LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE 75th Regular Session May 5, 1997 TO: Honorable David Counts, Chair IN RE: Senate Bill No. 1, Committee Report 2nd House, Substituted Committee on Natural Resources By: Brown House Austin, Texas FROM: John Keel, Director In response to your request for a Fiscal Note on SB1 ( Relating to the development and management of the water resources of the state; providing penalties.) this office has detemined the following: Biennial Net Impact to General Revenue Funds by SB1-Committee Report 2nd House, Substituted Implementing the provisions of the bill would result in a net negative impact of $(49,838,026) to General Revenue Related Funds through the biennium ending August 31, 1999. The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill. Fiscal Analysis The bill would provide a framework for the development and management of water resources, including drought planning, water utility regulation, interbasin transfers of water, financial and technical assistance, assistance to small and disadvantaged communities and data collection. The Texas Water Development Board (TWDB) would designate regional water planning areas, which would prepare water plans to develop, manage and conserve water resources and provide a drought contingency response. The TWDB, Texas Natural Resource Conservation Commission (TNRCC) and the Texas Parks and Wildlife Department (TPWD) would provide technical and financial assistance for this planning. The Governor s Office - Division of Emergency Management would coordinate the drought response portion of the state water plan. The bill would establish procedures for the TNRCC to create new groundwater districts. TNRCC and TWDB would provide technical assistance to districts in priority groundwater management areas to develop management plans that are consistent with regional plans. Financial assistance would be available for district activities. The bill would create the Texas Groundwater Management Council to determine whether districts are operational. The Texas Agricultural Extension Service would implement an educational program to inform residents of the status of the area's water resources and management options. The bill would provide a tax exemption for capital equipment used for water conservation or water/wastewater recycling in the manufacturing process. Contingent upon passage of a constitutional amendment (SJR 17), the bill would establish the Texas Water Development Fund II (Fund II), a special fund in the state treasury. Existing bond authorizations for water supply, water quality and flood control would be combined into a single financial assistance account. The Fund would include a state participation and an economically distressed areas program account. The bill would establish a water resource management fee to be collected by TNRCC from water systems, based on meter size and usage. In addition, the Texas Department of Health (TDH) would assess and collect fees on the gross receipts of bottled water plants. The bill also would establish an annual water rights fee to be assessed on rights held for certain uses. All fee revenue would be deposited to the Water Facilities Fund, a special account in the General Revenue Fund which would be administered by TWDB. Two and one-half percent of deposits to the fund would be available to pay for TNRCC operating expenses relating to water resource management and protection. The remainder would be used for TNRCC water programs, TWDB financial assistance programs and fund administration, and other specific uses, including weather modification and brush control. The bill would create two programs, the pilot weather modification and the conservation and restoration programs each with corresponding GR-Dedicated accounts. The Brush Control Fund also would be recreated under the Soil and Water Conservation Board. TNRCC would be required to determine appropriate compensation to be paid by the recipient of an interbasin water transfer to the basin of origin which would be deposited to the Water Facilities Fund. The funds would be used for loans on eligible projects, project acquisition, and debt service payments. The bill also addresses the financial needs of small and disadvantaged communities, water and wastewater service regulation and data collection. Methodolgy Estimates of the bill s cost are based on historical data and past experience for similar programs or requirements. The estimated fiscal impact to the General Revenue Fund and total FTEs (All Funds) required for each agency are shown for the 1998-99 biennium. TEXAS WATER DEVELOPMENT BOARD: Drought planning and monitoring; water conservation; financial and technical assistance for regional water planning and ground water management plans; administration of Water Facilities Fund; and financial assistance programs; coordinate and manage data collection and dissemination, including developing digital base maps. The estimate includes over $18 million in general revenue for grants to develop 16 regional management plans. ESTIMATED COST to General Revenue, 1998-99 biennium: $(40,478,960). ESTIMATED FTEs (All Funds), FY1998: 13.5; FY1999: 23.5. TEXAS NATURAL RESOURCE CONSERVATION COMMISSION: Drought planning and monitoring; water conservation; enforcement; administration of water resource management fee; water rights management; water service regulation; interbasin water transfers; data collection. ESTIMATED NET COST to General Revenue, 1998-99 biennium: $(5,662,066). ESTIMATED FTEs (All Funds) 1998-99 biennium: 24. TEXAS PARKS AND WILDLIFE DEPARTMENT: Drought planning and monitoring; assess impact of plans on fish and wildlife; administer of conservation and restoration fund; technical assistance; data collection. ESTIMATED NET COST to General Revenue, 1998-99 biennium: $(700,000). ESTIMATED FTEs (All Funds) 1998-99 biennium: 4. COMPTROLLER: Tax exemption for water conservation and wastewater recycling equipment. ESTIMATED NET LOSS to General Revenue, 1998-99 biennium: $(1,479,000) TEXAS AGRICULTURAL EXTENSION SERVICE: Administration of education program to inform district residents of water issues. ESTIMATED NET COST to General Revenue, 1998-99 biennium: $(1,500,000) OTHER AGENCIES: The Texas Department of Agriculture estimates that the bill's provisions for the linked deposit program, which provides funds to finance water conservation projects, would result in a loss of interest earnings of $200,000 per year. The estimated annual revenue collected by the Texas Department of Health (TDH) from the bottled water fee is $324,000, based on 54 facilities at the average fee of $6,000. TDH estimates that the cost to collect the fee is $9,000 per year. All other agencies affected by this bill estimated no fiscal impact. According to TNRCC, the estimated total revenue deposited to the Water Facilities Fund is $54.7 million per year, of which $3.4 million is retained by units of local government. In the following table, the estimated revenue gains to the Pilot Weather Modification Fund, Conservation and Restoration Fund and Water Resource Management Account are transfers from the Water Facilities Fund. The probable fiscal implications of implementing the provisions of the bill during each of the first five years following passage is estimated as follows: Five Year Impact: Fiscal Year Probable Probable Revenue Probable Revenue Probable Change in Number Savings/(Cost) Gain/(Loss) from Gain/(Loss) from Savings/(Cost) of State from General General Revenue Federal Funds from Federal Funds Employees from Revenue Fund Fund FY 1997 0001 0001 0555 0555 1998 ($35,607,990) ($493,000) $5,777,096 ($5,777,096) 41.5 1998 (12,751,036) (986,000) 5,763,597 (5,763,597) 51.5 2000 (12,366,036) (1,478,000) 5,834,234 (5,834,234) 51.5 2001 (17,366,036) (1,523,000) 5,834,234 (5,834,234) 51.5 2002 (13,632,380) (1,563,000) 92,012 (92,012) 51.5 Fiscal Year Probable Revenue Probable Probable Revenue Probable Gain/(Loss) from Savings/(Cost) Gain/(Loss) from Savings/(Cost) New - GR from New - GR New - GR from New - GR Dedicated - Dedicated - Dedicated - Dedicated - Water Facilities Water Facilities Pilot Weather Pilot Weather Fund Fund Modification Fund Modification Fund NEW-DED NEW-DED NEW-DED NEW-DED 1998 $51,300,000 ($51,300,000) $1,364,114 ($1,364,114) 1999 51,300,000 (51,300,000) 1,364,114 (1,364,114) 2000 51,300,000 (51,300,000) 1,364,114 (1,364,114) 2001 51,300,000 (51,300,000) 1,364,114 (1,364,114) 2002 51,300,000 (51,300,000) 1,364 (1,364,114) Fiscal Year Probable Revenue Probable Probable Revenue Probable Gain/(Loss) from Savings/(Cost) Gain/(Loss) from Savings/(Cost) New - GR from New - GR Water Resource from Water Dedicated - Dedicated - Management Resource Conservation and Conservation and Account - New GR Management Restoration Fund Restoration Fund Dedicated Account - New GR Dedicated NEW-DED NEW-DED NEW-DED NEW-DED 1998 $1,364,114 ($1,364,114) $1,282,500 ($1,282,500) 1999 1,364,114 (1,364,114) 1,282,500 (1,282,500) 2000 1,364,114 (1,364,114) 1,282,500 (1,282,500) 2001 1,364,114 (1,364,114) 1,282,500 (1,282,500) 2002 1,364,114 (1,364,114) 1,282,500 (1,282,500) Net Impact on General Revenue Related Funds: The probable fiscal implication to General Revenue related funds during each of the first five years is estimated as follows: Fiscal Year Probable Net Postive/(Negative) General Revenue Related Funds Funds 1998 ($36,100,990) 1999 (13,737,036) 2000 (13,844,036) 2001 (18,889,036) 2002 (15,195,380) Similar annual fiscal implications would continue as long as the provisions of the bill are in effect. Local governments would be affected by several provisions in this bill. The bill would impose additional requirements on units of local government that function as water utilities for water resource planning. Grant funding is available from TWDB for these purposes. Under the bill's water fee provisions, public water systems retain five cents for each connection to its system. TNRCC estimates that the revenue gain to local governments would be $3.4 million per year, which should cover administrative costs associated with the assessment and collection of the fees. In addition, much of the revenue generated under the bill's provisions for the Water Facilities Fund would be available to units of local government for loans and grants for water related projects. Source: Agencies: 580 Water Development Board 582 Natural Resources Conservation Commission 802 Parks and Wildlife Department 551 Department of Agriculture 304 Comptroller of Public Accounts 501 Department of Health 592 Soil and Water Conservation Board 555 Texas Agricultural Extension Service Governor's Office -- Division of Emergency Management LBB Staff: JK ,BB ,DM ,NT