U.S. sues New Mexico over Immigrant Safety Act that endangers bonds

Bloomberg News

A New Mexico law that poses a threat to bonds a county sold for a detention facility is the target of U.S. Department of Justice litigation challenging its constitutionality and seeking to block its enforcement.  

The state's Immigrant Safety Act, which takes effect May 20, prohibits new, existing, extended or renewed state and local governmental agreements related to the detention of individuals for federal civil immigration violations.

Ahead of the law's effective date, Otero County commissioners replaced an intergovernmental service agreement for a bond-financed detention center with U.S. Immigration and Customs Enforcement that expired March 15 with a five-year, $283 million deal to avoid a default on a nearly $5.26 million debt service payment due April 1.

Revenue generated under ICE agreements since 2008 is the sole source of payment on outstanding bonds from a $62.305 million unrated jail project revenue bond issue the county sold in 2007 to finance the 1,096-bed facility. 

DOJ's motion for a preliminary injunction to halt the law's enforcement, which was filed Friday in U.S. District Court in New Mexico, warned the bonds are imperiled.

"If the (Otero County Processing Center) is not used for civil immigration detention purposes, Otero County will default on its payment obligations, harming its ability to borrow for similar purposes in the future, and leaving bondholders without repayment," the court filing said, adding the county would also be deprived of "revenue, jobs, productive use of its property, and economic activity." 

DOJ contends New Mexico's law should be invalidated because it unlawfully seeks to regulate the federal government and violates the contract clause.

"Our filings seek to halt the state's unconstitutional actions by preserving cooperation between federal, state, and local law enforcement and allowing federal immigration officials to enforce the law," Brett A. Shumate, U.S. Assistant Attorney General in the Justice Department's Civil Division, said in a statement. 

New Mexico Attorney General Raúl Torrez said his office will defend the act, which he called "a constitutional exercise of state authority."  

"The legislature made a considered judgment that New Mexico's government, its employees, and its publicly funded facilities should not be instruments of a detention system that has caused serious and preventable harm to people held within our borders," he said in a statement. "That is precisely the kind of policy judgment that belongs to the states."

An attempt by Torrez's office to invalidate Otero County's contract with ICE was rejected in April by the New Mexico Supreme Court.

On March 31, S&P Global Ratings revised its outlook on the county's A-minus underlying gross tax receipts revenue bond rating to negative from stable, citing large general fund deficits that could be exacerbated by the loss of the ICE contract.