BILL ANALYSIS



S.B. 768
By: Montford (Junell)
March 31, 1995
Committee Report (Unamended)


BACKGROUND

The Federal Water Pollution Control Act of 1987 (Clean Water Act)
created the State Water Pollution Control Revolving Fund (SRF) to
provide financial assistance to political subdivisions at below
market rates of interest for the construction of sewage treatment
facilities.  Since 1987, the SRF has made available over $1.0
billion for loans which will produce aggregate savings for SRF
borrowers of over $100 million.

The SRF program is a self-supporting program funded from three
sources:  1) federal grants;  2) SRF revenue bonds; and 3) state of
Texas general obligation bonds.  The bonds are repaid from
borrowers' loan repayments and investment earnings.  Initially,
operating costs for the SRF were funded directly from draws on
federal grants.  Beginning in 1992, a portion of the interest
collected on loans from users of the SRF program has provided the
resources necessary to fund all SRF operating costs.  Current
operating expenses are about $4.5 million annually.

Current federal law restricts the total amount of operating
expenses that may be paid from the SRF to 4.0 percent of total
federal grant funds.  All authorized grant funds for the Clean
Water Act of 1987 have been appropriated and additional
authorizations or appropriations are not anticipated.  This
translates into a cap of about $24 million for the life of the
program.  Current projections indicate that this cap will be
reached during the next biennium.

Federal law and EPA regulations allow for recovery of SRF operation
costs through the assessment and collection of charges to SRF
borrowers, provided those charges are not deposited to the internal
SRF program accounts.  State law currently does not permit the
assessment and collection of charges to SRF borrowers.

PURPOSE

This bill would provide for cost recovery charges consisting of a
one-time loan origination charge combined with an annual loan
servicing charge which can be assessed to borrowers on loans made
from the SRF or additional SRFs.  Charges by the agency are limited
to a total deemed necessary to recover the costs of administering
and operating the SRF program and servicing SRF loans.

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does grant additional
rulemaking authority to the Texas Water Development Board to allow
rules to be established to provide for the collection of an
origination charge and annual charges from recipients of SRF
financial assistance.  Further, rules may be utilized to direct how
money in the operating fund shall be invested.

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Subchapter J, Chapter 15, Texas Water Code by
adding Section 15.609:

(a) authorizes an origination fee and an annual fee, set by rule,
to be collected from recipients of financial assistance from the
SRF or additional SRFs; limits fees to amounts necessary to recover
costs incurred in administering and operating the SRF or additional
SRFs;

(b) allows establishment of operating funds to be held outside the
state treasury and separate and apart from other revolving funds;
fees collected and deposited in an operating fund shall be used to
pay costs of administering the revolving fund to which the
operating fund relates;

(c) allows money to be transferred from an operating fund to its
respective revolving fund, but prohibits money from being
transferred from a revolving fund to an operating fund;

(d) provides that money in the operating fund shall be invested in
authorized investments as provided by board order, resolution, or
rule;

(e) provides the board may agree with SRF bondholders that charges
deposited to the operating fund(s) will be used only as provided by
this section.

SECTION 2.  Emergency clause.  Effective date:  upon passage.

SUMMARY OF COMMITTEE ACTION

The bill was taken up and considered in a public hearing on April
5, 1995.  Craig Pederson, Executive Administrator of the Water
Development Board testified on the bill.  Monte Akers with Texas
Municipal League testified for the bill.  The bill was left
pending.  The bill was taken up and considered again in a public
hearing on April 26, 1995.  Craig Pederson, Water Development
Board, testified on the bill.  There were no amendments to the
bill.  The motion to report the bill favorably to the Committee on
Calendars carried favorably by a vote of 20 ayes, 0 nays, 0 PNV and
7 absent.