Below is the HillCo client report from the June 2 SWIFT Advisory Committee hearing.
The committee met for their first meeting to discuss organizational issues and receive updates from the Texas Water Development Board.
Members in attendance include: Co-chairs Sen. Troy Fraser and Rep. Allan Ritter, Sen. Kevin Eltife, Rep. Drew Darby, Rep. Eddie Lucio III, and Comptroller designee Martin Hubert. Rep. Van Taylor who is not a member of the committee was also in attendance.
Chairman Troy Fraser: The point of the legislation last session was to change the focus of the TWDB from being a reactionary entity, mostly giving approval to loan requests, to being a proactive group getting out into the state and making the needs of communities a reality. The board has been doing a phenomenal job so far.
Carlos Rubenstein, Chairman, TWDB
- Trying to make sure that in the implementation of HB 4, people are not getting frustrated by working with the state agency
- TWDB has specific teams developed so that projects can remain with the same staff and personnel throughout its lifecycle
- This should allow TWDB to be more responsive to all stakeholders and more effective and efficient
- Rubenstein introduced the committee to Todd Chenoweth, rule development lead for HB 4 rules
- Recently took up a refinancing of $135 million in TWDB debt; realized $13.8 million in savings
- Looking for ways to streamline the process for receiving board funding for projects
- Have set up an agricultural rural ombudsman to help with rural customers and entities looking to work with the board
- The board is having many more work session with the full board both in Austin and around the state than in the past
- Workgroups have been very busy prioritizing projects in their water plans
- Feedback will be given and the list will become final on September 1
- Have been receiving stakeholder input during rule development and will be implementing many stakeholder suggestions
- Fraser noted he has been concerned that a project has to be in the state water plan to receive TWDB funding; because of the changing dynamic in Texas, does a regional planning group have the ability to add projects to the state water plan or re-prioritize
- Yes they have that ability and have already done so in some situations; there are procedures set up for a regional planning group to do that
- The public will see the HB 4 rule on June 18th; the board will consider publication on June 26th; the comment period should end sometime in September and the final rule should come to the board for adoption on December 18
- The rule format will be new subchapters within existing rules
Anne Burger Entrekin, Financial Adviser, First Southwest
- Have been a financial adviser to the TWDB since 1994
- Have been able to receive independent verification from the underwriter program that the structure of the fund will work but will require significant management throughout its lifecycle
- The funds earning rate is the key variable that affects forecasted cash flows
- Have been working very closely with staff to stress the model to assess all the different possibilities to define the amount of money the board feels comfortable investing out for a 10 year period without the fear of needing the invested money
- The board is legging in; investing small amounts of money at a time while it is being determined how much is needed for loans
- Rep. Van Taylor asked what the funds earning rate being used has been when determining forecasts
- 3.7%-5.9%
- Taylor asked if private letter ruling has been requested
- It has not been pursued yet
- Rubinstein noted bond counsel and tax attorneys have been in consultation with the board regarding that issue
- Taylor asked if other products aside from 20 and 30 year loans are being considered; perhaps 5-10 year construction loans, etc.
- Rubinstein replied that many options are being considered and customers are bringing up many products they are interested in
- Taylor asked why $800 million for projects at a single time would be necessary; how is the board going to convince groups to spend that much in projects
- Rep. Eddie Lucio noted over the last year, interest has grown significantly for starting water projects; asked if there is an indicator of how much application submissions have increased since the passage of prop 6
- Rubinstein noted it is hard to determine because of the effect of the drought and other situations; will have a better idea of that a little further down the road
- Taylor asked if anything needs to be done legislatively to allow the board to provide new products
- No
- Lucio asked if a 5 year amortization product is a stressor because it wouldn’t provide much interest
- Entrekin replied that it could be but not necessarily because it could provide quick turnaround for use on another project
- Lucio asked what efforts are being made to help small communities determine what their need is and what programs to utilize
- Working very closely with TCEQ so that when they are notifying cities and entities of violations because of capacity issues, etc., they will be notifying the government entities of the availability of programs within TWDB to achieve what they need to achieve
Danny Sachnowitz, Texas Treasury Safekeeping Trust Company
- Since HB 4 was passed there have been many interactions between the trust company and the TWDB
- Very interested in downside protection and taking as little risk as possible while still meeting all objectives
- Have been deploying the swift at about $250 million per month; about $1.25 billion has been invested so far; very liquid investment strategies have been used
- The investment model is being fine-tuned and will change moving forward
- Taylor asked what kind of assets would be used if $800 million were deployed
- Fixed income and credit based predominantly; some private strategies which will get a higher return but are less liquid would also be implemented