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Mechanics of hb 4 freese nichols_engineering Presentation Transcript

  • 1. Liz Fazio, Director, House Natural Resources Committee Buchanan, Copyright © Freese and Nichols, Inc. MECHANICS OF HOUSE BILL 4: THE ROLE OF ENGINEERING IN FINANCING THE TEXAS STATE WATER PLAN 83rd Texas Legislature Liz Fazio, Director, House Natural Resources Committee
  • 2. August 9, 2013 Freese and Nichols, Inc., Firm Presentation2 • Senate Bill 1 in 1997 – Created “Bottom-up” Regional Planning Process • Senate Bill 2 in 2001 – Created Water Infrastructure Fund • Senate Bill 3 in 2007 – Created Environmental Flow Process • House Bill 4 in 2013 – Created Mechanism for Financing State Water Plan Overview: State Water Planning in Texas Inks-Highland Lakes, Copyright © Freese and Nichols, Inc. August 9, 2013 Freese and Nichols, Inc., Firm Presentation
  • 3. Projected Population Growth, Water Demand, and Water Shortages in Texas’ Major Metro Areas by 2030 3 August 9, 2013 Freese and Nichols, Inc., Firm Presentation
  • 4. 2012 State Water Plan Water for Texas BY THE NUMBERS Learn why Texas needs to implement the 2012 State Water Plan. 16regional water planning groups plan for Texans’ needs for water over the next 50 years 12interest groups are represented on each planning group: agriculture, industry, the public, the environment, municipalities, business, water districts, river authorities, water utilities, counties, power generation, and groundwater management areas 450 voting and non-voting members make up the planning groups 3,000water user groups are planned for, representing 6 water use categories— municipal, manufacturing, steam-electric power, irrigation, livestock, and mining 46 million people will live in Texas by 2060 8.3million acre-feet of water would be needed during a repeat of the drought of record in 2060 562water management strategies were recommended by the planning groups to meet the needs for water during a repeat of the drought of record 9.0million acre-feet of water would be supplied from recommended strategies $53.1billion in capital costs are required to implement the plan $231billion capital costs is needed for water supplies, water treatment and distribution, wastewater collection and treatment, and flood control by 2060 4 August 9, 2013 Freese and Nichols, Inc., Firm Presentation
  • 5. Projected Texas Population Growth The population in Texas is expected to increase 82 percent between the years 2010 and 2060, growing from 25.4 million to 46.3 million people. 5 August 9, 2013 Freese and Nichols, Inc., Firm Presentation
  • 6. Projected Texas Population Growth in Texas Counties 6 August 9, 2013 Freese and Nichols, Inc., Firm Presentation
  • 7. Projected Water Demand and Existing Supplies Demand 18,010,599 19,038,954 19,821,152 20,517,886 21,190,527 21,952,198 Supplies 16,983,205 16,409,225 16,015,972 15,611,330 15,400,092 15,270,535 Water demand is projected to increase by only 22 percent over the planning horizon, from about 18 million acre‐feet per year in 2010 to about 22 million acre‐feet per year in 2060. Existing water supplies— the amount of water that can be produced with current permits, current contracts, and existing infrastructure during drought—are projected to decrease about 10 percent, from about 17.0 million acre‐feet in 2010 to about 15.3 million acre‐feet in 2060. 7 August 9, 2013 Freese and Nichols, Inc., Firm Presentation
  • 8. Projected Need for Additional Water in Times of Drought If Texas does not implement new water supply projects or management strategies, then homes, businesses, and agricultural enterprises throughout the state are projected to need 8.3 million acre-feet of additional water supply by 2060. 8 August 9, 2013 Freese and Nichols, Inc., Firm Presentation
  • 9. Recommended Water Management Strategies in 2060 9 August 9, 2013 Freese and Nichols, Inc., Firm Presentation
  • 10. Recommended Water Management Strategies in Acre-Feet Per Year Municipal Conservation 137,847 264,885 353,620 436,632 538,997 647,361 Irrigation Conservation 624,151 1,125,494 1,351,175 1,415,814 1,463,846 1,505,465 Other Conservation 4,660 9,242 15,977 18,469 21,371 23,432 New Major Reservoir 19,672 432,291 918,391 948,355 1,230,573 1,499,671 Other Surface Water 742,447 1,510,997 1,815,624 2,031,532 2,700,690 3,050,049 Groundwater 254,057 443,614 599,151 668,690 738,484 800,795 Reuse 100,592 428,263 487,795 637,089 766,402 915,589 Groundwater Desalination 56,553 81,156 103,435 133,278 163,083 181,568 Conjunctive use 26,505 88,001 87,496 113,035 136,351 135,846 Aquifer Storage and Recovery 22,181 61,743 61,743 72,243 72,243 80,869 Weather Modification - 15,206 15,206 15,206 15,206 15,206 Drought Management 41,701 461 461 461 461 1,912 Brush Control 18,862 18,862 18,862 18,862 18,862 18,862 Seawater Desalination 125 125 143 6,049 40,021 125,514 Surface Water Desalination - 2,700 2,700 2,700 2,700 2,700 The regional water planning groups recommended 562 unique water supply projects designed to meet needs for additional water supplies for Texas during drought, resulting in a total, if implemented, of 9.0 million acre‐feet per year in additional water supplies by 2060. 10 August 9, 2013 Freese and Nichols, Inc., Firm Presentation
  • 11. Total Capital Costs for Future Water Supply The majority of the $53 billion in costs are for water management strategies recommended for municipal water user groups. 11 August 9, 2013 Freese and Nichols, Inc., Firm Presentation
  • 12. Financing the 2012 State Water Plan • Senate Joint Resolution 1 – Constitutionally creates the State Water Implementation Fund for Texas (SWIFT) & State Water Implementation Revenue Fund for Texas (SWIRFT). Requires voter approval in November 5th, 2013 general election. • House Bill 1025 – Authorizes a one-time $2B transfer from the Rainy Day Fund to the SWIFT. • House Bill 4 – Provides for the structure, administration, and oversight of the funds. 12 August 9, 2013 Freese and Nichols, Inc., Firm Presentation
  • 13. Overview: Senate Joint Resolution 1 • Constitutional Dedication – SWIFT – SWIRFT • Inside State Treasury, Outside of the General Revenue Fund – Bond Enhancement Agreement (*Direct Loans – okay) – Without Further Appropriation – LBB Back-Stop • Self-Supporting – Any repayment of bonds may not cause GO bonds… to be no longer self- supporting (set-aside requirement) – Does not impact the constitutional state debt limit • Rainy Day Fund – Money dedicated to SWIFT/SWIRFT or an appropriation from the ESF does not count towards the constitutional spending cap (keyword: “dedicated”) 13 August 9, 2013 Freese and Nichols, Inc., Firm Presentation
  • 14. House Bill 4: Goals #1 GOAL: Increase Water Supply Today and Into the Future – Implement projects and develop water supply • Leverage One-Time Capitalization with State’s Bonding Authority – State financial assistance requested = $27B over 50 years • Protect the Corpus – Increase investment capabilities – grow the fund. • Provide Incentives – Lower-interest rates; – Longer repayment terms; – Incremental repayment terms; and – Deferred repayments. 14 August 9, 2013 Freese and Nichols, Inc., Firm Presentation
  • 15. House Bill 4: Challenges • Lots and Lots of Questions… – Who gets the funding and what type of projects? – How much do we need? – How do we know how much we need and when? – Who would manage and invest the corpus? – How would the corpus be invested? – How much/ what type of incentives should the state provide? – How is this similar to or different than the management of other state water funds? – What else can be done to ensure the “swift” implementation of the state water plan? 15 August 9, 2013 Freese and Nichols, Inc., Firm Presentation
  • 16. House Bill 4: Solutions Overview • Modeled Structure – Hundreds of models ran – Cash flow v. reserve fund models • Management – Reorganization of the TWDB – Benefit of bifurcating investment responsibility – Development of an advisory committee • Mandatory Prioritization of Projects – Use of Funds – Eligibility requirements – Regional prioritization process – TWDB prioritization at the time of request for financial assistance • Minimal Construction Contract Standards/ Maximized Lending Resources 16 August 9, 2013 Freese and Nichols, Inc., Firm Presentation
  • 17. House Bill 4: High-Level View of Modeled Structure 17 SWIRFT August 9, 2013 Freese and Nichols, Inc., Firm Presentation – Develops a sophisticated financing mechanism which leverages $2B one-time capitalization with TWDB’s bonding authority: • Protection of the corpus of the funds by Texas Treasury Safekeeping Trust Company; • Uses Bond Enhancement Agreements to move money between funds and entities; • No direct loans and no grants (at this time).
  • 18. House Bill 4: Management • TWDB – Created in 1957, 6 part-time Members – To-date, has sold $3.95B in bonds – HB 4, Restructures to 3 full-time Members *Effective September 1, 2013 • Texas Treasury Safekeeping Trust Company – Created in 1986, current powers 2001 – Overseen by Texas Comptroller of Public Accounts – Invests, manages, and oversees $58B of state’s assets • Advisory Committee – 7 members: Comptroller, 3 Senate Members, and 3 House Members – Advise and provide comments on rulemaking for SWIFT/ SWIRFT program • Evaluation of encouraging participation in the procurement of Texas domiciled companies (or with significant # of Texas employees) • Evaluation of HUB in projects 18 August 9, 2013 Freese and Nichols, Inc., Firm Presentation
  • 19. House Bill 4: Mandatory Prioritization of Projects • Use of the Fund – Sec. 15.434(b) • Eligibility – Sec. 15.435(g)(1) – Sec. 15.435(h) • Prioritization of Projects • Regional: Sec. 15.436 • TWDB: Sec. 15.437 19 August 9, 2013 Freese and Nichols, Inc., Firm Presentation Max Starcke Dam, Copyright © Freese and Nichols, Inc.
  • 20. Use of Funds Embraces conservation and reuse projects as part of overall strategy to meet future needs and recognizes the need to ensure rural areas are supported. TARGETED GOAL: During the life of any 5-year SWP: • 10% of projects funded to support rural areas, including agricultural water conservation, and • 20% of projects funded to support water conservation or reuse, including agricultural irrigation projects. 20 20 August 9, 2013 Freese and Nichols, Inc., Firm Presentation
  • 21. Eligibility In order to be eligible to receive financial assistance through SWIFT, an applicant must have: • submitted and implement a water conservation plan; and • complete a request for financing information, including a water infrastructure financing survey. *All projects must be included in the state water plan. 21 August 9, 2013 Freese and Nichols, Inc., Firm Presentation
  • 22. Eligibility In order to be eligible to receive financial assistance through SWIFT, an applicant must acknowledge compliance with: • federal law re: contracting with disadvantaged business enterprises (DBE); and • state law re: contracting with historically underutilized businesses (HUB). 22 August 9, 2013 Freese and Nichols, Inc., Firm Presentation
  • 23. Regional Prioritization • Each regional water planning group shall prioritize projects in its respective regional water plan, considering at a minimum: – decade of need; – feasibility of the project; – viability of the project; – sustainability of the project; and – cost-effectiveness of the project. 23 August 9, 2013 Freese and Nichols, Inc., Firm Presentation
  • 24. TWDB Prioritization • TWDB prioritization: – local contribution; – financial capacity of the applicant to repay; – ability of the board and the applicant to leverage local and federal funding; – emergency need for the project; – if applying for WIF programs, shovel ready; – demonstration of water conservation; and – priority given the project by the applicable RWPG. • High consideration: – serve a large population; – provide assistance to a diverse urban and rural population; – provide regionalization; or – meet a high percentage of the water supply needs of the water users to be served by the project. 24 August 9, 2013 Freese and Nichols, Inc., Firm Presentation
  • 25. House Bill 4: Minimal Construction Contract Standards Chapter 17, Texas Water Code changes: • Replaces terms “sound engineering principles” with “approved plans and specifications”; – Sec. 17.183 – Sec. 17.187 (strikes “in consultation with…” language) • Adds “Buy American Provisions” – Sec. 17.183 *Effective September 1, 2013 August 9, 2013 Freese and Nichols, Inc., Firm Presentation25
  • 26. House Bill 4: Maximized Lending Resources Chapter 49, Texas Water Code change: • Enables federally approved entities to issue bonds and/or notes to certain districts (more rural), in conjunction with already exempted entities: o Farmers Home Administration; o United States Department of Agriculture; o TWDB; and o North American Development Bank. – Sec. 49.153(e) re: 3 year issuances – Sec. 49.181(a) re: commission approval *Effective September 1, 2013 August 9, 2013 Freese and Nichols, Inc., Firm Presentation26
  • 27. Projected Economic Losses 27 Significant economic losses and threat to public health: Total annual losses of $11.9 today Loss of $115.7 billion by 2060 Loss of 1.1 million jobs 1.4 million Texans gone by 2060 Loss of local and state revenues August 9, 2013 Freese and Nichols, Inc., Firm Presentation
  • 28. Ballot Language: “The constitutional amendment providing for the creation of the State Water Implementation Fund for Texas and the State Water Implementation Revenue Fund for Texas to assist in the financing of priority projects in the state water plan to ensure the availability of adequate water resources.” Go Vote! – November 5th 28 Water Proposition November 5, 2013 August 9, 2013 Freese and Nichols, Inc., Firm Presentation
  • 29. August 1-2, 2013 Texas Environmental Superconference Questions? 29 Elizabeth A. Fazio, J.D., LL.M. Director, Natural Resources Committee Texas House of Representatives P.O. Box 2910, E2.104 Austin, Texas 78768 Telephone: (512) 463-0802 elizabeth.fazio_hc@house.state.tx.us Tom Miller Dam, Copyright © Freese and Nichols, Inc.