By CARINA JULIG
The Santa Fe New Mexican

Katie Olivant, managing director of New Mexico Actors Lab, was encouraged when the city of Santa Fe began seeking requests from local nonprofits for music and film equipment that had sat unused for years in buildings on the midtown campus.

The theater company asked for microphone stands and a subwoofer. 

City officials reached out at one point to let her know the group could pick up the equipment, she said — but then went radio silent when she tried to arrange a pickup time.

“I sent an email asking for further information, and they said they would have to get back to me,” Olivant said.

Officials had discovered their plan to distribute property left at the city-owned former college campus clashed with a provision in the New Mexico Constitution that long has vexed local governments and nonprofits: the anti-donation clause.

The more than century-old provision prohibits state and local government entities from making direct donations to any private person, business or organization, with a few exceptions.

Some donations of assets left behind at midtown when the Santa Fe University of Art and Design shut down in 2018 remain on pause while the city Arts and Culture Department explores its options to legally dispose of the equipment, such as long-term loans.

Meanwhile, two pieces of legislation introduced last week into the legislative session underway in Santa Fe would allow voters to decide on a constitutional amendment that would entirely undo the anti-donation clause.

Supporters of the proposal, including its sponsor, Rep. Andrea Romero, D-Santa Fe, say the legislation is needed to bring New Mexico into the 21st century.

“We need to remove this impediment and replace it with something that works,” Romero said in a Thursday interview.

Others, including State Auditor Joseph Maestas, argue the anti-donation clause is a “critical safeguard” against fraud and that the legislation would significantly upend some state government functions.

“The intent was to stop unchecked handouts to railroads, but I believe its purpose remains just as relevant today,” Maestas said of the provision. “The last thing we want is to blur the line between public benefit and private profit.”

Long-standing legislation

Disbursement of the old art school equipment has been a long process, but the Arts and Culture Department only recently realized its plan to give the last of the assets to private nonprofits violated the law.

Arts and Culture Director Chelsey Johnson said her agency had created a three-tiered donation system to equitably distribute the music and film equipment — first to city agencies, then to local public schools and finally to a handful of grassroots groups. It was in line with a new city policy on property disposal that included nonprofits.

An inquiry from The New Mexican about the process triggered a legal review, which found a snag when it came to contributing to private nonprofits.

Johnson described the discovery as “a crushing blow.”

The anti-donation clause comes up “all the time” in New Mexico’s local governments, City Attorney Erin McSherry said.

Her office regularly advises department leaders on the law’s effect on their work. She said part of determining if a donation is improper hinges on whether the move is part of an agency’s core purpose.

For instance, she said, “We’re not donating streets — we’re providing public streets because that’s part of our mission.”

A presentation to state lawmakers in December, prepared by Jeremy Farris, executive director of the New Mexico State Ethics Commission, said the anti-donation clause was part of the state’s original 1912 constitution but also was present in drafts dating back to 1850. 

The clause prohibits government entities from making gifts or using credit to aid private entities, and was put in place during an era when many Western states were struggling to pay back bonds for the creation of railroads. Over time, the New Mexico Legislature has added exemptions, including the Local Economic Development Act, which provides grants to businesses; housing aid; assistance for indigent medical care; college scholarships; and capital outlay, or funding for infrastructure.

McSherry noted the exemption for aid to the sick and indigent allowed the city to provide direct assistance during the COVID-19 pandemic.

Whether the anti-donation clause makes sense in 2025 is the subject of some debate. Farris’ presentation outlined several risks of repealing it:

• Government “picking winners” by providing subsidies to businesses without a commensurate public benefit.
• More pressure on ethics and disclosure laws: “Note that many of these laws do not exist at the local level, and many elected state and local officials have business and nonprofit affiliations,” the presentation states.
• Weakening government capacity by subsidizing nonprofits at a scale to fulfill government functions.

Relic or guardrail?

Johnson described the anti-donation clause as “the bane of every nonprofit’s existence.”

Along with the theater group, community nonprofits that had hoped to receive donations from the midtown campus include the Santa Fe Playhouse, Vital Spaces and the Santa Fe Indigenous Center.

Karen Buller, board chair of the Indigenous center, said she was disappointed it wouldn’t be receiving the donations, but she is more frustrated by the broader limitations the provision imposes on nonprofits.

The center can’t receive money directly from the Legislature, but instead must make requests through other entities, such as the state Indian Affairs Department. 

“We don’t always get that money,” Buller said.

The Indigenous center supports two pieces of legislation that would repeal the anti-donation clause, she added, noting she believes the move is particularly critical as the future of federal aid programs remain uncertain under the Trump administration.

“So much money and services are being taken away from poor and needy people,” Buller said. “We hope this would be able to give it back.”

The two legislative proposals would work in tandem.

House Joint Resolution 11 — the constitutional amendment appealing the clause — is sponsored by Romero and Reps. Kathleen Cates, D-Rio Rancho; Christine Chandler, D-Los Alamos; and Patricia Roybal Caballero, D-Albuquerque.  House Bill 290 — a replacement for the provision — is sponsored by Romero, Cates and Chandler.

Romero described the anti-donation clause as a relic of the robber baron era in New Mexico.

“We are well beyond those days and need to be able to invest in the various projects, programs, nonprofits and work that is being done all across the state,” she said.

She said the clause imposes a significant burden on local governments by requiring them to serve as fiscal agents for nonprofits, and noted administrative fees for fiscal agencies eat into money that could be going to directly to projects serving people.

HB 290, the Vibrant Communities Act, would create a new program in the Department of Finance and Administration that could distribute legislative allocations to nonprofits working toward a public purpose, and would put in place what Romero called guardrails to ensure the “robber barons of the 21st century” don’t take advantage of the clause’s repeal.

Both pieces of legislation have been sent to the House Government, Elections and Indians Affairs Committee, where Romero said she expects them to be heard soon.

At a time when federal funding is uncertain, Romero said the state should take the opportunity to repeal the anti-donation clause instead of continuing to carve out exemptions.

“The state is in a strategic place to make really important investments in our future, and while we’re doing that, we need to really think about how these systems work,” she said.

Romero suggested the legislation had gained wide support, adding Senate Majority Leader Peter Wirth, D-Santa Fe, would be signing on as a sponsor.

Wirth said through a spokesperson, however, he was continuing to monitor the legislation and had yet to make a decision.

Fiscal impact reports on the proposals have not yet been submitted.

But Maestas said as written, the measures would overwhelm the capacity of his office because each entity receiving money would need to be audited.

The State Auditor’s Office would not be able to keep up with the volume that would create, he said.

“There’s no way my office could accommodate this unscalable workload, and if that’s the case, then that could seriously jeopardize accountability of public monies,” he said.

Maestas said nonprofits already have an option to access public money through government entities, a process that prevents accountability risks.

“The anti-donation clause is a very effective guardrail that prevents fraud, waste and abuse of public monies,” he said.

Searching for a workaround

Johnson said the anti-donation clause is a source of frustration — for her department and for nonprofits.

“It seems to me the result means that you can throw things away more easily than you can give them away,” she said.

A handful of music and film items are left at the midtown campus, including half a dozen pianos and six to eight pieces of stereo equipment. With the exception of one baby grand piano, Johnson said, none of it is worth more than several hundred dollars.

The department is trying to find a legal workaround, such as giving goods to nonprofits through a long-term loan agreement, holding a public auction or simply leaving the assets with the company purchasing the campus property where they were left. The buildings being emptied by the city will become part of Aspect Media Village, a massive film studio development that includes housing.

Johnson said a public auction likely would be too costly because the city would have to move the equipment and hire an auctioneer.

Anything left on the six parcels of property being sold for the film studio project, including Benildus Hall and Garson Hall, will automatically belong to Aspect after the city sale closes.

Johnson said she hasn’t spoken to Aspect developer Philip Gesue about what he plans to do with anything left behind, but said one possibility is that the studio could donate the items to the nonprofits instead of the city making the donations.

“It’ll be up to him,” she said. “But we will certainly, if it comes to that, give him a list of the contact information of the interested parties.”