Local Public Financing Options

The Business Improvement District (BID) Act, 3-63-1 NMSA 1978, allows municipalities to create business improvement districts with the powers to provide for the administration and financing of additional and extended services to businesses within those designated districts.

Municipalities have the authority to issue BID revenue bonds from time to time in its discretion to finance the undertaking of any improvement within a BID’s area of operation. By giving BIDs the authority to finance local improvements, municipalities possess a more flexible and proactive vehicle to collaborate with entrepreneurs to restore the economic vitality of key municipal areas, such as downtowns, commercial districts and central business districts.

A BID may be created by petition of real property owners or by petition of business owners in a proposed district and must include any real property or business that benefits from improvements within the district.

Any real property or business located within a BID must pay a business-improvement benefit fee to the district. Exemptions to the benefit fee schedule include:

  • government-owned real property;
  • residential real property that is not multifamily residential rental property with at least four units or homeowners associations of multifamily ownership properties;
  • real property owned by a nonprofit corporation; and
  • residential real property, located within an existing district, that became eligible for a business improvement benefit fee assessment after the district was created.

The municipal governing body, upon adoption of an ordinance creating a district, must appoint a management committee that is responsible for the operation of the district in one of the following manners:

  • the council appoints an existing downtown, community or central business district revitalization nonprofit corporation that operates within the boundaries of the district, to administer and implement the business improvement district plan; or
  • the council appoints a management committee to administer and implement the business improvement district plan from nominees submitted by the owners of businesses and the owners of real property located in the district.
Enacted in 2009, the Infrastructure Development Zone (IDZ) Act, 5-17-1 NMSA 1978, allows for the creation of political subdivisions for the purpose of coordinating and financing infrastructure improvements and services. An IDZ can be within a municipality or county or overlap multiple jurisdictions. The IDZ can also be noncontiguous, provided the included parcels are within three miles of each other. An IDZ may only be established with the approval and consent of the affected local government, the county or the municipality.

Modeled after Colorado’s metropolitan districts, IDZs finance projects without tapping local government and state monies. IDZs may be used on development or redevelopment for commercial or residential purposes. The following infrastructure improvements and services may be financed by an IDZ:

  • Sanitary sewage systems
  • Drainage and flood-control systems
  • Water systems
  • Highways, streets, roadways, bridges, crossing structures and parking facilities
  • Trails, parks and open space
  • Landscaping
  • Public buildings and facilities for public safety and emergency services
  • Electrical and energy generation, transmission and distribution facilities
  • Natural gas distribution facilities
  • Lighting systems
  • Telecommunications and cable lines and equipment
  • Traffic control systems
  • Library and other public educational facilities
  • Solid waste and garbage collection

Once organized with a board of directors, the IDZ becomes a quasi-municipal corporation. The IDZ will have powers to enter into contracts, issue debt, and tax.

Construction projects may be financed from the following sources of revenue:

  • Proceeds received from the sale of bonds of the Infrastructure Development Zone
  • Money of the municipality or county contributed to the Infrastructure Development Zone
  • Annual property taxes or special assessments
  • State or federal grants or contributions
  • Private contributions
  • Fees, tolls and charges
  • Proceeds of loans or advances
  • Any other money available to the Infrastructure Development Zone by law

IDZs are precluded from requesting or receiving state capital-outlay monies.

The Local Economic Development Act (LEDA), 5-10-1 NMSA 1978, allows communities to provide assistance to qualified economic development projects while maintaining safeguards against the unauthorized use of public resources.

Economic development projects must create new job opportunities. After a local governmental entity creates and adopts an economic development plan, a qualifying business is required to submit a project application including all information the local government deems necessary. Projects are approved by ordinance, and the local government may negotiate with a qualifying business on the type and amount of assistance to be provided.

Up to 10 percent of annual general fund expenditures may fund economic development projects. New revenue may also be generated through the imposition of a local option gross receipts tax (LOGRT), specifically designed for economic development projects.

LEDA further allows municipalities and counties to enter into joint powers agreements to plan and support regional economic development projects, including investments in arts and cultural districts.

High front-end costs of on-site renewable-energy equipment, such as roof-mounted solar panels, often prevent many property owners from making these improvements. The demand for alternative financing procedures to promote the installation of renewable-energy equipment led to the Renewable Energy Financing District Act, 5-18-1 NMSA 1978. The statute authorizes a municipality or county to form a district for the purpose of encouraging and financing renewable energy improvements on property within the municipality or county.

In conjunction with various incentives already in place, like tax credits and green-energy rebates from utilities, a district helps individual property owners finance renewable-energy improvements over a 20-year period.

A district is responsible for setting the rate of and imposing a special assessment for the financing of the renewable energy improvements, including the costs of bond issuance, debt service and administrative costs of the district. Through the use of Qualified Energy Conservation Bonds (which have zero percent interest), renewable-energy improvements can pay for themselves, given that a property owner could receive more in energy savings and energy portfolio rebates than would be required to pay out in annual special assessment taxes.

Special assessments are placed only upon property within a district where improvements have been made.