0001| HOUSE BILL 229
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0002| 43RD LEGISLATURE - STATE OF NEW MEXICO - SECOND SESSION, 1998
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0003| INTRODUCED BY
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0004| RICHARD T. KNOWLES
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0006|
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0007|
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0008|
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0009|
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0010| AN ACT
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0011| RELATING TO THE INVESTMENT OF THE STATE PERMANENT FUNDS;
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0012| AMENDING SECTIONS 6-8-9 AND 7-27-5.1 NMSA 1978 (BEING LAWS
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0013| 1957, CHAPTER 179, SECTION 9 AND LAWS 1983, CHAPTER 306,
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0014| SECTION 8, AS AMENDED).
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0015|
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0016| BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
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0017| Section 1. Section 6-8-9 NMSA 1978 (being Laws 1957,
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0018| Chapter 179, Section 9, as amended) is amended to read:
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0019| "6-8-9. SECURITIES AND INVESTMENT.--
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0020| A. Money made available from the land grant
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0021| permanent funds for investment for a period in excess of one
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0022| year may be invested in the following classes of securities
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0023| and investments:
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0024| (1) bonds, notes or other obligations of the
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0025| United States government, its agencies, government-sponsored
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0001| enterprises, corporations or instrumentalities and that
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0002| portion of bonds, notes or other obligations guaranteed as to
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0003| principal and interest and issued by the United States
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0004| government, its agencies, government-sponsored enterprises,
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0005| corporations or instrumentalities or issued pursuant to acts
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0006| or programs authorized by the United States government;
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0007| (2) bonds, notes, debentures and other
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0008| obligations issued by the state of New Mexico or a
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0009| municipality or other political subdivision of the state that
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0010| are secured by an investment grade bond rating from a national
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0011| rating service, pledged revenue or other collateral or
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0012| insurance necessary to satisfy the standard of prudence set
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0013| forth in Section 6-8-10 NMSA 1978;
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0014| (3) bonds, notes, debentures, [equipment
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trust certificates] instruments, conditional sales
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0016| agreements, securities or other evidences of indebtedness of
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0017| any corporation, partnership or trust organized and
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0018| operating within the United States rated not less than Baa or
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0019| BBB or the equivalent by a national rating service;
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0020| (4) notes or obligations securing loans or
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0021| participation in loans to business concerns or other
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0022| organizations that are obligated to use the loan proceeds
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0023| within New Mexico, to the extent that loans are secured by
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0024| first mortgages on real estate located in New Mexico and are
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0025| further secured by an assignment of rentals, the payment of
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0001| which is fully guaranteed by the United States in an amount
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0002| sufficient to pay all principal and interest on the mortgage;
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0003| (5) common and preferred stocks and
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0004| convertible issues of any corporation; provided that it has
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0005| [a minimum net worth of twenty-five million dollars
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($25,000,000) and] securities listed on one or more national
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0007| stock exchanges or included in a nationally recognized list of
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0008| stocks; and provided further that the fund shall not own more
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0009| than five percent of the voting stock of any company;
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0010| (6) securities of non-United States
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0011| governmental, quasi-governmental, partnership, trust or
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0012| corporate entities, and these may be denominated in foreign
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0013| currencies; provided:
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0014| (a) aggregate non-United States
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0015| investments shall not exceed fifteen percent of the book value
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0016| of the land grant permanent funds;
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0017| (b) for non-United States stocks and
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0018| non-United States bonds and notes, issues permitted for
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0019| purchase shall be limited to those issues traded on a national
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0020| stock exchange or included in a nationally recognized list of
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0021| stocks or bonds;
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0022| (c) currency contracts may be used for
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0023| investing in non-United States securities only for the purpose
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0024| of hedging foreign currency risk and not for speculation;
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0025| (d) the investment management services
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0001| of a trust company or national bank exercising trust powers or
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0002| of an investment counseling firm may be employed; and
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0003| (e) reasonable compensation for
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0004| investment management services and other administrative and
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0005| investment expenses related to these investments shall be paid
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0006| directly from the assets of the funds, subject to budgeting
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0007| and appropriation by the legislature; and
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0008| (7) stocks or shares of a diversified
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0009| investment company registered under the federal Investment
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0010| Company Act of 1940, as amended, and listed securities of
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0011| long-term unit investment trusts or individual, common or
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0012| collective trust funds of banks or trust companies that invest
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0013| primarily in equity securities authorized in Paragraphs (5)
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0014| and (6) of this subsection; provided that the investment
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0015| company has total assets under management of at least one
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0016| hundred million dollars ($100,000,000); and provided further
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0017| that the council may allow reasonable administrative and
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0018| investment expenses to be paid directly from the assets
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0019| derived from these investments, subject to budgeting and
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0020| appropriation by the legislature.
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0021| B. Not more than sixty-five percent of the book
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0022| value of the land grant permanent funds shall be invested at
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0023| any given time in securities described in Paragraphs (5), (6)
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0024| and (7) of Subsection A of this section, and no more than ten
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0025| percent of the book value of the land grant permanent funds
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0001| shall be invested at any given time in securities described in
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0002| Paragraph (3) of Subsection A of this section that are rated
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0003| Baa or BBB. Assets of the land grant permanent funds may be
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0004| combined for investment in common pooled funds to effectuate
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0005| efficient management.
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0006| C. Commissions paid for the purchase and sale of
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0007| any security shall not exceed brokerage rates prescribed and
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0008| approved by national stock exchanges or by industry practice."
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0009| Section 2. Section 7-27-5.1 NMSA 1978 (being Laws 1983,
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0010| Chapter 306, Section 8, as amended) is amended to read:
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0011| "7-27-5.1. MARKET RATE INVESTMENTS.--
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0012| A. Money made available from the severance tax
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0013| permanent fund for investment for a period in excess of one
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0014| year in market rate investments may be invested in the
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0015| following classes of securities and investments:
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0016| (1) bonds, notes or other obligations of the
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0017| United States government, its agencies, government-sponsored
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0018| enterprises, corporations or instrumentalities and that
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0019| portion of bonds, notes or other obligations guaranteed as to
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0020| principal and interest and issued by the United States
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0021| government, its agencies, government-sponsored enterprises,
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0022| corporations or instrumentalities or issued pursuant to acts
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0023| or programs authorized by the United States government;
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0024| (2) bonds, notes, debentures and other
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0025| obligations issued by the state of New Mexico or a
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0001| municipality or other political subdivision of the state that
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0002| are secured by an investment grade bond rating from a national
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0003| rating service, pledged revenue or other collateral or
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0004| insurance necessary to satisfy the standard of prudence set
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0005| forth in Section 6-8-10 NMSA 1978;
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0006| (3) bonds, notes, debentures, [equipment
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trust certificates] instruments, conditional sales
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0008| agreements, securities or other evidences of indebtedness of
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0009| any corporation, partnership or trust organized and
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0010| operating within the United States rated not less that Baa or
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0011| BBB or the equivalent by a national rating service;
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0012| (4) notes or obligations securing loans or
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0013| participation in loans to business concerns or other
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0014| organizations that are obligated to use the loan proceeds
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0015| within New Mexico, to the extent that loans are secured by
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0016| first mortgages on real estate located in New Mexico and are
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0017| further secured by an assignment of rentals, the payment of
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0018| which is fully guaranteed by the United States in an amount
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0019| sufficient to pay all principal and interest on the mortgage;
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0020| (5) common and preferred stocks and
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0021| convertible issues of any corporation; provided that it has
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0022| [a minimum net worth of twenty-five million dollars
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($25,000,000) and] securities listed on one or more national
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0024| stock exchanges or included in a nationally recognized list of
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0025| stocks; and provided further that the fund shall not own more
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0001| than five percent of the voting stock of any company;
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0002| (6) securities of non-United States
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0003| governmental, quasi-governmental, partnership, trust or
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0004| corporate entities, and these may be denominated in foreign
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0005| currencies; provided:
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0006| (a) aggregate non-United States
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0007| investments shall not exceed fifteen percent of the book value
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0008| of the severance tax permanent fund;
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0009| (b) for non-United States stocks and
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0010| non-United States bonds and notes, issues permitted for
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0011| purchase shall be limited to those issues traded on a national
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0012| stock exchange or included in a nationally recognized list of
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0013| stocks or bonds;
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0014| (c) currency contracts may be used for
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0015| investing in non-United States securities only for the purpose
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0016| of hedging foreign currency risk and not for speculation;
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0017| (d) the investment management services
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0018| of a trust company or national bank exercising trust powers or
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0019| of an investment counseling firm may be employed; and
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0020| (e) reasonable compensation for
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0021| investment management services and other administrative and
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0022| investment expenses related to these investments shall be paid
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0023| directly from the assets of the fund, subject to budgeting and
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0024| appropriation by the legislature;
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0025| (7) stocks or shares of a diversified
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0001| investment company registered under the federal Investment
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0002| Company Act of 1940, as amended, and listed securities of
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0003| long-term unit investment trusts or individual, common or
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0004| collective trust funds of banks or trust companies that invest
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0005| primarily in equity securities authorized in Paragraphs (5)
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0006| and (6) of this subsection; provided that the investment
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0007| company has total assets under management of at least one
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0008| hundred million dollars ($100,000,000); and provided further
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0009| that the council may allow reasonable administrative and
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0010| investment expenses to be paid directly from the assets
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0011| derived from these investments, subject to budgeting and
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0012| appropriation by the legislature; and
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0013| (8) participation interests in New Mexico
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0014| real-property-related business loans. The actual amount
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0015| invested under this paragraph shall not exceed ten percent of
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0016| the severance tax permanent fund and shall be included in any
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0017| minimum amount of severance tax permanent fund investments
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0018| required to be placed in New Mexico certificates of deposit.
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0019| Investments authorized in this paragraph are subject to the
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0020| following:
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0021| (a) the state investment officer may
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0022| purchase from eligible institutions a participation interest
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0023| of up to eighty percent in any loan secured by a first
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0024| mortgage or a deed of trust on the real property located in
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0025| New Mexico of an eligible business entity, or its subsidiary,
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0001| that is operating or shall use loan proceeds to commence
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0002| operations within New Mexico plus any other guarantees or
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0003| collateral that may be judged by the eligible institution or
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0004| the state investment officer to be prudent. To be eligible
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0005| for investment the following minimum requirements shall be
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0006| met: 1) the loan proceeds shall be used exclusively for the
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0007| purpose of expanding or establishing businesses in New Mexico,
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0008| including the refinancing of such businesses for expansion
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0009| purposes only. If a portion of the loan proceeds were used
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0010| for refinancing or repaying an existing loan and payment of
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0011| principal and interest to the state has not been made within
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0012| ninety days from the due date, unless extended pursuant to
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0013| agreement between the originating institution and the state
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0014| investment officer, the originating institution shall buy back
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0015| the state's participation interest in the loan and begin
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0016| foreclosure proceedings; 2) eligible business entities shall
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0017| not include public utilities or financial institutions or
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0018| shopping centers, apartment buildings or other such passive
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0019| investments; 3) the minimum loan amount shall be two hundred
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0020| fifty thousand dollars ($250,000) and may be met by packaging
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0021| up to ten separate loans satisfying the requirements of this
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0022| paragraph. The maximum loan amount shall be two million
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0023| dollars ($2,000,000); 4) the loan maturity shall be not less
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0024| than five years or more than thirty years; 5) the maximum
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0025| loan-to-value ratio shall be seventy-five percent and based on
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0001| current appraisal of the real property by an appraiser who is
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0002| licensed or certified in New Mexico and approved by the state
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0003| investment officer, which shall be made not more than one
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0004| hundred eighty days from the loan origination date; 6) the
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0005| interest rate of the loan shall be fixed for five years and
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0006| shall be adjusted at every fifth anniversary of the note to
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0007| the rate specified in Item 7) of this subparagraph; 7) the
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0008| yield on the state's participation interest shall in no case
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0009| be less than the greater of the then-prevailing yield on
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0010| United States treasury securities of five-year maturity plus
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0011| two and one-half percent or the yield received by the lending
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0012| institution calculated exclusive of servicing fees; 8) if
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0013| payment of principal or interest has not been made within one
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0014| hundred eighty days from the due date, unless extended
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0015| pursuant to agreement between the originating institution and
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0016| the state investment officer, the originating institution
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0017| shall buy back the state's participation interest in the loan,
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0018| substitute another qualifying loan or begin foreclosure
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0019| proceedings; and 9) if foreclosure proceedings are commenced,
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0020| the state and the originating institution shall share in
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0021| proportion to their participation interest, as provided in
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0022| this subparagraph, in the legal and other foreclosure expenses
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0023| and in any loss incurred as a result of a foreclosure sale;
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0024| (b) a standardized participation
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0025| agreement, the form of which shall be approved by the attorney
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0001| general's office, shall be executed between the investment
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0002| office and each eligible originating institution. The
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0003| participation agreement shall provide that the originating
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0004| institution shall not assign its interest in any loan covered
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0005| by the agreement without the prior written consent of the
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0006| state investment officer;
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0007| (c) a formal forward commitment program
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0008| may be instituted by the state investment officer with the
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0009| approval of the council;
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0010| (d) the council shall adopt
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0011| regulations: 1) defining passive investments; 2) establishing
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0012| underwriting guidelines; 3) ensuring diversification across a
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0013| variety of types of collateral, types of businesses and
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0014| regions of the state; and 4) providing for the review by the
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0015| state investment officer of servicing and other fees that may
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0016| be charged by the eligible institution;
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0017| (e) eligible institutions include
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0018| banks, savings and loan associations and credit unions
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0019| operating in the state; and
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0020| (f) real property is defined as land
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0021| and attached buildings, but excludes all interests that may be
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0022| secured by a security interest under Article 9 of the Uniform
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0023| Commercial Code, and mineral resource values.
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0024| B. Not more than sixty-five percent of the book
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0025| value of the severance tax permanent fund shall be invested at
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0001| any given time in securities described in Paragraphs (5), (6)
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0002| and (7) of Subsection A of this section, and no more than ten
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0003| percent of the book value of the severance tax permanent fund
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0004| shall be invested at any given time in securities described in
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0005| Paragraph (3) of Subsection A of this section that are rated
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0006| Baa or BBB. Assets of the severance tax permanent fund may be
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0007| combined for investment in common pooled funds to effectuate
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0008| efficient management.
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0009| C. Commissions paid for the purchase and sale of
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0010| any security shall not exceed brokerage rates prescribed and
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0011| approved by national stock exchanges or by industry practice."
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0012|
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