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+Fiscal impact reports (FIRs) are prepared by the Le gislative Finance Committee (LFC) for standing finance
+committees of the Legislature. LFC does not assume responsibility for th e accuracy of these reports if they
+are used for other purposes.
+
+F I S C A L    I M P A C T    R E P O R T
+
+BILL NUMBER: House Bill 238
+SHORT TITLE: Independent Theater Sponsorship Program
+SPONSOR: Lujan
+LAST
+UPDATE:
+ ORIGINAL
+DATE:
+
+2/2/26
+
+ANALYST: Francis
+
+APPROPRIATION*
+(dollars in thousands)
+FY26 FY27 Recurring or
+Nonrecurring
+Fund
+Affected
+ 1,000.0 Nonrecurring General Fund
+*Amounts reflect most recent analysis of this legislation.
+
+ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT*
+(dollars in thousands)
+Agency/Program FY26 FY27 FY28 3 Year
+Total Cost
+Recurring or
+Nonrecurring
+Fund
+Affected
+EDD  Indeterminate
+but minimal
+Indeterminate
+but minimal  Nonrecurring General Fund
+Parentheses ( ) indicate expenditure decreases.
+*Amounts reflect most recent analysis of this legislation.
+
+Sources of Information
+
+LFC Files
+
+Agency or Agencies Providing Analysis
+Economic Development Department
+Department of Cultural Affairs
+
+Agency or Agencies That Were Asked for Analysis but did not Respond
+NM Department of Justice
+
+SUMMARY
+
+Synopsis of House Bill 238
+
+House Bill 238 (HB 238) appropriates $1 milli on from the general fund to the Economic
+Development Department (EDD) to be expende d over fiscal years 2027 through 2029 for the
+independent theater sponsorship program.
+
+HB 238 creates a three-year pilo t program to provide “sponsorsh ip payments,” or grants, to
+independent theaters. EDD will administer the project and provide grants up to $2,000 per month
+for an eligible independent theater based on th e theater’s financial capacity, operating capability,
+House Bill 238 – Page 2
+
+and potential for matching grants and sponsorships.
+
+EDD will develop and promulgate rules for th e application process and the evaluation of
+applications. EDD will also evaluate the fisc al impact of the program on municipal business
+districts and report on the program to interim legislative committees by November 1 of each year
+the program is in operation with a final report due on October 1, 2029, enumerating the outcomes
+and recommendations for the program.
+
+HB 238 defines eligible participan ts as independent theaters that are in a municipal business
+district that participates in the Main Street program and is designated as an arts and cultural
+district. The theater must be owned by a person that owns only one theater.
+
+The effective date of this bill is July 1, 2026.
+
+FISCAL IMPLICATIONS
+
+The appropriation of $1 million t housand contained in this bill is  a nonrecurring expense to the
+general fund. Although this bill does not specify future appropriations, multiyear appropriations,
+particularly if used to fund services and those services perform well, create an expectation the
+program will continue in future fi scal years; therefore, this cost could become recurring after the
+funding period.
+
+Assuming the grants begin January 1, 2027, after a six-month period to establish the rules and
+award the first grants, the program could suppor t 16 theaters over the pilot period. Each theater
+would receive $60,000 in funding from EDD (30 months x $2,000). However, there are only 13
+arts and cultural districts, which are affiliated with the NM Main Streets program.
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+
+SIGNIFICANT ISSUES
+
+HB 238 states that the goal of the sponsorship  program is to demons trate whether supporting
+independent theaters will help revitalize municipal business districts. NM Department of Cultural
+Affairs (DCA) suggests HB 238 woul d benefit these theaters by ma king them more competitive
+with larger chain theaters and would benefit downtown business districts by attracting people to
+the area.
+
+EDD states that independent theaters “act as vital economic anchors for commercial districts,
+driving significant foot traffic to surrounding rest aurants and retail stores while fostering unique
+community identity.” The NM Main Street program also has the Historic Theaters Initiative for
+publicly owned historic theaters in arts and cultural districts.
+
+Other grants are available to Arts and Cultura l Districts. In October 2025, grants of up to
+$100,000 were awarded to ten districts under the ACD Pilot Grant program.
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-HOUSE BILL 238
-57TH LEGISLATURE - STATE OF NEW MEXICO - SECOND SESSION, 2026
-INTRODUCED BY
-Tara L. Lujan
-AN ACT
-RELATING TO ECONOMIC DEVELOPMENT; CREATING THE INDEPENDENT
-THEATER SPONSORSHIP PROGRAM AS A THREE-YEAR PILOT PROJECT TO
-PROVIDE SPONSORSHIP PAYMENTS TO INDEPENDENT THEATERS; PROVIDING
-FOR PROGRAM ELIGIBILITY, PROGRAM TERMS AND REPORTING
-REQUIREMENTS; MAKING AN APPROPRIATION.
-BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
-SECTION 1.  [NEW MATERIAL] PILOT PROJECT--INDEPENDENT
-THEATER SPONSORSHIP PROGRAM--ELIGIBILITY--PROGRAM TERMS--
-REPORTING AND EVALUATION.--
-A.  The "independent theater sponsorship program" is
-created as a three-year pilot project to provide sponsorship
-payments to independent theaters and measure the effect of
-sponsorship payments on the economic development of municipal
-business districts.  The independent theater sponsorship
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-program is intended to demonstrate that sponsorship payments to
-independent theaters help to maintain the viability of
-independent theaters and revitalize municipal business
-districts.  The independent theater sponsorship program shall
-be administered by the economic development department.
-B.  An eligible participant in the independent
-theater sponsorship program is a theater that is:
-(1)  located in a municipal business district
-that is:
-(a)  participating in a main street
-program pursuant to the Main Street Act; or
-(b)  designated as an arts and cultural
-district pursuant to the Arts and Cultural District Act; and
-(2)  owned by a person that owns only one
-theater.
-C.  Subject to appropriation, the economic
-development department shall determine which independent
-theaters are eligible to participate in the independent theater
-sponsorship program and the amount of independent theater
-sponsorship payments.  The amount of a sponsorship payment
-shall be individualized for each participant and adjusted based
-on the participant's financial capacity, operating capability
-and sponsorship opportunities and the availability of matching
-public or private funds; provided that a state sponsorship
-shall not exceed two thousand dollars ($2,000) per month.  A
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-sponsorship payment may be expended on capital improvements or
-operating expenses, as provided by rule.
-D.  The economic development department shall:
-(1)  promulgate rules for the form and manner
-of sponsorship applications, procedures and criteria for
-reviewing applications, the methodology for evaluating
-potential participants and sponsorship obligations of
-participants; and
-(2)  evaluate the fiscal impact of the
-independent theater sponsorship program on municipal business
-districts.
-E.  The economic development department shall report
-to the appropriate interim legislative committees by no later
-than November 1 of each year the independent theater
-sponsorship program is in operation on the number and locations
-of participants and the amount of sponsorship payments to
-participants and matching funds received from participants.  No
-later than October 1, 2029, the economic development department
-shall provide a final report to the legislative finance
-committee and the appropriate interim legislative committee on
-the outcomes of the program for the participants, the fiscal
-impact of the program on municipal business districts and other
-recommendations that the economic development department deems
-appropriate.
-SECTION 2.  APPROPRIATION.--One million dollars
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-($1,000,000) is appropriated from the general fund to the
-economic development department for expenditure in fiscal years
-2027 through 2029 for the independent theater sponsorship
-program.  Any unexpended balance remaining at the end of fiscal
-year 2029 shall revert to the general fund.
-SECTION 3.  EFFECTIVE DATE.--The effective date of the
-provisions of this act is July 1, 2026.
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-.233034.1
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+PERFORMANCE IMPLICATIONS
+
+1 MainStreet - New Mexico MainStreet
+2 Creative Industries announces first round awardees of ACD Pilot Grant program – New Mexico Arts & Cultural
+Districts
+House Bill 238 – Page 3
+
+EDD notes there may be anti-don ation clause issues unless the grants were structured as a
+contract:
+One primary legal concern wi th HB 238 is whether or not  it violates the State
+Constitution’s Anti-Donation Clause. The independent theater sponsorship payments,
+however, could potentially be facilitated through a service contract with the theater
+providing advertising and mark eting services to the Econo mic Development Department
+in return for the sponsorship payments.
+
+ADMINISTRATIVE IMPLICATIONS
+
+The New Mexico MainStreet Program, enacte d by the Legislature in  1985, focuses on the
+revitalization of central business districts in New Mexico communities based on the preservation
+and rehabilitation of existing st ructures and development of management techniques. Since
+FY21, EDD has received $34.2 million in MainStr eet capital funding. In FY25, MainStreet
+facilitated the rehabilitation of 259 buildings and private sector  investment of approximately $72
+million into real estate in Main Street districts. For FY25, the Le gislature increased the agency’s
+budget to support the MainStreet Program by $80 thousand for technical contracts and $110.5
+thousand in personnel costs for 1 FTE.  EDD wa s appropriated $4 million for creative industries
+grants in FY 2026.
+
+EDD has highlighted administrative issues:
+Development, administration, and implementation of the pr ogram along with reporting
+requirements will require a significant am ount of staff time  for the Economic
+Development Department and may necessitate the need for an additional FTE to manage
+the program. HB 238 requires the Economic Development Department to promulgate
+rules for this program. Developing rules for a pilot program could take up to or greater
+than six-months, creating a time gap befo re the department can deploy funds. The
+department recommends flexibility to develop a department policy to guide the process.
+
+TECHNICAL ISSUES
+
+It is not clear if EDD can use some of the appropriation to implement and administer the
+program. If the intent is  for the entire appropria tion to fund grants, that  should be explicit.
+Alternatively, a specific amount or percentage to defray costs could be added.
+
+NF/dw