The Texas Water Development board met on August 10 to take up a number of items. The board approved financial assistance totaling $29,382,583 for water and wastewater projects, with $11,432,583 going to the City of Moody for a new wastewater treatment plant, $15,000,000 going to the City of Bay City for water system improvements, and $2,950,000 going to the City of Daingerfield for wastewater system improvements. A complete list of funding approved can be found here. A video of this meeting can be found here.

This report is intended to give you an overview and highlight the various topics taken up. It is not a verbatim transcript of the discussions but is based upon what was audible or understandable to the observer.

Item 2. Consider approving the Fiscal Year 2024 Debt Management Policy of the Texas Water Development Board.

Georgia Sanchez, Director of Debt and Portfolio Management and Development Fund Manager

  • Debt management policy was first adopted in 2007, with review and approval annually
  • Do not recommend any changes from the previously approved policy
  • Stepney – Great that we look at the document every year and tweak it as necessary, speaks to the good governance
  • Peyton – This item is a reflection of the best practices developed by the Water Management Team; having these items published is a great practice
  • Motion to approve the policy passes

 

Item 3. Consider approving by resolution delegation to the Executive Administrator and the Development Fund Manager the authority to utilize prepayments and other lawfully available funds to pay, redeem, and defease General Obligation Bonds.

Georgia Sanchez, Director of Debt and Portfolio Management and Development Fund Manager

  • Delegation creates a more efficient mechanism to utilize pre-payment proceeds received for the retirement of general obligation debt
  • Requests that the authority be granted till September 30, 2024
  • The resolution requires that an annual report be provided to board members
  • Stepney – The board will receive this delegation next year?
    • Today’s request asks that authority is till September 30, 2024
    • Around this time next year, will ask for the authority again
    • Are packaging a report that shows the authority that has been used this past year
  • Motion to approve authority passes

 

Item 4. Consider approving the Fiscal Year 2024 Underwriting Policies and Procedures for Negotiated Bond Transactions of the Texas Water Development Board. 

Georgia Sanchez, Director of Debt and Portfolio Management and Development Fund Manager

  • Policies provide detailed guidance for bringing a negotiated bond sale to market and providing consistent basis for staff to evaluate and report on performance factors
  • Not proposed any changes to the policies approved last fiscal year
  • Stepney – This is another example of our transparency and consistency which is really important to investors
  • Peyton – Has read through the document several times; it’s very precise and well-laid out. Can you talk about how you bring the bond document to the senior underwriters and they’re required to sign the document?
    • The underwriting syndicate members have already signed UPP when they become a member; after board approves any assignment as a senior manager, there is a separate meeting, and the page is signed again
    • Peyton – I think bringing it to their attention before every sale is important; it’s an excellent document
  • Motion to approve the policies and procedures passes

 

Item 5. Consider selection of bond and disclosure counsel and authorize the Executive Administrator to negotiate and enter into consultant contracts for outside counsel services from September 1, 2023, through August 31, 2025. 

Georgia Sanchez, Director of Debt and Portfolio Management and Development Fund Manager

  • Requests that the Board authorize contracts with the pool of outside bond counsel firms for the upcoming biennium
  • June 2nd request for qualifications was posted on the Electronic State Business Daily with the deadline of July 5th; an internal review team scored the responses
  • The top 4 scoring firms were Bracewell LLP, McCall, Parkhurst & Horton LLP, Norton Rose Fulbright LLP, and Orrick, Herrington & Sutcliffe LLP
  • Stepney – Thinks it’s great anyone can throw their hat into the game
  • Peyton – Is this a 2-year process?
    • Yes; limited to a 2-year contract for this type of outside counsel
  • Motion to approve entering into contracts passes

 

Item 6. Consider authorizing the Executive Administrator to amend the outside counsel contract with Orrick, Herrington & Sutcliffe LLP by increasing the contract amount by $65,000, for a total of $515,000.

Georgia Sanchez, Director of Debt and Portfolio Management and Development Fund Manager

  • Requests an amendment to the existing contract with Orrick, Herrington & Sutcliffe LLP to increase contract amount
  • The main driver behind this increase is higher-than-anticipated amounts of the transactions for which the firm served as bond counsel
  • The approval will allow them to close out existing contract and begin negotiations for the new contract
  • Stepney – The new amount is $625 million?
    • This contract would not exceed $515,000
  • Peyton – They’ve done more work than we anticipated and this why they’re getting an additional bump?
    • Yes
  • Motion to approve amending contract with Orrick, Herrington & Sutcliffe LLP passes

 

Item 7. Consider approving the Fiscal Year 2024 Texas Water Development Board Investment Policy and Strategies.

LeeRoy Lopez, Director of Accounting at Texas Water Development Board

  • One change from the previously approved document is the number of days for the final maturity of highly rated commercial paper from 270 to a maximum of 365 days
  • Stepney – Can you talk about why the change?
    • There was a change in the 86th Legislature and we consulted with the trust company that does investing and we want to make the change so we can match what they’ve done through their policy
  • Peyton – Great to match up commercial papers with what we’re doing statewide
  • Motion to approve the policy passes

 

Item 8. This is a briefing item regarding material changes to contracts for goods and services executed during the third quarter of Fiscal Year 2023, and the contract and performance report for the third quarter of Fiscal Year 2023.

Cameron Turner, Director of Procurement and Contract Services

  • Stepney – For enhanced monitoring, there were 3 contracts that were selected because the risk was low that didn’t take place?
    • These are not subject to enhanced monitoring, but could be
    • We reevaluate the risk throughout the course of the project
  • Stepney – All of that is really important for contract management
  • Peyton – Is it safe to assume we don’t have any contracts right now under enhanced monitoring?
    • That is correct
    • There are some high dollar contracts that we do meet with that contractor
    • We do implement enhanced monitoring on a number of contracts by default, although they’re not designated high-risk
    • Peyton – Might be nice to see a list of those
  • Peyton – On the attachment with flood monitoring and mapping, that’s under a master services agreement so that will adjust over time?
    • That is correct
    • Issue task orders under those; show up as amendments on the contract
    • Do implement enhanced monitoring on these contracts and monitor on a regular basis

 

Item 9. Consider authorizing the Executive Administrator to negotiate and execute a one-year contract with the Municipal Advisory Council of Texas for fiscal year 2024, not to exceed $150,000, and delegation of authority to renew the contract annually, through fiscal year 2027, in an amount not to exceed $150,000 per fiscal year.

Inette Hutching-Brown, Senior Financial Examiner

  • TWDB contracted with MAC to create a web-based interface with their databases specifically for completing financial compliance reviews
  • The interface provides access to Texas Municipal Reports, including issuers outstanding debt, operating statements, economic background, and finance-related officials
  • This contractual arrangement helps ensure TWDB completes annual stability reviews of all entities
  • The MAC interface is an essential electronic service, with benefits of improvement accuracy and efficiency of financial data analysis
  • The current contract with MAC expires August 31, 2023 and has no remaining extensions available
  • TWDB staff has published a request to the Electronic State Business Daily
  • Requests permission to enter into a new 1-year contract ending no later than August 23rd, 2027
  • The total projected cost is $150,000 each year between 2023-2027 for a total of $600,000
  • Recommends a 1-year contract with MAC to renew the contract annually through fiscal year 2027
  • Stepney – This is a very important relationship for us; sounds like it’s a repository of important financial benchmarks; number of entities we’ll be providing to will be increasing
  • Peyton – We are keeping this data internally; is the intent to have 2 systems, 1 internally and 1 externally?
    • The interface will allow us to have a linkage with the MAC, which allows us to retain the information in our system
  • Peyton – The number of agencies we’re working with will increase; this is an essential piece of ensuring we have data available that is accurate
  • Motion to approve the contract passes

 

Item 10. Consider authorizing the Executive Administrator to negotiate and execute an interagency contract with the Texas Facilities Commission regarding minor construction services for Texas Water Development Board assigned properties within the Stephen F. Austin building in an amount not to exceed $350,000.

Kelly Burton, Manager of Support Services

  • TWDB anticipates several forthcoming construction projects for 2024 and 2025
  • This contract will allow for efficiencies in administering these programs to modernize TWDB workspaces
  • Stepney – We received a large number of FTE’s from the legislature, which we’re very appreciative of; having the relationship with TFC to help with logistics is very helpful
  • Peyton – There is upkeep needed as well as in build-out in new areas
  • Motion to approve the contract passes

 

Item 11. Consider authorizing the Executive Administrator to execute an amendment to the Shared Technology Services interagency contract with the Department of Information Resources to extend the contract end date to August 31, 2025, with a contract amount not to exceed $7,741,343 during the Fiscal Year 2024-2025 biennium.

Scott Daywood, Manager of Security and Networking

  • The shared technology services over 200 state agencies and institutions of higher education
  • Requests for funding to sustain the TWDB server environments are part of the biennial budget process
  • Stepney – Have the costs gone up gradually over the years?
    • Yes, unfortunately; items that were normally paid by general budgets have to be moved under STS
    • Stepney – Part of daily costs
  • Peyton – Can you walk me through how you get to this very specific number?
    • It’s primarily from our previous years’ growth and adding more items into the contracts
    • There are new infrastructure that need to be added in for new projects
    • Peyton – It appears to be a very detailed buildup to get to this number
    • Peyton – It’s an essential service so being able to utilize the data and storing it effectively is essential
  • Motion to approve the contract passes

 

Item 12. Consider authorizing the Executive Administrator to (a) negotiate and execute contract amendments to increase funding allocated to the sixth cycle of regional water planning (2026 Regional Water Plans) contracts by an amount not to exceed $3,300,000; and (b) transfer these funds from the Water Assistance Fund to the Research and Planning Fund.

Sarah Lee, Manager of Regional Water Planning

  • These contract amendments will increase funding for the development of the 2026 water plans by approximately $3.3 million, bringing total grant amount for this cycle to $18.9 million
  • This additional funding is the result of increased appropriations authorized by 88th Legislature
  • This funding was requested to be added to future baseline funding, but funding has not increased, while costs in the engineering sector have increased
  • Amendments will emphasize that planning groups must conduct rural outreach
  • The total funds for each region have been allocated using a formula-based funding tool
  • Each region is recommended to receive additional funds
  • Stepney – Can you talk about the note that the 88th Legislature can appropriate a lesser amount?
    • The amount included for the portion of fiscal year 2026 is what we anticipate to receive
    • If we did not receive that amount, we would have to adjust the funding amounts down
  • Stepney – The groups will have to spend the additional appropriation in FY 24 and FY 25 before end of FY 25 and we’ll have to wait to see what happens in the next Session for FY 26?
    • FY 26 wouldn’t be available until 2025, which is close to when final plans will be due
  • Peyton – We are continuing to add statutory requirements, without additional funding; pleased that the Legislature saw fit to appropriate additional funds for these planning groups
  • Motion to approve the contract and transfer of funds passes

 

Item 13. Consider approving the State Fiscal Year 2023 Drinking Water State Revolving Fund Lead Service Line Replacement Intended Use Plan.

Mark Wyatt, Director of Program Administration & Reporting

  • This intended use plan covers federal grant funds in the amount of $222 million
  • The program reflects the ongoing role of the TWDB to serve others and do what is good and just
  • The plan allows entities to decide later how much funding is actually needed, enabling the TWDB to secure the entire Texas allotment of this special funding
  • There is a broad definition of disadvantaged community, that enables all areas of Texas to be eligible
  • This program provides a supplemental long-term benefit to the regular drinking water program
  • An important feature is a reserve construction ready project that will ensure the program has significant replacement projects moving quickly without the need to wait for the results of service-line inventories
  • Received 258 eligible project proposals requesting $4 billion
  • Peyton – Thanking Mark for all of his efforts
  • Stepney – Thanking Mark for all of his efforts
  • Stepney – This program is 5 years. Do you know how much money is allocated for Texas for the lead portion?
    • It depends
    • For the 2nd year, they’ve reduced it, so it will be in $140 million range
    • The 3rd year is open to a resurveying of entities, so we don’t know; our portion will likely go down a little
    • Do not know the 3rd, 4th, or 5th years
  • Stepney – We can show an Intended Use Plan that has $4 billion as the money is being redistributing
  • Stepney – The next year the Board will get to see how much money there will be and how to allocate it.
    • The Intended Use Plan is an annual review and comment
    • Looking forward to allowing the agency and partners to adjust as needed
  • Fortunately, we did not have negative comments from those entities
  • Stepney – The inventories are due October 2024 to TCEQ. There’s only a certain amount of money and there will be some that we can’t fund.
    • We will know the demand number
  • Peyton – The Intended Use Plan is a living and breathing document with lessons learned that we can implement in coming years; there’s a lot more demand than money available
  • Motion to approve the plan passes

 

Item 14. Consider approving the State Fiscal Year 2023 Drinking Water State Revolving Fund Emerging Contaminants Intended Use Plan. and Item 15. Consider approving the State Fiscal Year 2023 Clean Water State Revolving Fund Emerging Contaminants Intended Use Plan.

Mark Wyatt, Director of Program Administration & Reporting

  • The drinking water plan covers approximately $59 million
  • Sufficient funds are being retained for all clean water project proposals to be funded at requested amount, but any funding provided will be dependent upon the outcome of TWDB review of the project
  • The clean water plan covers approximately $3 million
  • For a project to be eligible for special funding, the primary purpose must be addressing emerging contaminants
  • All project funding will be provided as additional subsidization, which will be in from of principal forgiveness
  • The program prioritizes proposals that have identified and will address perfluoroalkyl and polyfluoroalkyl substances and proposals that request construction funding, which will ensure projects move forward in a timely manner
  • The program will also prioritize disadvantaged communities and rural projects
  • Received 15 eligible projects for drinking water requesting $175 million
  • Received 5 eligible projects for clean water requesting $3 million
  • Stepney – This is the first time we’ve funded projects like this. Are we expecting funding over 5 years?
    • We don’t anticipate any changes in the allocation
    • Looking at approximately $300 million for drinking and clean water
    • The 1st year we have more than enough to secure the funding, with extra
    • This is a non-regulated substance, not something that is on the federal regulated list
    • There will be more outreach on their part to make sure intended use attracts enough projects to use the money
  • Stepney – Emerging contaminants are pretty broad. Is there a list we can compare it to?
    • The lists are in the notice
    • Even if a substance in the next 5 year period moves off the emerging contaminant list and onto a regulated list, it would still be eligible
    • Those substances were mentioned in the appropriations
  • Peyton – Your team has the ability to think about the document in the future. Wants to commend the communities for putting their projects forward. Can you talk about dollars available for monitoring?
    • Monitoring is available but it has to be monitoring that would lead to a project proposal, as opposed to ongoing monitoring that is part of daily operations of a system
    • Texas used the broadest definition in the Intended Use Plan
    • Peyton – Seems like a critical first step to figure out what you’re dealing with
    • We wanted to fund projects that identified but also those that are checking to see if they identify
  • Motion to approve both plans passes

 

Item 16. Consider approving by resolution a request from the City of Moody (McLennan County) for $11,432,583 in financial assistance consisting of $3,475,000 in financing and $7,957,583 in principal forgiveness from the Clean Water State Revolving Fund for planning, acquisition, design, and construction of a new wastewater treatment plant.

Tom Barnett, Team Manager

  • City of Moody provides water and wastewater services to approximately 1400 residents
  • The city’s existing wastewater plan was constructed in 1978 and has reached the end of useful life
  • The existing plant has received numerous violations regarding effluent flow limits, total suspended solids, and E. coli concentrations
  • The existing plant cannot meet permit limits required in their 2019 TCEQ permit renewal
  • With the proposed project, the city would construct a new wastewater treatment plan with a designed capacity of 0.3 millions gallons per day, including funding for an emergency generator
  • The city qualified to receive principal forgiveness as a disadvantaged community
  • Stepney – It’s a very old plant; glad to provide financial assistance to a small community
  • Peyton – This is a fantastic deal for this community; this is what TWDB does best; loves that there is an asset management plan and a water conservation plan
  • Motion to approve the request passes

 

Item 17. Consider approving by resolution a request from the City of Bay City (Matagorda County) for a) $15,000,000 in financial assistance consisting of $14,500,000 in financing and $500,000 in principal forgiveness from the Drinking Water State Revolving Fund for planning, acquisition, design, and construction of water system improvements; and b) a waiver from the requirement to include funds to mitigate water loss as part of this project.

Dain Larsen, Team Manager

  • Bay City is requesting $15 million in drinking water SRF funding to address elevated levels of arsenic in the system
  • The city’s primary well is above the maximum contaminant level for arsenic and is not in production
  • The city is being offered additional subsidies in the form of $500,000 in principal forgiveness
  • The city proposes to either add filtration or drill a new well, which could utilize existing storage capacity or add new storage capacity
  • The city has exceeded its water loss threshold and is requesting a waiver from needing to provide additional funds in this request to address their water loss
  • Recently completed a project funded by TWDB in 2021 to add advance metering infrastructure meters to their system
  • They have hired a 3rd party to repair leaks in their system
  • The city is rated an average credit risk with a projected need to increase rates by $15 to provide 1.1x coverage of the proposed debt service
  • The city is pledging taxes and surplus revenues to meet this need for additional revenue
  • Stepney – Arsenic is a significant issue and glad that the city is taking steps needed to improve water quality; since they have a number of wells impacted, how are we going to ensure that new wells drilled won’t have arsenic?
    • Work with TCEQ and Texas Department of Licensing and Regulation
    • The process is they drill test holes to determine if there is a presence of arsenic; send samples to TDLR to make sure water is at quality needed; the water will be sent for testing to TCEQ
    • There are safeguards from a financial and quality standpoint
  • Stepney – The applicant would need to provide information about the test holes to TWDB so we can be ensured that we will be seeing a project that will work?
    • Yes
  • Peyton – They are getting a waiver for water loss mitigation because they are already engaged in doing water mitigation efforts, correct?
    • Funded a project which they just completed construction in February of this year
    • Expect to see benefits implemented soon
  • Motion to approve the request passes

 

Item 18. Consider approving by resolution a request from the City of Daingerfield (Morris County) for $2,950,000 in financial assistance consisting of $1,950,000 in financing and $1,000,000 in principal forgiveness from the Clean Water State Revolving Fund for planning, design, and construction of a wastewater system improvements project.

Marea Lohey

  • Provides water and wastewater services to approximately 2,500 residents
  • In the March 2022 meeting, the Board approved the commitment to address sewer improvements within the city
  • The city’s sanitary system and wastewater treatment plan need upgrades
  • The city is requesting planning construction funds for Phase 2 of their plan
  • The city qualified for principal forgiveness as a small rural disadvantaged community
  • Stepney – Supports the project; the city has quite a bit of issues with their collection system
  • Peyton – Seems like a great project, happy to support that
  • Motion to approve the request passes

 

Item 19. Consider authorizing the Executive Administrator to execute an amendment to the grant agreement with the Hidalgo County Drainage District No. 1, as amended, to include an additional $500,000 grant pursuant to Rider No. 21 of the General Appropriations Act for the 2022-23 Biennium.

Marea Lohey

  • Requests funding for the reimbursement for costs relating to the Raymondville Drain Project, which will encompass a drainage channel system of 60 miles to provide an alternative drainage conveyance for Hidalgo County and an improved drainage conveyance for the northern Willacy County
  • The project is anticipated to resolve 80% of problems caused by funding by increasing drainage capacity of the area, providing benefits to the communities
  • The design is 100% complete for the Hidalgo County portion of the project and the construction of a portion of the drainage channel has been completed
  • The schematic plans have been developed for the Willacy County portion
  • Stepney – Appreciates Senator Hinojosa staff for attending; this project is very important to the community and is a very long project with 60 miles
  • Peyton – It’s a very large project and pleased that the Board can be a part of it and hope it continues
  • Motion to approve the authorization passes