Understanding Capital Outlay

1. What is a State Capital Outlay appropriation?

Capital Outlay is funding appropriated by the New Mexico Legislature for eligible capital projects. Funding may be used for purposes such as planning, designing, constructing, improving, acquiring, equipping, or furnishing public capital assets.

Receiving an appropriation does not mean the money is immediately available to spend.

2. Who administers Capital Outlay grants?

Each appropriation is assigned to a State agency for administration.

Many City of Albuquerque Capital Outlay grants are administered by the New Mexico Department of Finance and Administration (DFA). Other grants may be administered by Legislative Grantee Support Bureau (LGSB), NMDOT, the Environment Department, Aging and Long-Term Services Department, Economic Development Department, Cultural Affairs Department, or another State agency.

Requirements can vary depending on the administering agency.

3. What happens after the Legislature approves a Capital Outlay appropriation?

The general process is:

1. The appropriation is enacted into law.
2. The appropriation is assigned to a State administering agency.
3. The City provides required project information and documentation.
4. The State prepares a Grant Agreement.
5. Any Special Conditions are addressed.
6. The Grant Agreement is fully executed.
7. Required expenditure authorization, such as a Notice of Obligation (NoO), is obtained.
8. The City proceeds with eligible project expenditures.
9. Reimbursement requests are submitted to the State.
10. The grant is closed after the project and required reimbursements are complete.

The exact process may differ depending on the administering agency.

4. What is a Grant Agreement?

The Grant Agreement is the formal agreement between the State and the City governing the Capital Outlay appropriation.

It identifies important requirements including the authorized project purpose, funding amount, expenditure period, reporting requirements, reimbursement procedures, and other conditions.

5. What are Special Conditions?

Special Conditions are project-specific requirements that must be addressed before the State will fully authorize use of the grant.

Examples may include:

• Additional project details and expanded descriptions;
• Property ownership documentation;
• Lease or Use Agreements;
• Agreements involving nonprofit organizations;
• Documentation regarding ownership of equipment or other capital assets;
• Environmental or archaeological requirements;
• Matching or additional funding documentation;
• Affordable Housing Certifications; or
• Other legal or administrative requirements.

Special Conditions can significantly delay a project if they are not addressed early.

6. Is a Capital Outlay appropriation a check from the State?

No. Capital Outlay generally operates on a reimbursement basis.

The City incurs eligible project costs and then requests reimbursement from the State in accordance with the Grant Agreement.

7. Can Capital Outlay funding be used for anything related to the project?

No. Expenses must be consistent with the purpose authorized by the Legislature and comply with the Grant Agreement and applicable State and City requirements.

An expense may benefit the project but still be ineligible if it falls outside the authorized appropriation language (Scope of the project).

8. What is a reversion date?

The reversion date is the statutory deadline associated with the appropriation. Funds that are not properly expended or obligated within the applicable timeframe may revert to the State.

Because Capital Outlay projects can take significant time to develop, procure, and construct, project sponsors should monitor reversion dates throughout the life of the grant.

9. What is reauthorization?

Reauthorization is legislative action to modify an existing Capital Outlay appropriation.

Depending on the legislation, reauthorization may include technical scope changes but cannot change the project's purpose, also extend the expenditure period, change the administering agency, or make another authorized modification.

Reauthorization requires legislative action during the spring capital outlay session and should never be assumed to be automatic or guaranteed.

FOR CITY DEPARTMENTS

Managing a Capital Outlay Project

10. When can my department begin spending Capital Outlay funds?

Do not assume that an appropriation or even an executed Grant Agreement means expenditures can begin.

Departments should coordinate with CIP before entering into contracts, issuing purchase orders, beginning construction, or otherwise obligating State Capital Outlay funds.

For DFA-administered grants, a Notice of Obligation (NoO) is generally required before the applicable grant funds are obligated.

Expenses incurred too early may not be eligible for reimbursement.

11. What is a Notice of Obligation (NoO)?

A Notice of Obligation documents the City's proposed commitment of Capital Outlay funds toward an eligible project expense.

Supporting documentation may include:

• Contracts;
• Purchase orders;
• Construction agreements;
• Professional service agreements;
• Quotes or proposals; or
• Other documentation demonstrating the proposed obligation.

CIP coordinates the NoO submission process with the State.

12. Does an approved NoO mean we have received the money?

No.

An NoO authorizes the obligation of grant funds. It is not a reimbursement request and does not mean the City has received the funds.

After eligible costs are incurred and paid, reimbursement must still be requested from the State.

13. How does reimbursement work?

Generally:

City pays eligible expense → documentation is collected → reimbursement request is submitted → State reviews request → State reimburses the City.

Departments are responsible for providing timely and complete supporting documentation so CIP can process reimbursement requests.

14. What documentation should departments maintain?

Departments should maintain complete project records, including applicable:

• Contracts and purchase orders;
• Procurement documentation;
• Quotes and proposals;
• Invoices;
• Proof of payment;
• Approved NoOs;
• Project schedules;
• Construction documentation;
• Equipment inventories;
• Property documentation;
• Use Agreements; and
• Other documentation required by the State.

Good recordkeeping throughout the project makes reimbursement and grant closeout significantly easier.

15. What if the project scope changes?

Contact CIP before implementing the change.

A scope change could affect whether the proposed expenditure remains eligible under the legislative appropriation.

If the new scope falls outside the authorized purpose, legislative reauthorization may be necessary. But remember, significant change in purpose is not allowed. 

16. What if the project is running behind schedule?

Notify CIP as early as possible.

Do not wait until the reversion date is approaching. Depending on the circumstances, options may include accelerating eligible obligations or pursuing legislative reauthorization.

The earlier the issue is identified, the more options may be available.

17. Can we move unused Capital Outlay funding to another project?

Generally, no.

Capital Outlay funding is restricted to the purpose authorized by the Legislature. It cannot simply be transferred to another City project because funding remains available.

18. Who is responsible for managing the actual project?

The sponsoring City department remains responsible for project implementation, including procurement, contracts, construction, invoices, schedules, and other departmental responsibilities.

CIP assists with State grant administration and compliance, including Grant Agreements, Special Conditions, NoOs, reimbursement requests, reporting, and grant closeout.

FOR NONPROFITS & COMMUNITY PARTNERS

Capital Outlay Projects Sponsored Through the City

19. Can a nonprofit receive State Capital Outlay funding through the City?

In certain circumstances, yes.

However, when the City of Albuquerque is the governmental grantee, the Capital Outlay appropriation is not simply passed through to the nonprofit as a cash grant.

The City remains responsible for administering the State grant and ensuring compliance with applicable requirements.

20. Will the City give our organization the Capital Outlay funds?

Generally, no.

The City typically makes eligible purchases or expenditures for the approved project rather than transferring the State grant funds directly to the nonprofit.

The specific arrangement depends on the appropriation, project, ownership structure, and State requirements.

21. Can our nonprofit buy the equipment and then ask the City to reimburse us?

Do not make a purchase assuming that the City will reimburse it from Capital Outlay funds.

The City must comply with State requirements and its own procurement procedures. A purchase independently made by a nonprofit or other third party may not qualify for reimbursement.

Always coordinate with the sponsoring City department and CIP before purchasing equipment, signing a contract, or beginning work associated with a City-administered Capital Outlay appropriation.

22. Who owns equipment purchased with Capital Outlay funding?

When the City is the grantee and purchases equipment with Capital Outlay funding, the equipment or other capital asset is generally owned by the City unless another arrangement has been specifically authorized.

A nonprofit may be permitted to use the City-owned equipment through an approved Use Agreement or similar arrangement.

23. What is a Use Agreement?

A Use Agreement establishes the responsibilities of the City and the nonprofit when publicly funded assets are being used by a nonprofit organization.

Depending on the project, the agreement may identify:

• The public services being provided;
• The value of those services;
• The equipment or assets being provided for use;
• Ownership of the assets;
• Maintenance responsibilities;
• Permitted uses of the equipment or property; and
• Requirements when the agreement ends.

24. Why does the City need information about the services our nonprofit provides?

Capital Outlay involves public funding and public capital assets.

When a nonprofit uses City-owned property or equipment, documentation may be necessary to establish the public benefit being provided in exchange for use of those assets.

For this reason, nonprofits may be asked to document their services and assign a reasonable value to those services as part of a Use Agreement.

25. Why do we need an equipment list?

When Capital Outlay funds are used to purchase equipment or other capital assets, the City must be able to identify and track those assets.

An equipment exhibit may identify information such as the item description, quantity, value, location, and other identifying information.

26. Can our organization start the project while the paperwork is being completed?

Do not assume that work performed before the required agreements and approvals are in place will be eligible.

Starting work or making purchases too early can create reimbursement and compliance problems.

Coordinate with the sponsoring City department and CIP before proceeding.

FOR CITY COUNCIL & LEGISLATIVE OFFICES

Helping Capital Outlay Projects Succeed

27. What can Council offices do before requesting Capital Outlay funding?

One of the most helpful things Council offices can do is ensure that a project is clearly defined and reasonably ready to proceed.

Before requesting an appropriation, consider:

• Who will own the property or equipment?
• Who will manage the project?
• Is a nonprofit or other third party involved?
• Is the proposed expenditure a capital expense?
• Is the requested amount sufficient to accomplish a useful portion of the project?
• Can the project realistically proceed within the appropriation period?
• Does the proposed appropriation language accurately describe what needs to be accomplished?

CIP can assist with these questions before the legislative session.

28. Why is appropriation language so important?

The language enacted by the Legislature establishes what the funding can legally be used for.

Language that is too narrow may prevent the City from paying for necessary components of a project. Language that does not accurately describe the intended project can also create problems when the City attempts to obligate or spend the funds.

Carefully developing appropriation language at the beginning can prevent significant delays later.

29. Does legislative approval guarantee that the project can proceed?

No.

Legislative approval establishes the appropriation, but the project must still satisfy applicable State and City requirements.

Potential issues include:

• Property ownership;
• Special Conditions;
• Procurement requirements;
• Environmental requirements;
• Third-party agreements;
• Insufficient funding;
• Project readiness;
• Eligibility of proposed expenditures; and
• Reversion deadlines.

30. What happens if a Council-sponsored project is not moving?

Contact CIP for a status update.

CIP can help identify whether the project is waiting on:

• The State Grant Agreement;
• Special Conditions;
• Department action;
• Procurement;
• A Notice of Obligation;
• Project documentation;
• Reimbursement processing; or
• Another State or City requirement.

Identifying the specific roadblock is the first step toward resolving it.

31. Can Council Capital Outlay funding be redirected if the original project is no longer viable?

Not administratively.

If the desired use is outside the existing appropriation language, legislative reauthorization may be required.

Council offices should contact CIP as early as possible when considering a change so there is sufficient time to evaluate whether reauthorization is necessary.

BEFORE YOU SPEND — CONTACT CIP

The most important rule for State Capital Outlay is:

An appropriation is not the same as authorization to spend.

Before making a purchase, signing a contract, beginning construction, changing a project scope, purchasing equipment for a nonprofit, or otherwise committing Capital Outlay funds, contact the City of Albuquerque Capital Implementation Program (CIP).

Early coordination can prevent an otherwise eligible project expense from becoming ineligible for State reimbursement.