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

SPONSOR Snyder

ORIGINAL DATE

LAST UPDATED

1/22/08

HB

Highway Project Gross Receipts to Road Fund

SB 235

ANALYST Schardin

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY08

FY09

FY10

3,392.7

20,248.7

19,128.6 Recurring State Road Fund

(3,392.7)

(20,248.7)

(19,128.6) Recurring General Fund

(Parenthesis ( ) Indicate Revenue Decreases)

Duplicates HB197

SOURCES OF INFORMATION

LFC Files

Responses Received From

Taxation and Revenue Department (TRD)

No Response Received From

Department of Transportation (DOT)

SUMMARY

Synopsis of Bill

Senate Bill 235 amends section 7-1-6.10 NMSA 1978 to create a new distribution from the

general fund to the state road fund. Each month, the distribution will equal 1/12 of the amount of

state gross receipts tax paid in the prior fiscal year by the Department of Transportation on

contracts for maintenance, design or construction of state highways. The bill provides that DOT

will certify the amount of gross receipts tax paid on such projects in the prior fiscal year by July

10 of each year.

Further, the bill provides that revenues distributed to the road fund pursuant to this new

construction gross receipts tax provision must be used only for public highway maintenance,

construction and improvement.

The effective date of the provisions is July 1, 2008 (see Technical Issues).

Senate Bill 235 – Page

2

FISCAL IMPLICATIONS

TRD estimates that DOT contracts for maintenance, design or construction of state highways

will total $407.1 million in FY08, $394.2 million in FY09, and $324.3 million in FY10. Because

revenue accrual is on a 60 day basis, the bill will cause a fiscal impact in the last two months of

FY08. The road fund distribution from this gross receipts tax provision is expected to be $3.4

million in FY08, $20.2 million in FY09, and $19.1 million in FY10.

This bill provides for continuing appropriations. The LFC has concerns with including

continuing appropriation language in the statutory provisions, as earmarking reduces the ability

of the legislature to establish spending priorities.

Because most state highway projects occur outside municipalities, the state will usually collect

five percent gross receipts tax on the affected contracts and distribute the same amount it

collected to the road fund. However, when state highway projects occur within municipalities,

the state will collect only 3.775 percent and still distribute 5 percent to the road fund because

municipalities receive 1.225 percent of the state rate. This effect on general fund revenue will be

small except when the state undertakes major highway projects within a municipality, such as the

Coors interchange or the “Big I" at the intersections of Interstates 40 and 25 in Albuquerque.

SIGNIFICANT ISSUES

This bill is recommended by the HM35 Infrastructure Task Force which met in the interim to

investigate transportation infrastructure priorities and revenue requirements. More information

about the task force recommendations can be found at the DOT website:

http://www.nmshtd.state.nm.us/upload/images/Final%20Report%20NM%20Transportation%20

Futures%20Task%20Force%20Report%20Nov%2015%202007.pdf

.

According to the Department of Transportation, slow-growing revenues and high project cost

inflation have challenged the department’s ability to serve the state’s growing transportation

needs. According to the Final Report of the House Memorial 35 Study, after adjusting for

inflation and population growth, New Mexico dedicates 23 percent less to transportation funding

than it did 20 years ago. The report also states that about 15 percent of state highways and 16

percent of state bridges are currently in poor condition.

PERFORMANCE IMPLICATIONS

Transportation infrastructure enables a state’s economy to grow and allows safe transportation of

people and goods. DOT reports that the state’s economy will suffer if transportation

infrastructure continues to deteriorate.

ADMINISTRATIVE IMPLICATIONS

Each fiscal year prior to July 10, DOT will be required to certify the amount of gross receipts tax

revenue paid in the prior fiscal year on certain contracts. The bill will impose no significant

administrative impact on TRD.

Senate Bill 235 – Page

3

DUPLICATION

Senate Bill 235 duplicates House Bill 197.

TECHNICAL ISSUES

The effective date provision of the bill would require amendment to avoid a fiscal impact in

FY08.

The bill could also be amended so that only 3.775 percent of the 5 percent gross receipts tax

would be transferred to the state road fund for contracts in municipalities. This would insulate

the general fund from losing more revenue than is actually paid on construction contracts.

SS/bb