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F I S C A L I M P A C T R E P O R T
SPONSOR Taylor
ORIGINAL DATE
LAST UPDATED
3/1/2007
HB
SHORT TITLE Constitutional Purposes for County Debt, CA
SB SJR 20
ANALYST Schuss
APPROPRIATION (dollars in thousands)
Appropriation
Recurring
or Non-Rec
Fund
Affected
FY07
FY08
NFI
(Parenthesis ( ) Indicate Expenditure Decreases)
SOURCES OF INFORMATION
LFC Files
Responses Received From
Attorney General’s Office (AGO)
Department of Finance and Administration (DFA)
Office of State Auditor (OSA)
SUMMARY
Synopsis of Bill
Senate Joint Resolution 20 if approved by the voters, would amend Article IX Section 10 of the
New Mexico Constitution to delete provisions describing specific purposes for which counties
may incur debt, and would allow them to borrow money for purposes “authorized by law". The
resolution would also delete language prohibiting the use of general obligation bond money for
maintaining existing buildings.
FISCAL IMPLICATIONS
DFA notes that SJR 20 directly affects the current debt structure policy that is in effect for local
public bodies and could be detrimental to sound financial management; unrestrained debt may
exceed politically acceptable or financially sustainable levels of debt. In particular, using long-
term general obligation bond money for maintenance means that there is no enduring value
behind the general obligation bond.
pg_0002
Senate Joint Resolution 20 – Page
2
SIGNIFICANT ISSUES
AGO states that Article IX Section 10 of the New Mexico Constitution prohibits counties from
borrowing money except for erecting, remodeling and making additions to necessary public
buildings; constructing or repairing public roads and bridges and purchasing capital equipment
for such projects; constructing or acquiring a system for supplying water, including the
acquisition of water and water rights, necessary real estate or rights-of-way and easements;
constructing or acquiring a sewer system, including the necessary real estate or rights-of-way and
easements; constructing an airport or sanitary landfill, including the necessary real estate;
acquiring necessary real estate for open space, open space trails and related areas and facilities;
or the purchase of books and other library resources for libraries in the county. This resolution
would delete those specific provisions and would allow the legislature to designate purposes for
which counties may incur debt in state law.
DFA reports that the rationale behind the restrictions outlined in Article 9, Section 10 of the
Constitution is directed towards General Obligation (property tax) debt. The uses of general
obligation bond proceeds have previously been limited to enduring, long term purchase and
building.
ADMINISTRATIVE IMPLICATIONS
DFA lists the following implications:
SJR 20 contains potential administrative implications to DFA. Due to the language
restricting the type of allowable expenditures, many counties that possess the ability to incur debt
will create an increase in the number of requests for bond certification.
The general obligation bond certification process consists of the comparison of net bond
capacity to all current outstanding debt generating the entity’s allowable bond capacity. Net
capacity is limited to 4% of the total property valuation of the entity. Currently this process is
managed by the Financial Management Bureau in the Local Government Division.
BS/nt