DALLAS — Texas Lt. Gov. David Dewhurst on Thursday proposed creation of a state water supply infrastructure bond bank financed with $1 billion from the $8 billion Rainy Day Fund.
The state must prepare its water systems and highways to accommodate a doubling of the population over the next 25 to 35 years, Dewhurst said. The state had 26.2 million residents in 2010.
“We’re going to have to be bold,” Dewhurst said in his presentation to the Dallas Regional Chamber. “We’ve got a growing population, and it isn’t inexpensive.”.
The Texas Water Development Board adopted a long-range plan in 2011 that said the state would need $53 billion of new reservoirs, dams, and supply lines over the next 50 years. The board’s official water plan estimates the Texas population will grow by 82% over the period.
“The state of Texas is not going to write a $53 billion check, but we are going to build reservoirs and we’re going to meet the demand for water from cities and industries,” Dewhurst said.
“We’re going to issue bonds,” he said. “We’re going to use project financing.”
Up to $1 billion could be taken from the Rainy Day Fund to finance an infrastructure bank that could provide grants to water projects by local governments, he said.
A revolving loan program would be established with the money from the Rainy Day Fund that would be supported by repayments from the water utilities, Dewhurst said.
The state’s emergency fund is expected to total more than $8 billion when the Legislature convenes in January for its biennial 140-day session.
The Legislature will use the Rainy Day Fund only for essential projects, Dewhurst said.
“In any case, and this is a bottom line, we have to maintain a healthy balance in the Rainy Day Fund,” he said. “But as a fiscal conservative, we can draw down a little bit and still keep a very healthy balance.”
A similar infrastructure bank could be useful in meeting future transportation needs, Dewhurst said, but a new dedicated revenue stream must be found for construction efforts by the Texas Department of Transportation.
“Over the last 11 years, the Legislature has appropriated $100 billion to TXDOT,” he said. “At the end of the day, we’re going to need additional dedicated revenue going into TXDOT to keep building roads.”
The 2013 Legislature is likely to allow state colleges and universities to issue tuition revenue bonds to finance on-campus projects, Dewhurst said. An enabling bill was introduced earlier this month by Sen. Judith Zaffirini, D-Laredo, who sponsored a similar measure that failed in 2011.
The Texas Water Development Board currently finances low-interest loans to local utilities with proceeds of state general obligation bonds.
Voters in 2011 approved a state constitutional amendment allowing the water board to have up to $6 billion of outstanding debt. The ceiling was raised from the $2 billion limit approved in 2001.
Dewhurst said the Texas economy is booming, with state tax revenues beating expectations for fiscal 2012 by more than $3 billion. Total state revenues are up 20% over the past 18 months, he said.
Dewhurst was not so optimistic about the national economy.
“If we were an island, completely separated from the other 49 states, I might be willing to spend more money on projects,” he said. “But we’re not.”