DALLAS — Texas in 2007 is enjoying one of the wettest years on record, but water experts still recall some of the worst droughts.
Thus, participants at the Texas Water Summit in San Antonio yesterday were planning for years when population growth and dry spells are sure to collide.
“In just 30 short years, Texas’ population is forecast to nearly double from 23 million to over 40 million residents,” said Lieut. Gov. David Dewhurst. “According to the State Water Plan, our demand for water will increase by nearly a third during that same period — an additional almost nine-million-acre feet per year. And over the last several decades we have invested practically nothing in developing new water resources.”
Dewhurst told water utility executives, finance experts, and hydrologists at the conference that the situation prompted him to work with Sen. Kip Averitt, R-Waco, author of the massive SB 3 passed by the 80th Texas Legislature last May. SB 3 provided $750 million for new water projects, new conservation measures, and for protecting streams from losing more water.
After failing to get a similar bill through the House in the 2005 session of the Legislature, Dewhurst developed another version for the 2007 session, “an even better bill, which not only accomplished my earlier goals but laid out a stair step investment totaling almost $1 billion over the next 20 years to develop new water resources as well as designating 19 new water reservoir sites throughout Texas.”
“When you look at the state’s current water supply versus what it will take to meet our state’s future water needs, it’s easy to conclude that our future supply would have been insufficient without the advances we made,” said Averitt, who chairs the Senate Committee on Natural Resources.
The Water Summit, presented annually by the Texas Water Development Board, ended with the board’s annual meeting. The TWDB, the issuer for the state’s water debt, operates several programs to provide bond financing for local water projects.
Next week, the board will issue $215.6 million of Series 2008A state revolving fund subordinate-lien revenue bonds in a negotiated deal led by Piper Jaffray & Co., with First Southwest Co. as financial adviser.
The debt will carry natural triple-A ratings from all three rating agencies.
Some of the proceeds will fund loans to the Trinity River Authority, one of the program’s largest borrowers. The TRA will use the funds for improving its Central Regional Wastewater System serving 20 cities in the Dallas-Fort Worth area as well as Dallas-Fort Worth International Airport.
Next week’s deal includes debt from a $300 million authorization from the Clean Water State Revolving Fund. The agency has already issued $120 million from that authorization and expects to issue $90 million from it in two separate tranches next week, said spokesman John Jadrosich.
Although the TRA can issue its own debt, it saves 95 basis points by issuing through the TWDB, Jadrosich said. That translates to about $17.8 million in savings over the 20-year life of the bonds.
The TRA’s project is one of 579 that have received about $5.6 billion from the wastewater revolving fund.
The TWDB’s top credit rating plays a big role in the ability of the state to expand water treatment and drinking water facilities, officials say.
“Moody’s believes that the size, diversity, and credit quality of the board’s loan portfolio, along with the board’s use of municipal bond insurance on nearly 85% of the loans
outstanding is an important element of the Aaa rating,” analysts wrote. “Borrower concentration in the portfolio is mitigated by the use of bond insurance. The top five borrowers account for 61% of the loans outstanding and
the largest borrower, the city of
Houston holds 26% of the loans outstanding.”
Fitch analysts note the largest uninsured loans go to the Trinity River Authority, whose regional wastewater system revenue bonds are rated AA-minus. TRA accounts for 19% of the TWDB’s portfolio, whose security provisions are “strong.”
“Because of these healthy credit characteristics, both the senior-lien and subordinate-lien bonds pass Fitch’s ‘AAA’ stress test by one of the widest margins in the sector,” analysts noted.
For the TWDB, the 2007 session of the Texas Legislature represented a watershed that included extension of the $250 million “colonias” water loans to needy areas beyond the Texas-Mexico border region for the first time.
“The 80th Regular Session of the Texas Legislature may be regarded as one of the very best and most successful for water policy changes and increased funding to develop future water supplies for the State of Texas,” the board wrote in its wrap-up of the session. “All eight recommendations for ‘necessary and desirable’ legislation made by the Texas Water Development Board were passed and signed into law.”
