SB0259

SENATE BILL 259

56th legislature - STATE OF NEW MEXICO - second session, 2024

INTRODUCED BY

Gerald Ortiz y Pino

AN ACT

RELATING TO FINANCE; AMENDING THE STATEWIDE ECONOMIC DEVELOPMENT FINANCE ACT; PROVIDING LOANS AND GRANTS TO NONPROFIT ORGANIZATIONS TO COMPLETE CAPITAL OUTLAY PROJECTS; ADDING DEFINITIONS; CREATING THE CAPITAL OUTLAY TRUST FUND; AMENDING, REPEALING AND ENACTING SECTIONS OF THE NMSA 1978.

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

SECTION 1. Section 6-25-3 NMSA 1978 (being Laws 2003, Chapter 349, Section 3, as amended) is amended to read:

"6-25-3. DEFINITIONS.--As used in the Statewide Economic Development Finance Act:

A. "authority" means the New Mexico finance authority;

B. "department" means the economic development department;

C. "capital outlay project" means the acquisition, improvement, alteration or reconstruction of assets of a long-term character that are intended to continue to be held or used, including land, buildings, machinery, furniture and equipment;

[C.] D. "community development entity" means an entity designed to take advantage of the federal new markets tax credit program;

E. "nonprofit organization" means a nonprofit corporation operating in this state that has been granted exemption from federal income tax by the United States commissioner of internal revenue as an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended;

[D.] F. "economic development assistance provisions" means the economic development assistance provisions of Subsection D of Article 9, Section 14 of the constitution of New Mexico;

[E.] G. "project revenue bonds" means bonds, notes or other instruments authorized in Section 6-25-7 NMSA 1978 and issued by the authority pursuant to the Statewide Economic Development Finance Act on behalf of eligible entities;

[F.] H. "economic development goal" means:

(1) assistance to rural and underserved areas designed to increase business activity, including agricultural enterprises, such as new or ongoing agricultural projects that add value to New Mexico agricultural products;

(2) retention and expansion of existing business, including agricultural enterprises, such as new or ongoing agricultural projects that add value to New Mexico agricultural products;

(3) attraction of new business, including agricultural enterprises, such as new or ongoing agricultural projects that add value to New Mexico agricultural products; or

(4) creation and promotion of an environment suitable for the support of start-up and emerging business, including agricultural enterprises, such as new or ongoing agricultural projects that add value to New Mexico agricultural products within the state;

[G.] I. "economic development revolving fund bonds" means bonds, notes or other instruments payable from the fund and issued by the authority pursuant to the Statewide Economic Development Finance Act;

[H.] J. "eligible entity" means a for-profit or not-for-profit business, including an agricultural enterprise, such as new or ongoing agricultural projects that add value to New Mexico agricultural products and including a corporation, limited liability company, partnership or other entity, determined by the department to be engaged in an enterprise that serves an economic development goal and is suitable for financing assistance;

[I.] K. "federal new markets tax credit program" means the tax credit program codified as Section 45D of the Internal Revenue Code of 1986, as that section may be amended or renumbered, and regulations issued pursuant to that section;

[J.] L. "financing assistance" means project revenue bonds, loans, loan participations or loan guarantees provided by the authority to or for eligible entities pursuant to the Statewide Economic Development Finance Act;

[K.] M. "fund" means the economic development revolving fund;

[L.] N. "mortgage" means a mortgage, deed of trust or pledge of any assets as a collateral security;

[M.] O. "opt-in agreement" means an agreement entered into between the department and a qualifying county, a school district and, if applicable, a qualifying municipality that provides for county, school district and, if applicable, municipal approval of a project, subject to compliance with all local zoning, permitting and other land use rules, and for payments in lieu of taxes to the qualifying county, school district and, if applicable, qualifying municipality as provided by the Statewide Economic Development Finance Act;

[N.] P. "payment in lieu of taxes" means the total annual payment, including any state in-lieu payment, paid as compensation for the tax impact of a project, in an amount negotiated and determined in the opt-in agreement between the department and the qualifying county, the school district and, if applicable, the qualifying municipality, which payment shall be distributed to the county, municipality and school district in the same proportion as property tax revenues are normally distributed to those recipients;

[O.] Q. "standard project" means land, buildings, improvements, machinery and equipment, operating capital and other personal property for which financing assistance is provided for adequate consideration, taking into account the anticipated quantifiable benefits of the standard project, for use by an eligible entity as:

(1) industrial or manufacturing facilities;

(2) commercial facilities, including facilities for wholesale sales and services;

(3) health care facilities, including hospitals, clinics, laboratory facilities and related office facilities;

(4) educational facilities, including schools;

(5) arts, entertainment or cultural facilities, including museums, theaters, arenas or assembly halls;

(6) recreational and tourism facilities, including parks, pools, trails, open space and equestrian facilities; and

(7) agricultural enterprises, including new or ongoing agricultural projects and projects that add value to New Mexico agricultural products;

[P.] R. "project" means a standard project or a state project;

[Q.] S. "qualifying municipality or county" means a municipality or county that enters into an opt-in agreement;

[R.] T. "quantifiable benefits" means a project's advancement of an economic development goal as measured by a variety of factors, including:

(1) the benefits an eligible entity contracts to provide, such as local hiring quotas, job training commitments and installation of public facilities or infrastructure; and

(2) other benefits such as the total number of direct and indirect jobs created by the project, total amount of annual salaries to be paid as a result of the project, total gross receipts and occupancy tax collections, total property tax collections, total state corporate and personal income tax collections and other fee and revenue collections resulting from the project;

[S.] U. "school district" means a school district where a project is located that is exempt from property taxes pursuant to the Statewide Economic Development Finance Act;

[T.] V. "state in-lieu payment" means an annual payment, in an amount determined by the department, that will be distributed to a qualifying county, a school district and, if applicable, a qualifying municipality in the same proportion as property tax revenues are normally distributed to those recipients;

[U.] W. "state project" means land, buildings or infrastructure for facilities to support new or expanding eligible entities for which financing assistance is provided pursuant to the economic development assistance provisions; and

[V.] X. "tax impact of a project" means the annual reduction in property tax revenue to affected property tax revenue recipients directly resulting from the conveyance of a project to the department."

SECTION 2. Section 6-25-6 NMSA 1978 (being Laws 2016, Chapter 38, Section 1, as amended) is amended to read:

"6-25-6. NEW MEXICO FINANCE AUTHORITY--ADDITIONAL POWERS AND DUTIES.--

A. To implement a program to assist eligible entities in financing projects, the authority has the powers specified in this section.

B. State projects receiving financing assistance with money in the fund shall first be approved by law. To protect public money in the fund or other public resources, rules of the authority relating to state projects shall include provisions to ensure achievement of the economic development goals of the state project and shall describe the means of recovering public money or other public resources if an eligible entity defaults on its obligations to the authority.

C. Standard projects receiving financing assistance with money in the fund shall be approved by the authority pursuant to rules approved by the New Mexico finance authority oversight committee. Beginning July 1, 2027, standard projects shall first be approved by law.

D. The authority may:

(1) issue project revenue bonds on behalf of an eligible entity, payable from the revenues of a project and other revenues authorized as security for the bonds, to finance a project on behalf of an eligible entity;

(2) make loans from the fund for projects to eligible entities that establish one or more dedicated sources of revenue to repay the loan from the authority;

(3) enter into loan participation agreements from the fund for projects, whether in the form of an interest rate buy-down, the purchase of loans or portions of loans originated and underwritten by third-party lenders or other similar arrangements;

(4) provide loan guarantees from the fund for projects;

(5) make loans and grants from the fund for capital outlay projects;

[(5)] (6) make, execute and enforce all contracts necessary, convenient or desirable for purposes of the authority or pertaining to project revenue bonds, economic development revolving fund bonds, loans, loan participations or loan guarantees and the Statewide Economic Development Finance Act and pay the reasonable value of services rendered to the authority pursuant to the contracts;

[(6)] (7) purchase and hold loans and loan participations in the fund at prices and in a manner determined by the authority;

[(7)] (8) sell loans and loan participations acquired or held by the authority in the fund at prices and in a manner determined by the authority;

[(8)] (9) prescribe the form of application or procedure required of:

(a) an eligible entity to apply for financing assistance; and

(b) a nonprofit organization to receive loans and grants for capital outlay projects;

[(9)] (10) fix the terms and conditions of the financing assistance, including the priority of lien and type of collateral or other security, and enter into agreements with eligible entities with respect to financing assistance;

[(10)] (11) fix, revise from time to time, charge and collect fees and other charges in connection with the issuance of bonds; the making, purchase, participation in or guarantee of loans; and the review of proposed financing assistance to an eligible entity, whether or not the financing assistance is provided;

[(11)] (12) employ architects, engineers, accountants and attorneys; construction and financial experts; and such other advisors, consultants and agents as may be necessary in its judgment, and fix and pay their compensation;

[(12)] (13) to the extent allowed under its contracts with the holders of bonds of the authority, consent to modification of the rate of interest, time and payment of installments of principal or interest, security or any other term of financing assistance;

[(13)] (14) consider the ability of the eligible entity to secure financing for a project from other sources and the costs of that financing;

[(14)] (15) acquire fee simple, leasehold, mortgagor's or mortgagee's interests in real or personal property and sell, mortgage, convey, lease or assign that property for authority purposes; and

[(15)] (16) in the event of default by an eligible entity, enforce its rights by suit, mandamus and all other remedies available under law.

E. The authority shall adopt rules subject to approval of the New Mexico finance authority oversight committee to:

(1) establish procedures for applying for financing assistance;

(2) establish credit qualifications for eligible entities and establish terms and conditions for financing assistance;

(3) establish economic development goals for projects in consultation with the department;

(4) establish methods for determining quantifiable benefits;

(5) provide safeguards to protect public money and other public resources provided for a state project;

(6) establish procedures by which the authority requests approval by law for projects receiving financing assistance with money in the fund; and

(7) establish fees to pay the costs of evaluating, originating and administering financing assistance.

F. The authority shall coordinate with the department to provide staffing and other assistance to the department in carrying out the department's responsibilities and activities pursuant to the Statewide Economic Development Finance Act.

G. The authority shall report to the New Mexico finance authority oversight committee twice each year regarding the total expenditures from the economic development revolving fund for the previous fiscal year, the purposes for which expenditures were made, an analysis of the progress of the projects funded and proposals for legislative action."

SECTION 3. A new section of the Statewide Economic Development Finance Act is enacted to read:

"[NEW MATERIAL] CAPITAL OUTLAY PROJECTS--LOANS AND GRANTS--RULES--TERMS--REPAYMENT--LOAN FORGIVENESS.--

A. Beginning June 1, 2025, the authority shall administer loans and grants to nonprofit organizations to complete capital outlay projects. Applications shall be made on forms and in a manner prescribed by the authority. The authority shall receive and review applications for loans and grants for capital outlay projects. If the authority determines that a capital outlay project is eligible for a loan or a grant, the authority may enter into a contract with a nonprofit organization.

B. Loans shall not be subject to repayment if the terms of the contract, including the completion of the capital outlay project, are carried out by the nonprofit organization.

C. As necessary to implement this section, upon completion of a capital outlay project, the nonprofit organization shall hold title in fee simple of any real property purchased by the nonprofit organization in the course of fulfilling the contract; provided that a breach of the terms of the contract of a loan or a grant shall preclude the nonprofit organization from obtaining title to the property."

SECTION 4. A new section of the Statewide Economic Development Finance Act is enacted to read:

"[NEW MATERIAL] NEW MEXICO FINANCE AUTHORITY--ADDITIONAL POWERS--CAPITAL OUTLAY PROJECTS.--In providing loans and grants for capital outlay projects pursuant to Section 3 of this 2024 act, the authority shall:

A. promulgate rules:

(1) for application, including requirements for loans and grants;

(2) establishing procedures for review, evaluation and approval of loan and grant applications;

(3) governing the terms of the loan or grant contract;

(4) establishing requirements for repayment of loans, including payment schedules, interest rates and loan terms; and

(5) governing loan forgiveness;

B. on or before August 1 of each year, evaluate proposed capital outlay projects on the merits of those projects, which includes considering:

(1) a nonprofit organization's capacity to fulfill the proposed capital outlay project;

(2) other sources of funding available to complete the proposed capital outlay project;

(3) the ability to repay monetary obligations as result of the loan; and

(4) whether the proposed capital outlay project meets the needs of the community where it would occur; and

C. seek recoupment of an outstanding loan balance."

SECTION 5. A new section of the Statewide Economic Development Finance Act is enacted to read:

"[NEW MATERIAL] CAPITAL OUTLAY TRUST FUND--CREATED--INVESTMENT--DISTRIBUTION.--

A. The "capital outlay trust fund" is created in the state treasury. The capital outlay trust fund consists of appropriations, distributions, gifts, grants, donations and money otherwise accruing to the fund. Money in the capital outlay trust fund shall be invested by the state investment officer as land grant permanent funds are invested pursuant to Chapter 6, Article 8 NMSA 1978. Income from investment of the capital outlay trust fund shall be credited to the capital outlay trust fund. Except as provided in Subsection B of this section, money in the capital outlay trust fund shall not be expended for any purpose.

B. On July 1, 2025 and each July 1 of each year thereafter, a distribution shall be made from the capital outlay trust fund to the economic development revolving fund in the amount of one million dollars ($1,000,000) until that amount is less than an amount equal to four and seven-tenths percent of the average of the year-end market values of the capital outlay trust fund for the immediately preceding five calendar years. Thereafter, the amount of the distribution shall be four and seven-tenths percent of the average of the year-end market values of the capital outlay trust fund for the immediately preceding five calendar years."

SECTION 6. Section 6-25-13 NMSA 1978 (being Laws 2003, Chapter 349, Section 13, as amended) is amended to read:

"6-25-13. ECONOMIC DEVELOPMENT REVOLVING FUND.--

A. The "economic development revolving fund" is created within the authority. The fund shall be administered by the authority as a separate account and may consist of such subaccounts as the authority deems necessary to carry out the purposes of the fund. The authority may establish procedures for administering the fund in accordance with the Statewide Economic Development Finance Act.

B. [Except as otherwise provided in the Statewide Economic Development Finance Act] Money from payments of principal of, interest on and other fees or charges paid to the authority in connection with economic development revolving fund bonds, loans, project revenue bonds purchased with money on deposit in the fund, loan participations, [and] loan guarantees and distributions from the capital outlay trust fund shall be deposited in the fund.

C. Money in the economic development revolving fund is appropriated to the authority to:

(1) pay the reasonably necessary administrative and other costs incurred by the authority in evaluating, processing, originating and servicing economic development revolving fund bonds, loans, grants, project revenue bonds, loan participations and loan guarantees;

(2) purchase loan participations for projects;

(3) make loans for projects;

(4) make loan guarantees for projects; [and]

(5) make loans for capital outlay projects;

(6) make grants for capital outlay projects; and

[(5)] (7) purchase project revenue bonds.

D. Money in the economic development revolving fund that is not needed for immediate disbursement, including money held in reserve, may be deposited or invested in the same manner as other funds administered by the authority.

E. Money on deposit in the economic development revolving fund may be designated as a reserve for economic development revolving fund bonds issued and for financing assistance provided from the fund by the authority pursuant to the Statewide Economic Development Finance Act and the authority may covenant in any resolution or trust indenture to maintain and replenish the reserve from money deposited in the fund.

F. Money in the economic development revolving fund may be used to purchase project revenue bonds issued by the authority pursuant to the Statewide Economic Development Finance Act, which are payable from any designated source of revenues or collateral. Purchasing and holding the bonds shall not result in cancellation or merger of the bonds, notwithstanding the fact that the authority as the issuer of the bonds is obligated to make the required debt service payments and the fund held by the authority is entitled to receive the required debt service payments."

SECTION 7. REPEAL.--Sections 6-26-1 through 6-26-8, 24-1C-1 through 24-1C-10 and 24-24-1 through 24-24-4 NMSA 1978 (being Laws 2004, Chapter 71, Sections 1 through 8, Laws 1994, Chapter 62, Sections 7 through 12, 15 and 16 and Laws 2003, Chapter 316, Sections 1 through 4, as amended) are repealed.

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