The Texas Water Development Board (board) adopts amendments to §363.33 and §363.209, concerning Financial Assistance Programs, without changes to the proposed text as published in the December 5, 1997, issue of the Texas Register (22 TexReg 12009) and will not be republished.

The Board has examined the demand for Clean Water State Revolving Fund (CWSRF) assistance and determined that in order to sustain the lending capacity of the CWSRF and the new Drinking Water State Revolving Fund (DWSRF), changes are needed in debt management policies and Board rules. Administrative Cost Recovery fees are being adjusted to reflect recent experience in the CWSRF program. The original fee structure was designed to provide sufficient budgeted revenue based upon a program size that has now been exceeded. It has been determined that the cost recovery fees and related basis point subsidies should both be adjusted. The Option Two fee structure was designed to offset the annual administrative fee payments and to be a match to the amount a borrower would have paid in loan origination charges under Option One. Experience in using the two cost recovery options has shown, however, that while the board recovers the same amount in fees from Option One or Option Two for any given loan, the actual method as to how the fees are recovered affects the overall capacity of the CWSRF program. There is a difference between the effects on the coverage requirements within the cash flow due to the additional 18 basis points being offered in all subsequent years over the life of a loan, and this difference equates to a lesser program capacity. Additionally, the Option Two method has rarely been utilized by borrowers and elimination of the option will not affect a large portion of borrowers.

The amendments allow for the adjustment of subsidy and elimination of a lending option in the Clean Water State Revolving Fund programs and renumber provisions as necessary. Amendments to §363.33 adjust the fixed rate index scale used for insured borrowers from the 98 Scale of the Delphis Hanover Corporation Range of Yield Curve Scales (Delphis) to the higher of the borrower's uninsured fixed rate index scale or the 96 Delphis Scale, adjust the Loan Origination Charge from 2.25% of the SRF loan amount to 1.85%, and reduce the corresponding basis point subsidy (relating to Administrative Cost Recovery) from 30 basis points to 25 basis points. Amendments to §§363.33 and 363.209 eliminate Payment Option Two (Origination Charge and Servicing Charge).

No comments were received on the proposed amendments.

Subchapter A. General Provisions

Formal Action by the Board

Introductory Provisions

The Texas Water Development Board (the board) adopts amendments to §§367.71, 367.72, and 367.77, the repeal of §367.74, and new §367.74, concerning the Agricultural Water Conservation Program without changes to the proposed text as published in the December 12, 1997 issue of the Texas Register (22 TexReg 12251) and will not be republished.

The amendments, repeal, and new section provide for the use of the Agricultural Trust Fund to make agricultural water conservation loans to eligible districts subject to the provisions of the Agricultural Water Conservation Bond Program and establish the procedure for setting interest rates.

Section 367.71 is amended to add the definitions of Agricultural Trust Fund and Loan as provided in §15.431 and §17.871 of the Texas Water Code. Section 367.72 is amended to allow money maintained as principal in the Agricultural Trust Fund to be used to make agricultural water conservation loans to eligible districts. Section 367.77 is amended to make both loans and conservation loans subject to prioritization in the event that applications exceed available funds. Existing §367.74 is repealed and replaced with new section §367.74 to provide the procedure and method for setting interest rates.

Section 15.431(d) of the Texas Water Code was amended by the 75th Legislature to allow principal in the Agricultural Trust Fund to be used by the board to make agricultural water conservation loans pursuant to the provisions of Chapter 17, Subchapter J of the Texas Water Code (Agricultural Water Conservation Bond Program). Chapter 367 was amended to allow the board to carry out the statutory powers authorized by §15.431(d) of the Texas Water Code. Since loans can be made from two separate funds, new §367.74 was provided to establish the interest rates for loans from both funds. The interest rates for loans from the Agricultural Conservation Fund are set at the rate necessary to pay the Agricultural Water Conservation Bonds issued by the Board to make loans from the Agricultural Conservation Fund. In order to maintain the amount of interest returning to the Agricultural Trust Fund (and the resulting amount of interest paid to the Agricultural Soil and Water Conservation Fund), interest rates for loans from the Agricultural Trust Fund are set as the asking yield of the twelve month maturity U.S. Treasury note, such rates being comparable to the interest rates that would have been earned by the Agricultural Trust Fund had the principal been invested.

No comments were received on the proposed amendments, repeal and new section.

Agricultural Water Conservation Loan Program

The Texas Water Development Board (board) adopts amendments to §371.22 and §371.52, concerning the Drinking Water State Revolving Fund (DWSRF), without changes to the proposed text as published in the December 5, 1997, issue of the Texas Register (22 TexReg 12011) and will not be republished.

The Board has examined the demand for Clean Water State Revolving Fund (CWSRF) assistance and determined that in order to sustain the lending capacity of the CWSRF and the new Drinking Water State Revolving Fund (DWSRF), changes are needed in debt management policies and Board rules. Administrative Cost Recovery fees are being adjusted to reflect recent experience in the CWSRF program. The original fee structure was designed to provide sufficient budgeted revenue based upon a program size that has now been exceeded. It has been determined that the cost recovery fees and related basis point subsidies should both be adjusted. The Option Two fee structure was designed to offset the annual administrative fee payments and to be a match to the amount a borrower would have paid in loan origination charges under Option One. Experience in using the two cost recovery options has shown, however, that while the board recovers the same amount in fees from Option One or Option Two for any given loan, the actual method as to how the fees are recovered affects the overall capacity of the CWSRF program. There is a difference between the effects on the coverage requirements within the cash flow due to the additional 18 basis points being offered in all subsequent years over the life of a loan, and this difference equates to a lesser program capacity. Additionally, the Option Two method has rarely been utilized by borrowers and elimination of the option will not affect a large portion of borrowers.

The amendments allow for the adjustment of subsidy and elimination of a lending option in the Drinking Water State Revolving Fund programs and renumber provisions as necessary. Amendments to §371.22 and §371.52 will eliminate Payment Option Two (Origination Charge and Servicing Charge). Amendments to §371.52 will adjust the fixed rate index scale used for insured borrowers from the 98 Scale of the Delphis Hanover Corporation Range of Yield Curve Scales (Delphis) to the higher of the borrower's uninsured fixed rate index scale or the 96 Delphis Scale.

No comments were received on the proposed amendments.

Program Requirements

The Texas Water Development Board (the board) adopts amendments to §375.21 and §375.52, concerning the State Water Pollution Control Revolving Fund (SRF), without changes to the proposed text as published in the December 5, 1997, issue of the Texas Register (22 TexReg 12013) and will not be republished.

The Board has examined the demand for Clean Water State Revolving Fund (CWSRF) assistance and determined that in order to sustain the lending capacity of the CWSRF and the new Drinking Water State Revolving Fund (DWSRF), changes are needed in debt management policies and Board rules. Administrative Cost Recovery fees are being adjusted to reflect recent experience in the CWSRF program. The original fee structure was designed to provide sufficient budgeted revenue based upon a program size that has now been exceeded. It has been determined that the cost recovery fees and related basis point subsidies should both be adjusted. The Option Two fee structure was designed to offset the annual administrative fee payments and to be a match to the amount a borrower would have paid in loan origination charges under Option One. Experience in using the two cost recovery options has shown, however, that while the board recovers the same amount in fees from Option One or Option Two for any given loan, the actual method as to how the fees are recovered affects the overall capacity of the CWSRF program. There is a difference between the effects on the coverage requirements within the cash flow due to the additional 18 basis points being offered in all subsequent years over the life of a loan, and this difference equates to a lesser program capacity. Additionally, the Option Two method has rarely been utilized by borrowers and elimination of the option will not affect a large portion of borrowers.

Amendments to §375.21, Administrative Cost Recovery, eliminate Payment Option Two which provides for both an origination charge and a servicing charge. The amendments additionally adjust the Loan Origination Charge from 2.25% of the loan amount to 1.85% of the loan amount and renumber provisions as necessary. Amendments to §375.52, Lending Rates, adjust the fixed rate index scale used for insured borrowers from the 98 Scale of the Delphis Hanover Corporation Range of Yield Curve Scales (Delphis) to the higher of the borrower's uninsured fixed rate index scale or the 96 Delphis Scale, reduce the corresponding basis point subsidy (relating to Administrative Cost Recovery) from 30 basis points to 25 basis points, and eliminate a paragraph which refers to the Option Two payment method.

No comments were received on the proposed amendments.

Program Requirements