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

SPONSOR Cisneros

ORIGINAL DATE

LAST UPDATED

2/3/06

HB

SHORT TITLE El Prado Water District Legal Services

SB 524

ANALYST Hoffmann

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

$1,750.0 Non-Recurring

General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

Relates to Senate Capital Outlay Request 723, House Capital Outlay Request 825, and duplicate

bills Senate Bill 637 and House Bill 683.

SOURCES OF INFORMATION

LFC Files

Responses Received From

Department of Finance and Administration (DFA)

Office of the State Engineer (OSE)

SUMMARY

Synopsis of Bill

Senate Bill 524 appropriates $1,750,000 from the general fund to the Interstate Stream Commis-

sion for the El Prado Water and Sanitation District to acquire water rights and pay for legal,

technical and administrative costs associated with its water rights acquisition.

FISCAL IMPLICATIONS

The proposed appropriation is not included in the Executive recommendation. The LFC budget

recommendations include $6,594,500 for litigation and adjudication of water rights.

The appropriation of $1,750,000 contained in this bill is a non-recurring expense to the general

fund. Any unexpended or unencumbered balance remaining at the end of fiscal year 2007 shall

revert to the general fund.

Senate Bill 524 – Page

2

SIGNIFICANT ISSUES

According to the State Engineer, the El Prado Water and Sanitation District (“El Prado”) has in

recent years diverted groundwater in amounts that exceed the amounts allowed under the permits

issued to it by the State Engineer. El Prado has been attempting to reconcile the disparity be-

tween its permitted diversion and its annual demand through the acquisition and transfer of water

rights. The State Engineer has worked with El Prado to remedy this problem with respect to ac-

ceptable methods for El Prado to repay its cumulative past over-diversions. Although the appro-

priation in this bill will assist El Prado in its efforts to acquire water rights, there is no guarantee

that El Prado will be able to locate and transfer the water rights it needs.

The Office of the State Engineer states that the $1.75 million appropriation contained in this bill

is consistent with appropriations for water rights acquisition that are anticipated to be necessary

if a settlement is reached with Taos Pueblo regarding the Pueblo’s water rights claims. The State

of New Mexico, Taos Pueblo, the Town of Taos, the Taos Valley Acequia Association on behalf

of the Taos area acequias, twelve Taos area mutual domestic water consumer associations, and

El Prado have been actively negotiating the terms of a proposed settlement of the water right

claims of Taos Pueblo since late 2003. These negotiations are subject to a confidentiality order

issued by the federal district court, and no proposed settlement agreement or agreed-upon settle-

ment cost projections have yet been released to the public. In the absence of any costs projec-

tions provided by the negotiating parties, the OSE estimates that if a settlement is reached the

state’s share of the costs to implement the settlement could reach $20 million.

PERFORMANCE IMPLICATIONS

According to the Office of the State Engineer, the appropriation would have a positive impact on

the administration of water rights in the Taos Valley if El Prado is successful in the acquisition

and transfer of water rights to address its problems with diversions of water in excess of the di-

version amounts allowed under its State Engineer permits.

DUPLICATION AND RELATIONSHIP

House Capital Outlay Request 825 includes $100,000 to purchase land around El Prado well

number three.

Senate Capital Outlay Request 723 includes $100,000 to purchase land around El Prado well

number three, and $2,000,000 to purchase water rights for the El Prado Water and Sanitation

District.

Duplicate bill Senate Bill 637 and House Bill 683 both authorize the New Mexico Finance Au-

thority to lend money to the El Prado Water and Sanitation District.

TECHNICAL ISSUES

The Office of the State Engineer states that it is unclear to what extent the ISC would be in-

volved in any transactions to acquire water rights with these funds. If the ISC itself were the en-

tity acquiring water rights, then there would be an impact on the ISC in terms of staff time neces-

sary for such transactions.

Senate Bill 524 – Page

3

ALTERNATIVES

Even if a proposed settlement with Taos Pueblo is announced soon, it still would need to be ap-

proved by congress and the legislature. The state therefore is unlikely to be obligated to provide

any funds to implement a settlement before the end of FY 2007, when the funding in this bill

would revert to the general fund. The bill therefore would better serve the state’s interests in

promoting a settlement if it were amended to appropriate the monies to a Taos settlement sub-

account in the Indian water rights settlement fund (IWRS fund), which was created by the 2005

legislature (Laws 2005, Ch. 172) to provide a mechanism for the state to fund its portion of the

costs of implementing Indian water rights settlements. The 2005 legislature created the IWRS

fund because such settlements typically take years to develop and implement. The 2005 legisla-

tion therefore provides that money appropriated to the IWRS fund does not revert to the general

fund. The ISC administers the IWRS fund, and upon a joint resolution by the legislature the ISC

may expend money in that fund to pay the state’s share of the costs of implementing a settle-

ment. Amending this bill to make the appropriation to a sub-account in the IWRS fund for the

Taos Pueblo water rights settlement would ensure that the appropriated funds would be available

when needed to fund any water rights acquisitions that may be necessary to implement the state’s

share of a settlement with Taos Pueblo.

If the legislature desires to make this appropriation independent of any Taos, Pueblo water rights

settlement, then the bill should be amended to make the appropriation to the Local Government

Division of the Department of Finance and Administration instead of to the ISC. Both alterna-

tives are addressed in the amendments proposed below.

CH/nt