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F I S C A L I M P A C T R E P O R T
SPONSOR Griego
ORIGINAL DATE
LAST UPDATED
2-10-07
HB
SHORT TITLE Drinking Water System Arsenic Standards
SB 677
ANALYST Aubel
APPROPRIATION (dollars in thousands)
Appropriation
Recurring
or Non-Rec
Fund
Affected
FY07
FY08
$10.000.0
$10,000.0
Recurring
General Fund
(Parenthesis ( ) Indicate Expenditure Decreases)
ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)
FY07
FY08
FY09 3 Year
Total Cost
Recurring
or Non-Rec
Fund
Affected
Total
$150.0 $150.0
$300.0 Recurring General
Fund
(Parenthesis ( ) Indicate Expenditure Decreases)
Relates to SM24 and HM24 HB781
SOURCES OF INFORMATION
LFC Files
Responses Received From
New Mexico Environment Department (NMED)
Energy, Minerals, Natural Resources Department (EMNRD)
Department of Health (DOH)
SUMMARY
Synopsis of Bill
Senate Bill 677 appropriates $10.0 million from the general fund each year to the New Mexico
Environment Department to make grants for improving drinking water systems to meet the
federal arsenic standards.
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Senate Bill 677 – Page
2
FISCAL IMPLICATIONS
The appropriation of $10.0 million contained in this bill is a recurring expense to the general
fund. Any unexpended or unencumbered balance remaining at the end of fiscal year 2007 shall
not revert to the general fund.
HB 677 intends NMED to administer the grant program, presumably by its Construction
Programs Bureau (CPB) with assistance from the Drinking Water Bureau. NMED specifies that
the appropriation of $10 million may allow for up to approximately 50 grants to various
communities. Each grant will require significant technical oversight, requiring at least two
additional full time employees (FTEs) to complete that work. $150.0 thousand would be the
approximate cost for one engineer and one administrator FTE.
SIGNIFICANT ISSUES
NMED points out that in New Mexico arsenic occurs naturally in groundwater. DOH notes that
long-term exposure to elevated concentrations of arsenic in water can cause cancer of the skin,
lungs, urinary bladder, kidneys.
In 2001 the federal standard for arsenic was lowered from 50 parts per billion (ppb) to 10 ppb,
with an effective date of December 31, 2007. That change caused many water systems, which
had been in compliance with the arsenic standard, to be out of compliance.
Reducing arsenic levels in drinking water is a difficult problem for water systems to correct. The
cost to bring the systems into compliance can be significant, with additional operating costs
implied. According to Senate Memorial 24, approximately $135.0 million is needed to rebuild
water treatment facilities and that approximately $20.0 million will be needed annually in
additional operating costs. Small systems are less able to absorb the short term and long term
financial impacts of reducing arsenic levels.
NMED details as follows:
“… there are approximately 80 drinking water systems potentially in violation of the federal Safe
Drinking Water Act (SDWA) because those systems have a water source with an arsenic
concentration greater than the Maximum Contaminant Level (MCL) of 10 parts per billion
(ppb). The population statistics are as follows: approximately 28 percent of the water systems
impacted by arsenic serve less than 100 people; 32 percent serve between 100 and 500 people;
30 percent serve between 500 and 10,000 people; and 10 percent serve populations between
10,000 and 500,000 people. Of the 80 systems affected, approximately nine are currently
installing treatment systems or have found alternative sources of water. Therefore,
approximately 70 water systems must find solutions to their arsenic problems. A primary reason
that many systems have not yet been able to address their arsenic problem is because of the high
cost of installing and maintaining a treatment system. This bill will greatly assist arsenic-
impacted water systems with the high cost of reducing arsenic concentrations in their drinking
water."
PERFORMANCE IMPLICATIONS
NMED suggests that HB will allow arsenic-impacted systems to install adequate treatment to
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Senate Bill 677 – Page
3
bring arsenic levels within a level that puts the systems on a reduced monitoring schedule for
arsenic. That could assist NMED’s Drinking Water Bureau meet its performance measure of
completing 95 percent of the sampling requirements within the required timeframe. The bureau
would also be able to assist water systems with high arsenic levels meet compliance standards
mandated by Safe Drinking Water Act regulations.
If administered by the CPB, its performance measures for customer satisfaction could drop
without the added resources to administer the grants and provide the technical assistance.
ADMINISTRATIVE IMPLICATIONS
To administer the grant fund, NMED will have to determine how to rank and prioritize requests
for assistance. Either NMED’s Drinking Water Bureau or Construction Program Bureau (or both
in cooperation) will need to track the grants, as well as review plans and specifications for the
water systems. If a new grant coordinator position is created to administer the grant program, it
will assist with addressing those and other issues.
CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP
SB 677 relates to House Memorial 24 and Senate Memorial 24, both which request the Governor
and NMED to protest the new arsenic standard, its significant costs for implementation without
federal funding, and insufficient data pertaining to arsenic levels in New Mexico relating to
health effects.
SB 677 relates to House Bill 781, which proposes creating an Office of Water Infrastructure
Development and moving the CPB to this new department.
TECHNICAL ISSUES
SB 677 does not specify a current fund that is administered by NMED and does not create a new
fund by statute.
Language does not provide for earnings to be distributed as grants.
The effective date would be June 30, 2007.
ALTERNATIVES
NMED suggests that an amendment targeting the bill at small drinking water systems impacted
by arsenic would direct the money to systems least financially able to contend with their arsenic
problems.
Some of the impacted water systems may seek a loan from the clean water state revolving fund
or the rural infrastructure revolving loan fund. Grants are also obtainable through the Special
Appropriations Program, which would allow legislative direction for the funds. Other funding
agency sources include the United States Environmental Protection Agency’s State and Tribal
Assistance Grants (STAG), New Mexico Finance Authority’s Water and Wastewater Grant
Fund, and the Water Trust Board.
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Senate Bill 677 – Page
4
WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL
Some impacted systems may have a difficult time obtaining a loan due to their current financial
circumstances and those systems will seek grant monies. However, during the time a system is
seeking funding from other sources, they may be in violation of state and federal regulations and
potentially impacting the health of their customers. Those and other arsenic-impacted systems
will compete with other worthy projects for grant funding and the continuing need for funding
for arsenic treatment will be unmet.
POSSIBLE QUESTIONS
1.
Will the grants apply to additional operating costs or new infrastructure only.
2.
How will the grants be prioritized.
3.
How will the grants be fairly distributed.
4.
Will the grants be made with “sliding scale" loan components, as Best Management
Practices dictate.
5.
Can the fund be leveraged.
6.
Will the grants be administered by the Drinking Water Bureau or the Construction
Programs Bureau, or both in cooperation.
7.
If the Office for Water Infrastructure is created, how would the funds and FTE be
transferred.
8.
If the request to the EPA for a reduced arsenic standard is granted, how would that event
affect this new program and fund.
9.
Will the appropriation continue indefinitely.
10.
Are there any other funding sources for the grants.
MA/nt