A. Grants and loans shall be made only to qualifying entities that:

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(1)     agree to operate and maintain a water project so that it will function properly over the structural and material design life;

(2)     require the contractor of a construction project to post a performance and payment bond in accordance with the requirements of Section 13-4-18 N.M. Stat. Ann.;

(3)     provide written assurance signed by an attorney or provide a title insurance policy that the qualifying entity has proper title, easements and rights of way to the property upon or through which a water project proposed for funding is to be constructed or extended;

(4)     meet the requirements of the financial capability set by the authority to ensure sufficient revenues to operate and maintain a water project for its useful life and to repay the loan;

(5)     agree to properly maintain financial records in accordance with all applicable laws; and

(6)     agree to pay costs of originating grants and loans as determined by rules adopted by the authority.

B. Plans and specifications for a water project shall be approved by the authority after review and upon the recommendation of the state engineer and the department of environment before grant or loan disbursements to pay for construction costs are made to a qualifying entity. Plans and specifications for a water project shall incorporate available technologies and operational design for water use efficiency.

C. Grants and loans shall be made only for eligible items, which include: (1)     to match federal and local cost shares;

(2)     engineering feasibility reports; (3)     contracted engineering design; (4)     inspection of construction;

(5)     special engineering services;

(6)     environmental or archaeological surveys; (7)     construction;

(8)     land acquisition;

(9)     easements and rights of way; and

(10)    legal costs.