New Waves October 2011

Breaking news about water resources research and education in Texas

Propositions up for vote in November could affect Texas' water future

Two of the 10 Propositions being voted on in the Nov. 8 Texas Constitutional Amendment Election address water issues in the state.

Proposition 2, would allow the Texas Water Development Board (TWDB) to issue general obligation bonds not exceeding an aggregate of $6 billion at any point, without additional elections.

In 1957, the TWDB was created through a state constitutional amendment. This amendment reads that the TWDB “shall have the authority to provide for, issue and sell general obligation bonds.”

According to the House Research Organization, the latest voter authorization for increased bonding authority was in 2001, in which voters approved $2 billion for the TWDB to use in general obligation bonds. A report by the organization states “Proposition 2 would grant the TWDB a net increase of $4.9 billion in bonding authority under the proposed $6 billion aggregate cap since about $1.1 billion in bonds currently is outstanding.”

The Legislative Budget Board, in its Fiscal Note, reports that there is not any significant fiscal implication anticipated, outside of publication cost. This is because the bonds are self-supporting, unless non self-supporting bonds are approved on an individual basis by the Legislature.

Supporters of the proposition, according to the House organization, speculate that the extra spending power Proposition 2 would provide is necessary for the TWDB to fulfill its responsibilities well, particularly during future times of drought. They also support the proposition because bonds provided by the TWDB may provide better rates to entities (particularly smaller ones) that may not be able to get them otherwise. The bonds would be financed by principal and interest payments from the local governments.

According to the Sunset Advisory Commission, who reviewed TWDB in February 2011, “Without additional bond authority, the Board will be unable to fulfill its constitutional mission to provide financial assistance through loans to political subdivisions to meet water and wastewater infrastructure needs.”

Opponents of the Proposition, according to the House organization, claim it would essentially “authorize state debt in perpetuity.” It is also stated by opponents that Proposition 2 could cause, without state voter approval, increased state debt.

An important feature of this Proposition is that it creates an “evergreen” process. Because the amendment would prevent more than $6 billion being issued at any one point in time, when one bond is retired, another can be reissued. Therefore, over time the amount can add up to over $6 billion, as bonds are retired and reissued, providing that the amount outstanding at any point in time does not exceed $6 billion.

The House organization said that proponents of the proposition support this process, saying that it saves time and money by not requiring voter approval for every new bond issue. Opponents claim that voters should retain their authority to approve bonds in the future.

If this proposition is passed, the Bond Review Board, as part of the Legislature, under its constitutional authority will still have “full power” to direct the bonds issued by the TWDB.

The ballot will read the following: “The constitutional amendment providing for the issuance of additional general obligation bonds by the Texas Water Development Board in an amount not to exceed $6 billion at any time outstanding.”

Proposition 8 is another of the propositions dealing with water on the ballot during the upcoming election. Currently, the Texas Constitution requires that all “real and tangible property” be taxed in proportion to its value, unless under some type of exemption. Article 8, Section 1-d-1(a) allows “for taxation of open-space land devoted to farm, ranch, or wildlife management purposes on the basis of itsproductive capacity[italics added for emphasis].”

If Proposition 8 is approved, “water-stewardship” will be added to the list of open-space land that will be taxed based on productive capacity rather than in proportion to its value. According to the Senate Joint Resolution, the changes would go into effect January of 2012.

Despite the changes, the Legislative Budget Board reports that, “No statistically significant impact on the overall distribution of a state tax or fee burden among individuals is anticipated from the provisions of this bill.”

The goal of this amendment, as seen in the Constitution, is to “promote the preservation” of these particular types of open-space or timber land. According to the fiscal note drafted during the Legislative session, exact requirements for defining “water-stewardship” would be developed after the passage of Proposition 8, the details of which would be the responsibility of the Legislature.

The Bill Analysis, developed by the Senate Research Center, states that amending the constitution to include these tax benefits to lands devoted to water-stewardship purposes “gives landowners another tool to manage their property and incentivizes doing so in a way that is not cost prohibitive.”

In essence, the amendment would allow for lower, or at most equal, taxation on these types of open-space land. The Constitution specifies “appraised value so determined [on the basis of the lands productive capacity] may not exceed the market value as determined by other appraisal methods.”

Supporters of Proposition 8, according to the House organization, say it would help Texas meet conservation goals and create incentives for landowners to work with the state to meet water-stewardship standards. As the House Research Organization reports, supporters also emphasize the importance by stating that “90 percent of Texas water flows through or under land owned by private individuals.”

Opponents of Proposition 8, according to the House organization, claim that it is unnecessary because it would duplicate other existing options. In addition, they claim that those landowners who qualify for agricultural valuation do not need an additional incentive, as they are already practicing water conservation; therefore, including water stewardship would be “excessive and unnecessary.”

The ballot will read the following: “The constitutional amendment providing for the appraisal for ad valorem tax purposes of open-space land devoted to water-stewardship purposes on the basis of its productive capacity.”

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