DALLAS — The Texas Water Development Board could have up to $6 billion of outstanding bonds that finance projects across the state if voters approve a proposed constitutional amendment on Nov. 18.
The authorization for the self-supporting general obligation bonds would raise the limit on the board’s total outstanding debt from the $2 billion approved by voters in 2001.
Melanie Callahan, executive director of the state water board, said the higher ceiling is necessary because the current limit will soon be reached.
“We’re running out of capacity,” she said. “We’re not out now, but we’re close.”
Callahan said the TWDB has issued more than $1 billion of the current $2 billion capacity in the past three years. There is $966 million of authorized but unissued debt from the 2001 capacity, she said.
Without the additional capacity, Callahan said, the water board would exhaust its capacity before the end of fiscal 2013.
The board’s debt is rated triple-A by Moody’s Investors Service and Fitch Ratings, and AA-plus by Standard & Poor’s.
The proceeds from the bonds are earmarked for the agency’s water development fund, which provides low-interest loans to local utilities and districts for water supply and treatment projects, according to Callahan.
“It’s our broadest fund,” she said. “The loans can be used for water tanks, transmission lines, treatment plants, system upgrades, and even flood control.”
The cost of a loan to a local utility currently us 4.61%, Callahan said.
“The state of Texas is highly rated,” she said. “That allows us to provide loans at very reasonable interest rates.”
The TWDB bonds will be supporting by loan payments by the local entities.
The Texas Legislature has in the past appropriated debt service for water bonds so it could provide loans to economically distressed areas at a rate lower than the board’s borrowing costs, Callahan said.
That could happen again, she said, but the debt authorized by the amendment is to be structured as self-supporting through the loan programs.
Since 1957, voters have approved constitutional amendments authorizing the TWDB to issue up to $4.2 billion in bonds for financing water-related projects, and a total of $3.3 billion has been issued.
The water board’s outstanding debt includes $900.8 million of self-supporting GO debt and $988.5 million of GO debt supported by state appropriations.
The water board will issue bonds as the money is needed by the local utilities to pay for projects.
“The sales schedule is based on need,” Callahan said. “We match the sales with the needs to avoid providing funds that would sit unspent for months or longer.”
The constitutional amendment raising the outstanding debt ceiling was put on the ballot by the Legislature as Senate Joint Resolution 4, which was approved in early May during the regular session.
The measure was recommended by the Legislature’s Sunset Advisory Commission in a report issued in February.
The sunset review said the $2 billion limit on outstanding bonding capacity would be reached by the end of fiscal 2011. However, Callahan said several programs were not funded by the Legislature at the level expected when the water board was reviewed.
