Fiscal impact reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for standing finance
committees of the Legislature. LFC does not assume responsibility for the accuracy of these reports if they
are used for other purposes.
F I S C A L I M P A C T R E P O R T
SPONSOR
Cadena
LAST UPDATED
ORIGINAL DATE 2/24/2025
SHORT TITLE
Real-Time Water Qualit
y Monitoring
BILL
NUMBER House Bill 427
ANALYST Davidson
ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT*
(dollars in thousands)
Agency/Program
FY25 FY26 FY27
3 Year
Total Cost
Recurring or
Nonrecurring
Fund
Affected
NMFA
No fiscal
impact
$200.0 $200.0 $400.0 Recurring
Other state
funds
Parentheses ( ) indicate expenditure decreases.
*Amounts reflect most recent analysis of this legislation.
Sources of Information
LFC Files
Agency Analysis Received From
New Mexico Environment Department (NMED) Office of the State Engineer (OSE) New Mexico Attorney General (NMAG)
New Mexico Finance Authority (NMFA)
Department of Finance Administration (DFA)
SUMMARY
Synopsis of House Bill 427
House Bill 427 amends the Water Project Finance Act to add new criteria for grant projects and
loans for real-time water quality monitoring projects. The bill also allows for funds administered
by the Water Trust Board to be used for real-time water quality monitoring projects.
This bill does not contain an effective date and, as a result, would go into effect 90 days after the
Legislature adjourns if enacted, or June 20, 2025.
FISCAL IMPLICATIONS
The water project fund receives a 9 percent annual earmark on senior severance tax bond (STB)
capacity and an annual distribution from the water trust fund of the greater of $4 million or 4.7
percent of the average year-end value of the trust fund over the previous five years. According to
the Board of Finance, the water project fund’s 9 percent STB capacity earmark will yield a
$124.6 million distribution in FY24, with a net $115.7 million available for award by the Water
Trust Board including the water trust fund distribution.
House Bill 427 – Page 2
The Office of the State Engineer receives 10 percent of the annual distributions from severance
tax bond proceeds and the trust fund for water rights adjudication. Additionally, 10 percent is
allocated to the Administrative Office of the Courts (AOC). Legislation passed in 2024
temporarily reduced the distribution to OSE to the lesser of $4 million or 8 percent of water
project funds, with 2 percent of water project funds continuing to the flow to AOC.
Severance tax bond earmark distributions to the water project fund have grown dramatically over
the last several years with rising oil and gas revenues, with the average award in FY24 being 82
percent grant and 18 percent loan. Loan terms are up to 20 years at 0 percent interest. Demand
for these funds has also increased.
For the FY26 funding cycle, eighty-four projects sought by 62 public entities are authorized for
funding in the bill. Which projects are ultimately awarded funding, and at what amounts, will be
determined by the Water Trust Board after legislative authorization. The 84 projects authorized
for FY26 requested funds totaling $256.4 million, leaving a roughly $99 million funding gap for
the other projects which could be authorized
The New Mexico Finance Authority (NMFA) administers the Water Trust Fund and Water Trust
Board. Currently, it does not have staff with expertise in water quality monitoring projects and if
HB427 is implemented, NMFA analysis notes the agency will need to hire contractors to ensure
funds are expended appropriately and projects are vetted properly. LFC analysis estimates the
board could need up to $200 thousand from the water projects fund to accommodate for the
expanded portfolio of projects it would need to analyze.
SIGNIFICANT ISSUES
Analysis from the New Mexico Attorney General (NMAG) notes current statute regarding what
water projects can qualify for funding from the Water Trust Board include water storage,
conveyance, restoration, and flood prevention, but not data-storage or technology acquisition that
House Bill 427 discusses. NMAG analysis notes the bill could potentially open up funding for
water quality monitoring projects but would not subject them to the same conditions and
restrictions such as financial assurance and recordkeeping that other eligible projects face.
NMAG analyses further notes the current Water Project Finance Act requires qualifying water
projects to be authorized by the Legislature. HB427 removes this requirement.
Analysis from NMFA notes the projects discussed in HB427 relate more to operations and
maintenance, which would be out of the scope of projects the proceeds from the severance tax
bonds that make up the majority of the funding the Water Trust Board awards. Due to this,
NMFA notes that, regardless of water quality monitoring projects being included in the act,
restrictions on the use of severance tax bond proceeds could still exclude water quality
monitoring projects from receiving Water Trust Board funds.
NMFA analysis further notes that, due to HB427 specifying the water trust board funding would
be delivered as grants, NMFA would not be able recoup its costs of administration regarding
these new projects. This is due to reimbursing the most of the board’s administrative costs
through annual loan repayments, since severance tax bond proceeds cannot be used for
administrative costs.
House Bill 427 – Page 3
Any projects funded by the Water Trust Board must be recommended to it and specifically
authorized by law. For projects to be vetted and then recommended to the Legislature by the
board, the board uses an annual application cycle which begins in July of each year. NMFA
analysis notes the new type of projects authorized by HB427 would not be reviewable for the
FY26 review cycle due to time constraints and would have to wait until FY27.
Analysis from the New Mexico Environment Department (NMED) notes the bill does not
contain specific language relating to reporting of the water quality monitoring data:
The bill requires real-time monitoring data be reported to NMED, but it does not specify
how this data should be used. One of the main limitations of real-time monitoring is that
data collected from these systems generally cannot be used for regulatory compliance.
State and federal regulations require that compliance sampling be conducted using EPA-
approved methods and that samples be analyzed at certified laboratories to ensure
accuracy and legal validity. While real-time monitors can serve as an important
operational tool for water and wastewater systems, they do not replace compliance
sampling requirements.
CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP
HB427 relates to House Bill 206, which authorizes Water Trust Board projects.
Technical Issues
Analysis from the Office of the State Engineer notes some technical issues exist in the bills
discussion in the bill relating to which types of water quality monitoring the bill is discussing:
The title of the bill states, “...to monitor the quality of New Mexico’s drinking water,” but
in the text of the bill, it states the funding can be used for wastewater monitoring. If the
intent of the bill is to allow for wastewater monitoring, then the word wastewater should
be used throughout the bill whenever “water quality” appears (i.e., and for real-time
water and wastewater quality monitoring projects as provided in Section 72-4A-7 NMSA
1978).
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