SB0419

SENATE BILL 419

51st legislature - STATE OF NEW MEXICO - first session, 2013

INTRODUCED BY

George K. Munoz

AN ACT

RELATING TO PUBLIC FINANCE; MOVING THE DRINKING WATER STATE REVOLVING LOAN FUND FROM THE NEW MEXICO FINANCE AUTHORITY TO THE DEPARTMENT OF ENVIRONMENT; PROVIDING POWERS AND DUTIES OF THE DEPARTMENT AND THE STATE BOARD OF FINANCE; MAKING AN APPROPRIATION.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

SECTION 1. Section 6-21A-1 NMSA 1978 (being Laws 1997, Chapter 144, Section 1) is amended to read:

"6-21A-1. SHORT TITLE.--[Sections 1 through 9 of this act] Chapter 6, Article 21A NMSA 1978 may be cited as the "Drinking Water State Revolving Loan Fund Act"."

SECTION 2. Section 6-21A-3 NMSA 1978 (being Laws 1997, Chapter 144, Section 3, as amended) is amended to read:

"6-21A-3. DEFINITIONS.--As used in the Drinking Water State Revolving Loan Fund Act:

[A. "authority" means the New Mexico finance authority]

A. "administrative fund" means the drinking water administrative fund;

B. "board" means the state board of finance;

C. "bonds" means obligations issued by the board for the repayment of which specified revenue is pledged, whether designated as a bond, note or loan, and includes refunding obligations;

[B.] D. "department" means the department of environment;

[C.] E. "drinking water facility construction project" means the acquisition, design, construction, improvement, expansion, repair or rehabilitation of all or part of any structure, facility or equipment necessary for a drinking water system or water supply system;

[D.] F. "drinking water supply facility" means any structure, facility or equipment necessary for a drinking water system or water supply system;

[E.] G. "financial assistance" means [loans, the purchase or refinancing of debt obligation of a local authority at an interest rate that is less than or equal to the market interest rate in any case in which a debt obligation is incurred after July 1, 1993, loan guarantees, bond insurance or security for revenue bonds issued by the authority] all forms of assistance for which the fund may be used pursuant to the Safe Drinking Water Act and state law;

H. "financial capacity" means a public water system's ability to acquire and manage sufficient financial resources to allow the system to achieve and maintain compliance with federal and state laws and rules applicable to public water systems;

[F.] I. "fund" means the drinking water state revolving loan fund;

J. "issuing resolution" means a resolution issued by the board containing the terms and conditions of bonds;

[G.] K. "local authority" means [any] a municipality, county, incorporated county, sanitation district, water and sanitation district or any similar district, public or private water cooperative or association or any similar organization, public or private community water system or nonprofit noncommunity water system or any other agency created pursuant to a joint powers agreement acting on behalf of any entity listed in this subsection with a publicly owned drinking water system or water supply system that qualifies as a community water system or nonprofit noncommunity system as defined by the Safe Drinking Water Act. "Local authority" does not include systems owned by federal agencies;

L. "managerial capacity" means a public water system's ability to conduct its affairs in a manner that enables it to achieve and maintain compliance with federal and state laws and rules applicable to public water systems;

[H.] M. "operate and maintain" means to perform all necessary activities, including the replacement of equipment or appurtenances, to assure the dependable and economical function of a drinking water supply facility in accordance with its intended purpose; [and]

N. "recommending resolution" means a formal statement issued by the department to the board recommending that bonds be issued pursuant to the Drinking Water State Revolving Loan Fund Act;

[I.] O. "Safe Drinking Water Act" means the federal Safe Drinking Water Act as amended in 1996 and its subsequent amendments or successor provisions; and

P. "technical capacity" means the adequacy of operation and physical infrastructure of a public water system, including the water source, treatment, storage and distribution system, to allow the public water system to achieve and maintain compliance with federal and state laws and rules applicable to public water systems."

SECTION 3. Section 6-21A-4 NMSA 1978 (being Laws 1997, Chapter 144, Section 4, as amended) is amended to read:

"6-21A-4. FUND CREATED--ADMINISTRATION.--

A. [There is created in the authority a revolving loan fund to be known as] The "drinking water state revolving loan fund" [which] is created in the state treasury and shall be administered by the [authority. The authority is authorized to establish procedures required] department and operated as a separate account and shall consist of such subaccounts as the department deems necessary; provided that the department shall create such subaccounts and keep such records as the board requires for bond proceeds. The department may adopt rules and establish procedures to administer the fund in accordance with the Safe Drinking Water Act and state laws. The [authority and the] department shall, whenever possible, coordinate application procedures and funding cycles with the New Mexico Community Assistance Act. Any rule relating to the issuance of bonds and the expenditure of the proceeds of bonds shall be approved by the board. Disbursements from the fund shall be on warrant of the secretary of finance and administration pursuant to vouchers signed by the secretary of environment or the secretary of environment's authorized representative.

B. The following shall be deposited directly in the fund:

(1) grants from the federal government or its agencies allotted to the state for capitalization of the fund;

(2) funds as appropriated by the legislature to implement the provisions of the Drinking Water State Revolving Loan Fund Act or to provide state matching funds that are required by the terms of [any] a federal grant under the Safe Drinking Water Act;

(3) loan principal, interest and penalty payments if required by the terms of [any] a federal grant under the Safe Drinking Water Act;

(4) proceeds from bonds issued by the board pursuant to the Drinking Water State Revolving Loan Fund Act, except as may be required for refunding bonds in which the bonds may be directly repaid or a separate escrow account may be established at the direction of the board;

[(4)] (5) any other public or private money dedicated to the fund; and

[(5) revenue] (6) money transferred from other state revolving funds.

C. Money in the fund is appropriated for expenditure by the [authority] department in a manner consistent with the terms and conditions of the federal capitalization grants and the Safe Drinking Water Act and may be used:

(1) to provide [loans] funding for [the construction or rehabilitation of] drinking water [facilities] facility construction projects;

(2) to buy or refinance the debt obligation of a local authority for drinking water obligations at an interest rate that is less than or equal to the market interest rate in any case in which a debt obligation is incurred after July 1, 1993;

(3) to guarantee or purchase insurance for obligations of local authorities to improve credit market access or reduce interest rates;

(4) to provide loan guarantees for similar revolving funds established by local authorities; [and]

(5) to provide a source of revenue or security for the repayment of principal and interest on bonds [issued by the authority] if the proceeds of the bonds are deposited in the fund or if the proceeds of the bonds are used to make loans to local authorities to the extent provided in the terms of the federal grant;

(6) as allowed by federal law, to fund certain administrative expenses of the department, including servicing loans, to implement the provisions of the Drinking Water State Revolving Loan Fund Act;

(7) as allowed by federal law and by contract executed between the department and the board, to fund the administrative expenses of the board, including issuing bonds and related costs for start-up, financial management, legal consulting and support services; and

(8) to fund other programs for which the federal government authorizes the use of drinking water grants or to provide for other expenditures allowable under the Safe Drinking Water Act grant programs and state law consistent with the Drinking Water State Revolving Loan Fund Act.

D. If needed to cover additional administrative expenses, pursuant to procedures established by the [authority] department, the [authority] department may impose and collect a fee from each local authority that receives financial assistance from the fund, which fee shall be used solely for the costs of administering the fund and which fee shall be [kept outside] deposited in the administrative fund.

E. Money not currently needed for the operation of the fund or otherwise dedicated may be invested [pursuant to the New Mexico Finance Authority Act] in accordance with Chapter 6, Article 10 NMSA 1978, and all interest earned on such investments shall be credited to the fund. Money remaining in the fund at the end of the fiscal year shall not revert to the general fund but shall accrue to the credit of the fund.

F. The [authority] department shall maintain full authority for the operation of the fund in accordance with applicable federal and state law. [including, in cooperation with the department, ensuring the loan] The department shall ensure that financial assistance recipients are on the state priority list [or] and otherwise satisfy the Safe Drinking Water Act requirements.

G. The [authority] department shall establish fiscal controls and accounting procedures that are sufficient to assure proper accounting for fund payments, disbursements and balances and shall provide [in cooperation with the department, a biannual] an annual report and an annual independent audit on the fund to the governor and to the United States environmental protection agency as required by the Safe Drinking Water Act."

SECTION 4. A new section of the Drinking Water State Revolving Loan Fund Act is enacted to read:

"[NEW MATERIAL] DRINKING WATER ADMINISTRATIVE FUND--CREATED--USE.--

A. The "drinking water administrative fund" is created as a dedicated nonreverting fund in the state treasury. The department shall administer the administrative fund, and it may create such subaccounts as it deems necessary. Money from investment of the administrative fund shall be credited to the administrative fund. Money in the administrative fund is appropriated to the department to administer the drinking water state revolving loan fund, including drinking water planning and any other expenses allowable by federal law for administrative purposes. Disbursements from the administrative fund shall be by warrant drawn by the secretary of finance and administration pursuant to vouchers signed by the secretary of environment or the secretary of environment's authorized representative.

B. The administrative fund consists of money deposited from:

(1) loan administration fees collected by the department after July 1, 2013 on loans made from the drinking water state revolving loan fund;

(2) income from investment of the administrative fund;

(3) grants from the federal government allotted to the state for the administrative fund;

(4) money appropriated to the administrative fund; and

(5) gifts, grants and donations from public or private sources for the administrative fund.

C. The department may adopt rules and establish procedures and set fees as required to administer the administrative fund in accordance with the Drinking Water State Revolving Loan Fund Act.

D. The department shall establish fiscal controls and accounting procedures that are sufficient to ensure proper accounting for administrative fund payments, disbursements and balances and shall provide an annual report and an annual independent audit on the administrative fund to the governor and the United States environmental protection agency as required by the Safe Drinking Water Act.

E. Money not currently needed for the operation of the administrative fund or otherwise dedicated may be invested in accordance with Chapter 6, Article 10 NMSA 1978, and all interest earned on such investments shall be credited to the administrative fund."

SECTION 5. Section 6-21A-5 NMSA 1978 (being Laws 1997, Chapter 144, Section 5) is amended to read:

"6-21A-5. LOAN PROGRAM--ADMINISTRATION.--

A. The [authority] department shall establish a program to provide financial assistance from the fund to local authorities, individually or jointly, for [acquisition, construction or modification of] drinking water [facilities] facility construction projects. The [authority is authorized to] department may enter into memoranda of understanding, contracts and other agreements to carry out the provisions of the Drinking Water State Revolving Loan Fund Act, including [but not limited to] memoranda of understanding, contracts and agreements with federal agencies, the [department] board, local authorities and other parties.

B. The department shall adopt, by [regulation] rule, a system for the ranking of drinking water facility construction projects requesting financial assistance and for the development of a priority list [which] that will be part of the annual intended use plan, as required by the Safe Drinking Water Act.

C. The department [shall] may adopt [regulations or internal] rules and establish procedures addressing the mechanism for the preparation of the annual intended use plan and the content of [such] the plan and shall prepare [such] the plan [with the assistance of the authority] as required by the Safe Drinking Water Act and the capitalization grant agreement. The department shall review all proposals for drinking water facility construction projects, including [but not limited to] project plans and specifications for compliance with the requirements of the Safe Drinking Water Act and the requirements of state laws and [regulations] rules governing the construction and operation of drinking water supply facilities. The department also shall determine whether a local authority has demonstrated adequate technical [and], managerial [capability] and financial capacity to operate the drinking water supply facility for its useful life in compliance with the requirements of the Safe Drinking Water Act and with the requirements of state laws and regulations governing the operation of drinking water supply facilities.

D. The department [and the authority shall enter into an agreement for the purpose of describing and allocating duties and responsibilities with respect to] is responsible for monitoring the construction of drinking water facility construction projects that have been provided financial assistance pursuant to the provisions of the Drinking Water State Revolving Loan Fund Act to ensure compliance with the requirements of the Safe Drinking Water Act and with the requirements of state laws and [regulations] rules governing construction and operation of drinking water supply facilities.

E. The department [shall] may adopt [regulations or internal] rules and establish procedures establishing the criteria and method for the distribution of annual capitalization grant funds between the fund and the nonproject activities (set-asides) allowed by the Safe Drinking Water Act and for the description in the intended use plan and annual report of the financial programmatic status of the nonproject activities (set-asides) allowed by the Safe Drinking Water Act.

F. The [authority, with the assistance of the] department [shall] may establish procedures to identify affordability criteria for a disadvantaged community and to extend a program to assist such communities.

G. The department shall set up separate accounts outside the fund to use for nonproject activities (set-asides) [activities] authorized under the Safe Drinking Water Act, Sections 1452 (g) and 1452 (k), and the [authority] department shall set up a separate account outside the fund for administration of the fund. The department shall also provide the additional match for Safe Drinking Water Act, Section 1452 (g) (2) activities.

H. The department shall prepare and submit applications for capitalization grants to the United States environmental protection agency as required by the Safe Drinking Water Act."

SECTION 6. Section 6-21A-6 NMSA 1978 (being Laws 1997, Chapter 144, Section 6) is amended to read:

"6-21A-6. FINANCIAL ASSISTANCE--CRITERIA.--

A. Financial assistance shall be provided only to local authorities that:

(1) meet the requirements for financial [capability] ability to pay set by the [authority] department to assure sufficient revenues to operate and maintain the drinking water supply facility for its useful life and to repay the financial assistance as appropriate;

(2) appear on the priority list for the fund, developed and maintained by the department, regardless of rank on such list;

(3) are considered by the [authority and the] department ready to proceed with the drinking water facility construction project;

(4) demonstrate adequate technical [and], managerial [capability] and financial capacity to operate the drinking water supply facility for its useful life; [and]

(5) agree to maintain separate drinking water facility construction project accounts in accordance with generally accepted governmental accounting standards and to conduct an audit of the drinking water facility construction project's financial records;

(6) agree to provide a written assurance, signed by an attorney, that the local authority has or will acquire proper title, easement and right of way to or through which the drinking water facility construction project proposed for funding is to be constructed or extended;

(7) agree to require the contractor of the drinking water facility construction project to post a performance and payment bond in accordance with the requirements of Section 13-4-18 NMSA 1978;

(8) agree to provide written notice of the beginning and end of construction and the start of the operation of the drinking water facility construction project;

(9) provide information required by the department to comply with the provisions of the Safe Drinking Water Act and state law and any other information the department deems necessary to evaluate the local authority's financial ability to repay a loan; and

[(5)] (10) agree to meet other requirements established by [the authority] department rule and state laws, including [but not limited to] procurement, recordkeeping and accounting.

B. Loans from the fund shall be made by the [authority] department only to local authorities that establish one or more dedicated sources of revenue to repay the money received from the fund and to provide for operation, maintenance and equipment replacement expenses of the drinking water supply facility for which the drinking water facility construction project is proposed for funding.

C. The [authority, with assistance from the] department shall establish procedures addressing methods to provide financial assistance to local authorities in accordance with the criteria set forth in the Safe Drinking Water Act, Section 1452(a)(3).

D. Each loan made by the [authority] department shall provide that repayment of the loan shall begin not later than one year after completion of construction of the drinking water facility construction project for which the loan was made and shall be repaid in full no later than twenty years after completion of the construction, except in the case of a disadvantaged community [in which case]. The [authority] department may extend the term of the loan to a disadvantaged community, as long as the extended term:

(1) terminates not later than the date that is thirty years after the date of [project] completion of construction; and

(2) does not exceed the expected design life of the drinking water facility construction project.

E. Financial assistance may be made with an annual interest rate [which] that is less than a market rate as determined [by procedures established] by the [authority] department and reported annually in the intended use plan prepared by the department [with the assistance of the authority] as allowed by law.

F. Financial assistance pursuant to the Drinking Water State Revolving Loan Fund Act shall not be given to a local authority if the [authority] department determines that the financial assistance is for a drinking water facility construction project to be constructed in fulfillment or partial fulfillment of requirements made of a subdivider under the provisions of the Land Subdivision Act or the New Mexico Subdivision Act.

G. Financial assistance [may] shall be made only to local authorities that employ or contract with a registered professional engineer to provide and be responsible for engineering services on the drinking water facility construction project. Such services, if the [authority] department determines such services are needed, may include [but are not limited to] an engineering report, facility plans, environmental evaluations, construction contract documents, supervision of construction, [and] start-up services and close-out documents.

H. Financial assistance shall be made only for eligible items as described by [authority] department procedures and as identified [pursuant to] in accordance with the Safe Drinking Water Act.

I. A local authority may use the proceeds from financial assistance received pursuant to the Drinking Water State Revolving Loan Fund Act to provide a local match or other nonfederal share of a drinking water facility construction project to the extent allowed by the Safe Drinking Water Act."

SECTION 7. Section 6-21A-7 NMSA 1978 (being Laws 1997, Chapter 144, Section 7) is amended to read:

"6-21A-7. DEPARTMENT DUTIES--POWERS.--

A. For the purpose of carrying out its responsibilities under the Drinking Water State Revolving Loan Fund Act, the department may:

(1) provide financial assistance to local authorities to finance all or part of a drinking water facility construction project;

(2) make recommendations to the board to issue bonds pursuant to the provisions of the Drinking Water State Revolving Loan Fund Act;

(3) after consultation with the board, pledge, transfer and assign as security for the payment of the principal and interest on bonds:

(a) obligations of each local authority, payable to the department;

(b) the security for the local authority obligations;

(d) income, revenue, funds or other money of the department from any other source appropriated or authorized for paying principal and interest on bonds issued pursuant to the provisions of the Drinking Water State Revolving Loan Fund Act;

(4) acquire, construct, hold, improve, grant mortgages of, accept mortgages of, sell, lease, convey or dispose of real and personal property for its public purposes;

(5) acquire, construct or improve real property, buildings and facilities for lease and to pledge rentals and other income received from such leases to the payment of bonds;

(6) acquire and hold title to or a leasehold interest in real and personal property and to sell, convey or lease that property for the purpose of satisfying a default or enforcing the provisions of a loan agreement;

(7) in the event of a default by a local authority, foreclose upon or attach any property or interest pledged, mortgaged or otherwise available as security for a drinking water facility construction project financed in whole or in part from the fund;

(8) enforce its rights by suit or mandamus and use all other available remedies under state law in the event of default by a local authority, a violation of department rules promulgated pursuant to the Drinking Water State Revolving Loan Fund Act by the local authority or a breach of an agreement between the local authority and the department;

(9) manage the fund, grant and administer financial assistance to local authorities and apply for and accept grants, including capitalization grant awards made to the state in accordance with the Safe Drinking Water Act and the Drinking Water State Revolving Loan Fund Act;

(10) appoint and employ attorneys, financial advisors, underwriters and other experts and agents and employees as the business of the department and the board may require;

(11) prosecute and defend all actions, at law or in equity, in any court having jurisdiction over the subject matter and the parties to the matter;

(12) collect application, origination and administrative fees from the local authority, the total of which for any loan shall not exceed four percent of the value of the loan requested or authorized; and

(13) adopt rules necessary and appropriate to implement the provisions of the Drinking Water State Revolving Loan Fund Act.

[A.] B. The department, with the approval of the governor and as authorized by federal law and in the intended use plan, may transfer up to one-third of a wastewater facility construction loan fund capitalization grant to the drinking water state revolving loan fund [provided the Wastewater Facility Construction Loan Act is amended to allow for such transfer. This provision is available one year after the receipt of the first full capitalization grant for the Drinking Water State Revolving Loan Fund Act and will expire with the capitalization grant of the year 2002] or may transfer up to one-third of a drinking water state revolving loan fund capitalization grant to the wastewater facility construction loan fund. Before the department makes the transfer, the department shall:

(1) outline the transfer in the applicable intended use plans for both the drinking water state revolving loan fund and the wastewater facility construction loan fund; and

(2) report the intended transfer to the legislature.

[B.] C. The department [in the annual intended use plan] shall certify annually to the United States environmental protection agency the progress made regarding operator certification and capacity development programs as they relate to the receipt of capitalization grants available from the environmental protection agency [under] pursuant to the Safe Drinking Water Act."

SECTION 8. A new section of the Drinking Water State Revolving Loan Fund Act is enacted to read:

"[NEW MATERIAL] BOARD POWERS AND DUTIES.--

A. The board, upon recommendation from the department, may issue and sell bonds recommended by the department for any purpose enumerated in the Drinking Water State Revolving Loan Fund Act or for payment of obligations incurred or temporary loans made to accomplish any purpose of that act. Bonds issued by the board:

(1) may be issued in one or more series;

(2) shall bear prescribed dates;

(3) shall be in the form provided in the Supplemental Public Securities Act;

(4) shall be issued in prescribed denominations;

(5) shall have terms and maturities that do not exceed twenty-five years from the date of issue of each series;

(6) shall bear interest at prescribed rates;

(7) shall be payable and evidenced in the manner and times as set by the board;

(8) may be redeemed with or without premiums prior to maturity;

(9) may be issued on parity or ranked or assigned priority status; and

(10) may contain provisions not inconsistent with this subsection.

B. The bonds issued by the board may be sold at any time the board determines. The bonds may be sold at private or public sale at prices as provided in the Public Securities Act and in a manner determined by the board. The board retains the power to fix the date of sale of the bonds and to take all actions necessary to sell and deliver the bonds. Bond proceeds may be used for:

(1) purposes of the Drinking Water State Revolving Loan Fund Act or the purposes for which the fund may be used;

(2) the payment of interest on bonds for a period not to exceed three years from the date of issuance of the bonds; and

(3) the payment of all expenses, including publication and printing charges, attorney fees, financial advisory and underwriter fees, and premiums or commissions that the board determines are necessary or advantageous in connection with the recommendation, advertisement, sale, creation and issuance of bonds.

C. The board may issue and sell refunding bonds for the purpose of paying, defeasing or refunding the principal of, interest on and any redemption premiums on any outstanding bonds. Refunding bonds issued by the board shall be subject to the provisions of the Drinking Water State Revolving Loan Fund Act. Except as otherwise provided in that act, the proceeds of refunding bonds shall be immediately applied to the retirement of the bonds to be refunded or be placed in escrow or trust in one or more trust banks within or without the state to be applied to the payment of the refunded bonds or the refunding bonds, or both in such priority and in the manner that the board may determine.

D. The incidental costs of refunding bonds may be paid by the purchaser of the refunding bonds or be defrayed from other available revenues of the department, from the proceeds of the refunding bonds, from the interest or other yield derived from the investment of any refunding bond proceeds or other money in escrow or trust, from any other sources legally available for that purpose or from any combination of sources as the department may determine.

E. Any accrued interest and any premium appertaining to a sale of refunding bonds may be applied to the payment of the interest or the principal of the bonds, or to both interest and principal, may be deposited in an escrow or trust and expended solely for the purposes of this subsection or may be used to defray any incidental costs appertaining to the refunding or any combination thereof, as the board may require.

F. An escrow or trust shall be limited to proceeds of refunding bonds. Proceeds in escrow or trust may be invested or reinvested in federal securities and, in the case of an escrow or trust for the refunding of outstanding bonds or securities, in other securities issued by the federal government if the issuing resolution expressly permits the investment or reinvestment in securities issued by the federal government other than federal securities. A trust bank accounting for federal securities and other securities issued by the federal government in escrow or trust may place those securities for safekeeping wholly or in part in one or more trust banks within or without the state.

G. A trust bank shall continuously secure by a pledge of federal securities in an amount at all times at least equal to the total uninvested amount of the money, any money placed in escrow or trust in that trust bank, or by that trust bank in one or more trust banks within or without the state, and not invested or reinvested in federal securities and other securities issued by the federal government.

H. Proceeds and investments in escrow or trust, together with interest or gain to be derived from that investment, shall be in an amount at all times sufficient to pay principal, interest, prior redemption premiums due, charges of the escrow agent or trustee and other incidental expenses except to the extent otherwise provided for, as such obligations become due at their respective maturities or due at designated prior redemption dates in connection with which the board has exercised or is obligated to exercise a prior redemption option. The computations made in determining sufficiency shall be verified by a certified public accountant.

I. A purchaser of a refunding bond issued pursuant to this section shall not be responsible for the application of the proceeds by the department or any of the officers, agents, or employees of the department.

J. Bonds shall be legal investments in which all insurance companies, banks and savings and loan associations organized under the laws of the state, public officers and public bodies and all administrators, guardians, executors, trustees and other fiduciaries may properly and legally invest funds.

K. Bonds and the interest applicable to the bonds and the income from the bonds are exempt from taxation in the state.

L. Bonds may be issued under the provisions of the Drinking Water State Revolving Loan Fund Act only with the recommendation of the department and the approval of the board pursuant to authority provided in that act.

M. Department employees or board members or employees and any person executing bonds issued pursuant to the Drinking Water State Revolving Loan Fund Act shall not be liable personally on such bonds or be subject to any personal liability or accountability by reason of the issuance of the bonds.

N. All bonds recommended by the department and issued by the board, while registered, are declared and shall be construed to be negotiable instruments.

O. All bonds recommended by the department and issued by the board shall be special obligations of the board, payable solely from the revenue, income, fees or charges that may be pledged to the payment of the obligations pursuant to the provisions of the Drinking Water State Revolving Loan Fund Act and the bonds shall not create an obligation, debt or liability of the state. No breach of any pledge, obligation or agreement of the department or the board shall impose a pecuniary liability upon the state or a charge upon its general credit or taxing power.

P. An issuing resolution shall recite that each bond authorized is issued by the board under recommendation of the department. The recital shall clearly state that the bonds are in full compliance with all of the provisions of the Drinking Water State Revolving Loan Fund Act, and all bonds issued containing such recital shall be incontestable for any cause whatsoever after their delivery for value."

SECTION 9. Section 6-21A-9 NMSA 1978 (being Laws 1997, Chapter 144, Section 9) is amended to read:

"6-21A-9. AGREEMENT OF THE STATE NOT TO LIMIT OR ALTER RIGHTS OF OBLIGEES.--The state [hereby] pledges to and agrees with the holders of any bonds or other obligations issued under the Drinking Water State Revolving Loan Fund Act and with those parties that enter into contracts or agreements with the department or with the [authority] board pursuant to the provisions of that act, that the state shall not limit, alter, restrict or impair any rights vested in the [authority] department or board to fulfill the terms of agreements made with the holders of bonds or other obligations issued pursuant to [the Drinking Water State Revolving Loan Fund] that act and with the parties who may enter into contracts with a local authority, the department or the [authority] board pursuant to [the Drinking Water State Revolving Loan Fund] that act, and that the state shall not limit, alter, restrict or impair the rights vested in a local authority or in the department or the [authority] board to fulfill the terms of contracts made with the department or the [authority] board and with parties who enter into contracts with [such] local authorities. The state further agrees that it shall not in any way impair the rights or remedies of the holders of such bonds or other obligations of such parties until [such] the bonds and other obligations, together with interest [thereon] on the bonds and other obligations, with interest on any unpaid installment of interest and all costs and expense in connection with any action or proceeding by or on behalf of such holders, are fully met and discharged and [such] the contracts are fully performed on the part of [the authority] the department, the board or the local authorities. Nothing in this subsection precludes [such] limitation or alteration if [and when] adequate provision is made by law for the protection of the holders of bonds or other obligations issued by the [authority] board or those entering into [such] contracts with the [authority, or the authority or the] department or the board under any contract with a local authority. The [authority or the] department or the board may include this pledge and undertaking for the state in such bonds or other obligations and in such contracts. The department shall be the successor obligor to all obligations of the New Mexico finance authority that have arisen under Section 6-21A-9 NMSA 1978 as of June 30, 2013 without limitation or enlargement."

SECTION 10. A new section of the Drinking Water State Revolving Fund Act is enacted to read:

"[NEW MATERIAL] DRINKING WATER BOND SERVICE FUND CREATED.--

A. The "drinking water bond service fund" is created in the state treasury and shall be administered by the state treasurer. The department shall transfer all repayments of principal and interest of pledged loans upon receipt to the drinking water bond service fund until such time that all interest and principal payments on bonds for which such loans were pledged are fully paid. The drinking water bond service fund shall be used solely to pay principal and interest due on bonds issued by the board.

B. Payments from the drinking water bond service fund shall be paid by the state treasurer, who shall keep a complete bond register showing drinking water state revolving loan fund bonds, coupons paid and outstanding on the bonds and such other records as the board shall require.

C. Upon full payment of all bond principal and interest due, the state treasurer shall return to the drinking water state revolving loan fund any repayments of principal and interest of pledged loans no longer needed for bond repayments."

SECTION 11. TEMPORARY PROVISION--TRANSFER OF FUNCTIONS, PROPERTY, CONTRACTS AND REFERENCES IN LAW.--

A. On the effective date of this act, all functions, appropriations, money, records, equipment, supplies and other property related to the New Mexico finance authority's administration of the Drinking Water State Revolving Loan Fund Act are transferred to the department of environment. It is the intent of the legislature that transfer of services and programs from the authority to the department shall be accomplished as quickly as practicable, without disruption in services to current or potential borrowers. The governor's office and the state budget division of the department of finance and administration shall assist in the identification of functions, money, appropriations, records, equipment, supplies and other property to be transferred and shall certify to the legislature that resources transferred from the authority to the department are sufficient to continue the same level of services. The secretary of environment shall provide periodic updates to the legislative finance committee and the New Mexico finance authority oversight committee on the progress of the transfer, which shall be completed no later than September 30, 2013. Money transferred from the New Mexico finance authority shall be placed in the appropriate funds in the state treasury created in this act so that there will be no disruption in loans, payments or other obligations pursuant to the Drinking Water State Revolving Loan Fund Act or federal requirements.

B. On the effective date of this act, all contractual obligations arising from the New Mexico finance authority’s administration of the Drinking Water State Revolving Loan Fund Act shall be transferred to the department of environment.

C. On the effective date of this act, all references in law to the New Mexico finance authority's administration of the Drinking Water State Revolving Loan Fund Act shall be deemed to be references to the department of environment.

SECTION 12. REPEAL.--Section 6-21A-8 NMSA 1978 (being Laws 1997, Chapter 144, Section 8) is repealed.

SECTION 13. EFFECTIVE DATE.--The effective date of the provisions of this act is July 1, 2013.

- 32 -