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F I S C A L I M P A C T R E P O R T

SPONSOR Madalena

ORIGINAL DATE

LAST UPDATED

1/22/08

HB 116

SHORT TITLE Tribal Infrastructure Project Fund

SB

ANALYST Schardin

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY08

FY09

6,450.0

Recurring

General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY08

FY09

FY10

6,450.0

6,920.0 Recurring Tribal Infrastructure Project Fund

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Indian Affairs Department (IAD)

Gaming Control Board (GCB)

Department of Transportation (DOT)

Department of Finance and Administration (DFA)

SUMMARY

Synopsis of Bill

House Bill 116 would direct the department of finance and administration to transfer an amount

equal to 10 percent of the prior fiscal year’s tribal revenue sharing payments from tribal gaming

entities from the general fund to the tribal infrastructure project fund. The appropriation from the

general fund to the tribal infrastructure project fund would occur each year by August 1. Money

transferred would be restricted for use for transportation-related projects, including roads,

bridges and maintenance facilities, equipment and operations.

House Bill 116 – Page

2

Because no effective date is provided in the bill, its provisions will become effective 90 days

after the 2008 legislative session adjourns on May 14, 2008. The first transfer will take place on

August 1, 2008 based on revenue received in FY08 (see Technical Issues).

FISCAL IMPLICATIONS

The December 2007 consensus revenue estimate for tribal revenue sharing payments to the

general fund are $64.5 million in FY08 and $69.2 million in FY09. Therefore the appropriation

from the general fund to the tribal infrastructure project fund will be $6.45 million in FY09 and

$6.92 million in FY10 (see Technical Issues).

This bill provides for continuing appropriations. The LFC has concerns with including

continuing appropriation language in the statutory provisions, as earmarking reduces the ability

of the legislature to establish spending priorities.

SIGNIFICANT ISSUES

Slow-growing revenues and high project cost inflation have challenged the Department of

Transportation’s ability to serve the state’s growing transportation needs. According to the Final

Report of the House Memorial 35 Study, after adjusting for inflation and population growth,

New Mexico dedicates 23 percent less to transportation funding than it did 20 years ago. The

report also states that about 15 percent of state highways and 16 percent of state bridges are

currently in poor condition.

In 2005, the legislature passed and the governor signed the Tribal Infrastructure Act (Section 9-

21-17 through 9-21-24 NMSA 1978). This act created the tribal infrastructure trust fund, an

endowment fund to be invested by the state investment council in the same manner in which the

state’s permanent funds are invested. The act also created the tribal infrastructure project fund,

which receives a distribution from the trust fund every year. On July 1, the lesser of $10 million

or 4.7 percent of the average year-end market value of the trust fund for the last five calendar

years is distributed from the trust fund to the project fund. Money in the project fund may be

used to fund tribal infrastructure improvement in the areas of water and wastewater, electrical,

communications, roads, health, emergency response, and economic development. To date, the

trust fund balance is insignificant, so no major distributions have been made to the project fund.

In FY06, $3 million of nonrecurring general fund was appropriated for tribal infrastructure

improvements. Of that $3 million, $2.5 million was awarded to 12 entities that leveraged the

money to accomplish about $2 million in improvements that benefited approximately 13,500

people.

In FY07, $5 million of nonrecurring general fund was appropriated for tribal infrastructure

improvements. That funding has been appropriated to the 17 projects detailed in the table below.

House Bill 116 – Page

3

FY07 Nonrecurring Appropriations: Name of Project Funded

TIF Amount

INFRASTRUCTURE PROJECTS

Santa Clara Pueblo Regional Adult Day Care Center

$500,000

Acoma Pueblo North Acomita Wastewater Treatment Project

890,000

San Ildefonso Pueblo Mesa Vista Affordable Housing Development

574,023

Sandia Pueblo Community Water System Improvements

300,000

Mexican Springs Chapter Road Improvement Project

100,000

San Felipe Pueblo Regional Wastewater Treatment Facility

500,000

Huerfano & Nageezi Chapter Table Egg Production Facility

340,000

Isleta Pueblo Village Proper Water Main Replacement

750,000

Nambe Pueblo Development Corporation New Nambe Water System

500,000

PLANNING PROJECTS

Laguna Pueblo Water/Waste Water Infrastructure Planning Project

$50,000

Shiprock Youth Home

50,000

Crownpoint Judicial & Public Safety Complex

50,000

Tohatchi Chapter Community Warehouse

50,000

Baahaali Chapter Pinehaven Development Site

50,000

Standing Rock Chapter Waste Water Lagoon

50,000

Ohkay Owingeh Plan for Upgrade of Outdated Infrastructure

50,000

Lake Valley Chapter Powerline Project

50,000

TOTAL TIF AWARDS

$4,854,023

Uncommitted Amount Remaining

$145,977

Source: Indian Affairs Department

Tribes face several funding barriers to infrastructure improvement. The state capital outlay

process cannot meet the large needs of the state’s tribal entities. Tribes also have greater

difficulty leveraging funds outside the capital outlay process because of the perception that

lending to tribal governments is riskier because of their sovereignty status and other financial

issues. Tribes rely primarily on federal funding for infrastructure development. In recent years,

federal funding has been diminishing.

PERFORMANCE IMPLICATIONS

Transportation infrastructure enables a state’s economy to grow and allows safe transportation of

people and goods. Extreme infrastructure deficiencies in tribal areas create great barriers to

economic development, health and safety.

ADMINISTRATIVE IMPLICATIONS

Because the state operates on a modified accrual basis rather than a cash basis, the bill will be

difficult to administer as drafted (see Technical Issues).

TECHNICAL ISSUES

Assuming the intent of the bill is to impact 10 percent of revenues recognized on an accrual basis

in the previous fiscal year, it will not be possible for DFA to know with certainty the amount of

tribal revenue sharing payments that were made in the previous fiscal year by August 1. The

House Bill 116 – Page

4

state operates on a 60 day modified accrual basis, meaning that revenues are accrued back to the

time period in which a taxable event took place for up to 60 days past the end of the fiscal year.

The bill should be amended to allow the transfer to take place at a later date, such as January 1 of

each year. The amendment should also make clear that the transfer from the general fund to the

tribal infrastructure project fund will be based on 10 percent of revenues earned, not received, in

the prior fiscal year, to conform to the state’s modified accrual accounting method.

SS/mt