A. The proceeds derived from the issuance of any refunding bonds under the provisions of Sections 6-15-11 through 6-15-22 NMSA 1978, shall first be either immediately applied to the payment, or redemption and retirement of the bonds to be refunded and the cost and expense incident to such procedures, or shall immediately be placed in escrow to be applied to the payment of said bonds upon their presentation therefor and the costs and expenses incident to such proceedings. Any money remaining after providing for the payment of the refunded bonds and any expenses and costs incident therewith shall be credited against the initial or subsequent levies required by Section 6-15-14 NMSA 1978 and deposited to the special fund of the political subdivision to be used to pay maturing principal and interest on the refunding bonds.

B. Any such escrowed proceeds, pending such use, may be invested or, if necessary, reinvested only in direct obligation [obligations] of the United States of America, or obligations guaranteed by the United States of America, maturing at such times as to ensure the prompt payment of the bonds refunded under the provisions of this article and the interest accruing thereon. For the purposes of this section, obligations guaranteed by the United States of America shall include but not be limited to the following: farmers home administration certificates of beneficial ownership, export-import bank certificates of beneficial interest, export-import bank participation certificates, export-import bank debentures, government national mortgage association participation certificates and debentures and small business administration debentures.

C. Such escrowed proceeds and investment [investments], together with any interest to be derived from such investments, shall be in an amount which at all times shall be sufficient to pay the bonds refunded as they become due at their respective maturities or as they are called for redemption and payment on prior redemption dates, as to principal, interest, any prior redemption premium due, and any charges of the escrow agent payable therefrom; the computations made in determining such sufficiency shall be verified by a certified or registered public accountant.

D. For the purpose of implementing the provisions of this article, the governing body shall have the power to enter into escrow agreements and to establish escrow accounts with any qualified depository located within the state of New Mexico, which is a member of the federal deposit insurance corporation, under protective covenants and agreements whereby such accounts shall be fully secured by direct obligations of the United States of America or obligations guaranteed by the United States of America or shall be invested in such direct obligations, or guaranteed obligations in such amounts as will be sufficient, and maturing at such times, so as to ensure the prompt payment of the bonds refunded, and the interest accruing thereon, under the provisions of Sections 6-15-11 through 6-15-22 NMSA 1978. All banks are authorized and directed to give such security.

E. In no event shall the aggregate amount of bonded indebtedness of any county, municipality or school district exceed the maximum allowable amount as determined pursuant to the statute applicable to such county, municipality or school district.

F. The issuance of refunding bonds by any county, municipality or school district for the purposes and in the manner authorized by this article or under the provisions of any other law thereunto enabling, shall never be interpreted or taken to be the creation of an indebtedness such that the same would require the approval of the qualified electors of the county, municipality or school district, and no such approval shall be required for the issuance of such refunding bonds except as is specifically required by the law under which said refunding bonds are sought to be issued or have been issued.

G. No bonds may be refunded under the provisions of Sections 6-15-11 through 6-15-22 NMSA 1978 unless the holders thereof voluntarily surrender said bonds for immediate exchange or immediate payment or unless said bonds either mature or are callable for redemption prior to their maturity under their terms within twenty years from the date of issuance of the refunding bonds and provision shall be made for paying or redeeming and discharging all of the bonds refunded within said period of time.

History: 1953 Comp., § 11-6-34.1, enacted by Laws 1963, ch. 235, § 1; 1975, ch. 326, § 6; 1981, ch. 338, § 1.

Bracketed material. — The bracketed material was inserted by the compiler and is not part of the law.

Compiler's notes. — The words "this article" refer to Chapter 11, Article 6, 1953 Comp., the operative provisions of which are presently compiled as 6-6-7 to 6-6-18 and 6-15-1 to 6-15-28 NMSA 1978.

Placing proceeds in escrow does not increase indebtedness. — Where proceeds of municipal bonds were to be placed in escrow and invested in United States bonds for the sole purpose of paying off indebtedness on existing municipal bonds, the refunding bonds could not be considered as an increase in the city's indebtedness within N.M. Const., art. IX, § 12 and N.M. Const., art. IX § 13, even though some 10 years would lapse between issuance of refunding bonds and final payment of original bonds, and though original bonds would not be paid immediately upon their initial callable date. City of Albuquerque v. Gott, 1964-NMSC-027, 73 N.M. 439, 389 P.2d 207.

Principal amount greater than principal amount of outstanding bonds being refunded. — Subject to the approval of the department of finance and administration, a board of education may issue general obligation refunding bonds in a principal amount that is greater than the principal amount of the outstanding bonds being refunded, provided the proceeds of the refunding bonds are used only for the purpose of refunding existing school district general obligation indebtedness, as provided by law, and not for new capital outlay projects, operating costs of a school district or other purposes besides refunding. 2001 Op. Att'y Gen. No. 01-03.