June 4, 2015

Why capital outlay can still happen, weeks after deadline

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After on-and-off negotiations since the end of the legislative session in March, state lawmakers recently came to an agreement with Gov. Susana Martinez on a capital outlay and tax package deal that will bring them back to Santa Fe for a special session next week.

Money flying_sidewaysThis, despite repeated statements from state Sen. John Arthur Smith, D-Deming, that a special session had to occur by May 18—more than two weeks ago.

“We don’t think we can do that after the 18th,” Smith told New Mexico Political Report last month.

From our May 14 report:

Smith said if legislators can’t strike a deal before a creeping deadline of Monday, May 18, all bets are pretty much off. That’s because New Mexico’s next fiscal year starts July 1, and bond sales for state infrastructure projects need 30 days to advertise before then.

If the legislature approves a new capital outlay late, Smith said the state will lose bond capacity on new projects outlined in a deal.

New Mexico Political Report wasn’t the only media outlet to report about the imposed deadline. In a May 14 story titled, “Lawmakers agree deadline for special session has arrived,” the Santa Fe New Mexican quoted lawmakers from both sides stating that a deal had to be made that weekend for any special session to take place this year.

From that report:

Smith, who had said earlier in the week that agreeing to a special session by Monday might still work, said he now agrees wholeheartedly with Martinez’s assessment during one of their conversations that, if an agreement isn’t reached Friday, it will be too late.

So now that May is over and a special session will be called most likely on Monday, June 8—much later than the supposed mid-May deadline—the question is how can it still happen? Was the May 18 deadline just posturing to the media?

According to those involved in the negotiations, they believed that it was too late but the New Mexico Board of Finance was able to find a way.

“Our initial deadline was May 15,” state Rep Jason Harper, R-Rio Rancho, told New Mexico Political Report in a recent interview. “When that passed, we thought, ‘OK, that’s dead.'”

Harper is the chair of the House Ways and Means Committee.

Yet apparently, the Board of Finance, which issues state bonds, told some lawmakers last week that they would still be able to meet advertising deadlines in the event of a special session.

Smith told New Mexico Political Report in a recent interview that he had asked the board how it would be able to issue notice of bonds on time “and they felt those advertising questions had been met.”

“The state Board of Finance evidently felt they were meeting the guidelines and timeframe to advertise those bonds in the event we had a special session,” Smith said.

Because any approval of the estimated $295 million capital outlay bill will come much later this year than usual, it will be paid for in a different process than usual. The first $40 million will likely be paid for with short-term “sponge bonds,” which require a short notice before they’re sold.

After the sponge bonds are sold, the Board of Finance can look at funding the rest of the capital outlay bill through the sale of long-term severance bonds, which typically require a longer time period of notice. The state can apparently use the first sales of the sponge bonds and the need to fund the remainder of the capital outlay bill as a reason to issue the long-term bonds on a shorter notice.

 

 

 

 

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