83(R) - 2013
Energy & Environment
Relating to the funding of certain water-related projects by the Texas Water Development Board; authorizing the issuance of revenue bonds.
No significant fiscal implication to the State is anticipated.
The Texas legislature must address water development to mitigate against long term drought and to keep pace with a rapidly expanding population. Unfortunately, we must note that this legislation is flawed and does not address the fundamental issues hindering adequate water infrastructure development. Regardless of the flaws, and despite our concerns that this legislation is inadequate to the challenge at hand, we recognize that this legislation makes an attempt to tackle a very difficult and urgent policy issue. Legislators should carefully consider both the positive and negative aspects of HB 4. While we will not make a recommendation on the overall bill, we will recommend on some of the prefiled amendments and other improvements that should be considered.
HB 4 creates a fund, outside the treasury, for use by the Texas Water Development Board (TWDB). This fund would be called the State Water Implementation Fund for Texas (SWIFT). TWDB would use SWIFT to fund projects across the state to improve water infrastructure, water conservation projects, and other projects designed to better prepare Texas for future drought conditions and rapid population growth.
While the SWIFT would be funded from the economic stabilization fund (Rainy Day Fund), HB 4 does not actually appropriate funds. HB 4 sets up the SWIFT program and leaves funding to be established under the guidelines outlined in HB 11 (subject to its passage). This is designed to be a one-time expenditure from the Rainy Day Fund.
- This legislation entirely avoids addressing the fundamental issue of regulatory reform.
- HB 4 would require 20% of the funds to be used for water conservation and education projects. Creating an arbitrary quota would not allow for water projects to be prioritized according to need and feasibility. This additional regulatory hurdle could unnecessarily slow projects. This money will go to special interests without adding any new water infrastructure.
- This legislation is billed as a one-time expenditure to create a revolving fund that will increase as loans are returned to the fund and investments realize a return. However, as with all such programs there will be an enormous temptation for future legislatures to increase the fund size or raid it for other purposes. Additionally, there is no guarantee the projects will be completed on schedule or within budget.
- Government loan and loan guarantee programs are not the most efficient method of financing infrastructure projects. Government loan programs have a tendency to grow into corporate welfare programs with all the typical symptoms of cronyism.
- While HB 4 does not directly raid the Rainy Day Fund, it is widely understood that HB 11 (the funding mechanism for the SWIFT program that HB 4 creates) would do exactly that. HB 4 neither excludes the Rainy Day Fund nor suggests a specific alternative. If the SWIFT fund is ultimately created, the funding mechanism should come from general revenue.
- The spending cap should not be raised to accommodate the creation of this fund.
- This legislation addresses a major state obligation that must be dealt with.
- This does not directly increase state debt or raise taxes.
- The SWIFT fund will make it easier for developers to secure funding for water project that they might not otherwise be able to secure.
- Much of the fund will remain in a trust that will earn interest so in addition to the interest paid on SWIFT loans, the fund itself will generate revenue over time which can be used to fund more water projects without making additional appropriations.
- The 20% quota for environmental education and conservation should be removed from the bill.
- Specific language should be added to prevent the SWIFT from being funded by the Rainy Day Fund.
The 83rd Legislature could better address this issue by:
- Identifying and removing state level regulatory barriers to private financing of water development projects.
- Eliminating the "junior rights" provision of the Texas Water Code to enable inter-basin water transfers so that regions suffering a lack of water may benefit from regions with a surplus.
- Simplifying TCEQ requirements for approval of water right amendment.
- Simplifying requirements for bed and banks authorization for the indirect reuse of water.