LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
March 27, 2001
TO: Honorable J.E. "Buster" Brown, Chair, Senate Committee on
Natural Resources
FROM: John Keel, Director, Legislative Budget Board
IN RE: SB2 by Brown, J. E. "Buster" (Relating to the
development and management of the water resources of the
state, including the ratification of the creation of
certain groundwater conservation districts; providing
penalties.), As Introduced
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* SB2, As Introduced: negative impact of $(67,234,128) through the *
* biennium ending August 31, 2003. *
* *
* The bill would make no appropriation but could provide the legal *
* basis for an appropriation of funds to implement the provisions of *
* the bill. *
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General Revenue-Related Funds, Five-Year Impact:
****************************************************
* Fiscal Year Probable Net Positive/(Negative) *
* Impact to General Revenue Related *
* Funds *
* 2002 $(35,404,056) *
* 2003 (31,830,072) *
* 2004 (31,830,072) *
* 2005 (31,830,072) *
* 2006 (31,830,072) *
****************************************************
All Funds, Five-Year Impact:
***********************************************************************
*Fiscal Probable Probable Probable Probable Change in *
* Year Revenue Savings/ Revenue Savings/ Number of *
* Gain/(Loss) (Cost) from Gain/(Loss) (Cost) from State *
* from General from New New General Employees *
* General Revenue General Revenue from FY 2001 *
* Revenue Fund Revenue Dedicated- *
* Fund 0001 Dedicated- Water *
* 0001 Water Infrastruc- *
* Infrastruc- ture Fund *
* ture Fund *
* 2002 $261,749,000 36.0 *
* $(28,646,$(6,758,056) $(261,749, *
* 000) 000) *
* 2003 (580,072) 283,803,000 85.0 *
* (31,250,000) (283,803, *
* 000) *
* 2004 (580,072) 281,505,000 103.0 *
* (31,250,000) (281,505, *
* 000) *
* 2005 (580,072) 280,723,000 103.0 *
* (31,250,000) (280,723, *
* 000) *
* 2006 (580,072) 281,311,000 103.0 *
* (31,250,000) (281,311, *
* 000) *
***********************************************************************
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*Fiscal Probable Revenue Probable Revenue Probable Revenue *
* Year Gain/(Loss) from Gain/(Loss) from Gain/(Loss) from *
* Cities Transit Authorities Other Special *
* Districts/Counties *
* 2002 $33,743,000 $13,023,000 $3,998,000 *
* 2003 40,630,000 15,680,000 4,814,000 *
* 2004 40,215,000 15,520,000 4,765,000 *
* 2005 40,073,000 15,466,000 4,748,000 *
* 2006 40,180,000 15,507,000 4,761,000 *
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Technology Impact
The cost of providing computers and network enhancements to accommodate
additional FTEs at the Texas Water Development Board (TWDB) is estimated
to be $109,100 in fiscal year 2002, $133,200 in fiscal year 2003 and
$69,778 in fiscal year 2004.
The technology impact to the Texas Natural Resource Conservation
Commission (TNRCC) is estimated at $15,000 in fiscal year 2002 for the
purchase of new computers for 5 additional FTEs.
Fiscal Analysis
The bill would create the Texas Water Policy Council. The Council would
conduct reviews of water districts and authorities as specified in the
bill on a five-year cycle and provide reports on the findings of those
reviews on a biennial basis. The Council would have a secretary who would
be a full-time employee of the TNRCC. Other necessary staff would be
provided by the TWDB. The bill would create the Interagency Water Policy
Account, a special account in the General Revenue Fund.
The bill would create the Water Infrastructure Fund as a General Revenue
account to provide financial assistance to local governments for the
implementation of water-related projects. The bill would designate
several sources of revenue to be deposited to the fund, including:
1) an annual water rights fee created by the bill;
2) a $1 per resident water fee to be paid by counties;
3) one-half of revenues from groundwater export fees;
4) an extension of the sales and use tax to domestic sewage service and
potable water; and
5) other funds, such as legislative appropriations, loan repayments and
interest.
The TWDB would allocate funds in the Water Infrastructure Fund in the
form of grants and loans to water-related projects around the state. The
Fund also could be used to pay necessary and reasonable expenses of the
Board.
The bill would create the Rural Water Assistance Fund as a General
Revenue account to provide assistance for water and water-related
projects to rural political subdivisions and to finance an outreach and
technical assistance program to assist rural political subdivisions in
obtaining assistance through the fund.
The bill would exempt certain items from the sales and use tax including:
rainwater harvesting equipment; desalination equipment; brush control
equipment; precipitation enhancement; and certain water and wastewater
construction equipment.
The bill also would require the TWDB to develop groundwater availability
models for major and minor aquifers and require the TWDB and the TNRCC
to complete an initial designation of priority groundwater management
areas for all major and minor aquifers of the state by September 1,
2005.
Methodology
State agencies included as members of the Water Policy Council or
required to provide staff to the Council could incur some administrative
costs associated with attending meetings and preparing reports required
by the bill. However, these costs are not anticipated to be significant.
The bill's provision for officials of the Water Policy Council to be
eligible for reimbursement for actual and necessary expenses is not
expected to result in significant fiscal implications.
It is estimated that revenues to the Water Infrastructure Fund would
total $261.8 million in fiscal year 2002. This is based on the following
assumptions:
1) revenue from the annual water rights fee created by the bill is
estimate at $6.7 million per year by the Comptroller's Office by applying
the rates prescribed in the bill to permitted usage amounts in each
class;
2) revenue from the $1 per resident water fee to be paid by counties is
estimated to be $20.9 million per year, based on the 2000 U.S. Census;
3) revenue from the groundwater export fee provision of the bill is not
expected to be significant; and
4) revenue estimates associated with extending the sales and use tax to
include domestic potable water and sewer service is estimated to be
$234.2 in fiscal year 2002, rising to $253.8 by 2006. The potable water
estimate was derived using an exemption estimate in the Comptroller's
"Tax Exemptions and Tax Incidence" report (January 2000), while revenue
from the tax being extended to domestic sewage was estimated by the
Comptroller based on the potable water estimate adjusted using a "return
share" figure provided by the TWDB.
It is estimated that there would be a loss of revenue to the General
Revenue Fund due to the bill's sales and use tax exemption provisions.
The Comptroller estimates that loss would be $28.6 million in fiscal year
2002 and $31.3 million in fiscal years 2003 through 2006. The exemption
amounts were derived using data from projects in many of the topical
areas for exemption and sales data for certain items that would become
exempt formed the basis for the proposed exemptions.
Revenue estimates are provided based on a dynamic fiscal impact as
calculated by the Comptroller's office to distribute amounts that
otherwise would have been saved or spent on other items by businesses and
consumers.
It is estimated that the TWDB would incur administrative expenses
associated with the administration of the Water Infrastructure Fund of
$1.8 million in fiscal year 2002, increasing to $7.3 million in each
fiscal year beginning in 2003. It also is estimated that the agency would
require 25 additional FTEs in 2002, 74 additional FTEs in 2003, and a
total 98 additional FTEs in 2004 through 2006. This assumes that
approximately 300 contracts would be entered for approximately $250-275
million in loans and grants per fiscal year from proceeds of the Water
Infrastructure Fund. The estimate is based on current Water Development
Board Clean Water Revolving Fund and Drinking Water Revolving Fund
activity of approximately $350 million in assistance per year, 300
contracts per year and 125 FTEs working directly in those programs. This
estimate assumes that such expenses would be paid for using proceeds of
the Water Infrastructure Fund, leaving the following amounts available in
the Fund for grants and loans: $259.9 million in 2002; $276.5 million in
2003; $274.2 million in 2004; $273.4 million in 2005; and $274.0 million
in 2006.
The Texas Water Development Board also is expected to incur costs
associated with the groundwater availability modeling requirements of the
bill. These costs would total $378,000 in fiscal year 2002 for the
purchase and maintenance of 60 additional stream gauges and additional
network equipment, and $240,000 in each fiscal year from 2002 through
2006 to operate/maintain the gauges. This estimate assumes that these
costs could not be paid out of the Water Infrastructure Fund and
therefore would require additional general revenue. This estimate also
assumes that additional activity required to develop models for minor
aquifers, which is expected to begin 2005, would use existing
appropriations and FTEs currently used to develop models for major
aquifers.
The Texas Water Development Board also would require additional funds and
FTEs to administer the Rural Water Assistance Fund (RWAF), depending on
the amount available in the RWAF to make loans and grants. Although the
bill does not specify an amount to be deposited to the RWAF, this
estimate assumes that the TWDB would issue approximately $16 million in
bonds and that $6 million out of the General Revenue Fund would be
appropriated to the RWAF to buy down interest rates for loan and for
outreach and administration. It is estimated that the TWDB would use
$470,000 of this amount (including employee benefits) and require 6
additional FTEs in each fiscal year 2002 and 2003 for outreach and
administration as provided in the bill. It is expected that the remaining
$2,530,000 in each year used to buy down interest rates on loans and
grants to rural political subdivisions. This estimate assumes no RWAF
activity, hence no appropriations or FTEs, in fiscal years 2004 through
2006.
If no funds are appropriated to the RWAF in 2002-03, it is assumed there
would be no significant program activity, and therefore no significant
costs to the TWDB associated with the administration of the program in
those years.
The bill's requirement relating to the designation of priority
groundwater management areas for all major and minor aquifers of the
state would result in additional costs to the TNRCC of $380,056 in
fiscal year 2002 and $340,072 in fiscal years 2003 through 2006 to
support an additional 5 FTEs. These estimates include benefits, and it
is assumed these costs would be paid out of the General Revenue Fund.
Local Government Impact
Estimates in the table above include revenue increases to counties,
cities and special districts statewide associated with the extension of
the sales and use tax to include potable water and sewer service as
taxable items. These estimates were provided by the Comptroller's Office.
The net amount of increased revenue to local governments could be
somewhat lower, depending upon the amount of tax exemptions created by
the bill that would be claimed in each jurisdiction.
The Texas Water Conservation Association (TWCA) indicated that 20 water
districts or river authorities are currently submitting management
audits; therefore, the proposed audit requirements under the provisions
of the bill would have no impact on those 20 districts, but would have a
negative impact on the 13 districts not already submitting management
audits. TWCA indicated that the negative impact could range from $2,000
to $10,000 per district, depending on the size of the district and level
of detail of the audit.
The Texas Association of Ground Water Districts surveyed members of their
association regarding the fiscal impact for ground water pumpage. The
Edwards Aquifer Authority responded that the pumpage provisions of the
bill would result in an annual cost increase of approximately $254,000.
The Harris-Galveston Subsidence indicated an annual cost increase of a
little over $180,000. The High Plains Underground Water Conservation
District estimated an annual cost increase of $235,000.
Certain municipalities would also be responsible for paying fees on water
rights related to industrial, hydro-electric, or irrigation usage. Two
of the municipalities contacted, San Antonio and Corpus Christi, both
reported there would be no significant fiscal impact as a result of
imposition of use fees.
Source Agencies: 592 State Soil & Water Conservation Board, 551
Texas Department of Agriculture, 555 Texas
Agricultural Extension Service, 352 Texas Bond
Review Board, 580 Texas Water Development Board,
582 Texas Natural Resource Conservation
Commission, 302 Office of the Attorney General,
802 Texas Parks and Wildlife Department, 304
Comptroller of Public Accounts
LBB Staff: JK, CL, MF, TL, DB