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The State Water Implementation Fund for Texas (SWIFT) Joint Advisory Committee met to hear invited testimony related to an annual report of the fund including financial soundness and future uses of SWIFT funds

This report is intended to give you an overview and highlight of the discussions on the various topics the committee took up. It is not a verbatim transcript of the hearing but is based upon what was audible or understandable to the observer and the desire to get details out as quickly as possible with few errors or omissions.

Peter Lake, Texas Water Development Board (TWDB)

  • The program has been successful
  • SWIFT is the only water finance structure that links long-term water planning with financing

Rebecca Trevino, TWDB

  • Agency issued bonds 5 times at over $5 billion in state water plan projects
  • Agency has utilized $617 million of SWIFT
    • Balance is $1.9 billion as of 9/30/18
    • Each transaction received AAA rating
  • $5.5 billion of $8.1 in long term commitments have been delivered

Jeff Walker, TWDB

  • Described various types of projects funded across the state
  • Specific examples of projects that allowed for significant saving and efficiencies found by utilizing SWIFT funding
  • Not as many rural communities utilize SWIFT
    • Working to incentivize rural projects
  • Regionalization would benefit rural communities

Peter Lake, TWDB

  • Active management of the fund has allowed for continued funding of the program
  • Need to maintain balance between draws and inputs back into the fund
    • Reducing interest rates
    • Subsidies
    • Funding structure
  • 93% debt service paid by political subdivision obligations
    • Demonstrates successful incentivization
  • Perry – is there anything that is preventing you from tapping into the rural markets?
    • Lake – some clarification of the definition of rural in statute related to this would be helpful
  • Perry – you have $8.1 billion out in commitments, who is watching out for maintaining the ability to continue funding smaller projects?
    • Lake – it is something that is constantly being monitored and making tweaks to allow for that
  • Perry – what do you envision going out in forecasting that would pull back the low interest rates?
    • Lake – we have had great progress so far, funding 20% of the projects in 10% of the time
    • Lake – the trust has performed exceptionally well, and have benefitted from very low interest rates
  • Perry – believes there will be many more applications in the near future
  • Lucio – what % of the people that apply get funded, and what percent of rural have not-qualified percentage
    • Walker – most of the drop out is because the project is not ready, or a better funding mechanism was found, have not had anybody not get paid yet

Paul Ballard, Texas Treasury Safekeeping Trust Company

  • Described the trust company
  • SWIFT portfolio is a hybrid fund that utilizes tools from the Endowment Fund that would allow for both growth and liquidity
  • Written testimony shows assets allocated in the SWIFT
    • In compliance with the investment policy
    • Well diversified
  • Reviewed historical trends of the portfolio, distribution trends, and market value history of the fund
  • Investment returns have replenished half of the distributions at this point – as intended
  • Annualized return is about 7%
  • Very pleased with performance
  • Perry – it sounds like the market has treated us well, as the market changes be sure that the committee is kept in the loop to be on the same page with expectations