Gov. Bill Richardson's administration has canceled grants and agreements between local governments and the state Department of Finance and Administration for capital outlay projects, causing concern among city officials about what will happen to their ongoing projects.

The plan, part of the state's efforts to deal with a budget crisis, only applies to projects funded with general fund or severance tax bond funds, according to a memo from the state agency.

The memo also states that cities with contracts in place for projects as of Oct. 30 will be able to initiate new agreements for the amount encumbered up until then, with proper documentation. Those new agreements would be retroactively approved in order to not interrupt reimbursements, DFA Local Government Division Director Robert Apodaca said in the memo.

Whether the move will affect any projects in Santa Fe remains to be seen. Cities have until Nov. 15 to submit paperwork to DFA showing that a proper contract for work on a capital project is in place.

Already, though, several local projects are included on a list of hundreds of capital outlay projects recommended for delay or cancellation by the Legislative Finance Committee staff.

These include a rape crisis center, a Santa Fe Opera rehearsal hall and a bridge over the Santa Fe River.

Across the state, city officials have been calling the New Mexico Municipal League with questions on what to do.

"I do have some towns that figure they do have to stop projects, put work on hold and are concerned about people's jobs," said Bill Fulginiti, the league's executive director. "They don't want to stop projects that are in full swing."

The move doesn't void the legislative appropriation for the project, the memo states, but rather terminates the intergovernmental agreements needed for those projects to go forward.

The process "will allow the state to identify those projects that have legitimate third-party contracts and to initiate new grants or other forms of inter-governmental agreements for projects that are viable up to the total amount of all third party contracts."

Richardson last week ordered a freeze on projects. Spokesman Gilbert Gallegos said Tuesday that "the point of the freeze is to stop all projects while we determine which projects could be voided."

He said approaching the situation this way will realize the most savings for the state.

While cities and local governments were notified of the process, some lawmakers said they would have preferred to get a heads up from the administration.

"You hate to get that call from someone down at the city asking what to do and you have to scramble around for the answer," said state Sen. Sander Rue, R-Albuquerque. "It really creates a lot of confusion."

Contact Kate Nash at 986-3036 or knash@sfnewexican.com. Read her blog at www.greenchilechatter.com.