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F I S C A L I M P A C T R E P O R T
SPONSOR Griego
ORIGINAL DATE
LAST UPDATED
1/31/06
HB
SHORT TITLE State Investment Officer Film Company Loans
SB 535
ANALYST Geisler
REVENUE (dollars in thousands)
Estimated Revenue
Recurring
or Non-Rec
Fund
Affected
FY06
FY07
FY08
$1,000.0
$1,000.0 Recurring Severance Tax
Permanent Fund
(Parenthesis ( ) Indicate Expenditure Decreases)
Duplicates: HB 591
Relates to: HB 358, HB 359
SOURCES OF INFORMATION
LFC Files
Responses Received From
State Investment Council (SIC)
SUMMARY
Synopsis of Bill
Senate Bill 535 clarifies existing statutory language that allows the State Investment Council to
make short-term loans to film & television productions, based on estimated tax-credit rebates
qualified for under state law.
Currently, there is a minor conflict between this program and the State Film Investment program,
capping the total of both combined programs at $15 million per production. This new language
would allow a film to receive both the film production tax-credit loan, in addition to a separate
investment/participation loan of up to $15 million.
Both loans are drawn from the Severance Tax Permanent Fund (STPF) as administered by the
State Investment Council.
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Senate Bill 535 – Page
2
FISCAL IMPLICATIONS
Tax Credit Production Loans are offered to film productions at a rate of a one-year US treasury
note plus 100 basis points (1%), for an overall annual return of roughly 5%. The SIC anticipates
an increased number of projects applying for these loans, with an estimate of $20 million in
loans per year. Such an amount would earn an estimated $1 million per year for the STPF.
SIGNIFICANT ISSUES
Tax credit production loans can be made up to 80% of the anticipated tax credit. The tax credit
rebate is for up to 15% of a film’s total expenditures in New Mexico. Currently this program has
only two projects receiving Film Production Tax Credit Loans, Bordertown and The Flock. The
films, with budgets of $21 million and $32 million respectively, both received loans of $2.3 mil-
lion based on the projects’ direct expenditures in New Mexico. Both loans will be repaid, with
interest, during calendar year 2006.
PERFORMANCE IMPLICATIONS
SIC notes that the loans will draw from an available pool of 3% of the STPF, or about $116 mil-
lion. However, the loans are short-term, by statute, no more than 12 months, and the pool will
recycle its capacity often. As a whole, and using preliminary performance data, the STPF for
calendar year 2005 returned 6.8%, while the S&P 500 index returned 4.9%. In contrast, this
program’s US Treasury note + 100 basis points will return approximately 5% to the fund. Obvi-
ously the difference in performance will vary from year to year based on overall market condi-
tions and rates.
CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP
Duplicates HB 591. Relates to HB 358 and HB 359, which seek to increase the film production
tax credit.
WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL
The State Investment Council views Film Production Tax Credits as a valuable tool in New
Mexico’s film incentive package. SIC believes failure to enact SB 535 will put New Mexico at a
distinct competitive disadvantage to other states that currently use tax credits to create incentive
to attract film and TV productions.
GG/mt:yr