Paying for Water: The 83rd Legislative Session and the $2 Billion Water Infrastructure Bank

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The current drought has been hanging over Texas for three years. Meteorologists have predicted that it could last for another five years and could become worse than the infamous 1950s drought of record, which “reshaped Texas, ruining thousands of farmers and ranchers and pushing rural residents to migrate out of the country and into the cities.”Among Texas leaders, there is a general consensus that the state must act now to ensure its longterm water security, and as the legislature convened for its 2013 session, many observers predicted water would emerge as a marquee issue. And it did, with lawmakers introducing numerous water-related bills.Three of these bills are aimed at financing enough water infrastructure projects to assure longterm water supplies for the state: H.B. 4, H.B. 1025 and S.J.R. 1. These bills could have a profound and long-lasting impact on Texas water law and water resources. H.B. 4 revamps the agency that provides state financing for water infrastructure, the Texas Water Development Board (TWDB). Together with H.B. 1025 and S.J.R. 1, it creates two new funds to be used by TWDB, contingent upon voters Texas approving Proposition 6 (as authorized by S.J.R. 1) in the November 5 special election.The new funds are the State Water Implementation Fund for Texas (SWIFT) and the State Water Implementation Revenue Fund for Texas (SWIRFT). If Proposition 6 passes, SWIFT will receive a $2 billion appropriation from the Economic Stabilization Fund (“Rainy Day Fund”). TWDB may disburse money from SWIFT through a “bond enhancement agreement” to certain other TWDB funds, which may then provide approved forms of financial assistance to applicants for state aid. Sister fund SWIRFT provides TWDB with new revenue bonding authority and provides an additional mechanism for distributing SWIFT money.While H.B. 4 sets broad parameters for SWIFT and SWIRFT, it delegates significant responsibility for creating, designing and operating those funds to TWDB. Many of the questions that a politically high-profile and financially high-dollar bill such as H.B. 4 raises – which projects will benefit, how exactly will the money be used, and how long will the money last – will remain unanswered until TWDB promulgates regulations to implement its statutory commands.In anticipation of the November 5 special election, and of the extensive rulemaking processes that will follow if Proposition 6 succeeds, the Center for Global Energy, International Arbitration and Environmental Law has prepared this white paper. It explains the key provisions in H.B. 4 and Proposition 6. It explores the contours and inflection points in complex legislation that – aside from a salient few details – remains relatively unfamiliar to the general public and even to those who work regularly on water policy issues.