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

SPONSOR Papen

ORIGINAL DATE

LAST UPDATED

2/2/06

HB

SHORT TITLE Water Project Act Funds for Original Purpose

SB 224

ANALYST Kehoe

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

NFI

NFI

NFI

NFI

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

New Mexico Finance Authority (NMF)

SUMMARY

Synopsis of Bill

Senate Bill 224 amends the Water Project Finance Act to provide that expenditures of the money

from the water project fund be used for its original purposes.

SIGNIFICANT ISSUES

The Water Finance Act was amended in 2005 to allow 10 percent of all money in the water pro-

ject fund be dedicated to the State Engineer for water rights adjudications; and 20 percent of the

money dedicate for water rights adjudications be allocated to the administrative office of the

courts for the courts’ costs associated with those adjudications. Following the 2005 Legislative

Session, prior to the sale of severance tax bonds, it was determined by bond counsel that the sev-

erance tax bonds could not be used for administrative purposes. Therefore, the Office of State

Engineer and Administrative Office of the Courts did not receive money for adjudication pur-

poses from the water project fund in 2005.

Eligible water projects funded from the water project fund are defined as those involving: 1) the

storage, conveyance or delivery of water to end-users; 2) the implementation of federal Endan-

gered Species Act collaborative programs; 3) the restoration of watersheds; 4) flood prevention;

5) conservation; or 6) for recycling, treatment or reuse of water.

Senate Bill 224 – Page

2

The water project fund is capitalized with 10 percent of the severance tax bonding capacity each

year as provided by Laws of 2003, Chapter 134. The 10 percent set-aside of severance tax bond

capacity for FY06-07 is approximately $28.5 million for allocation by the water trust board for

eligible water projects authorized by the Legislature. Money from the severance tax bonds may

not be used to pay indirect project costs, and any unexpended balance from proceeds of sever-

ance 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 ensur-

ing proper reversions.

OTHER SUBSTANTIVE ISSUES

According to NMFA, over $2 billion in water-related needs have been identified throughout the

state. The water trust board in FY05 received over $129 in requests for water-related projects.

To date, the water trust board has recommended $47 million of grant funding for 47 projects for

29 local entities statewide. The state has leveraged more than $50 million of local and/or federal

funding.

LMK/yr