After several months of debate, the legislature
approved and Governor Perry signed House
Bill 4, setting up a revolving loan fund to implement the Texas Water
Plan. However, the proposed transfer of
$ 2.0 billion from the Economic Stabilization Fund (known as the Rainy Day
Fund) to capitalize the new implementation fund will not become effective unless
authorized by a constitutional amendment that will be before voters in the November
2013 statewide election.
But, HB 4 is much more than just a new loan fund. In fact, it restructures the Texas Water
Development Board and, contingent on the passage of the constitution amendment,
sets up a complex new prioritization process for deciding how to allocate the
new loan funds.
And, as with any major public policy initiative, the
devil is in the details. So, what does HB 4 do and what can we expect to happen
over the next few years?
First, let’s look at what happens even if the
constitutional amendment authorizing the transfer from the Rainy Day Fund, SJR
1, does
not pass in November.
The Texas Water
Development Board will change from the current six-member unpaid, part-time
board to a three-member, paid, full-time board whether or not the voters
approve the constitutional amendment. As
with the current TWDB, the Governor will make all board appointments, in this
case by September 1, 2013. Under the new
legislation, one member must have experience in engineering, one in public or
private finance, and one in law or business.
The new board is then required to
hire a new Executive Administrator by October 1, 2013. It’s likely that this new administrative team
will also begin to set their own goals and policies.
Once the board members are appointed, they will face
some looming deadlines under HB 4 to get the new infrastructure fund up and
running and establish a process to set priorities for using the fund. But, these actions will only be required if
the constitutional amendment transferring rainy funds to the infrastructure
fund is approved by the voters.
If SJR 1 does pass, then the board will begin a fairly
complex process to prioritize spending from the new infrastructure fund, which
will be known as the State Water Implementation Fund for Texas (SWIFT). The
legislation itself sets some priorities for spending, requiring that not less
than 10% of the funds disbursed go to projects for “rural political subdivisions
or agricultural water conservation and that not less than 20% go to support
projects for water conservation or reuse, including agricultural irrigation
projects.
Beyond these directives, however, the Board has the
primary role in prioritizing projects for funding.
Here, in brief are the steps set out in HB 4:
First, the Board is to convene the chairs of the
regional water planning groups (RWPGs).
This group is tasked with developing “uniform standards to be used by
the regional water planning groups” in prioritizing projects. These standards must
be developed by December 2013 and “approved by the Board.”
Then, using these “standards”, each regional group is to
prioritize projects in its respective regional water plan. This prioritization will be conducted for
both the existing 2012 plan and,
at the appropriate time, for the new plans now under development. The draft regional prioritization for the
2012 plans must be submitted to the Board by June 2014. The Board can then comment on the RWPG draft
prioritization. The final RWP prioritization
is due by September 2014.
At a minimum, a regional water planning group must
consider the following criteria in prioritizing each project:
(1)
the decade in which the project will be
needed;
(2 ) the feasibility
of the project, including the
availability
of water rights for purposes of the project and the
hydrological
and scientific practicability of the project;
(3) the viability
of the project, including whether
the
project is a comprehensive solution with a measurable outcome;
(4) the sustainability
of the project, taking into
consideration
the life of the project; and
(5) the cost-effectiveness
of the project, taking into
consideration
the expected unit cost of the water to be supplied by
the
project.
In prioritizing projects, each regional water planning group
is to “include projects that meet long-term needs as well as projects that meet
short-term needs.”
But, the
regional prioritization is not the final step.
In fact, it is only one factor to be considered by the Board. HB 4 provides that the Board has the final
say on prioritization as it relates to providing financial assistance from the SWIFT.
The Board is charged with setting up a “point system” for prioritization. This system must include a “standard for the
board to apply in determining whether a project qualifies for financial assistance
at the time the application for financial assistance is filed with the board.”
The legislation then provides fairly substantial direction to the
Board in what should be considered in setting up this point system. Specifically it provides:
(c)The board shall give the highest consideration in
awarding points to projects that will have a substantial
effect,
including projects that will:
(1) serve a large population;
(2) provide assistance to a diverse
urban and rural
population;
(3) provide regionalization; or
(4) meet a high percentage of the
water supply needs of
the water users to be served by the project.
In addition to these criteria the Board must
must also consider at least the following criteria in
prioritizing projects:
(1)
the local contribution to be made to finance the
project, including the up-front capital to be provided by
the
applicant;
(2)
the financial capacity of the applicant to repay
the financial assistance provided;
(3)
the ability of the board and the applicant to
timely leverage state financing with local and federal
funding;
(4)
whether there is an emergency need for the
project, taking into consideration whether:
(A)the applicant is included at the
time of the
application on the list maintained by the commission of
local
public water systems that have a water supply that will
last less
than 180 days without additional rainfall; and
(B)federal funding for which the
project is
eligible has been used or sought;
… whether the applicant is ready to proceed with the
project at the time of the application, including whether:
(A)
all preliminary planning and design work
associated with the project has been completed;
(B)
the applicant has acquired the water rights
associated with the project;
(C)
the applicant has secured funding for the
project from other sources; and
(D)
the applicant is able to begin implementing
or constructing the project;
(5)
the demonstrated or projected effect of the
project on water conservation, including preventing the
loss of
water, taking into consideration, if applicable, whether
the
applicant has filed a water audit with the board … that
demonstrates that the applicant is accountable with regard to reducing water
loss and increasing efficiency in the distribution of water; and
(6)
the priority given the project by the applicable
regional water planning group….
The Board will also have to consider comments from the
SWIFT Advisory Committee created by HB 4.
This committee will be made up of the Comptroller, three senators
appointed by the Lt. Governor and three representatives appointed by the
Speaker of the House.
House Bill 4 does not set a date by which the Board
must complete the point system for administering the SWIFT, but it is unlikely
to happen before September 2014, when the regional prioritizations of the 2012
plans are to be finalized. By that time,
of course, the current round of planning will be well underway and a new
session of the legislature will be just around the corner.
