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

SPONSOR Rodriguez

ORIGINAL DATE

LAST UPDATED

2-24-07

3-13-07 HB

SHORT TITLE Rural Infrastructure Loan Cap & Scope

SB 1058/aSJC/aSFC

ANALYST Aubel

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

$0.01*

*See narrative Non-Recurring Rural Infrastructure

Revolving Loan Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

FY09

$0.01*

$0.01* Recurring Administrative

Account

Duplicates House Bill 1179/aHENRC

SOURCES OF INFORMATION

LFC Files

Responses Received From

New Mexico Environment Department (NMED)

Energy, Minerals and Natural Resources (EMNRD)

New Mexico Finance Authority (NMFA)

SUMMARY

Synopsis of SFC Amendment

The Senate Finance Amendment changes the administrative allocation appropriated to the

department to carry out the provisions of the Rural Infrastructure Act from 10

percent of the

uncommitted balance

to 2

percent of the total

balance.

According to the 2/28/07 financial statement for the Rural Infrastructure Program, the change in

Senate Bill 1058/aSJC/aSFC – Page

2

the administrative allocation would be demonstrated as follows:

Uncommitted Balance:

$15,784.116 10 Percent = $1,578,411 SB1058/aSJC

Ending Cash Balance (Total Balance): $19,193,263 2 Percent = $383,865 /aSFC

Synopsis of SJC Amendment

The Senate Judiciary Committee Amendment makes three primary changes to SB 1058:

1.

It strikes the “phrase “but not limited to" for definitions relating to “operate and

maintain", “solid waste facility", “wastewater facility", and “water supply facility,"

effectively limiting the scope of the definitions to that which is specifically listed.

2.

In specifying remedies for NMED in response to a loan default, the Amendment strikes

the specified means of remedy and reference to loan default, creating a broader authority

for the department to “enforce its rights as provided by law."

3.

The payment options are expanded from annual to include monthly and quarterly

schedules.

NMED concludes that these changes do not significantly affect the purpose or intent of the bill.

Synopsis of Original Bill

Senate Bill 1058 amends the Rural Infrastructure Act (Act) to allow the New Mexico

Environment Department (NMED) to expand the scope of eligible communities, makes solid

waste disposal projects eligible for funding, increases NEMD’s authority to ensure project

sustainability, and allows for administrative costs. SB 1058 also increases the grant portion

funding from $200 thousand to $500 thousand, while increasing the maximum assistance for

both loans and grants from $500 thousand to $2 million.

FISCAL IMPLICATIONS

The bill specifies that money in the fund is appropriated to the department to carry out the

provisions of the Act, not to exceed 10 percent of the available uncommitted balance in the fund.

Money allocated for administrative expenses will be placed in a separate administrative account

and any unexpended or unencumbered balance remaining in this administrative account at the

end of the fiscal year shall not revert to the rural infrastructure revolving loan fund.

SIGNIFICANT ISSUES

NMED lists the significant issues as follows:

•

The definition of eligible entities is revised, raising the population limit from 10,000 to 20,000

and breaking out counties with populations less than 200,000. This is necessary to

accommodate the addition of solid waste facilities as eligible projects because most are

operated by counties with populations greater than 10,000.

•

Solid waste facilities, in addition to water and wastewater facilities, would be eligible for

loans. Few funding sources exist for solid waste projects and this would help fill that gap.

Senate Bill 1058/aSJC/aSFC – Page

3

•

Up to 10 percent of rural infrastructure revolving loan fund could be used to pay for

administrative expenses necessary to carry out the provisions of the Act. NMED would need

to project the administrative cost and place that amount in a separate account to be used solely

for administration. This would help make this program self-sufficient and ensure adequate

administration for the life of the 20-year loans.

•

The annual cap on loans to an eligible entity would be raised from $500,000 to $2 million.

That would bring the program in line with current construction costs and provide money for

larger projects, such as solid waste projects. The current limit dates from the inception of the

Act in 1988. The limit for grants, as provided for in the Act, would also be updated from

$200,000 to $500,000. Note that currently no funds are available for grants.

•

NMED’s authority to manage the loans would be expanded to allow periodic reviews of

operation, request financial statements and review the rate-setting analysis that supports the

loan payments. Those changes provide more tools should the borrower become delinquent in

his loan.

NMFA notes that with the increase of available funding for municipalities and counties with SB

1058, the RIP Loan would be in direct competition with NMFA’s Public Project Revolving Fund

loan.

PERFORMANCE IMPLICATIONS

NMED maintains the agency would benefit from the proposed changes by providing greater

ability to initiate projects that preserve surface- and groundwater quality. Potential borrowers

would also benefit by having access to larger loans to completely fund projects that would

protect human health and the environment.

ADMINISTRATIVE IMPLICATIONS

NMED states that it be better suited to manage and administer the loans with the increase in

authority and the addition of revenue to support those tasks.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

Duplicates House Bill 1179.

OTHER SUBSTANTIVE ISSUES

EMNRD suggests that this bill may increase the number of solid waste facilities. Although

projected savings cannot be determined, solid waste management is a substantial operational and

financial issue for the State Parks Division (SPD), which serves over 4 million people annually at

parks located throughout the state. By increasing the number of communities eligible for these

loans, as well as making solid waste handling facilities eligible for this loan program, it may

result in increased access to solid waste facilities for agencies such as SPD, which operate in

many rural areas. Having more, and hopefully closer, solid waste handling facilities may help

limit increases or reduce hauling costs and solid waste management contract costs incurred by

SPD to the extent increased availability of loans and grants to local entities may limit or reduce

price increases to their customers, as well as allow them to offer more services to SPD.

Senate Bill 1058/aSJC/aSFC – Page

4

NMED states that the New Mexico Municipal League, New Mexico Association of Counties,

New Mexico Rural Water Association and the Solid Waste Association of North America

endorsed this bill.

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

If SB 1058 is not enacted, solid waste projects will not have an additional funding source and

communities will continue to be restricted in the amount of the loan they can obtain from this

program.

MA/nt