Summary:

 Senate Bill 293 (SB 293) amends the Tax Increment for Development Act, expanding the eligibility criteria for Tax Development Districts (TDDs) to support housing and mixed-use developments. The bill enhances financing mechanisms for housing infrastructure, allowing local governments to use tax increment financing (TIF) to fund residential and mixed-use projects. It also clarifies requirements for local government participation, developer obligations, and the approval process for district formation. The provisions take effect July 1, 2025. 

Legislation Overview:

 Senate Bill 293 (SB 293) modifies Sections 5-15-3 through 5-15-7 NMSA 1978, expanding the scope of Tax Development Districts (TDDs) to include housing infrastructure and mixed-use development projects. Under the bill, local governments may authorize TDDs to capture a portion of gross receipts tax and property tax revenue to finance affordable housing, workforce housing, and transit-oriented development projects.

The bill introduces new eligibility criteria, requiring that at least 30% of a district’s increment revenue (TIR) be allocated to residential housing development. It also allows local governments to issue bonds backed by TIR to support housing infrastructure, road improvements, utility expansions, and site preparation for mixed-use communities.

SB 293 streamlines the approval process for TDDs, establishing a clearer framework for local governments, developers, and financing entities. The bill requires municipalities and counties to demonstrate long-term fiscal sustainability for proposed TDD projects, ensuring that tax revenue capture does not undermine essential public services. The legislation also strengthens public reporting requirements, mandating annual transparency reports on TDD revenue collection, expenditures, and development progress.

The bill retains existing restrictions on TDDs, ensuring that public schools, emergency services, and essential local services do not experience funding shortfalls due to diverted tax revenues. It also reinforces public participation requirements, mandating public hearings before TDD approval to ensure community input on new development projects.

Implications
SB 293 expands the use of tax increment financing to stimulate housing development, addressing New Mexico’s housing shortage by creating new funding mechanisms for residential and mixed-use projects. By allowing local governments to designate TDDs for housing infrastructure, the bill encourages public-private partnerships in real estate development while providing targeted incentives for affordable housing projects.

The bill’s requirement that 30% of TDD revenue be allocated to housing ensures that residential development is prioritized within designated districts. However, the expansion of TDDs for housing-related projects could result in reduced tax revenue for municipal general funds, requiring local governments to balance economic development goals with fiscal sustainability.

The ability to issue bonds backed by TDD revenue enhances financing flexibility but introduces debt-related risks, particularly if projected tax increment growth does not meet expectations. Local governments must carefully assess revenue projections before committing to long-term financing obligations to avoid budget shortfalls or underperforming developments.

The bill’s strengthened transparency and reporting requirements promote accountability in TDD financing, ensuring that public funds are used effectively. However, the requirement for annual public reporting may impose administrative burdens on local governments, necessitating additional resources for compliance and financial oversight.
 

Current Law:

 Under current law, Tax Development Districts are primarily used to finance commercial and infrastructure projects, with limited provisions for residential housing. SB 293 expands the eligible use of TDDs, allowing them to finance housing development, mixed-use communities, and related infrastructure. The bill aligns New Mexico’s TDD policies with national best practices, promoting a more integrated approach to economic development and housing growth.