Texas Water Development Board approves $309 million loan for project
The Texas Water Development Board on Monday, Jan. 28, unanimously approved a $309 million loan for the first two phases of the Brushy Creek Regional Utility Authority project. Here’s the TWDB press release on the board action. The Phase 1 commitment is for $170.6 million, with Phase 2 at $139.1 million.
Phase 1 of the project includes construction of a new temporary floating intake structure on Lake Travis, a raw water pipeline within the Trails End Road right of way, a new treatment plant in Cedar Park, and a new treated water pipeline. Construction is expected to begin in 2008 and be completed in 2010. Phase 1 FAQ.
Phase 2 of the project includes construction of permanent deep-water intake and raw water pipeline from the intake to the existing raw water pipeline. Construction is expected to be required no later than 2016, but it may be accelerated depending on drought conditions and lake levels. Phase 2 FAQ.
The TWDB’s commitment for Phase 2 funding is conditioned such that the BCRUA must obtain a reaffirmation of the commitment from the Board prior to closing the loan for Phase 2. During this reaffirmation, the Board will consider any findings and recommendations regarding the environmental, socioeconomic, and permitting issues, as well as any other issues of concern to the Board.
September 21st, 2008 at 8:14 am
In 2007, Willaimson County’s Senator Ogden, Chair of the Senate Finance Committee, appropriated $365M to the TWDB. Three months later this project filed a funding application for $358M. The project applied under D-Fund because it does not require joint liability or bond insurance. Most D-
Fund loans are under $5M.
* Leander and Cedar Park considered no other alternative water source.
These Brazos Basin cities have a drought-proof, prolific aquifer available just east of Round Rock. This would be a second source of water!
* Leander’s increased water supply contract has not been approved by TCEQ. No economic or environmental studies are planned on the project’s effect on Lake Travis. Lake Travis is the single most important economic and environmental driving engine of Central Texas.
* D-Fund can not be used for projects that result in the inter-basin transfer of surface water necessary to supply the 50-year water requirements of the river basin of origin.
* BCRUA has no eminent domain power within the Village of Volente without its consent. The project’s recommended industrial intake site is in an existing residential neighborhood. How will the project follow Volente’s zoning restrictions?
* Leander’s ability to afford this project is questionable. Leander has 47% of the project cost and 12% of the population. In 2008 the estimated project cost increased by $63M, delaying $20M to Phase 2. What is the current project cost and cost per acre foot?
* The BCRUA Master Agreement does not have joint and/or several liability, or bond insurance. If one city defaults, the others are not liable or responsible. Has default been explained to the residents of Leander? Is the BCRUA lien subordinate to the LCRA?
The BCRUA is going after the wrong source of water. Lake Travis is drought prone, over-stressed and over-promised. How is the TWDB allowing this huge financial and health risk?
December 18th, 2008 at 2:43 pm
I have always felt that one of the often-overlooked challenges the BCRUA is going to have with their little adventure is how to pay for it. There are really 2 ways in which I can see how they will raise the money. First, and the most obvious are rate increases that will be passed onto existing customers. Leander has already put forward a 21% utility rate increase over the next three years with projected growth and 43% with lower. Basically, if Leander does not hit their growth targets they are going to dump their failings on existing residents. Secondly, they will have to raise municipal bonds – more than likely a revenue bond – to afford a project this size. Revenue bonds are paid back by income generated by the water utility from payments by customers.
I know a little something about bonds and how they work as I sat on the bond oversight board for 4 years of the second largest bond city in the country. Leander has done some good things to get their junk bond status turned around, albeit mostly PR, but it is important to note that the BCRUA master agreement does not have joint and/or several liability, or bond insurance. If one city defaults, the others are not liable or responsible. Because Leander has agreed to take a majority of the cost for this project (47%) will their residents take on the expense if Cedar Park or Round Rock defaults? Leander’s 23, 000 residents are already overburdened with over a half a billion dollars in bonds. Leander’s current bond packages represent over $22,000 per resident – not a good position to be in and one that will certainly need to be taken into consideration when they submit their bond package for due diligence.
The current economic downturn has caused the bond market to come to a standstill with most bond traders only purchasing secured bonds – i.e school bonds (Permanent School Fund (PSF) bonds). We can thank the sub-prime mortgage crisis for causing the monoline insurers (companies that guarantee the timely repayment of bond principal and interest when an issuer defaults) to incur heavy losses. This caused the Institutional investors — the biggest buyers of municipal bonds — to sell off the bonds they own, and aren’t interested in buying new bond issues. If there continues to be a lack of market liquidity and uncertainty I anticipate any new bond projects not being killed outright, but delayed and cost a lot more than anticipated. We will also see unprecedented scrutiny put on municipalities by the monoline insurers before they guarantee anything new.
With a general slowdown of growth in the tri-cities and the fact that this project is still in the planning stages it will be difficult for the BCRUA to put together a bond package that will appeal to the market – especially if Leander does not hit its growth projections. Bond financing will be one of the BCRUA’s toughest challenges in the coming years, especially when there are other less expensive alternatives that do not put significant risk on their existing residents in a down economy.
Check out – limecreekhoa.wordpress.com
January 14th, 2009 at 6:25 pm
Thank you for your post. You will be pleased to know that the BCRUA project team is continuously monitoring the economic climate and local growth trends. In light of the current situation, the BCRUA board has decided to delay project construction by six months to give the volatile market time to settle. We appreciate your interest and assure you that we will continue to act responsibly and in the best interests of the community.