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

SPONSOR Taylor, J.G.

ORIGINAL DATE

LAST UPDATED

1/23/07

3/13/07 HB

SHORT TITLE NMFA Water Project Fund Grants

SB 100/aHAFC

ANALYST Kehoe

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

NFI

Water Project Fund

(See Fiscal Narrative)

(Parenthesis ( ) Indicate Expenditure Decreases)

Relates to executive capital outlay proposal.

SOURCES OF INFORMATION

LFC Files

New Mexico Finance Authority (NMFA)

New Mexico Agriculture Department (NMSU)

SUMMARY

Synopsis of HAFC Amendment

The House Appropriations and Finance Committee amendment to Senate Bill 100, as amended,

authorizes the New Mexico Finance Authority to make loans or grants from the water project

fund to the City of Rio Rancho in Sandoval County and to Bernalillo County for a water

conveyance project.

Synopsis of Original Bill

Senate Bill 100 authorizes the New Mexico Finance Authority to make loans or grants from the

water project fund to 30 political subdivisions for qualifying projects on terms and conditions

established by the Water Trust Board and the New Mexico Finance Authority.

FISCAL IMPLICATIONS

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

Senate Bill 100/aHAFC – Page

2

$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. The value of the 10 percent of severance tax bond capacity can

change from year to year depending on oil and gas revenues.

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 creating the water trust fund approved in November

2006, and in accordance with state law, 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.

Section 72-4A-8 of the Water Finance 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.

SIGNIFICANT ISSUES

The water project fund and water trust board were created by the Water Finance Act. According

to the Act, once authorized by the Legislature, the Water Trust Board reviews all projects and

determines qualifying entities and projects for consideration of loans or grants from the water

project fund.,

According to NMFA, the Water Trust Board received 94 letters of interest requesting a total of

approximately $175.5 million for funding from the 2007 annual distribution to the water project

fund. The total amount requested for the 30 projects contain in this bill is $58.8 million.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

The executive is proposing increasing the 10 percent allocation from severance tax bond capacity

to the water project fund from 10 percent to 15 percent. The increase would generate

approximately $16.3 million more for the water project fund.

LMK/mt