{Editor's Note: This is part 2 of a multi-article series on the NM CAP Entity meeting of April 3, 2018)

By Mary Alice Murphy

The second item of old business at the April 3, 2018 meeting of the New Mexico Central Arizona Project Entity addresses responses to a letter than was used in a fiscal impact statement on a bill sponsored by Sen. Howie Morales in the Senate at the last legislative session. The bill attempted to remove $50 million from the New Mexico Unit Fund for other projects.

The response letter is addressed to NM State Auditor's Office – Special Investigations Division's Hamish Thompson.

The letter from the New Mexico State Auditor to the Interstate Stream Commission was dated November 30, 2017, evidently one of the last actions of the previous State Auditor Tim Keller before he became Albuquerque mayor.

Not only did the letter expose a lack of knowledge of what the CAP Entity has as its proposed action, according to New Mexico CAP Entity Executive Director Anthony Gutierrez, but it also had errors in a letter attached to the information.

The proposed action is: The New Mexico CAP Entity (“Entity”), on October 30, 2017, chose in an open public meeting the diversion, conveyance and storage alternatives as its amended proposed action. The amended proposed action includes project components in three areas-the Upper Gila Valley, along the San Francisco River and in the Virden Valley. Diversion structures in the Upper Gila and San Francisco, conveyance (ditch) improvements in all three identified areas including a portion of lined ditches, construction of 6 on/off farm storage ponds in Upper Gila and two in Virden totaling approximately 3,500 acre-feet, and construction of a reservoir in a side canyon of the San Francisco with an estimated 1,800 acre-feet of storage (proposed funding outside of construction fund). In addition, five conventional well systems (total capacity of 4,000 acre-feet of delivery) are also being proposed in the Upper Gila Valley to provide alternative methods of irrigation such as sprinkler or drip irrigation for maximum efficiency while also providing for aquifer storage and recovery.

These components provide opportunity for an increase in agriculture production as well as an increase in efficiency of the existing system. Current proposed project components were approved with an attempt to keep costs within the constraints of the appropriation from the Lower Colorado River Basin Development Fund (Construction Fund) identified solely for the purpose of funding the construction of the New Mexico Unit. The total estimated cost for the NM Unit is $42 million while recent estimated amounts available for construction in the construction fund are between $50-$55 million. If these monies are not used for the purpose of constructing a NM Unit project, they will be forfeited with no ability for future use.

"Our letter has a correction on the $28 million that was used," Gutierrez said. "It has a description of the proposed action and a breakdown of the comments from Silver City Attorney Robert Scavron. (Scavron's letter was from 2015 when he was trying to convince the town not to join the CAP Entity.) Lorraine Hollingsworth (of CAP Entity Attorney Pete Domenici Jr.'s office) and I put this draft together. I gave her an outline, she wrote it and I added the project description and some comments about funding."

The draft letter can be read at http://nmcapentity.org/documents/reference-documents/85-response-regarding-nm-state-auditor-documents-from-040318-meeting

Howard Hutchinson, representing the San Francisco Soil and Water Conservation District, asked for some minor word changes, and he asked for an explanation of some information in parentheses (proposed funding outside of construction fund).

Gutierrez explained that in the discussion about Weedy Canyon, it was said the additional funding might be acquired by Catron County from another source, rather than coming from the construction funding. Hutchinson proposed striking the language.

Hutchinson also asked that a portion be struck that said components provide opportunity for an increase in agriculture production. "This water is not dedicated to the increase of agricultural production, but rather to a whole host of uses, including municipal and industrial uses, and a whole host of other uses." He asked for it to be replaced with inserting "multiple uses of new water." In the same sentence he requested changing the word "system" to "water uses."

He also requested adding "local governments" between the ISC and the NM CAP Entity in the language on page 4, in a sentence beginning with "The JPA (joint powers agreement) was carefully drafted and reviewed by counsel…"

Vance Lee, representing Hidalgo County, asked that a word on the first page, "in connection" be replaced with "in consultation" to be more consistent with the Arizona Water Settlements Act.

Aaron Sera, representing Deming, which is the second fiscal agent for the NM CAP Entity, asked what the intent of the letter is. "Are we just giving them facts hoping they won't try the same thing in the next legislative session and make the same mistakes in the fiscal impact statement?"

"There are inconsistencies in the letter from the State Auditor's Office," Gutierrez said. "The letter has errors on how the funding is being used. They are directly related to how our JPA is put together. We want to set the record straight."

Joe Runyan, representing the Gila Farm Irrigation Association, asked if Scavron's comments were personal or directed by Silver City. Hutchinson said he believed it was a memo and that it stated his legal opinion.

Chairwoman Darr Shannon, representing the Hidalgo Soil and Water Conservation District, said the specific language was also used by the Legislative Council in its comments on the bill.

Domenici concurred that Scavron's comments were his opinion as counsel to Silver City, "so it should be taken more seriously."

Dominique Work, ISC attorney, attending by telephone, said she, too, had prepared a response to the State Auditor's letter, "but I have not received direction from my superiors whether to send it."

The board members approved the sending of the letter with the proposed changes.

In new business, Gutierrez presented the Bi-Annual Project Plan and Schedule of Advances for the New Mexico Unit-Central Arizona Project, as received from the Bureau of Reclamation. The document can be read at http://nmcapentity.org/documents/reference-documents/82-bi-annual-plan-and-fy20-proposed-budget-from-040318-meeting

"The Bureau of Reclamation provides this to the ISC and us on an annual basis," Gutierrez said. "I will ask Dominique Work to explain the components and schedule of advances."

"These documents are provided to us pursuant to an agreement between the ISC and the Bureau of Reclamation," Work said. "It required the Bureau of Reclamation to give us their estimates of expenses for the upcoming fiscal year and the fiscal year following that. These are two-year projections. There are five categories of expenses: NEPA evaluation, cultural resources compliance, engineering evaluation, PR&Gs (water resources principles, requirements and guidelines) and contingency funding."

She said the underlying assumptions are also included with the estimates. "The schedule reflects the amount of money Reclamation estimates it will need every quarter from the New Mexico Unit Fund. At this point, the ISC has advanced several million, although nothing has been advanced since January 2016 (which she corrected from having said July 2017)."

Gutierrez noted that the scheduled amounts are decreasing. "Our proposed action will have to be included. Anything not expended in a year from these estimates rolls over into the next year."

Hutchinson questioned why the cost for cultural resources compliance was the highest, as much of the proposed property to be utilized is on private land.

John Rasmussen of the Phoenix Office of the Bureau of Reclamation, who attended by telephone, said he believes much of it goes toward the programmatic process of government to government consultation on 30 Native American entities and with the Forest Service, the state Archaeologist and state Historic Preservation."

Hutchinson said it seems to be high. "At the last Soil and Water Conservation District conference, we had a detailed course on compliance with cultural resources. I know on the San Francisco, we will have to have a survey for one site, but the remainder are on private land."

"I'm at a loss," Van "Bucky" Allred, representing Catron County said. "We're talking about public land. Didn't the Forest Service just go through all of this for the Travel Management Plan?"

Jeff Riley, Reclamation engineer, said: "Good questions and appropriate. We absolutely will work with other surveys that have been done. We assure you we have good networking among agencies. These are estimates, as best we can understand the project. The costs have been going down. With the estimates, we want to make sure we capture the full specter of costs as best we understand the project. The project is evolving a little bit. As that happens, costs have been going down. In this case, cultural is particularly hard to estimate. As the surveys start the actual costs become clearer. We want to make sure we don't come back and say we need more money."

Hutchinson said the New Mexico Association of Soil and Water Conservation Districts has under contract a number of archaeologists who do surveys. "If you have a requirement for surveys on these sites, I can get Reclamation lined up with an NMASWCD to use one of our contractors."

Gutierrez said it was not just the site that needed to be surveyed, but also for a radius of a certain number of miles around each site.

Riley noted Reclamation has strict compliance requirements. "We have to remain within federal law. It is our contract and we may not be able to sole source it out."

Hutchinson said the association has a memorandum of understanding with the Bureau of Land Management to provide services. "We have a model, if Reclamation is interested in looking at it."

Work noted she had seen an error in one of the numbers, where a total does not match other totals. Marcos Mendiola, representing the ISC on the CAP Entity as a non-voting member, said the total on page 6 for 2020 does not match the totals on pages 2 and 3.

Work said ISC would be in conversation with Reclamation to ask for a correction page. "I don't know if you want to vote on it without the correction."

Gutierrez asked when it needs to be approved to meet the terms of the agreement. Work said it needed to be approved as soon as possible, but "I don't think it would not be problematic to postpone it until next month's meeting."

Shannon said because the group knows the correct number, "we can approve it with the correction." The board approved the bi-annual plan.

The next item in new business was approval of the New Mexico CAP Entity preliminary budget for fiscal year 2020.

"We're required to submit a budget a year in advance," Gutierrez said. "It goes through the ISC and will be presented in the Finance Council to the legislative appropriations committee."

He noted the existing budget for 2018 is for $1,364,984, the FY19 budget is for $700,000, and the FY20 budget is for $791,684.89.

The FY20 budget increases the mileage, because a new vehicle was not purchased, and it decreases the per diem amount by $5,000 and leaves the transportation allowance at $8,000. The maintenance contract, which includes the website and software, as well as copy machine maintenance was increased from $500 to $5,000. "The vehicle maintenance budget was increased, because in 2020, we re-added the vehicle purchase. If we receive a favorable Record of Decision, things may change with the potential of going into construction. We also had an increase in professional services. Our budget this year was for $60,000, but we had a line item adjustment raising it to $150,000. We're having a need now, potentially in 2020 for final design and will need continued support for NEPA, so we increased it to $325,000. We also, based on if we remove the other contractual services line item, the difference is about $140,000. We are going to have to take another look at that next month. We also added in $25,000 for other engineering services. Those are the basic changes. My recommendation is for $791,684.89 for the 2020 budget."

He said if a new vehicle is purchased, the mileage line item would decrease, and fuel can come out of the transportation line item.

Lee said: "It's going to be terribly difficult to put together a budget for two years ahead. My question is I don't fully understand what happens with the $850,000 we were setting aside to purchase water credits."

Gutierrez said the 2019 budget, which he will bring next month and will make the 2020 budget a bit more understandable, was reduced from $1.3 million to $700,000 by House Bill 2. He said contractual services had to be part of the operating budget, but because the purchase of water credits probably won't come before the Record of Decision, if there is a need to purchase credits in 2020, the entity will need to request a budget adjustment. "If we receive a favorable record of decision in December 2019, I presume we will have six months to request our 2021 budget."

The preliminary budget for FY2020 was approved.

Sera said it is critical to have the FY2019 budget approved at the next meeting.

The next article will address the scope of work 1801P for OCCAM Engineers Inc.