• New Mexico meets financial and organizational capacity requirements.
• Stakeholder participation in loan programs is low due to affordability issues.
• Competing funds offer more attractive financial terms, affecting participation.
• The New Mexico Environment Department (NMED) is understaffed, hindering program management.
• Recommendations include enhanced monitoring and training for NMED staff.

July 4, 2024 — New Mexico’s ability to manage clean water infrastructure funding is under scrutiny, as a recent evaluation by the U.S. Environmental Protection Agency (EPA) Office of Inspector General reveals a mix of strengths and challenges. While the New Mexico Environment Department (NMED) has demonstrated financial and organizational competence, it faces significant hurdles in stakeholder engagement and staffing, potentially impeding the effective use of allocated funds.

Financial and Organizational Capacity.

The NMED has shown it can effectively manage the financial aspects of the Clean Water State Revolving Fund (CWSRF) Program. The department has consistently met or exceeded its financial match requirements, indicating a robust financial capacity. Additionally, Region 6 and NMED staff affirm that the administrative fund is sufficient to meet operational needs. Structural and policy changes, such as creating a loan marketing position, lowering interest rates to 0.01%, and revising affordability criteria, have enhanced the visibility and accessibility of the CWSRF Program.

Stakeholder Challenges.

Despite these strengths, the NMED struggles with low stakeholder participation in the CWSRF Program. Many potential loan recipients, particularly those managing small water systems, find it challenging to afford the loans. These stakeholders often seek alternative funding sources that provide grants or low-interest loans without the stringent federal requirements associated with the CWSRF. As a result, New Mexico’s participation rates and financial health indicators for the CWSRF are below the national average, leading to an excess of available funds, projected to be $75.6 million in fiscal year 2024.

Human Capital Issues.

The NMED also faces human capital challenges. The department is not fully staffed and has difficulties filling vacancies. This staffing shortfall poses a significant risk: if participation in the CWSRF Program increases, the current staff may struggle to manage the increased workload. Addressing these staffing issues is critical for the NMED to effectively enhance its capacity to manage and utilize future CWSRF funds.

Recommendations and Corrective Actions.

The EPA’s Office of Inspector General has recommended several actions to address these challenges. First, the regional administrator for Region 6 should develop and implement a plan for additional monitoring of the NMED’s hiring efforts until fiscal year 2026 or until all vacancies are filled. This plan aims to ensure the NMED can build the human capital necessary to manage its programs effectively.

Additionally, the regional administrator should provide annual training to the NMED’s staff through fiscal year 2026. This training will enhance their knowledge of the CWSRF Program and the Infrastructure Investment and Jobs Act (IIJA) requirements, equipping them with the skills to manage the funds more efficiently.

The EPA has agreed with these recommendations and has provided acceptable planned corrective actions with estimated completion dates. These steps are designed to resolve the identified challenges and improve the NMED’s capacity to effectively manage its clean water infrastructure funds.

Conclusion.

Evaluating New Mexico’s capacity to manage clean water infrastructure funds highlights a blend of capabilities and challenges. While the NMED has demonstrated strong financial and organizational capacity, it must address significant stakeholder and staffing issues. By implementing the recommended corrective actions, the NMED can overcome these obstacles, ensuring that New Mexico fully benefits from the available funds to improve public health and water quality.