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.

 

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

 

 

SPONSOR:

Romero

 

DATE TYPED:

02/28/03

 

HB

 

 

SHORT TITLE:

Southeast Albuquerque Business Development

 

SB

785

 

 

ANALYST:

Padilla

 

APPROPRIATION

 

Appropriation Contained

Estimated Additional Impact

Recurring

or Non-Rec

Fund

Affected

FY03

FY04

FY03

FY04

 

 

 

$500.0

 

 

Recurring

General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

 

Duplicates HB 687 except for the amount of the appropriation and its term

Relates to SB 271, HB 133 and SB 134

 

SOURCES OF INFORMATION

 

LFC Files

 

Responses Received From

Economic Development Department

 

SUMMARY

 

     Synopsis of Bill

 

Senate Bill 785 appropriates $500.0 from the general fund to the Economic Development Department for the purpose of contracting for business incubation services in southeast Albuquerque.  The bill states that the contract can include program development, operating costs, outreach, and development of evaluation tools.  The appropriation can be expended between fiscal years 2004 and 2006.

 

     Significant Issues

 

Although EDD did not identify the relevant business incubator that would be funded by this bill, it is presumably the incubator being planned by the Southeast Community Alliance in Albuquerque.  According to a 2002 EDD report on business incubation, the SCA is a non-profit organization seeking to promote and develop entrepreneurship for minorities.  The incubator being planned would be a multi-purpose incubator that would encourage and sustain new business activity in the area.

 

According to EDD’s report, there are currently no economic development or multi-purpose incubators in the Albuquerque area.  Previous business incubators in Albuquerque have been unsuccessful.

 

Neither the bill nor EDD explains how the incubator will receive the majority of its program and operating costs.  The National Business Incubation Association has found that incubation programs are more likely to be successful when there is strong local support. 

 

FISCAL IMPLICATIONS

 

The appropriation of $500.0 contained in this bill is a recurring expense to the general fund.  Unless the incubator has a business plan to cover its operating costs every year, it will likely require state assistance on a recurring basis.

 

Any unexpended or unencumbered balance remaining at the end of fiscal year 2006 shall revert to the general fund.

 

EDD is concerned that there are no funds attached to the bill for administration, evaluation and auditing costs. 

 

ADMINISTRATIVE IMPLICATIONS

 

EDD believes it does not currently have the staff to administer this program.

 

DUPLICATION AND RELATIONSHIP

 

This bill duplicates House Bill 687 in all respects except the appropriation and its term.  HB 687 appropriates $204.3, versus the $500.0 in this bill.  However, the appropriation in HB 687 can be expended only in fiscal year 2004.

 

This bill relates to HB 133 and SB 271, both of which appropriate $500.0 to support a business incubator in Santa Fe.

 

The bill also relates to HB 134, which appropriates $1,500.0 to EDD to administer a statewide business incubation program.  This is the approach that the 2002 EDD report recommended.  The report said that a statewide incubator programs could provide a means of continued education and support to incubator managers and also enable incubator tenants to become aware of other incubated companies in New Mexico with which they may be able to work.  

 

POSSIBLE QUESTIONS

 

1.  Is this appropriation intended to fund a contract directly with a non-profit business incubator?

2.  Is this business incubator affiliated with a university or other educational institution?

3.  Is the City of Albuquerque providing support to the incubator?

4.  Would a statewide business incubator program, such as that proposed in HB 134, be preferable to support for individual programs?

 

LP/njw