NOTE:  As provided in LFC policy, this report is intended only for use by the standing finance committees of the legislature.  The Legislative Finance Committee does not assume responsibility for the accuracy of the information in this report when used for other purposes.

 

The most recent FIR version (in HTML & Adobe PDF formats) is available on the Legislative Website.  The Adobe PDF version includes all attachments, whereas the HTML version does not.  Previously issued FIRs and attachments may be obtained from the LFC in Suite 101 of the State Capitol Building North.

 

 

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

 

 

 

SPONSOR:

Lujan

 

DATE TYPED:

03/06/03

 

HB

882/aHTRC

 

SHORT TITLE:

Severance Tax Bonds for Water Projects

 

SB

 

 

 

ANALYST:

Kehoe

 

APPROPRIATION

 

Appropriation Contained

Estimated Additional Impact

Recurring

or Non-Rec

Fund

Affected

FY03

FY04

FY03

FY04

 

 

 

 

 

See Narrative

 

 

(Parenthesis ( ) Indicate Expenditure Decreases)

 

SOURCES OF INFORMATION

 

LFC Files

 

SUMMARY

 

     Synopsis of HTRC Amendment

 

House Taxation and Revenue Committee Amendments to House Bill 882 modify the bill as follows:

 

  • Items 1,5, 6, 7, 12, 13 and 14 are technical corrections to the bill.
  • Items 2 and 3 clarify that the State Board of Finance (BOF) shall “authorize” rather than “deduct” ten percent of the estimated bonding capacity each year to be used by the Water Trust Board for the purpose of funding water projects statewide and provides legislative authority to BOF to issue severance tax bonds in the annually deducted amount.
  • Item 4 removes language that required the Water Trust Board from having to select water projects from a list provided by NMFA.
  • Item 8 enforces BOF’s responsibility to comply with the federal Internal Revenue Code of 1986 when issuing and selling severance tax bonds.
  • Item 9 requires that the proceeds of severance tax bonds be deposited in the Water Project Fund administered by NMFA rather than appropriated directly to NMFA.
  • Item 10 clarifies that the Water Trust Board is responsible for certifying the use of proceeds from the Water Project Fund.
  • Item 11 strikes a provision that required recipients of bond proceeds to have a substantial binding obligation to a third party to expend at least five percent of the bond proceeds; and that at least 85 percent of the bond proceeds be expended within three years after the bonds have been sold.
  • Item 15 expands the definition of “water projects” to include conservation, recycling, treatment or reuse of water.

 

     Synopsis of Original Bill

 

House Bill 882 requires a certain percentage of annual severance tax bonding capacity to be used for funding statewide water projects recommended by NMFA to the Water Trust Board.

 

     Significant Issues

 

House Bill 882 requires that the Board of Finance (BOF), by January 15 of each year, estimate the amount of bonding capacity available for severance tax bonds to be authorized by the legislature and that BOF deduct ten percent of the estimated bonding capacity for use by the New Mexico Finance Authority (NMFA) to fund water projects statewide.

 

The Water Trust Board will select the projects from a list of water projects provided by NMFA and will certify to BOF the need for issuance of bonds for the water projects.  Proceeds from the sale of the bonds are appropriated to NMFA for funding the approved water projects.  House Bill 882 defines water projects as capital outlay for: 1) the storage, conveyance or delivery of water to end-users; 2) the implementation of federal Endangered Species Act of 1973 collaborative programs; 3) the restoration of watersheds; or 4) flood prevention.

 

House Bill 882 requires NMFA to recommend water projects that are developed sufficiently so the Authority expects that the recipient will:  1) incur a substantial binding obligation to a third party to expend at least five percent of the bond proceeds; and 2) spend at least eighty-five percent of the bond proceeds within three years after the bonds have been sold.

 

FISCAL IMPLICATIONS

 

The appropriation contained in this bill is an annual recurring expense to severance tax bond capacity. Any unexpended or unencumbered balances remaining at the completion of a water project shall revert to the severance tax bond fund.  House Bill 882 specifically requires that severance tax bond proceeds shall not be used to pay indirect project costs and that the proceeds from bonds issued for a water project will revert to the severance tax bond fund within six months of completion of the water project.  The bill requires NMFA to monitor and ensure proper reversions.

 

OTHER SUBSTANTIVE ISSUES

 

Water-related funding issues continue to dominate as one of the state’s most pressing needs.  The Water Trust Board has identified over $2.3 billion in regional and statewide water project needs.  House Bill 882 would provide much needed resources for the state’s water system needs.

 

LMK/yr