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

SPONSOR Leavell

ORIGINAL DATE

LAST UPDATED

1/23/08

HB

SHORT TITLE NMFA Bonds for Lea County Cancer Center

SB 161

ANALYST Francis

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY08

FY09

FY10

(126.0)

(125.0) Recurring Cigarette Tax

Fund

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

New Mexico Finance Authority

SUMMARY

Synopsis of Bill

Senate Bill 161 amends an appropriation for NMFA revenue bonds for regional county cancer

treatment centers. The amendment allows NMFA to issue and sell revenue bonds not to exceed

$1,500,000 for a regional cancer center in Lea County. The current appropriation is for the Gila

regional medical center in Grant County. NMFA can issue the bonds upon a certification of

need from the Nor-Lea special hospital district. The proceeds of any issued bonds are

appropriated to the Department of Finance and Administration Local Government Division for

the purpose of building the center. The maximum duration of the bonds will be 20 years.

FISCAL IMPLICATIONS

According to NMFA,

Nor-Lea General Hospital will issue bonds, which the New Mexico Finance Authority

will purchase through its Public Project Revolving Loan Fund (PPRF). Debt service to

cover principal and interest payments throughout the life of the bond, which is not to

exceed twenty years, will be paid monthly from Cigarette Tax revenues as distributed by

the Taxation and Revenue Department to the NMFA. The Cigarette Tax Revenue fund

will see a decrease of approximately $125,000 per year to cover the debt service

payments of the $1.5 Nor-Lea Cancer Center Bonds.

Senate Bill 161 – Page

2

SIGNIFICANT ISSUES

NMFA:

In order to project the stability of principal and interest repayment, it is estimated that the

revenue generated by the cigarette tax revenue fund will decline approximately 3 percent

per year over the life of bonds.

Under the same authorization, the Gila Regional Cancer Center was funded in August,

2007 utilizing the same 1% distribution of Cigarette Tax revenue in the amount of $3

million. Due to the fact that the Gila Regional Cancer Center debt service schedule was

structured under the assumption that there is an annual 3% decline in revenue generated

from the Cigarette Tax Fund, the $3 million dollar Gila Regional bond is front-loaded in

its structure, thus having the maximum debt service payment of $304,964 in 2009 and

declining in the subsequent years for the life of the bonds at the anticipated 3% decline.

In fiscal year 2007, the 1% distribution of Cigarette Tax revenue generated a total of

$637,953. With Cigarette Tax Bonds requiring a debt service coverage and additional

bonds test (ABT) of 150%, the debt structure of the Nor-Lea Bonds may either have to

back-loaded or level throughout the life of the bonds so that the annual debt service

payments of Gila Regional and Nor-Lea together do not flag any debt service coverage or

additional bonds test requirements.

NF/bb