Can a New Mexico charter school's capital-outlay project include both its land lease-purchase cost and new school construction?

Plain-English summary

New Mexico's Public School Facilities Authority asked how to calculate project cost when a charter school already had a lease-purchase agreement for undeveloped land and sought capital-outlay funding for permanent buildings on that land.

Attorney General Raúl Torrez concluded that the Public School Capital Outlay Act did not cap the total project cost at the purchase option in the land-only agreement. The calculation could include both the amount needed to acquire the land and the remaining cost of building the school facility.

When a lease-purchase agreement finances one component, its contribution to total project cost is the total payment needed to exercise the purchase option and acquire title. Other financial instruments may fund the rest of the facility. This reading matched the Act's focus on safe, functional, and durable learning environments and its repeated treatment of a facility as a built environment rather than bare land.

The opinion also relied on the Act's equal treatment of charter schools and other public schools. It rejected an argument based on the statute's singular word "agreement" because New Mexico's drafting rule provides that singular terms include the plural.

What this means for you

Charter school leaders

An existing lease-purchase agreement for undeveloped land does not, by itself, limit total project cost to the land purchase option. Under the opinion, the project calculation can also include the cost of permanent school structures.

Public School Capital Outlay Council

For a project using a land lease-purchase agreement, the agreement's purchase option is one component of total project cost. The opinion allows other financing instruments to cover construction components, while the Council continues to evaluate applications under the Act's funding criteria.

Public School Facilities Authority staff

The opinion reads "facility" to include land and built structures. Calculating a project only from the cost of bare land would not reflect the Act's stated purpose or its provisions covering school building systems.

School finance and education attorneys

The analysis rejects a single-instrument limit. It uses the statutory definition of total project cost, the Act's broader facility provisions, and the rule that singular terms include plural ones.

Common questions

Q: Does a land-only lease-purchase agreement cap a charter school's capital-outlay project cost? A: No. The AG concluded that total project cost may include the land purchase option plus the cost to build the school facility.

Q: How is the lease-purchase part of the project valued?
A: The opinion uses the total payments due under the agreement to acquire title, described as the purchase option reduced according to lease payments made.

Q: Can the remainder of the project use another financing instrument? A: Yes. The opinion concluded that other instruments may finance the components not covered by the land lease-purchase agreement.

Q: Are charter schools treated differently from other public schools for these standards? A: No. The opinion cited provisions requiring the Council to apply its standards to charter schools to the same extent as other public schools and defining school districts to include state-chartered charter schools.

Q: Does the opinion guarantee a particular grant amount?
A: No. It interprets what can be included in total project cost. The Council still considers applications and makes awards under the Act's criteria.

Background and statutory framework

The Public School Capital Outlay Act, NMSA 1978 §§ 22-24-1 to -12, governs state capital funding for school districts and charter schools. Section 22-24-5(B)(7)(d) defines total project cost as the amount necessary to complete a project, less insurance reimbursement. Section 22-24-5(D) defines lease-purchase agreements and addresses the payments used when a school will acquire title to a facility.

The opinion read those provisions alongside the Act's purpose, definitions of building systems, and equal-treatment rules for charter schools. It used State v. Moya and State v. Nance for avoiding absurd statutory readings and following legislative purpose. State v. Torres and NMSA 1978, § 12-2A-5(A) supported reading singular and plural terms flexibly rather than treating "agreement" as a one-instrument cap.

Citations and references

Statutes:

• NMSA 1978 §§ 22-24-1 to -12 (1973, as amended through 2025)
• Section 22-24-5(D)
• Section 22-24-5(B)(7)(d)
• NMSA 1978, § 12-2A-5(A) (1997)

Cases:

• State v. Moya, 2007-NMSC-027, ¶ 6, 141 N.M. 817
• State v. Nance, 1966-NMSC-207, ¶¶ 15–16, 77 N.M. 39
• State v. Torres, 2022-NMSC-024, ¶ 22

Source

• Landing page: https://nmdoj.gov/publication/opinion/2026-10-opinion-lease-purchase-agreements-under-the-public-school-capital-outlay-act/
• Original PDF: https://nmdoj.gov/wp-content/uploads/Attorney-General-Opinion-2026-10-Lease-purchase-agreements-under-the-Public-School-Capital-Outlay-Act.pdf

Original opinion text

September 3, 2026
OPINION
OF
RAÚL TORREZ
Attorney General

Opinion No. 2026-10

To:

Marcos Trujillo, Executive Director, Public School Facilities Authority

Re:

Attorney General Opinion – Lease purchase agreements under the Public School Capital Outlay Act Question

If a charter school has entered into a lease purchase agreement for land but without built structures, does the Public School Capital Outlay Act, NMSA 1978 §§ 22-24-1 to -12 (1973, as amended through 2025), limit any award by the Public School Capital Outlay Council to the value of the charter school’s existing land-only lease purchase agreement? Or does such an award extend to the value of the land-only lease purchase agreement plus the cost to build structures on the land? Answer Under the Public School Capital Outlay Act, the “total project cost” includes both the purchase option to acquire land under a lease purchase agreement and remaining costs to build the facility. Background The Public School Capital Outlay Council is responsible for allocating capital outlay funding to school districts and charter schools “to promote and maximize safe, functional and durable learning environments in order for the state to meet its educational responsibilities and for New Mexico’s students to have the opportunity to achieve success.” Section 22-24-2; § 22-24-5(A);
§ 22-24-6. Beneath the Council sits the Public School Facilities Authority, which staffs and assists the Council. Section 22-24-9. The Council considers applications for capital outlay funding from school districts and charter schools, and consistent with the Act’s criteria for evaluating applications, makes awards to school districts based on need. Section 22-24-5.

New Mexico Department of Justice
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Analysis
Schools, particularly charter schools, often use lease purchase agreements to acquire new facilities without incurring debt.1 A lease purchase agreement is a “financing agreement that provides for lease payments with an option to purchase for a price that is reduced according to lease payments.” Section 22-24-5(D). To make a grant, the Council first determines the “total project cost,” which is the “total amount necessary to complete the public school capital outlay project less any insurance reimbursement received by the school district for the project.” Section 22-24-5(B)(7)(d). The total project cost is the starting point for calculating a capital outlay grant. See § 22-24-5(B)(6). When a school seeks to acquire a facility via a public school capital outlay project using a lease purchase agreement, the “total project cost shall equal the total payments that would be due under the agreement if the school district or charter school would eventually acquire title to the facility.” Section 22-245(D)(3). You asked, if a charter school already has a lease purchase agreement for the naked, undeveloped land where it plans to build permanent school buildings, does Section 22-24-5(D) cap the total project cost (and relatedly, the grant) at the purchase option under the existing lease purchase agreement (hereinafter, “single instrument reading”)? Or does Section 22-24-5(D) permit the total project cost to include the cost of both the purchase option for the naked, undeveloped land and the cost to build permanent structures (hereinafter, “multiple instrument reading”)? The best reading of Section 22-24-5(D) is the multiple instrument reading, that is, where a component of the total project cost is a lease purchase agreement, the application should use the agreement’s purchase option (the “option to purchase for a price that is reduced according to lease payments made,” § 22-24-5(D)) as the component of the total project cost due to whatever was financed with a lease purchase agreement. Other instruments can be used to finance the remainder of the total project cost. To start, in any question of statutory interpretation, we must “give effect to the Legislature’s intent by ‘adopting a construction which will not render the statute’s application absurd or unreasonable,’ and we construe the statute ‘according to its obvious spirit or reason.’” State v. Moya, 2007NMSC-027, ¶ 6, 141 N.M. 817 (quoting State v. Nance, 1966-NMSC-207, ¶¶ 15–16, 77 N.M. 39). The Public School Capital Outlay Act’s text lays its purpose clear. The Act funds the “design, construction and maintenance of school sites and facilities [to] encourage, promote and maximize safe, functional and durable learning environments.” Section 22-24-2. Bare land is not a “safe, functional and durable learning environment[].” See id. Other parts of the Act reinforce the reading that the total project cost to “acquire title to a facility” encompasses both land and built structures. Section 22-24-5(D)(3). For example, the Act refers to a “building system,” which is defined as the “set of interacting parts” that are “component[s] of a 1

The Act makes charter schools eligible for awards just like other school districts. Section 22-243(J). 2

facility” and that together “make[] up an entire integrated facility, including roofing, electrical distribution, electronic communication, plumbing, lighting, mechanical, fire prevention, facility shell, interior finishes, heating, ventilation and air conditioning systems and school security systems . . . .” Section 22-24-3(B). The Act repeatedly references the built environment, not just land. See, e.g., § 22-24-4(L) (demolition); § 22-24-4.3 (roof repair). And, the word “facility” can mean “something . . . that is built, installed, or established to serve a particular purpose.” Facility, Merriam-Webster, https://www.merriam-webster.com/dictionary/facility (last visited Aug. 10, 2026). For charter schools specifically, the multiple instrument reading is consistent with other provisions of the Act that intend to treat charter schools on equal footing with school districts. Section 22-245(B)(2)(a) (“[T]he council shall apply the standards to charter schools to the same extent that they are applied to other public schools.”); § 22-24-3(J) (“‘[S]chool district’ includes state-chartered charter schools . . . .”). In sum, the Legislature intended public school capital outlay projects to encompass school buildings and classrooms, and not simply undeveloped land. Multiple financial instruments can be used to accomplish this goal. The more restrictive single instrument reading appears to rest on the statute’s reference to a singular “agreement.” Section 22-24-5(D)(3) (defining the total project cost as “the total payments that would be due under the agreement . . . [to] acquire title to the facility” (emphasis added)). But reading too much into the use of “the” would be mistaken because our Legislature has instructed that the “[u]se of the singular number includes the plural, and use of the plural number includes the singular.” NMSA 1978, § 12-2A-5(A) (1997); see State v. Torres, 2022-NMSC-024, ¶ 22 (“[T]he use of singular or plural language is not always dispositive as to legislative intent.”). It also presumes that a singular lease purchase agreement would be used to acquire title to a “facility,” but a “facility” includes both land and built structures, so more than just a land-only lease purchase agreement can be necessary to acquire title to the entire “facility.” Section 22-24-5(D) is not meant to cap a grant to acquire a facility at the total cost of an existing land-only lease purchase agreement. Instead, Section 22-24-5(D) means that where a lease purchase agreement is used to finance the acquisition of a facility, the portion of the total project cost attributed to the lease purchase agreement is “the total payments that would be due under the agreement” to eventually acquire the title to the facility, that is, the purchase option. As such, the total project cost is not capped at the purchase option of a land-only lease purchase agreement. Conclusion It is this office’s opinion that the total project cost to acquire a facility can encompass more than just the cost of a land-only lease purchase agreement, that is, both the land and built structures.

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Please note that this opinion is a public document and is not protected by the attorney-client privilege. It will be published on our website and made available to the general public. RAÚL TORREZ ATTORNEY GENERAL
/s/ Daniel Ahrens
Daniel Ahrens
Assistant Solicitor General

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