HB 253/a CAPITAL OUTLAY CHANGES

Rep Derrick Lente

Actions: [4] HTRC/HAFC-HTRC- DP-HAFC [9] DP/a [12] PASSED/H (63-0) [7] SFC-SFC [10] DP [14] PASSED/S (39-1) SGND BY GOV (Mar. 5) Ch. 56.

Scheduled: Not Scheduled

 House Bill 253 (HB 253):  This legislative bill focuses on several amendments and additions to the Severance Tax Bonding Act.  

 House Bill 253 (HB 253):  Section 1 - Amendment to Section 7-27-10.1 NMSA 1978: The amendment specifies the transfer of funds to Severance Tax permanent fund before determining bonding capacity.  

Estimation of Bonding Capacity: 
•	The division is required to estimate the bonding capacity for severance tax bonds annually. Two methods are outlined for estimating bonding capacity, and the lesser of the two is to be used.

Allocation for Water and Tribal Infrastructure Projects: 
•	Nine percent of the estimated bonding capacity is allocated for water projects, and four and one-half percent for tribal infrastructure projects.
•	 The state board of finance is authorized to issue severance tax bonds for these projects.

Limitations on Use of Funds: 
•	The money from severance tax bonds is restricted from being used for indirect project costs. 
•	Unexpended balances are to revert to the severance tax bonding fund within six months of project completion.

Section 2:  Creation of Capital Development and Reserve Fund: A new non-reverting fund called the "capital development and reserve fund" is established. 
•	It consists of various sources, including distributions, appropriations, gifts, grants, and donations. 
•	The fund is not to be pledged against any state debt.

Investment of the Fund: 
•	The state investment officer is authorized to invest money in the fund in accordance with the prudent investor rule. Quarterly reports on investments are required.

Distribution from the Fund:
•	Annually, on July 1, a distribution is to be made from the capital development and reserve fund to the capital development program fund.

Use in Case of Insufficient Severance Tax Bond Fund Balance: 
•	The fund may be used to meet principal and interest payments on outstanding bonds if the severance tax bonding fund balance is insufficient.

Section 3: Creation of Capital Development Program Fund: 
•	Another non-reverting fund, the "capital development program fund," is established. It is administered by the department of finance and administration and used for funding capital projects.

Section 4: Authorization for Severance Tax Bonds for Capital Development Program Fund: 
•	The board of finance division is directed to allocate a specific amount for projects funded by the capital development program fund. 
•	The state board of finance is authorized to issue severance tax bonds for these projects.

Limitations on Use of Funds: 
•	This section specifies that funds from severance tax bonds should not be used for indirect project costs.

These amendments and additions propose to provide a structured framework for utilizing severance tax bonds for specific projects, focusing on water, tribal infrastructure, and capital development.
 

 Amended February 1, 2024, in HAFC
HAFCa/HB 253:  
•	Page1, line 11, after the semicolon, insert, “Authorizing a certain Amount of Severance Tax Bonds that may be issued in fiscal year 2024;”.
•	Page 1, between lines 17 and 18 insert:
o	Section 1.  Section 7-27-10 NMSA 1978 (being Laws 1961, Chapter 5, Section 8, as amended) is amended to read: “7-27-10 State Board of Finance Shall issue Bonds:
o	A.  The Board can issue and sell Severance Bonds within the provisions provided in the Severance Tax Bond Act.
o	B.  In fiscal year 2024, the state board of finance is authorized to sell or issue up to five hundred million dollars of severance tax bonds.  Proceeds from the sale of these bonds or notes shall be deposited in the central development and reserve fund.
o	The State Board of Finance is the only entity authorized to issue and sell supplemental severance tax bonds within the provision of the Severance Bond Act.
•	Renumber the succeeding sections
•	Page 5, line 19, after the first occurrence of “in”, insert “Subsections E through F of”.
•	Page 6, line 8, strike “July” and insert “January” on line 11, before “year-end”, insert “fiscal”, on line13, strike “calendar” and insert “fiscal” and strike “July” and insert “fiscal”, on line 16, before “year-end”, insert “fiscal” and on line 18, strike “calendar” and insert “fiscal”.
•	Page 6, line 20, after the subsection designation “E”, strike the remainder of the line and strike line 21 through “money” and insert the following”
o	“Money in the fund is subject to appropriation by the Legislature for capital projects or for transfer to the severance tax permanent fund”.
•	Page 7, line 7, strike “in the sate treasury” and insert “as a subaccount of the severance tax bonding fund”.
•	Page 7, line 18, after the period, insert:  “Any unexpended or unencumbered balance of an appropriation for a capital project remaining after two years following the date of the appropriation shall revert to the severance tax permanent fund”.