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

SPONSOR Stewart

ORIGINAL DATE

LAST UPDATED

1-21-06

1-31-06 HB 121/aHAGC/aHENRC

SHORT TITLE Statewide Water Projects

SB

ANALYST Woods

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

$280,000.0

Non-Recurring

General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Office of the State Engineer-Interstate Stream Commission (OSE)

Department of Finance and Administration (DFA)

SUMMARY

Synopsis of HENR Amendment

House Energy and Natural Resources Committee amendment to HB121/a

HAGC

amends the leg-

islation as follows:

1. Strike House Agriculture and Water Resources Committee Amendment.

2. On pages 1 and 2, strike Subsection A in its entirety and insert in lieu thereof the following

new Subsection A to read:

"A. Two hundred eighty million dollars ($280,000,000) is appropriated from the general

fund to the funds and agencies identified below in the following amounts for expenditure

in fiscal year 2006 and subsequent fiscal years for the following purposes:

(1) seventy-five million dollars ($75,000,000) to the Indian water rights settlement

fund to pay the state's portion of the costs necessary to implement Indian water rights

settlements approved by the legislature and the United States congress;

(2) a final forty-eight million dollars ($48,000,000) to the interstate stream commis-

House Bill 121/ aHAGC/aHENRC – Page

2

sion to complete the Pecos River Compact settlement;

(3) thirty million dollars ($30,000,000) to the improvement of Rio Grande income

fund for the middle Rio Grande Endangered Species Act collaborative program;

(4) seven million dollars ($7,000,000) to the interstate stream commission for the

Gila river settlement in the federal Arizona Water Settlements Act, to be used to

conduct a full and inclusive process of public involvement, complete a thorough sci-

entific assessment of ecological conditions in the Gila river basin and a full analysis

of all water needs and supply alternatives in the southwestern water-planning region;

(5) seventy million dollars ($70,000,000) to the water project fund for the Ute pipe-

line project;

(6) forty-four million dollars ($44,000,000) to the New Mexico irrigation works con-

struction fund for acequia and dam safety improvements statewide; and

(7) six million dollars ($6,000,000) to the water project fund for La Plata conser-

vancy district's cost share of the Animas-La Plata project.".,

House Energy and Natural Resources Committee amendment to HB121/a HAGC attaches no

additional appropriation to the legislation.

Synopsis of HAGC Amendment

House Agriculture and Water Resources Committee amendment to HB121 amends the legisla-

tion as follows:

1. On pages 1 and 2, strike Subsection A in its entirety and insert in lieu thereof the following

new Subsection A to read:

"A. Two hundred eighty million dollars ($280,000,000) is appropriated from the general

fund to the funds and agencies identified below in the following amounts for expenditure

in fiscal year 2006 and subsequent fiscal years for the following purposes:

(1) seventy-five million dollars ($75,000,000) to the Indian water rights settlement

fund to pay the state's portion of the costs necessary to implement Indian water rights

settlements approved by the legislature and the United States congress;

(2) a final forty-eight million dollars ($48,000,000) to the interstate stream commis-

sion to complete the Pecos River Compact settlement;

(3) thirty million dollars ($30,000,000) to the water project fund for the middle Rio

Grande collaborative program;

(4) seven million dollars ($7,000,000) to the interstate stream commission in connec-

tion with the Gila river settlement for compliance with federal environmental man-

dates, scientific studies, public outreach and education, cost benefit analyses and

other studies and efforts or evaluations necessary to determine the best use of New

House Bill 121/ aHAGC/aHENRC – Page

3

Mexico's benefits under the 2004 Arizona Water Settlements Act; provided that no

amount of this appropriation shall be used for construction of any actual project;

(5) seventy million dollars ($70,000,000) to the water project fund for the Ute pipe-

line project; and

(6) fifty million dollars ($50,000,000) to the New Mexico irrigation works construc-

tion fund for acequia and dam safety improvements statewide.".

2. On page 2, line 10, after "of" insert "a", strike "2007" and after "shall", insert "not".,

House Agriculture and Water Resources Committee amendment to HB121 attaches no additional

appropriation to the legislation.

Synopsis of Original Bill

House Bill 121 –

Making an Appropriation for Water Projects of Statewide Significance; Declaring and

Emergency – seeks to appropriate $280,000,000 from the general fund to the Office of the State Engineer

for expenditure in fiscal years 2006 and 2007 to initiate, plan and implement the following projects in the

following amounts:

•

$75,000,000 for Indian water rights and regional community settlements, in-

cluding the Navajo, Taos and Aamodt settlements;

•

$48,000,000 for the Pecos river settlement;

•

$30,000,000 for the middle Rio Grande collaborative program;

•

$7,000,000 for the Gila river settlement;

•

$70,000,000 for the Ute pipeline project; and

•

$50,000,000 for acequia and dam safety improvements statewide.

Any unexpended or unencumbered balance remaining at the end of fiscal year 2007 shall revert to the

general fund.

This legislation carries emergency language.

SIGNIFICANT ISSUES

The Office of the State Engineer-Interstate Stream Commission (OSE) suggests that this funding

level is appropriate and is required to accomplish the projects described in the bill, but this sum

could not be expended within two years, because many of the projects will take years to develop

and complete. Therefore, the money should not revert to the general fund at the end of fiscal

year 2007, but should instead remain available for a longer time to accomplish the projects. Ac-

cordingly, OSE additionally proposes an amendment to the legislation [See Amendments Section

Below] to address two areas of concern:

•

to allow the funds appropriated for certain projects to revert to the gen-

eral fund after a longer period of time. For other projects, the money

should not revert at all, but should instead remain in specific existing

funds indefinitely, namely the water trust fund, the Indian water rights

settlement fund, and the irrigation works construction fund; and

House Bill 121/ aHAGC/aHENRC – Page

4

•

see that the monies the proposed amendment would appropriate to the

water trust fund would generate distributions to the water project fund

pursuant to NMSA 1978, §§ 72-4A-8 and –9 (2001). The Water Trust

Board and the New Mexico Finance Authority then could issue bonds

against these distributions from the water trust fund to finance the Ute

pipeline project and projects related to the middle Rio Grande collabora-

tive program. It does not appear that the Water Project Finance Act

(NMSA 1978, §§ 72-4A-1 through –10 (2001 and 2003)) would preclude

the Water Trust Board and the New Mexico Finance Authority from is-

suing such bonds. To the extent, however, that specific language author-

izing such bonding authority is needed, it should be included.

OSE also observes that funds appropriated for the Gila river settlement should be dedicated to

funding the extensive planning, compliance, and scientific and public involvement effort neces-

sary to ensure New Mexico can make an informed and considered decision on how to best utilize

the $66 to 128 Million of federal funds available and the 14,000 acre-feet (average) of additional

water that New Mexico is entitled to develop under the Gila Settlement ratified by Congress in

the 2004 Arizona Water Settlements Act. Because these funds will not be used for construction

of an actual project, the bill should be modified to so reflect, which is included in the proposed

amendment below.

The Department of Finance and Administration (DFA) raises a number of comments with re-

spect to this legislation. While DFA recognizes that the appropriation would fund several

broadly-defined OSE efforts – most of which are currently underway – because of the lack of

specificity it is difficult to note specific outcomes outside of noting that these funds would fur-

ther and/or expedite completion of the named efforts.

DFA additionally remarks that, depending upon which projects within these initiatives OSE

elects to pursue, some activities may not be able to use millions of dollars of appropriations

within less than two years. Further, that although in some instances federal matching funds might

be leveraged by the proposed expenditures, the amount of potential federal funds is unknown,

and it is unlikely OSE could administer or utilize the entire appropriation – whatever the federal-

state funding relationships might be – within the appropriation period even if the appropriation

was spread among a number of efforts and utilized contractual services where appropriate.

DFA suggests that certain initiatives or aspects of initiatives are not able to absorb large amounts

of funds or are not able to be expedited beyond a certain level. Those instances include: activities

that need to be done in house; activities for which there exist a limited number of qualified con-

tractors (e.g. lawyers with New Mexico water law experience); activities for which the timeline

is dictated by the seasons, an outside entity or a court; or activities that are construction oriented

capital improvements that would tend to have substantial planning, design and RFP phases that

would have to occur prior to construction. In some cases, as in the Ute pipeline project, the ap-

propriation may not be sufficient to complete the project and use of funds provided in this appro-

priation may be delayed until sufficient funds to finish the project are amassed.

DFA concludes with the observation that this proposed appropriation is not consistent in the Ex-

ecutive recommendation, and further that consideration might be given to funding, where appro-

priate, the selected activities through multi-year capital appropriations for capital-oriented pro-

jects.

House Bill 121/ aHAGC/aHENRC – Page

5

AMENDMENTS

OSE suggests the following amendment to the legislation:

On page 1, line 15, through page 2, line 13, strike Section 1 in its entirety and insert in lieu

thereof:

“Section 1. APPROPRIATION

A. Two hundred eighty million dollars ($280,000,000) is appropriated from the general

fund to the funds identified below in the following amounts and for the following pur-

poses:

(1) seventy-five million dollars ($75,000,000) is appropriated from the general fund

to the Indian water rights settlement fund, created pursuant to Section 72-1-12

NMSA 1978 (being Laws 2005, Chapter 172, Section 2) for expenditure in fiscal

year 2007 and subsequent fiscal years to pay the state's portion of the costs necessary

to implement Indian water rights settlements approved by the legislature and the

United States congress. Any unexpended or unencumbered balance remaining at the

end of a fiscal year shall not revert to the general fund;

(2) forty-eight million dollars ($48,000,000) is appropriated from the general fund to

the interstate stream commission for expenditure in fiscal years 2007 through 2010

to implement the Pecos river settlement. Any unexpended or unencumbered balance

remaining at the end of fiscal year 2010 shall revert to the general fund;

(3) thirty million ($30,000,000) is appropriated from the general fund to the water

trust fund, created pursuant to Section 72-4A-8 NMSA 1978 (being Laws 2001,

Chapter 164, Section 8), for expenditure in fiscal year 2007 and subsequent fiscal

years for the middle Rio Grande collaborative program. Any unexpended or unen-

cumbered balance remaining at the end of a fiscal year shall not revert to the general

fund;

(4) seven million dollars ($7,000,000) is appropriated to the interstate stream com-

mission, in connection with the Gila river settlement, for expenditure in fiscal years

2007 through 2014 for compliance with federal environmental mandates, scientific

studies, public outreach and education, cost benefit analyses, and other studies, ef-

forts, or evaluations necessary to determine the best use of New Mexico’s benefits

under the 2004 Arizona Water Settlements Act, provided that no amount of this ap-

propriation shall be used for construction of any actual project, and any unexpended

or unencumbered balance remaining at the end of fiscal year 2014 shall revert to the

general fund;

(5) seventy million dollars ($70,000,000) is appropriated from the general fund to the

water trust fund, created pursuant to Section 72-4A-8 NMSA 1978 (being Laws

2001, Chapter 164, Section 8), for expenditure in fiscal year 2007 and subsequent

fiscal years for the Ute pipeline project. Any unexpended or unencumbered balance

remaining at the end of a fiscal year shall not revert to the general fund; and

House Bill 121/ aHAGC/aHENRC – Page

6

(6) fifty million dollars ($50,000,000) is appropriated from the general fund to the ir-

rigation works construction fund, created pursuant to Section 72-14-23 NMSA 1978

(being Laws 1955, Chapter 266, Section 15, as amended), for expenditure in fiscal

year 2007 and subsequent fiscal years for acequia and dam safety improvements

statewide. Any unexpended or unencumbered balance remaining at the end of a fis-

cal year shall not revert to the general fund.”

BW/nt