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).

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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 SFL

ORIGINAL DATE

LAST UPDATED

2/13/08

2/19/08 HB

SHORT TITLE Capital Outlay Project Reauthorizations

SB

CS/352/aSFL#1/a

HTRC/aHAFC

ANALYST Kehoe, L.

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY08

FY09

NFI

NFI

N/A

(See Fiscal Impact

Implications)

(Parenthesis ( ) Indicate Expenditure Decreases)

Relates to House Bill 44.

SOURCES OF INFORMATION

LFC Files

Responses Received From

Public Education Department (PED)

Department of Transportation (DOT)

General Services Department (GSD)

Department of Health (deferred request for information to the General Services Department)

Corrections Department (no information received)

SUMMARY

Synopsis of HAFC Amendments

The House Appropriations and Finance Committee amendments struck House Taxation and

Revenue Committee amendments 3, 4, 5, and 6; and struck Sections 70 and 78 in their entirety.

The effect of the amendments restores the unexpended funds totaling $1,150,000 originally

appropriated in 2007 “for renovations to the facilities at Red Rock state park in Gallup in

McKinley County."

Synopsis of HTRC Amendments

The House Taxation and Revenue Committee amendments provide as follows:

CS/Senate Bill 352/aSFl#1/aHTRC – Page

2

Item 1 and 2, reauthorizes unexpended funds originally appropriated ($100,000) in 2007 for “a

facility for a dance academy and ballet folklorico conservatory in Albuquerque" to instead be

used “to plan, design, construct, and equip a dance facility for use by a children's dance program

providing in-school, after-school and weekend activities in Bernalillo county."

Item 3 and 4, reauthorizes unexpended funds originally appropriated ($750,000) in 2007 “for

renovations to the facilities at Red Rock state park in Gallup in McKinley County" to instead be

appropriated to the capital program fund to be used “to plan, design, construct, equip and furnish

a safety inspection station in Santa Teresa in Dona Ana county." The original reauthorization

was “to construct, equip and furnish improvements to the Pit facility in Albuquerque.

Item 5 and 6, reauthorizes unexpended funds originally appropriated ($400,000) in 2007 “for

renovations to the facilities at Red Rock state park in Gallup in McKinley County" to instead be

appropriated to the capital program fund to be used “to plan, design, construct, equip and furnish

a safety inspection station in Santa Teresa in Dona Ana county." The original reauthorization

was “to plan, design, construct, equip and furnish the Unser Museum in Albuquerque."

Item 7 and 8, reauthorizes funds originally appropriated ($2,500,000) in 2007 “for computers and

related technology for certain nonpublic schools statewide" to instead be appropriated to the

following projects:

To the Local Government Division, “$200,000 to purchase land for, make improvements to,

plan, design and construct tennis and basketball courts and a walking track for the Nambe head

start program in Nambe in Santa Fe county"; and

To the capital program fund, “$388,814 to plan, design, construct, equip and furnish the Unser

museum in Albuquerque in Bernalillo county";

“$146,951 to plan, design, construct, equip and furnish a safety inspection station in Santa Teresa

in Dona Ana county"; and

“$214,235 to plan, design, construct and equip rapid payback energy efficiency projects in state

buildings, including lighting retrofits and heating, ventilation and air conditioning control

upgrades, statewide";

To the General Services Department, “$800,000" to purchase an airplane in Santa Fe in Santa Fe

county; and

To the Board of Regents of the University of New Mexico, “$750,000" to construct, equip and

furnish improvements to the Pit facility in Albuquerque in Bernalillo county"."

Item 9 and 10, provide for technical amendments to the bill and restores funding ($995,000) “for

construction and equipping the Explora Science Center and Children’s museum in

Albuquerque." The original reauthorization was appropriated to the General Services

Department “to purchase an airplane."

Item 11, reauthorizes unexpended funds originally appropriated ($354,719) in 2003 and 2005

“for improvements to the sewer lift station at the Southern New Mexico correctional facility and

for improvements to wastewater systems at correctional facilities statewide" to instead be

CS/Senate Bill 352/aSFl#1/aHTRC – Page

3

appropriated “to plan, design, construct, equip and furnish a safety inspection station in Santa

Teresa in Dona Ana county."

Item 12 and 13, reauthorizes unexpended funds originally appropriated ($330,007) in 2003 “to

renovate the laundry building at the Southern New Mexico Rehabilitation Center in Roswell" to

instead be appropriated “to plan, design, construct, equip and furnish a safety inspection station

in Santa Teresa in Dona Ana county."

Items 14 – 17, provides for technical amendments and expands the purpose of an appropriation

of unexpended funds ($301,701) in 2003 to be used “for repairs, improvements, equipment and

furniture at state facilities and for energy efficiency upgrades."

Synopsis of SFl#1 Amendment

The Senate Floor Amendment inserts a new section. The new section corrects an “erroneous

estimate" for a project authorized in Laws 2007. The amendment changes the estimate from

$5,571,500 to $3,500,000.

Synopsis of Original Bill

Senate Floor Substitute for Senate Bill 352 reauthorizes projects funded in previous years. The

bill contains 442 project reauthorizations—45 sponsored by the Legislature on behalf of the

executive, 207 sponsored by House members and 189 sponsored by Senate members.

FISCAL IMPLICATIONS

The reauthorizations contained in this bill are a non-recurring expense to both the severance tax

bond fund and general fund. Any unexpended or unencumbered balance remaining at the end of

the fiscal year shall revert to either severance tax bond capacity or the general fund.

The Department of Finance and Administration (DFA), Local Government Division (LGD), is

responsible for the administration, distribution and monitoring of special and capital outlay funds

appropriated by the legislature. The reports generated by LGD are made available to the

Legislature on a quarterly basis, therefore, the obligation to contractors, exact uncommitted

balance for projects, or the reversion dates being extended in this bill is not always known at the

time of developing the reauthorization bill. However, if the funding for projects contained in this

bill have been obligated for work in progress or have reverted, the reauthorizations contained

within this bill become null and void.

According to GSD, Section 1, Subsection B defines “unexpended balance" as “the remainder of

an appropriation after reserving for unpaid costs and expenses covered by binding written

obligations to third parties." Therefore, funds from reauthorized projects can be spent under

existing contracts until the end of the fiscal year on June 30, 2008. New contracts will not be

initiated, but the exact amount of funds that will be available for new purposes will not be known

until after July 1

st

.

Given the limited time and resources to research the status of each project and unexpended

balance for the projects being reauthorized, the total fiscal impact of this bill is unknown. Of

particular concern, based on information derived by LFC staff during the interim, are certain

CS/Senate Bill 352/aSFl#1/aHTRC – Page

4

sections of the bill reauthorizing funds, such as:

.

Sec. 210 and 211 – reauthorizes balances of $356.3 thousand originally appropriated to

repair buildings at Turquoise Lodge and $600 thousand for security improvements

statewide and at the penitentiary. The funds are reauthorized to plan, design and

construct a safety inspection station at Santa Teresa in Dona Ana County. According to

GSD Infrastructure Capital Improvement Plan, the repairs to Turquoise Lodge buildings

are needed to attract potential tenants for the vacant buildings. An additional $1 million

was requested by GSD in 2008 for this purpose.

.

Section 400 - two appropriations authorized in 2003 totaling nearly $1 million were

combined to address connecting the wastewater facility at the New Mexico Southern

Correctional center into the City of Las Cruces sewer system. Following three years of

developing surveys, easements, sewage screening, etc., the project is now under contract

and is scheduled to bid early this summer. Of the two appropriations, Section 400

reauthorizes nearly $345 thousand of the funds. If the remaining $546 thousand is not

sufficient to continue with the work, the bid will be delayed, costs may escalate, and the

Corrections Department will have to request additional funding in 2009. The funds were

reauthorized “to plan, design, construct and equip rapid payback energy efficiency

projects in state buildings, including lighting, retrofits and heating, ventilation and air

conditional upgrades statewide."

.

Section 401 – reauthorizes $351.4 thousand originally authorized for renovations to the

laundry building at Southern New Mexico Rehabilitation Center to “to plan, design,

construct and equip rapid payback energy efficiency projects in state buildings, including

lighting, retrofits and heating, ventilation and air conditional upgrades statewide."

.

Section 402 – reauthorizes over $300 thousand originally authorized for repairs,

improvements, equipment and furniture at state facilities. Approximately $250 thousand

is already encumbered to pay vendors under contract for various projects. The state’s

obligation to vendors may make the reauthorization null and void. The funds were

reauthorized “to plan, design, construct and equip rapid payback energy efficiency

projects in state buildings, including lighting, retrofits and heating, ventilation and air

conditional upgrades statewide."

.

Section 406 – reauthorizes funds appropriated in 2003 to upgrade the fire system at Fort

Bayard Medical Center. It may not be prudent to expend funds on a facility that will be

abandoned, but because completion of the new facility has been extended, the State Fire

Marshal has notified the Property Control Division that the fire system must be upgraded

as long as patients and staff are housed in the facility. The fire system upgrade is under

contract and should be completed by June 30, 2008. The funds were reauthorized “to

plan, design, construct and equip rapid payback energy efficiency projects in state

buildings, including lighting, retrofits and heating, ventilation and air conditional

upgrades statewide."

.

Section 382 – reauthorizes $995 thousand appropriated in 2006 to the Explora science

and Children’s Museum for constructing and equipping the center. The reauthorization is

for the purchase of an airplane for the General Services Department. According to the

City of Albuquerque, a contract for $200 thousand has been signed by the architect for

CS/Senate Bill 352/aSFl#1/aHTRC – Page

5

programming and schematics of the project. The project cost of $2 million has been

secured, but the loss of the $995 thousand would be a major set-back for the project.

Again, delays could cause costs to escalate, and the museum will have to again seek

legislative funds in 2009. It should be noted only $150 thousand of the $995 thousand

was from the executive’s allocation.

.

Section 383 – reauthorizes $2 million originally appropriated for constructing a drop yard

in Santa Teresa to the General Services Department to purchase an airplane. According

to the Border Authority a request was made for an extension of time and a change of

purpose to use the funds for construction of the Santa Teresa safety inspection station.

SIGNIFICANT ISSUES

The LGD supervises capital projects for all state agencies, public schools and higher education

on an electronic capital projects monitoring system. The system provides reports dependent

upon data provided by the state and local government entities. This data is not audited, and is

only reviewed by LGD for “reasonableness". Reports generated by the system provide a control

number, project description, funding source, appropriation amount, expenditures, encumbrances,

uncommitted balances and the percent of the project completed.

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 LGD and BOF reports is not practical

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

amounts sold in separate issues. The Budget Division 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 joint Legislative County and Legislative Finance Committee Capital Outlay Subcommittee

approved taking four recommended changes to the reauthorization process to the full Legislature

for their consideration. They proposed changes are as follows:

1.

No reauthorizations for completed projects with balances under $20,000. (Money that

reverts will revert into the capital projects fund.)

2.

Reauthorizations can only be made once, except to fix errors.

3.

Extension of time may only be granted for two years.

4.

Language drafted into the capital bill to ensure that all balances remaining after a

project’s reversion date shall revert within a 90-day period after that June 30 reversion

date.

(Please note that exceptions to the first two policies can be made only if the receiving agency

certifies to the Legislative Council Service that the project needs to be reauthorized due to

tribal government delays.)

Although not formally adopted by the Legislature, many of the legislators followed the proposed

reauthorization process. The majority of the reauthorizations in this bill extended the period of

time, broadened the language, or changed the purpose of the original project. A few legislators

CS/Senate Bill 352/aSFl#1/aHTRC – Page

6

continued to reauthorize balances with a value of less than $20,000. Sponsors strictly complied

with the two-year extension for completion of projects and reversion of funds.

ADMINISTRATIVE IMPLICATIONS

Between 1997 and 2007, the Legislature authorized over $3.7 billion for over 17,000 capital

projects. Of the amount, over $2.1 billion remains unexpended for over 8,500 projects, including

$721.6 million for nearly 3,000 projects authorized in 2007. It took Local Government Division

and other agency staff nearly 6 months to research and to develop new budget documents for

over 400 projects reauthorized in 2007. It could take the same amount of time for state agencies

to research the 442 projects reauthorized in this bill.

The Public Education Department indicates reauthorizations are assigned new tracking numbers

following each legislative session. The department indicates the number changes sometimes

causes agencies to budget the same project twice and further confusion exists because the State

Board of Finance always tracks the projects by the original numbers.

RELATIONSHIP

House Bill 44, while not identical, reauthorizes some of the same projects referred to in Senate

Floor Substitute for Senate Bill 352.

TECHNICAL ISSUES

The following proposed amendments could allow the original purpose to be fulfilled and still

ensure the projects will comply with the changed purpose of “rapid payback energy efficiency":

On page 142, line 13, after the word “to" insert the words “repair, renovate, and make

improvements to state buildings statewide, including"

On page 143, line 1, after the word “to" insert the words “repair, renovate, and make

improvements to state buildings statewide, including"

On page 143, line 13, after the word “to" insert the words “repair, renovate, and make

improvements to state buildings statewide, including"

On page 144, line 24, after the word “to" insert the words “repair, renovate, and make

improvements to state buildings statewide, including"

OTHER SUBSTANTIVE ISSUES

The purpose of reauthorization of projects may vary from project to project. The necessity for

reauthorizations may include the following:

·

Inadequate funding levels: scope of project exceeds available funding

·

Grantees unable to meet match contingencies

·

Expenditure period is not sufficient for property acquisition such as a right of way

purchase or condemnation proceedings

·

Projects funded for nonprofit or private entities do not meet the state’s anti-donation

requirements

CS/Senate Bill 352/aSFl#1/aHTRC – Page

7

·

Project may not be a priority for the receiving governmental entity or operational funds or

staffing may not be available for the project

·

Lack of planning, communication and oversight among between sponsor of project and

administering agency and receiving entity

·

Grantees lack proper documentation to draw reimbursement for completed projects or do

not draw down reimbursements on a timely basis.

A reauthorization of a previously funded capital outlay project may change the administering

agency, change the purpose of the project, extend the period of expiration of the project, or

expand the purpose of the original project.

The Department of Transportation indicates the reauthorization in this bill to extend the period of

time for road improvements in Curry County was needed due to a lack of electricity in the area

of the road improvements.

LMK/bb