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AN ACT

RELATING TO PUBLIC FINANCE; RAISING THE CAP ON RURAL

INFRASTRUCTURE LOANS; EXPANDING THE SCOPE OF ELIGIBLE

COMMUNITIES; MAKING SOLID WASTE DISPOSAL PROJECTS ELIGIBLE

FOR FUNDING; ALLOWING FOR ADMINISTRATIVE COSTS; MAKING AN

APPROPRIATION.

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

Section 1. Section 75-1-2 NMSA 1978 (being Laws 1973,

Chapter 333, Section 2, as amended by Laws 2001, Chapter 250,

Section 1 and by Laws 2001, Chapter 265, Section 1) is

amended to read:

"75-1-2. DEFINITIONS.--As used in the Rural

Infrastructure Act:

A. "department" means the department of

environment;

B. "fund" means the rural infrastructure revolving

loan fund;

C. "local authority" means a mutual domestic

association or water and sanitation district that supplies

water, wastewater or solid waste services to, or a

municipality that has, a population of less than twenty

thousand or a county with a population of less than two

hundred thousand;

D. "operate and maintain" means all necessary

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activities, including replacement of equipment or

appurtenances to assure the dependable and economical

function of a facility in accordance with its intended

purpose;

E. "secretary" means the secretary of environment;

F. "solid waste facility" includes transfer and

convenience facilities, landfills or other equipment or

systems used for the processing, transformation, recycling or

disposal of solid waste;

G. "wastewater facility" includes collection

lines, pumping equipment, treatment works and disposal piping

or process units; and

H. "water supply facility" includes the source of

supply of water, pumping equipment, storage facilities,

transmission lines, treatment works and distribution

systems."

Section 2. Section 75-1-2.1 NMSA 1978 (being Laws 1983,

Chapter 173, Section 3, as amended by Laws 2001, Chapter 250,

Section 2 and by Laws 2001, Chapter 265, Section 2) is

amended to read:

"75-1-2.1. PURPOSE OF ACT.--The purpose of the Rural

Infrastructure Act is to provide financial assistance to

local authorities for the planning, design and construction

or modification of water supply, wastewater and solid waste

facilities."

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Section 3. Section 75-1-3 NMSA 1978 (being Laws 1973,

Chapter 333, Section 3, as amended by Laws 2001, Chapter 250,

Section 3 and by Laws 2001, Chapter 265, Section 3) is

amended to read:

"75-1-3. FUND CREATED--ADMINISTRATION--EMERGENCY

FUND.--

A. A special fund is created to be known as the

"rural infrastructure revolving loan fund". Money

appropriated to the fund or to the department to carry out

the provisions of the Rural Infrastructure Act may be used to

make loans and grants to local authorities, individually or

jointly, for water supply, wastewater or solid waste

facilities. Appropriations made to the fund but not expended

at the end of the fiscal year for which appropriated shall

not revert to the general fund but shall accrue to the credit

of the fund. Earnings on the balance in the fund shall be

credited to the fund. In addition, when the proceeds from

the issuance of severance tax bonds appropriated to the fund

are deposited in the state treasury, interest earned on that

money during the period from deposit in the state treasury

until the actual transfer of the money to the fund shall be

credited to the fund.

B. Ten percent of any appropriation to the fund or

to the department to carry out the provisions of the Rural

Infrastructure Act shall be set aside for emergency grants

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and loans pursuant to Section 75-1-5 NMSA 1978.

C. All water supply, wastewater and solid waste

facilities shall be designed in compliance with the

engineering requirements established by the secretary after

consulting with and considering the recommendations of the

professional engineering societies operating in New Mexico.

The secretary shall also establish, by regulation, guidelines

for the ranking of projects for top priority based on public

health needs.

D. The department shall administer the fund and

shall make grant and loan disbursements in accordance with

the Rural Infrastructure Act. The secretary shall adopt

regulations to govern the application procedure and

requirements for disbursing grants and loans under the Rural

Infrastructure Act, including requirements consistent with

the purpose of the act for determining the eligibility and

priority of local authorities for such grants and loans.

E. Receipts from the repayment of loans, including

loans approved by the state board of finance pursuant to

Section 75-1-5 NMSA 1978, shall be deposited in the fund by

the department, including receipts from the repayment of

loans made pursuant to appropriations to carry out the

purposes of the Water Supply Construction Act made prior to

the effective date of the Rural Infrastructure Act.

F. Money in the fund is appropriated to the

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department to carry out the provisions of the Rural

Infrastructure Act. The department may allocate up to two

percent of the total balance in the fund to pay for

administrative expenses necessary to carry out the provisions

of the Rural Infrastructure Act. Money allocated for

administrative expenses shall be placed in a separate

administrative account in the fund to be used solely for

administrative expenses, and the department shall at the

beginning of the fiscal year determine the projected

administrative costs for the year and deposit in the account

the appropriate amount; provided that the amount to be

deposited does not exceed two percent of the total balance in

the fund. Money in the account shall remain in the account

at the end of a fiscal year.

G. Loans and grants made pursuant to the

provisions of the Rural Infrastructure Act shall not be used

by the local authority on any project constructed in

fulfillment or partial fulfillment of requirements made of a

subdivider by the provisions of the Land Subdivision Act or

the New Mexico Subdivision Act."

Section 4. Section 75-1-4 NMSA 1978 (being Laws 1973,

Chapter 333, Section 4, as amended by Laws 2001, Chapter 250,

Section 4 and by Laws 2001, Chapter 265, Section 4) is

amended to read:

"75-1-4. CONDITIONS FOR GRANTS AND LOANS.--

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A. Grants and loans shall be made only to local

authorities that:

(1) agree to operate and maintain the water

supply, wastewater or solid waste facilities so that the

facilities will function properly over the structural and

material design life, which shall not be less than twenty

years;

(2) require the contractor of the

construction project to post a performance and payment bond

in accordance with the requirements of Section 13-4-18 NMSA

1978;

(3) provide a written assurance, signed by

an attorney, that the local authority has proper title,

easements and rights of way to the property upon or through

which the water supply, wastewater or solid waste facility

proposed for funding is to be constructed or extended;

(4) meet the requirements of the financial

capability set by the department to assure sufficient

revenues to operate and maintain the facility for its useful

life and to repay the loan;

(5) pledge sufficient revenues for repayment

of the loan, provided that such revenues may by law be

pledged for that purpose; and

(6) agree to properly maintain financial

records and to conduct an audit of the project's financial

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records.

B. Except as otherwise provided in the Rural

Infrastructure Act, a loan shall be for a period of time not

to exceed twenty years. Loans may be interest free or bear

an annual interest rate set by the secretary that is at or

below market interest rates. The repayment of loans shall be

in annual, quarterly or monthly installments, as approved by

the department, beginning one year after completion of the

project. The repayment of the interest on the loan

accumulated during the design and construction of a project

may be included in the final loan amount, but it shall not be

counted in determining the maximum loan amount.

C. No loan recipient eligible to receive a grant

under the Rural Infrastructure Act shall receive grants in

any one year totaling more than five hundred thousand dollars

($500,000).

D. The maximum assistance, including both loans

and grants, that a local authority may receive under the

Rural Infrastructure Act in any one year is two million

dollars ($2,000,000).

E. Plans and specifications for a water supply,

wastewater or solid waste facility construction project shall

be approved by the department before grant or loan

disbursements to pay for construction costs are made to a

local authority. Interim loan disbursements to pay for

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engineering and other professional services may be made by

the department prior to the approval of the plans and

specifications.

F. Privately owned water supply, wastewater or

solid waste facilities are not eligible for assistance under

the Rural Infrastructure Act.

G. Grants and loans shall be made only for

eligible items. Eligible items include but are not limited

to the costs of engineering feasibility reports, contracted

engineering design, inspection of construction, special

engineering services, archaeological surveys and contracted

construction. The costs of water rights, land, system

acquisition, easements and rights of way, refinancing of

program loans, legal costs and fiscal agents' fees are

eligible items only for loan funds. Local authority

administrative costs shall not be included as eligible items.

H. The department may:

(1) conduct periodic reviews of the

operation of a local authority that has received funding from

the department;

(2) require the local authority to submit

information relevant to the loan to the department;

(3) require the submission of financial

reports relevant to the ability of the local authority to

repay the loan; and

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(4) review and require changes to the

rate-setting analysis that supports the loan payments.

I. In the event the local authority fails to make

the prescribed loan repayment, the department is authorized

to set solid waste, water or wastewater user rates in the

area of the local authority's jurisdiction in order to

provide sufficient money for repayment of the loan and proper

operation and maintenance. Funds sufficient to provide for

repayment of the loan and proper operation and maintenance

shall be identified through a rate-setting analysis that will

ensure enough revenue to cover yearly expenses and

emergencies, a reserve fund for nonmajor capital items and

equitable pay for staff. The rate-setting analysis may be

reviewed and changed on a yearly basis if necessary.

J. The department may enforce its rights as

provided by law."

Section 5. Section 75-1-5 NMSA 1978 (being Laws 1987,

Chapter 175, Section 4, as amended by Laws 2001, Chapter 250,

Section 5 and by Laws 2001, Chapter 265, Section 5) is

amended to read:

"75-1-5. EMERGENCY LOANS AND GRANTS.--Ten percent of

the proceeds of each severance tax bond issuance or other

appropriation for the purpose of carrying out the provisions

of the Rural Infrastructure Act shall be reserved for

emergencies and shall be allocated by the department only

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upon approval of the state board of finance. This amount

shall not be deposited in the fund and shall be allocated

only for emergency loans and grants. Emergency loans and

grants shall be made in accordance with the applicable

provisions for loans pursuant to the Rural Infrastructure

Act; provided that a grant shall not exceed five hundred

thousand dollars ($500,000). At the end of the third quarter

of each fiscal year, the unexpended balance of the reserved

amount may be transferred by the department to the fund for

use in accordance with the Rural Infrastructure Act."

Section 6. Section 75-1-6 NMSA 1978 (being Laws 1988,

Chapter 28, Section 7, as amended by Laws 2001, Chapter 250,

Section 6 and by Laws 2001, Chapter 265, Section 6) is

amended to read:

"75-1-6. AVERAGE RESIDENTIAL USER COST REDUCTION GRANTS

AND ZERO PERCENT LOANS.--

A. No more than twenty-five percent of the

proceeds of each severance tax bond issuance or other

appropriation for the purpose of carrying out the provisions

of the Rural Infrastructure Act shall be reserved for average

residential user cost reduction grants or zero percent loans

to reduce average residential user cost to a reasonable level

for eligible financially needy loan recipients whose water

supply or wastewater facilities serve less than three

thousand persons.

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B. Average residential user cost reduction grants

and zero percent loans shall be allocated by the department

in accordance with the provisions for grants and loans

pursuant to the Rural Infrastructure Act, provided that an

average residential user cost reduction grant or zero percent

loan shall not exceed five hundred thousand dollars

($500,000). Such grants and loans shall reduce only the

principal and interest portion of the average residential

user cost to a reasonable cost as determined by the

department.

C. A zero percent loan or average residential user

cost reduction grant shall be approved by the department

when, after construction bids have been received, the

following conditions have been met by the local authority

whose average residential user costs are in need of

reduction:

(1) the construction project is designed

using the most cost-effective and dependable option;

(2) the system is designed with adequate

built-in expansion capacity;

(3) other sources of grant funds have been

sought and are not available in a timely manner;

(4) the project cannot feasibly be reduced

in scope or phased so as to bring it within available loan

funds and within reasonable user cost; and

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(5) the local authority's median household

income is less than ninety percent of the statewide

non-metropolitan median household income based on the most

current federal decennial census."

Section 7. EFFECTIVE DATE.--The effective date of the

provisions of this act is July 1, 2007.