The authority functions as a bank for government infrastructure projects, including water systems and buildings. It has come under greater scrutiny because its financial audit was faked earlier this year. The authority's former controller has been indicted for securities fraud and forgery.
Authority CEO John Gasparich told a legislative committee the agency's ability to make loans would be greatly reduced if tax revenues flowing to the authority were diverted to the state's main budget account. That's because the revenue helps strengthen the authority's credit rating.
The authority is independent of any state agency. It makes loans to local governments with bond proceeds and the loan repayments cover debt service on the bonds. The tax money, however, provides an extra credit guarantee and is available to pay bondholders if loan repayments aren't adequate.
Gasparich warned of a "firestorm" of legal problems if New Mexico tried to shift the tax money away from the authority to other purposes while the revenue is pledged for outstanding bonds—about $1.2 million currently.
The possibility of pulling back the tax revenues was raised in a memo by one of the governor's top budget officials last year as a suggestion for narrowing the focus of the authority to its main mission of helping smaller rural parts of the state with infrastructure.
But Gasparich said the reallocation of tax money "is not the administration's policy and never has been."
"There is not an effort on the administration's part to do this," he said.
The Legislature would have to approve such a change in the authority's financing. Earmarking tax money for the authority is critical for the agency to offer loans to local governments at lower costs than they might be able to get in the private financial markets, Gasparich said.
State law dedicates about $26 million a year from taxes on governmental services and goods, such as trash collection and the sale of water, to the authority.
Gasparich was named CEO in August as part of management shakeup in the wake of the audit scandal.
The former controller, in comments to the news media and securities investigators, has acknowledged forging the authority's financial statements to make it appear they had been audited by an independent accounting firm. So far there's no evidence that any money is missing, however. The financial statements were part of the material made available to investors earlier this year before the authority issued $24 million in bonds.
The authority plans to hire a permanent internal auditor, who will report to the agency's governing board rather than management.
"An internal auditor, in a sense, is the eyes and ears of the board so the board is aware of issues that may exist within the organization that management may not be doing or able to tell them about," said Gasparich.
The state's securities regulator on Thursday told lawmakers that the fake audit went undetected for months because of a complete breakdown of the authority's management and oversight.
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