N.M. Stat. § 75-1-6

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.

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

(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.