With nearly $5 billion unspent, legislative staff is recommending tighter controls on large public projects
Billions in public funds intended to pay for new buildings, vehicles and equipment for communities across New Mexico have not been spent, and legislative staff is recommending state officials create a new state office to help complete the projects.
At the end of September, there was nearly $5 billion in unspent money earmarked for 4,900 projects funded by the state’s “capital expenditures” program, state analyst Callie Carswell told the Legislative Finance Committee on Tuesday.
Lawmakers pass a capital expenditures bill each year to pay for all or part of new infrastructure or construction — things like buildings, parks, roads or water upgrades.
There are 766 active projects that lawmakers have allocated at least $1 million for fiscal year 2024, representing a total of $3.6 billion, according to Data Produced by legislative staff.
Of these projects, 415 are on schedule, 170 are behind schedule, and 181 have no activity, the local governments responsible have not sold bonds needed to raise funds, or face “significant obstacles to completion,” according to the report. .
These include, for example, the relocation of the Guadalupe County Courthouse, a few senior center projects, several projects with the City of Santa Fe, funds for road construction and funds for a therapeutic group home run by New Mexico Children’s Youth and Family Division.
Only 11 projects funded at more than $1 million were completed or were granted an extension, according to LFC data. This includes the Vladim Museum of Contemporary Art in Santa Fe, upgrades to the Albuquerque Police Department’s evidence lab, an Albuquerque Fire Department vehicle, and building upgrades at Eastern New Mexico University.
Earlier this year, Carswell told lawmakers that construction costs were rising, and contractors were having difficulty attracting and retaining qualified workers to meet the state’s construction demand.
The situation remains unchanged, she said in her update on Tuesday.
All 1,400 projects approved by lawmakers in the last legislative session were funded with money from the state’s general fund, the largest single fund of general funds, Carswell said.
The source of the funds is important because the law authorizing the spending requires each capital expenditure project to spend at least 5% of the funds within one year. When that doesn’t happen, the money is pulled back into the general fund, Carswell said.
Rep. Jack Chatfield (R-Mosquero) asked how paying for capital expenditure projects using the general fund instead of selling bonds would affect the state’s rating from bond rating agencies.
Carswell said this does not put the state in a bad position.
But she warned that if state officials borrow too much money to pay for capital spending projects, it could put them in a worse position with rating agencies.
“It’s an issue that they had previously reported to the Finance Board as something they were concerned about,” she said.
She suggested lawmakers change state law to lower the maximum amount they can borrow each year to pay for these projects.
She said three major state agencies administered most of the capital expenditure funds: the Department of Finance and Administration, the Department of Indian Affairs and the New Mexico Department of the Environment, and each issued grant agreements for eligible projects.
Communities now need to pursue a better path to signing those agreements and spending capital expenditure funds, Carswell said. She said lawmakers could use data on projects that received at least $1 million to contact local governments and encourage them to take action.
Liverpool expects lawmakers to get billions more in capital expenditure requests during the 2024 session. If those projects are approved, Carswell said, they will likely face “a saturated, if not oversaturated, construction market, where it is difficult to start new things and complete new ones.” that are already in preparation.”
Anticipating higher costs, some state agencies and higher education institutions have already requested more money in addition to their original requests for next year. This means local governments are already facing significant changes in project costs expected over the summer and fall, Carswell said.
Local governments and others who received these capital expenditure funds have until Nov. 22 to provide information to state agencies about the unexpectedly high costs of existing projects, she said.
The purpose of these reports is to inform Legislative Finance Committee analysts of projects that are stalled, delayed, or facing challenges due to cost increases. Liverpool expects to present the results of that survey to lawmakers in December, Carswell testified.
In 2025 and beyond, Carswell said she recommends lawmakers consider setting an earlier deadline for local capital spending requests, and creating a basic way to vet and track projects that get state money.
This could allow lawmakers to fund planning and design separately from construction, so that larger sums of money are allocated to major construction projects that have proper plans and are ready to go, she said.
House Appropriations and Finance Committee Chairman Rep. Nathan Small (D-Las Cruces) said lawmakers have asked Gov. Michelle Lujan Grisham’s administration to consolidate capital spending requests, and that “there is openness from the executive branch to do that.”
As uncertainty grows about future oil production, Small said, the state’s entire system for funding capital spending projects comes into greater question, because any variation in that industry impacts the entire program.
Small said he is reluctant to severely reduce the amount of money provided for capital projects.
“But it is clear that we need to find other financing opportunities and other sources to support capital (spending),” he said.