFA Board has approved $4.1 million in loan participations,

leveraging an additional $11 million from private banking partners.

House Bill 245 requests legislative authorization for NMFA to provide financial assistance for

projects totaling approximately $254 million in the form of loan participations with private

lenders not to exceed five million dollars ($5,000,000) per project and subject to certain terms

and conditions as set forth by NMFA. According to NMFA the two components to the

investment return to legislative appropriations to the economic development revolving fund is as

follows:

.

The direct returns to the fund measured by the repayments of principal and interest on

loans from the fund; and

.

The return to the state as a whole in the form of additional tax and fee revenue generated

as a result of the new business investment financed with loans from the fund.

The NMFA will leverage the capital by partnering with private banks and institutions so that

loans from the fund finance no more than 49 percent of a total project. The program is designed

to match the risk-need with appropriate financing arrangements. In a rural area, for example,

local lenders may be constrained by legal lending limits and out-of-area lenders may be

uncomfortable with the location. Regardless of the reason, the program will bridge the gap and

give businesses in all areas of the state access to affordable capital. Some projects may only

need introductions to lenders while others may need direct guarantees.

The NMFA will estimate the overall economic impact of each project by analyzing the long-term

economic diversification, the increase in revenue to the state, job creation, and geographical

location to determine priority of funded projects.

SIGNIFICANT ISSUES

Laws 2003, Chapter 349, enacted the Statewide Economic Development Finance Act authorizing

creation of a Statewide Economic Development Finance Program (Smart Money), creation of the

economic development revolving fund, and authorizing NMFA to issue certain Economic

Development Bonds, and to make loan participation and loan guarantees on behalf of entities

engaged in qualifying economic development projects. The loan participation program shares

risk of the project with the bank. The projects financed must stimulate economic development

and create jobs.

According to statute, projects must be authorized by the Legislature.

ADMINISTRATIVE IMPLICATIONS

The NMFA and Economic Development Department partner in developing and administering

the Smart Money program and work together to identify all viable business expansion and

relocation projects currently in need of financing assistance.

LMK/bb