DALLAS – Texas Gov. Rick Perry is asking voters to approve draining $2 billion from a $9 billion rainy day fund to help pay for projects intended to provide sufficient water to the drought stricken state without raising taxes.

Texans will go to the polls Nov. 5 to decide on Proposition 6, a constitutional amendment that would take $2 billion from the Emergency Stabilization Fund to establish special water funds. If Proposition 6 passes, the rainy day fund will contain $6.7 billion at the end of fiscal 2014.

The plan is being boosted by two political action committees and Perry, who has crisscrossed the state holding news conferences with local officials in support of the water supply proposal. Approval would leverage $30 billion in funding for the state’s water needs from the $2 billion deposit, Perry said recently in San Angelo, Texas.

Additional supplies of water are essential to Texas’s future prosperity, Perry said as he stood on the dusty shores of a one-time large lake that has mostly dried up in the current drought.

“If Texas is to remain the best place to live, work, grow your business or raise your family, we must ensure adequate supplies for generations to come,” he said. “We stand at a historic crossroads.”

The two new funds – State Water Implementation Fund for Texas (SWIFT) and State Water Implementation Revenue Fund for Texas -- would be dedicated to the $53 billion of needed water supply projects included in the state’s water plan adopted in 2012.

Only the projects in the water plan would be eligible for assistance from the new constitutional funds

The population of Texas is expected to grow by 82% by 2060, from 25.4 million Texans in 2010 to 46.3 million. Water demand is expected to grow by only 22% during the period, but water available from existing supplies is expected to drop by 10%.

Economic losses in Texas to the drought were estimated at $7 billion in 2011. The lack of water could cost more than 1 million jobs by 2060, the 2012 water plan estimated, with economic losses of more than $115 billion.

Unlike the $6 billion of state GO water bonds capacity authorized by voters in 2011, Proposition 6 does not provide for additional state bonds.

“It is not a bond bill and this is not a bond election,” said Merry Kolonower, communications director for the Texas Water Development Board, which will oversee the proposed water funds.

“It is a one-time infusion from the rainy day fund into new accounts,” she said. “It is not a debt proposal at all.”

Proposition 6 was included as on a November bond election site maintained by the state comptroller’s office, but was removed at the suggestion of the water agency, Kolonower said.

The $2 billion would be deposited into the SWIFT account, and with the investment income, be used to reduce interest rates or offer deferred loan repayments for loans funded through several of the state water agency’s existing bond programs.

Money in the funds would be available to provide support for low-interest loans, longer repayment terms for loans, deferral of loan payments, and incremental repurchase terms for projects in which the state owns an interest.

The SWIFT money is the critical piece that provides the financial incentives project sponsors need to use TWDB?’s bond authority for water supply infrastructure.

Over the life of an infrastructure loan, the agency said, local and regional water supply authorities should save millions in borrowing costs through the lower interest rates or deferred payments that would be possible because of the SWIFT money.

Eligible supply projects include new reservoirs, desalinization plants, and new technologies to conserve and re-use current supplies.

The new state programs would support water project loan financing with more term flexibility than the existing federal loan programs it administers, TWDB? said. The state program will also provide more options in ranking of projects, timing, and program management.

The state water agency was established in 1957 to issue state bonds and use the proceeds to provide low-cost loans to local water utilities. The constitutional amendment that created the TWDB? also funded the original loan program with $100 million of state general obligation bonds.

House Bill 4, which authorized the Proposition 6 vote, passed easily through the 2013 Legislature.

A similar proposal to divert half of the money flowing annually into the rainy day fund to highway projects was adopted in the Legislature’s third special session during the summer after several failed attempts earlier. The transportation amendment will go to voters in November 2015.

Turnout is expected to be light at the off-year November elections, despite almost $5 billion of local government bond proposals on the slate. The constitutional amendments are the only statewide issues up for a vote.

Almost 60% of the 13 million registered Texas voters cast a ballot in the November 2012 presidential but only 600,000 voted in the constitutional amendment election in 2011. Houston and Harris County, which have a $212 million countywide bond referendum and a hotly contested mayor’s race, could generate up to a third of all votes in November.

Earlier this month, Perry renewed a 2011 finding that 240 of the 254 counties in Texas are experiencing drought conditions.

State Rep. Bill Callegari, R- Katy, a member of the House Committee on Natural Resources, said the Texas economy depends on an adequate water supply.

“As things are now, we won’t have enough water to keep up with our vast growth,” said Callegari. “It’s really important that we get ahead of this. We need to pass Proposition 6, or we’re going to be in real trouble.”

Water demand is expected to increase by 48% by 2060 in the Houston metropolitan area that includes Galveston, Harris, Montgomery, and Fort Bend counties.

The population in the Austin metropolitan area is expected to double in the next 50 years, said Greg Meszaros, director of Austin’s water utilities. Tomorrow’s expansion will strain a water supply system undergoing significant stress today, he said.

“We’re in a very intense drought, one of the worst droughts central Texas has ever experienced,” Meszaros said. “It’s a multi-year drought.”

Since 1957, the Legislature and voters approved constitutional amendments authorizing the TWDB? to issue up to $10.9 billion of debt. The agency has issued almost $4 billion of since then to finance the construction of water- and wastewater-related projects by local governments.

The $6 billion of GO bonds authorized in by voters in 2011 will not be issued until TWDB? exhausts the final $360 million remaining from $2 billion of GO bonds approved by in 2002.

The Legislature authorized the agency to issue $50 million of bonds for projects in economically distressed areas over the current two-year biennium.

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