Below is the HillCo client report from the May 15 TWDB board meeting.
 
The Board met to consider their posted agenda.  The following report focuses only on selected agenda items.
 
Guidance to Trust regarding SWIFT

  • SWIFT/SWIRFT fund is taking the $2 billion and doing dollar cost averaging as it moves into the market (ie slowly releasing funds in phases)
  • Staff noted trust (Texas Treasury Safekeeping Trust Company) is moving in a very thorough and deliberate process
  • Trust goal to preserve purchasing power (at least rate of inflation)
  • The first phase has already occurred which released $950m in the market – timing of entry helps minimize risk of funds
  • They have earned about $10m in interest to date
  • They are now in the process of moving to phase II – that was approved during the Trust March board meeting
  • Trust is authorizing longer duration strategies on some of the funds in phase II which will increase the rate of return & impacts the fund rating
  • TWDB will be able to fund approx. $800m in loans in first year of SWIRFT program resulting in an approx. draw of $125-145m on SWIFT fund balance depending on which model and assumptions utilized
    • Each program only offers interest rate subsidy and/or payment deferral
    • Staff reviewed all the various ranges loans can be granted such as: WIFT structure
    • WIFT deferred, State Participation, 20 or 30 yr loan
    • Principal  from borrowers will be repaid in full
  • It is anticipated, the fund will be fully deployed into the market by the 4th quarter of the year
  • Funds are being released in increments of $250m per month
  • The staff is requesting guidance from TWDB on the cash flow needs they anticipate they will need to help further inform the investing methodology
  • Continued legging in while collecting more information is necessary
  • The need to work in a collaborative effort with the borrower is crucial
    • The borrower needs to close the loan as near to the commitment date from TWDB as possible
  • Chair Rubinstein said the next few months will be critical to help get a better handle on the need as priority/need will be finalized in September
  • Rubinstein also noted he wants to see the worst case scenarios from staff as well and how the model handled them  
  • TWDB member Bech Bruun wanted to comment out that upon hearing they plan to lock away $500m for the next ten years, it needs to be explained clearly to the legislature and the Advisory committee as to why that is being done – ie trying to protect the corpus over an extended period of time- and even though this discussion will be continued to the next meeting, the issue still needs to be clearly explained “across the street”
  • The discussion of this item was extended to the next meeting – June 5

 
Discussion on HB 4 Rule Development

  • The Board hosted worksessions on February 11th in Conroe, February 24th in Lubbock, and
  • March 24th in Harlingen. The next worksession will be May29 in El Paso at TechH20 Center
  • The staff House Bill 4 rule team hosted stakeholder meetings in Austin on January 31st, February 19th, and March 6th
  • In addition, they have collected a total of 38 written comments to date
  • A draft rule will be provided at the worksession on June 26 for approval for publication
  • A draft rule could be posted on the website by June 18
  • It is anticipated that an extended comment period will be provided as well as public hearings will be held around the state
  • The dates and locations of the public hearing will be posted with the rule proposal
  • Hearing dates and proposed rule will also be on the TWDB website
  • Staff is on schedule to bring the adopted rule to TWDB by the first part of December 2014

 
Drought Discussion

  • A presentation was provided and it was noted that even in spite of recent rains that we are still looking conditions worse for this time of year and still at worse since 1990
  • List of public water supply systems at risk is being impacted by drought and staff will continue to monitor that list
  • US seasonal drought outlook through August predicts the drought to worsen with only minimal portions of Texas not in drought
  • Bruun request more information on what is taking place in the way of evaporation and effect on steam flows (normal vs historical data)