Fiscal impact reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for standing finance

committees of the NM Legislature. The LFC does not assume responsibility for the accuracy of these reports

if they are used for other purposes.

Current FIRs (in HTML & Adobe PDF formats) are a vailable on the NM Legislative Website (legis.state.nm.us).

Adobe PDF versions include all attachments, whereas HTML versions may not. Previously issued FIRs and

attachments may be obtained from the LFC in Suite 101 of the State Capitol Building North.

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

SPONSOR Foley

ORIGINAL DATE

LAST UPDATED

1/26/07

HB 462

SHORT TITLE Water Trust Fund

SB

ANALYST Kehoe

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

$100,000.0

Non-Recurring

General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

Duplicates HB 55; relates to HB 53.

Relates to HB 7 and SB 2, both General Appropriation Acts.

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

FY09

$100,000.0

Non-Recurring

Water Trust

Fund (See Fiscal

Implications)

$4,000.0

Recurring Water Project

Fund

(Parenthesis ( ) Indicate Revenue Decreases)

Duplicates HB 55 Relates to HB 7 and HB 53.

SOURCES OF INFORMATION

LFC Files

New Mexico Finance Authority (NMFA)

Energy, Minerals & Natural Resources Department (EMNRD)

SUMMARY

House Bill 462 appropriates $100 million from the general fund to the water trust fund for the

purpose of carrying out the Water Project Finance Act.

House Bill 462 – Page

2

FISCAL IMPLICATIONS

The electorate in November 2006, by 60 percent of the vote cast, approved an amendment to

Article 16 of the Constitution of New Mexico to create a water trust fund whose purpose is to

secure a supply of clean and safe water for New Mexico residents. The fund shall consist of

money appropriated, donated or otherwise accrued to the fund. Money in the fund shall be

invested by the State Investment Council as land grant permanent funds are invested, and

requires strict accountability and oversight measures as provided by the State Investment council

to ensure appropriate safety of and return on investments. Earning from investment of fund shall

be credited to the fund and shall not revert or be expended for any purpose.

Laws 2006, Chapter 109, provided for the transfer of $40 million from the general fund at the

beginning of fiscal year 2007 to the water trust fund created by the Water Finance Act.

According to the constitutional provision, on July 1, 2008 and each fiscal year thereafter, an

annual distribution shall be made from the water trust fund pursuant to state law, and that

distribution shall then be appropriated by the legislature only for water projects consistent with a

state water plan and as otherwise provided by law to support critically needed projects that

preserve and protect New Mexico’s water supply.

According to the Water Finance Act, the $100 million appropriation to the water trust fund

proposed in House Bill 462 would be invested by the State Investment Officer in the same

manner that the land grant permanent funds are invested. Section 72-4A-8 of the Act provides

that on July 1 of each fiscal year, 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.

Laws 2003 (Chapter 134) requires the Board of Finance to authorize and issue bonds for 10

percent of the severance tax bonding capacity each year for deposit in the water project fund.

The 10 percent set-aside of severance tax bond capacity for FY07-08 will provide approximately

$32.7 million to the water project fund for eligible water projects. Money from the severance tax

bonds may not be used to pay indirect 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.

Eligible water projects are defined as those involving: 1) the storage, conveyance or delivery of

water to end-users; 2) the implementation of federal Endangered 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. In 2005, the Act was amended to add the category

of “water rights adjudication" to provide automatic funding in an amount equal to 10 percent of

the annual distribution to the water project fund for use by the Office of the State Engineer and

the Administrative Office of the Courts.

The appropriation of $100 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 shall not

revert to the general fund.

House Bill 462 – Page

3

SIGNIFICANT ISSUES

The water trust board has adopted rules governing the terms and conditions of grants or loans

recommended by the board for appropriation by the Legislature from the water project fund.

Conforming with statutory obligations, the rules give priority to projects that have urgent needs,

that have been identified for implementation of a completed regional water plan that is accepted

by the Interstate Stream Commission, and that have matching contributions from federal or local

sources.

As per the Water Finance Act, NMFA provides staff support for the board, develops

application procedures and forms for political subdivisions to apply for grants and loans from the

water project fund, and make loans or grants for water projects authorized by the Legislature.

Other actions taken by the water trust board have included adoption of bylaws, approval of an

open meeting resolution, and a per diem and mileage policy.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

This bill duplicates House Bill 55 in its entirety.

House Bill 7 and Senate Bill 2 propose to transfer $50 million to the Water Trust Fund in fiscal

year 2008.

The executive capital outlay budget for 2007 recommends a $25 million appropriation to the

Water Trust Fund.

House Bill 53 increases the membership of the Water Trust Board from fifteen to sixteen

members by adding the secretary of the Department of Finance and Administration, and requires

that the chair be elected a majority of the board members. The State Engineer is the current

chair.

LMK/mt