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

SPONSOR Stell

ORIGINAL DATE

LAST UPDATED

2/6/06

2/8/06 HB 499/aHAGC

SHORT TITLE No Reverting of Water Trust Fund Money

SB

ANALYST Kehoe

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

$100,000.0

Non-Recurring

General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

Duplicates House Bill 132; relates to House Bill 134, House Bill 296 Senate Bill 93, Senate Bill

194, Senate Bill 224 and House Joint Resolution 6.

House Bill 499 relates to the Appropriation in the General Appropriation Act.

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

FY08

$100,000.0

Non-Recurring Water Trust

Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

New Mexico Finance Authority (NMFA)

Office of the State Engineer (OSE)

SUMMARY

Synopsis of HAGC Amendment

The House Agriculture and Water Resources Committee amendment inserts a provision for an

emergency clause makes technical language changes that do not impact the intent of the bill.

House Bill 499/aHAGC – Page

2

Synopsis of Original Bill

House Bill 499 appropriates $100 million from the general fund to the water trust for the pur-

poses of carrying out the intent of the Water Finance Act and clarifies that funds deposited in the

water trust fund shall not revert.

FISCAL IMPLICATIONS

The Water Project Finance Act, Chapter 164, Laws of 2001, created a water trust fund program,

a water project fund and a water trust board. The water trust fund is intended to provide a per-

manent revenue source to provide grants and loans to political subdivisions and to provide for

long-range planning and financing of regional and statewide water supply projects. To date, the

water trust fund has never been capitalized to establish the permanent corpus of the fund.

The $100 million appropriation to the water trust fund proposed in this bill would be invested by

the State Investment Officer in the same manner that the land grant permanent funds are in-

vested. Earnings from the investment of the trust funds are to be credited to the water trust fund

and shall be used only for an annual distribution to the water project fund. Section 72-4A-8 of

the Act provides that on July 1 of each fiscal year, an annual distribution will be made from the

water trust fund to the water project fund in the amount of $4 million until the amount is less

than an amount equal to 4.7 percent of the average of the year-end market values of the water

trust fund for the immediate preceding five calendar years.

The appropriation in House Bill 499 is for expenditure in fiscal year 2006 and subsequent years.

Any unexpended or unencumbered balance remaining at the end of FY06 shall not revert to the

general fund.

SIGNIFICANT ISSUES

Eligible water projects funded from the water project fund are defined as those involving: 1) the

storage, conveyance or delivery of water to end-users; 2) the implementation of federal Endan-

gered Species Act collaborative programs; 3) the restoration of watersheds; 4) flood prevention;

5) conservation; or 6) for recycling, treatment or reuse of water. In 2005, the Act was amended

to add the category of “water rights adjudication” to provide automatic fund in an amount equal

to 10 percent of the annual distribution to the water project fund. Following the 2005 Legislative

Session, prior to the sale of severance tax bonds, it was determined the severance tax bonds

could not be used for administrative purposes. Therefore, the Office of State Engineer and Ad-

ministrative Office of the Courts did not receive money for adjudication purposes from the water

project fund in 2005.

Although the water trust fund has not previously been funded, the water project fund is capital-

ized with 10 percent of the severance tax bonding capacity each year as provided by Laws of

2003, Chapter 134. The 10 percent set-aside of severance tax bond capacity for FY06-07 is ap-

proximately $28.5 million for allocation by the water trust board for eligible water projects au-

thorized by the Legislature. Money from the severance tax bonds may not be used to pay indi-

rect project costs, and any unexpended balance from proceeds of severance tax bonds issued for

a water project shall revert to the severance tax bonding fund within six months of completion of

the water project. NMFA is responsible for monitoring and ensuring proper reversions.

House Bill 499/aHAGC – Page

3

NMFA reports over $2 billion in water-related needs have been identified throughout the state.

The water trust board in FY05 received over $129 in requests for water-related projects. To date,

the water trust board has recommended $47 million of grant funding for 47 projects for 29 local

entities statewide. The state has leveraged more than $50 million of local and/or federal funding.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

House Bill 132 duplicates this bill in its entirety.

Senate Bill 194 duplicates the intent of House Bill 134, House Bill 296 and Senate Bill 93 pro-

viding that $100 million of the nonrecurring revenue of the general fund remaining at the end of

fiscal year 2006 be transferred to the water trust fund.

Senate Bill 93 and House Bill 134 appropriate $100 million from the general fund to the water

trust fund for the purpose of caring out the provisions of the Water Project Finance Act.

Senate Bill 224 deletes a provision within the Water Project Finance Act which would allowed

10 percent of the total amount allocated to the water project fund to be used for water rights ad-

judication.

House Joint Resolution 6 proposes an amendment to the New Mexico Constitutional amendment

to establish a water trust fund in the 2006 General Election.

House Joint Memorial 21 requests the Legislative Council to appoint a task force to assess op-

tions for creating a permanent funding mechanism for the water trust fund.

As of the date of this writing, the General Appropriation Act contains an appropriation of $30

million to the water trust fund.

LMK/nt:yr