HBA-BSM C.S.H.B. 622 77(R) BILL ANALYSIS Office of House Bill AnalysisC.S.H.B. 622 By: Lewis, Ron Natural Resources 4/9/2001 Committee Report (Substituted) BACKGROUND AND PURPOSE Currently, more than 4,500 community water systems deliver drinking water to the citizens of Texas. The great majority of these serve rural populations of 10,000 or fewer. Districts and cities currently secure financing by issuing tax-exempt bonds or securing loans through the Texas Water Development Board (board). However, these funding resources do not adequately address the demand or special needs of rural utility providers with small rural populations. In addition, nonprofit rural water corporations do not qualify for the lower cost of financing by the sale of tax exempt bonds. Also, these small water systems may not have the manpower or technical resources that are available to larger entities. The Sunset Advisory Commission report on the board notes that the smaller rural water systems, including small cities and districts, cannot take advantage of financial assistance easily, and that these areas need technical assistance and outreach to take advantage of the funding. C.S.H.B. 622 establishes the rural water assistance fund. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly granted to the Texas Water Development Board in Section 1 (Section 15.906, Water Code) of this bill. ANALYSIS C.S.H.B. 622 amends the Water Code to create the rural water assistance fund (fund) and sets forth provisions regarding the composition of the fund. The bill requires the Texas Water Development Board (board) to adopt the necessary rules to administer the fund, including rules establishing procedures for application for and award of loans, distribution of loans, investment of funds, and the administration of loans. The fund may be used: _ to provide low interest loans to any nonprofit water supply or sewer service corporation, district or municipality with a service of 10,000 or less in population or which otherwise qualifies for financing from a federal agency, or any county in which no urban area exceeds 50,000 in population; _to enable such eligible political subdivisions to obtain water from other political subdivisions; _ to finance the consolidation or regionalization of water or water-related projects of neighboring eligible political subdivisions; _to contract for an outreach and technical assistance program; _to refinance loans at lower interest rates; or _as a source of revenue for the payment of principal and interest on certain water financial assistance bonds. The bill prohibits the board from delivering funds unless a proposed applicant for surface water, or underground water development has the necessary water rights to use the water that the project will provide. The bill requires the board to make certain considerations when reviewing an application and sets forth provisions regarding the approval of an application. The bill also requires the board to require an applicant to adopt or implement a program of water conservation. The bill authorizes the board to transfer amounts from the water assistance fund to the fund and to direct the comptroller to transfer amounts from the financial assistance account to the fund. C.S.H.B. 622 amends the Tax Code to provide a tax exemption for projects financed by the fund. EFFECTIVE DATE September 1, 2001. COMPARISON OF ORIGINAL TO SUBSTITUTE C.S.H.B. 622 differs from the original bill by including provisions to ensure a project has the necessary surface or groundwater rights to make the project viable. The substitute also specifies factors which the board must consider when considering applications for the fund. The substitute also clarifies the definition of rural eligible political subdivisions for the fund. C.S.H.B. 622 also differs from the original bill to authorize the board to direct the comptroller to transfer funds to the rural water assistance fund (fund). The substitute also provides for a tax exemption for projects financed by the rural water assistance fund.