The Texas Water Development Board will sell its largest-ever bond issue this week as part of a $2.6 billion, two-deal offering and ahead of a November election on a proposed constitutional amendment to earmark more state money to boost water supplies amid increasing demand.
A $1.87 billion of State Water Implementation Revenue Fund for Texas revenue bond issue scheduled to price on Wednesday is the biggest SWIRFT deal
On Thursday, nearly $762 million of water financial assistance bonds, backed by Texas' triple-A-rated general obligation pledge, are slated to price. The deal will mark the first time financial assistance through the GO bonds will provide an interest-rate subsidy and the first time a transfer from the SWIFT will provide additional revenue to pay debt service, according to TWDB's emailed response to questions.
"The issuance of two credits in the same week is also a new approach to facilitate the common plan of finance," TWDB added. "The use of the water financial assistance bonds to finance projects in the State Water Plan through the SWIFT program is expected to help increase the overall capacity of the program."
Top ratings and an interest rate subsidy provided by the SWIFT program incentivizes local governments to move forward with projects that are recommended in the state water plan.
At $880.7 million, the biggest borrower in the latest SWIRFT deal is the North Texas Municipal Water District, which provides water and wastewater services for 2 million residents in 10 counties. Proceeds will finance a raw water pipeline project and expansion of a water treatment plant and pump station. The district could save approximately $51.5 million over the life of the loans under the SWIFT program,
Houston has $350 million of combined utility system revenue bonds in the deal. That is the first tranche of a three-year, $996 million commitment
"The city will add new treatment facilities capable of producing 360 million gallons per day of drinking water to supplement the city's existing East Water Purification Plant," a TWDB press release said, adding savings through the SWIFT program could save Houston $28.8 million over the life of the loan.
Ongoing financing for a seawater desalination project in Corpus Christ, which was included in the TWDB's $1.568 billion SWIRFT bond sale in 2024, is not part of the 2025 issue. The city council took action on Sept. 3 essentially terminating the project in the wake of escalating costs. The move led
The SWIRFT deal is structured with serial maturities from 2026 through 2060, according to the preliminary official statement. The POS for the GO bond deal shows $444.7 million of tax-exempt and $317.24 million of taxable bonds with each series structured with serial maturities between 2026 and 2056.
BofA Securities leads both deals' underwriting team consisting of co-senior manager Jefferies and co-managers Robert W. Baird & Co, BOK Financial, JP Morgan, Loop Capital Markets, Mesirow Financial, Morgan Stanley, Piper Sandler & Co, PNC Capital Markets, Ramirez & Co, Raymond James, Stifel, and Wells Fargo Securities. Hilltop Securities is the financial advisor. Bond counsel are McCall, Parkhurst & Horton for the SWIRFT deal and Orrick, Herrington & Sutcliffe for the GO deal.
With Texas' coffers overflowing with cash in recent years, the state has boosted its financial support to hunt for water as existing supply lags projected demand from a growing population.
Voters in November 2023 approved a constitutional amendment creating a $1 billion Texas Water Fund administered by the TWDB with at least 25% of the money allocated to a New Water Supply for Texas Fund to finance projects leading to 7 million acre feet of additional water supply by the end of 2033.
A proposed constitutional amendment on the Nov. 4 ballot could raise $1 billion annually over 20 years for water supply projects. The
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Results released earlier this month by Texas 2036, a nonprofit, nonpartisan public policy research and advocacy group, showed strong support for the measure with 73% of the 802 likely constitutional amendment voters polled in favor.
"Water is the foundation of Texas' future, and Proposition 4 represents the largest and most forward-looking investment in our state's water infrastructure in Texas history," Jeremy Mazur, the group's director of infrastructure and natural resources policy, said in a statement. "This poll shows that when Texans understand what's at stake, such as our reliable drinking water, thriving communities, and growing economy, they overwhelmingly support this critical measure."
Texas should continue to have an active role in coordinating water management given flooding and drought conditions in the state, according to Howard Cure, director of municipal bond research at Evercore Wealth Management.
"Additional state financial support may need to be allocated in recognition of the water demands put on by continued growth and the desire by the state to permit and encourage such growth," he said in an email.
