SANTA FE, N.M. (AP) With New Mexico’s economy continuing to sputter, the Legislature and Republican Gov. Susana Martinez face tough decisions next year on whether to spend every dime of available bond financing for capital projects to help create construction jobs but potentially risk a backlash from voters who could be hit with property tax increases.
Despite a slide in revenues for state government operations, there’s a large pool of money that can be used for construction projects next year to possibly stimulate the economy.
Nearly $430 million in bond capacity is available for capital projects — twice as much as the revenues expected next year for possible budget increases for government programs and services.
About $300 million of the capital financing could come from general obligation bonds, which are backed by property tax levies but require the approval of voters.
Sen. John Arthur Smith, a Deming Democrat and chairman of the Legislative Finance Committee, said lawmakers may want to consider limiting the general obligation bond issue next year to try to minimize a property tax increase.
“It is going to be easier to pass a skinny budget than it is to ... get that GO bond past the public,” said Smith, who also is chairman of a Senate committee responsible for preparing the state’s operating budget.
He said it’s possible the state could issue $150 million to $180 million in general obligation bonds without a change in property tax rates. That’s because new bonds would replace older ones being paid off with current tax revenues.
In 2010, voters narrowly rejected a $155 million bond question that would have financed building projects for universities, the state School for the Deaf and the New Mexico School for the Blind and Visually Impaired. Had the higher education bond issue been approved, yearly taxes would have increased an estimated $10 on property valued at $100,000. That unused bond capacity is carried forward and is part of the $300 million available in 2012.
The governor hasn’t decided on her capital projects recommendations to next year’s Legislature, “but she is very sensitive about the impact on property taxes,” said Scott Darnell, a spokesman of Martinez.
“We are still very early in the process of identifying capital needs, setting budget priorities and examining general obligation bond priorities. These will be driven by the necessity and quality of projects proposed,” said Darnell.
Besides $300 million in general obligation bonds, the state can authorize $130 million in bonds backed by severance tax revenues and those don’t require voter approval.
Rep. Brian Egolf, a Santa Fe Democrat, said the Legislature should use the bond financing on construction projects to stimulate the economy.
“I think it’s our responsibility to do everything humanly possible to get New Mexico back to work,” Egolf said in an interview. “The need for jobs and work is real, and it’s right now and it is incredibly serious. We shouldn’t ignore that by some fears of theoretical changes in taxes.”
In the past, the state has typically authorized the full amount of available general obligation bonds for capital projects.
During a special session in September, the Legislature approved $81 million worth of capital improvements to be paid for with severance tax bond proceeds. Egolf was among Democratic and GOP lawmakers who supported a larger package. The governor had proposed $212 million for capital projects, but Smith and other Democrats contended it was prudent to approve a smaller amount in the special session because of uncertainty over the state’s finances.
A similar debate over capital projects is likely next year when the Legislature convenes in January for a 30-day session. Universities have a big stake in the outcome because they depend heavily on general obligation bonds for capital improvements. The state earmarks other bond financing for public school capital projects.
“The backlog of infrastructure is enormous,” David Lepre, executive director of the Council of University Presidents, said in an email statement. “I believe the last time the state measured higher education’s deferred maintenance it totaled well over $1 billion.”