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F I S C A L I M P A C T R E P O R T

SPONSOR Gonzales

DATE TYPED 03/14/05 HB 123/aHAFC/aSFC

SHORT TITLE Drinking Water System Financing

SB

ANALYST Kehoe

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

$2,000.0

Non-recurring

Public Project

Revolving Loan

Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

REVENUE

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY05

FY06

$2,000.0

Non-recurring

Drinking Water

Revolving Loan

Fund

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

New Mexico Finance Authority (NMFA)

SUMMARY

Synopsis of SFC Amendment

Senate Finance Committee amendment to HB123 amends the legislation as follows:

1. The amendment strikes House Appropriations and Finance Committee

Amendment 1.

House Bill 123/aHAFC/aSFC -- Page 2

2. On page 1, lines 15 and 16: the amendment strikes the language "Four mil-

lion dollars ($4,000,000) and inserts in lieu thereof "Pursuant to the provisions

of Section 6-21-6.1 NMSA 1978, two million dollars ($2,000,000)". Section 6-

21-6.1 NMSA 1978 relates to the “Public Project Revolving Fund.”

Senate Finance Committee amendment to HB123 attaches no additional appropriation to the

legislation and the emergency language remains in the bill.

Synopsis of HAFC Amendments

The House Appropriations and Finance Committee amendment reduces the appropriation

amount from $4 million to $2 million and appropriates the funds from the public project revolv-

ing fund rather than the general fund.

Synopsis of Original Bill

House Bill 123 appropriates $4 million from the general fund to the drinking water state revolv-

ing loan fund to provide state match funds for carrying out the purposes of the federal Safe

Drinking Water Act.

Significant Issues

The appropriation contained in this bill will provide a 20 percent state match toward federal allo-

cations in federal fiscal years 2004 and 2005 totaling $16.6 million for loans from the drinking

water state revolving loan fund (DWRLF).

The New Mexico Drinking Water State Revolving Loan Fund Act was enacted by the 1997 Leg-

islature in response to the re-authorization of the federal Safe Drinking Water Act (SDWA). The

re-authorization required the Environmental Protection Agency (EPA) to make capitalization

grants to states over the next seven years to further the health objectives of SDWA. The state act

charged NMFA with establishing, in cooperation with the Environment Department, a loan pro-

gram to provide local authorities with low-cost financial assistance in the construction of neces-

sary drinking water facilities to improve water quality in New Mexico. The Act created the

drinking water state revolving loan fund administered by NMFA.

If statutorily authorized by the Legislature, loans from the Public Project Revolving Fund can be

combined with loans from DWRLF to maximize dollars in the fund. As of June 30, 2004, NMFA

has made 17 loans totaling $21.1 million and committed an additional seven loans totaling $33.5

million from the fund. Entities with binding commitments for loans totaling $33.5 million in-

clude: Roosevelt County Water Cooperation, City of Santa Fe, City of Hobbs, City of Alamo-

gordo, City of Aztec, City of Espanola, and Albuquerque/Bernalillo Water Utility Association.

Section 2 of the bill contains an emergency clause.

FISCAL IMPLICATIONS

The appropriation of $4 million contained in this bill is a non-recurring expense to the general

fund. Any unexpended or unencumbered balance remaining at the end of a fiscal year will not

revert to the general fund, but would remain in the drinking water state revolving loan fund.

House Bill 123/aHAFC/aSFC -- Page 3

DMINISTRATIVE IMPLICATIONS

The SDWA allows a 31 percent set-aside of the annual federal allocation to be used for adminis-

trative activities of both the Drinking Water Bureau (DWB) of the state Environment Depart-

ment (ED) and NMFA. NMFA utilizes 4 percent of the set-aside to administer the financial as-

pects of the program including legal support, construction oversight, and technical review. DWB

utilizes the funds to provide technical support and capacity development to public water systems.

LMK/yr:lg