1. Liz Fazio, Director, House Natural Resources Committee
Buchanan,
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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,
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3. Projected Population Growth, Water Demand, and
Water Shortages in Texas’ Major Metro Areas by 2030
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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
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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.
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6. Projected Texas Population Growth
in Texas Counties
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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.
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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.
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9. Recommended Water Management
Strategies in 2060
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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.
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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.
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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.
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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”)
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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.
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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?
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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
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17. House Bill 4: High-Level View of
Modeled Structure
17
SWIRFT
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– 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
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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
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Max Starcke Dam,
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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
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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.
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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).
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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.
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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.
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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
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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
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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
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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
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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,
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