LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
April 9, 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.), Committee Report 1st House, Substituted
**************************************************************************
* Estimated Two-year Net Impact to General Revenue Related Funds for *
* SB 2, Committee Report, 1st House: negative impact of *
* $(10,623,128) under Scenario #1 discussed in the fiscal note *
* below; negative impact of $(16,623,128) under Scenario #2 *
* discussed in the fiscal note below.The bill would make no *
* appropriation but could provide the legal basis for an *
* appropriation of funds to implement the provisions of the bill. *
**************************************************************************
The first table below represents costs associated with Scenario #1, in
which the only revenues available to the Water Infrastructure Fund would
be the proceeds of the $1 per resident water fee provided by the bill,
and no revenues would be appropriated for the Rural Water Infrastructure
Fund.
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-- WIF *
* 0001 WIF *
* 2002 $(908,056) $20,852,000 8.0 *
* $(4,297,000) $(20,852, *
* 000) *
* 2003 (4,688,000) (730,072) 20,852,000 12.0 *
* (20,852,000) *
* 2004 (4,688,000) (880,072) 20,852,000 14.0 *
* (20,852,000) *
* 2005 (4,688,000) (880,072) 20,852,000 14.0 *
* (20,852,000) *
* 2006 (4,688,000) (880,072) 20,852,000 14.0 *
* (20,852,000) *
***********************************************************************
The table below represents the fiscal implications of under Scenario #2,
which assumes bonds proceeds would be available to the Water
Infrastructure Fund, in addition to proceeds of the $1 per resident
water fee, and that $3 million per year out of the General Revenue Fund
would be appropriated to the Rural Water Infrastructure Fund.
***********************************************************************
*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-- WIF *
* 0001 WIF *
* 2002 $102,300,000 37.0 *
* $(4,297,000)$(3,908,056) $(102,300, *
* 000) *
* 2003 (4,688,000) (3,730,072) 252,400,000 86.0 *
* (252,400, *
* 000) *
* 2004 (4,688,000) (3,880,072) 338,000,000 110.0 *
* (338,000, *
* 000) *
* 2005 (4,688,000) (3,880,072) 338,000,000 110.0 *
* (338,000, *
* 000) *
* 2006 (4,688,000) (3,880,072) 338,000,000 110.0 *
* (338,000, *
* 000) *
***********************************************************************
Technology Impact
The cost of providing computers and network enhancements to accommodate
additional FTEs at the Texas Water Development Board (TWDB) is not
estimated to be significant under Scenario #1. Under Scenario #2, the
technology cost to the TWDB is estimated at $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) for the purchase of new computers for 5 additional
FTEs is not expected to be significant.
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. Other
necessary staff would be provided by the TNRCC, the TWDB, the Parks and
Wildlife Department and the Department of Agriculture. 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 (WIF) as a General
Revenue account to provide financial assistance to local governments for
the implementation of water-related projects. The bill designates as a
source of revenue to the WIF a $1 per resident water fee to be paid by
counties. Revenues to the WIF could also include other funds, such as
legislative appropriations, loan repayments, interest and bond proceeds.
The TWDB could allocate funds in the Water Infrastructure Fund in the
form of grants and loans to water-related projects around the state. The
WIF also could be used to pay necessary and reasonable expenses of the
Board. The methodology for providing assistance would be determined by
the TWDB.
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.
The bill would require that the TWBD and the Parks and Wildlife
Department collect instream flow data and perform studies to determine
the flow conditions of the state's rivers and streams necessary to
maintain environmental and economic viability of bays and estuaries.
The bill would create the Water Trust Account as a General Revenue
Account to be used by the Parks and Wildlife Department for the
administration and operation of a Water Trust created by the bill, which
would function as a bank holding deposit of water rights.
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 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 the loss would be $4.3 million in fiscal
year 2002 and $4.7 million in fiscal years 2003 through 2006.
Under Scenario #1 shown in the first table above, it is estimated that
revenues to the Water Infrastructure Fund would total $20.9 million in
each fiscal year beginning in fiscal year 2002. This is based on the
assumption that only revenue from the $1 per resident fee, calculated
based on the state population according to the 2000 U.S. Census, would be
available to the WIF.
Under Scenario #1, it is estimated that the TWDB would incur costs
associated with administering the WIF totaling $144,000 in fiscal year
2002 and costs of $584,000 per year in subsequent fiscal years beginning
in fiscal year 2003. It also is estimated that the agency would require
two additional FTEs in 2002, six additional FTEs in 2003 and eight
additional FTEs in fiscal year 2004 and beyond. Under Scenario #1, $20.8
million would be available in the WIF for grants and loans in fiscal year
2002 and $20.3 million would be available in subsequent years.
Under Scenario #2, it is estimated that revenues to the Water
Infrastructure Fund would total $102.3 million in fiscal year 2002,
$252.4 million in fiscal year 2003 and $333.8 million annually in fiscal
years 2004 through 2006. This second scenario assumes that in addition to
the $1 per resident fee, the Water Development Board would issue a
combination of general obligation and revenue bonds over the five year
period covered in this estimate, and that those proceeds would be
deposited to the WIF. This scenario also assumes that the TWDB would use
the funds generated by the $1 per resident fee to subsidize the interest
rates for loans made using the bond proceeds.
Under Scenario #2, 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, seventy four
additional FTEs in 2003, and a total ninety eight additional FTEs in 2004
through 2006. It is estimated that the following amounts would be
available in the WIF for grants and loans and for interest rate subsidies
on loans: $100.5 million in 2002; $245.1 million in 2003; and $326.5
million annually from 2004 through 2006.
Both scenarios are based on current Water Development Board Clean Water
Revolving Fund and Drinking Water Revolving Fund activity, funding levels
and FTE levels. Both scenarios also assume that administrative expenses
would be paid using proceeds of the Water Infrastructure Fund.
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 2003 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. The bill does
not specify an amount to be deposited to the RWAF.
Under Scenario #1, it is assumed that no funds would be appropriated to
the RWAF. In this case, there would be no significant fiscal implications
to the TWDB in administering the program because there would be no loan
activity.
Under Scenario #2, it is assumed 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 in the 2002-03 biennium. 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 subsidize interest
rates on loans and grants to rural political subdivisions. Similar fiscal
implications are anticipated for fiscal years 2004 through 2006.
Some professional services contract costs could be incurred as a result
of the bill's requirement for the TWDB to coordinate with the Parks and
Wildlife Department to collect instream flow data and to perform studies
to determine flows of the state rivers and streams. This estimate assumes
that the TWDB would incur the costs, which would include one additional
FTE and $150,000 per year in each 2002 and 2003 and $300,000 annually
from 2004 through 2006 (including contractual service costs and
benefits), and that there would be no significant fiscal impact to the
Parks and Wildlife Department.
The bill's provision relating to the operation and administration of the
Water Trust by the Parks and Wildlife Department is not expected to
result in significant fiscal implications to the agency.
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
Any revenue losses to local governments from the bill's tax exemption
provisions are not expected to be significant.
Counties would be assessed a $1 per resident fee annually, resulting in
costs to each county based on population.
Local governments could experience cost savings if they were able to
obtain grants or lower interest rates through the WIF or the RWAF.
Savings would depend on the amount of funding in the WIF and RWAF and the
Water Development Board's determination of project priorities.
Local governments participating in the bill's economic development
program could incur administrative costs associated with making grants
and loans to other entities. However, a political subdivision would only
be expected to participate in the program if it could reasonably absorb
such costs.
Source Agencies: 582 Texas Natural Resource Conservation Commission,
304 Comptroller of Public Accounts, 580 Texas
Water Development Board, 802 Texas Parks and
Wildlife Department
LBB Staff: JK, CL, TL