This post was written by Sachin Shah, an intern in EDF's Austin Office.
Infrastructure for the Ages
On any given day this summer you can probably find a broken water main like the ones found in Southeast Houston and Central Austin. The water infrastructure in Texas isn't getting any younger, which is why the state feels it needs more money to repair the hundreds of thousands of old water pipes in the state. The American Water Works Association reports that the average amount of leakage from Texas municipal water infrastructure systems is 15 percent and 18 percent which can add up to a lot of water waste.
Water loss from leaking pipes can generate negative effects such as increased cost of water treatment, higher water costs for customers, and property damage, placing even more strain on a state with dire need of water use efficiency practices.
Currently, 78 percent of the state falls within the exceptional drought category, and other 12% isn’t doing well either. The stress placed on both water supply and water infrastructure calls for the need to repair leaky pipelines and construct additional infrastructure to ensure continuous delivery of water.
This November, the proposed $6 billion constitutional amendment Proposition 2 will provide additional general obligation bonds by the Texas Water Development Board (TWDB) to help restore water infrastructure and other water-related projects to increase use efficiency across the state and save much needed water. At the core of TWDB’s mission is to ensure that Texas is prepared for drought, not only by overseeing and maintaining a state water plan, but also through financing a significant portion of water and wastewater infrastructure for the state.
Drop in the Bucket
Proposition 2 would allow cities, counties, districts, and river authorities to apply for low-interest loans from the state for various water infrastructure projects. This financial assistance loan program is particularly helpful for municipalities who are unable to access funds from traditional market sources. This isn’t the first time citizens are voting to approve state bonds to provide loans to local governments for water projects in Texas. In 2001, voters authorized TWDB to issue $2 billion in new bonds, which led to numerous water conservation projects across the state.
Proposition 2 would allow TWDB to issue up to a total of $6 billion in bonds at one time as cities ask for it and reissue those bonds as they are paid off without coming back to voters for permission. Without additional authority to issue state-backed bonds, TWDB would be unable to provide the financing needed to meet the state’s water and wastewater needs. The state also may be unable to provide required funding matches for federal grants, which could mean losing federal funds for Texas water programs.
In reality, $6 billion would be a drop in the bucket for the state. The TWDB estimates there is $231 billion worth of long term infrastructure needs statewide. With water issues in Texas at the front of people's minds in the coming decades, the State sees the need for statewide repairs while the rest of us have seen water bubbling up from the ground more than usual this summer.
Melanie Callahan, interim director of the TWDB, explains that it is beneficial for municipalities to borrow money from the agency rather than trying to raise bonds themselves, because of the strong credit rating of the TWDB. TWDB can issue loans at a lower rate than most of the entities throughout the state and are backed by revenue streams guaranteed by municipalities seeking the funds. As a result, Callahan said that the chance that a municipality might default is very low, even if economic conditions in municipalities become bleaker.
Texas Two-Step: More Growth, Less Supply
In Texas, our biggest challenge in sustaining job growth and economic development is water. The Texas population is expected to double by 2060. This growth is a plus in many ways, but a lack of water could stunt it.
Although we may not agree on all the various assumptions regarding future water use used in TWDB’s projected water models, we can all agree that meeting the needs of all Texans over the next 50 years is going to be a challenge so using it wisely and eliminating waste should be a top priority. While it might be true that Texas population is growing, it isn’t a foregone conclusion that we can’t save more water or use water more intelligently.
As TWDB points out, “economic losses from not creating additional water supply could result in a reduction in income of approximately $11.9 billion annually if current drought conditions continue, and as much as $115.7 billion annually by 2060, with over a million lost jobs.” One way to find additional supply is to use less. Leakage repair and water reuse can help.
No Blank Checks
Let’s be clear that the TWDB bond loans will only be based on requests for funds from local entities and will not be a handout. In addition, the Bond Review Board, chaired by the Governor and composed of state leadership, oversees issuance of all state bonds, including the TWDB’s bonds.
One of our concerns is whether the bonds will be used for constructing reservoirs. The proposition funds would be on a first come, first serve application basis to no one really knows exactly which projects will be funded. However, any bonds could be used for reservoir construction would likely require a legislative appropriation for construction because of the price tag. This system of checks and balances will hopefully ensure the money goes to the best place keeping Texas with water for a long time to come.
Texans will vote on Proposition 2 along with nine other constitutional amendments on November 8, 2011.