Part 10.
TEXAS WATER DEVELOPMENT BOARD
Chapter 367.
AGRICULTURAL WATER CONSERVATION PROGRAM
31 TAC §§367.1 - 367.3, 367.12, 367.15 - 367.20
The Texas Water Development Board (the board) proposes amendments
to 31 TAC Chapter 367, Agricultural Water Conservation Program (AWCP). The
board proposes to amend §§367.1 - 367.3, and §367.12 and propose
new §§367.15 - 367.20 relating to the creation of the Agricultural
Water Conservation Linked Deposit Program. The proposed amendments and new
sections reflect changes to the Texas Water Code enacted by the 78th Legislature
that authorized the creation of the Agricultural Water Conservation Linked
Deposit Program (AWCLDP).
The board proposes to amend §367.1, Policy Statement, to include linked
deposits as part of its financial assistance that it will be the policy of
the board to provide in order to conserve and protect the state's water resources
and provide resulting benefits to all of the state's citizens.
The board proposes to amend §367.2, Definitions of Terms, to provide
definitions for eligible lending institution, linked deposit, and linked deposit
agreement in order to implement the AWCLDP. The board proposes a definition
of eligible lending institution that refers to a commercial lending institution
that is either designated a depository of state funds by the Texas comptroller
of public accounts or an institution of the Farm Credit System headquartered
in this state, that agrees to participate in a linked deposit program established
under Water Code §17.905, and that is willing to agree to provide collateral
equal to the amount of linked deposits placed with it. This definition follows
the language of the new legislation in order to maximize the number of institutions
that are eligible to participate. The board proposes a definition for linked
deposit to be a deposit governed by a linked deposit agreement which requires
that: 1) the lending institution pay interest to the board on the deposit
at a rate equal to the asking yield for a U.S. Treasury note with a twelve-month
maturity as of the date five days preceding the submission of all the documents
required of the eligible lending institution to the executive administrator
requesting a linked deposit agreement; 2) the state not withdraw any part
of the deposit except as according to the terms of the linked deposit agreement
and the terms of this chapter; and 3) the institution agree to lend the value
of the deposit to a person at a rate not to exceed the interest paid by the
eligible lending institution to the board plus four percent. This definition
follows the language of the new legislation in order to implement the program
to maximize extent possible under the legislation. The board proposes a definition
for linked deposit agreement as a written agreement between the board and
an eligible lending institution that provides for the deposit of money from
the agricultural water conservation fund (fund) with the lending institution
according to the conditions of this chapter. By defining linked deposit agreement
in this manner, the rules have a ready reference to the contract while leaving
the details of the terms of the contract to be more fully explained in this
chapter related to the AWCLDP.
The board proposes to amend §367.3, Eligible Uses of the Fund, to
include a new subsection (3) that specifically authorizes the fund to be used
to provide a linked deposit to an eligible lending institution that agrees
to provide a loan to a person for a conservation project.
The board proposes to amend §367.12, Construction Requirements, to
include the phrase "financed by the board through a grant or loan and" so
that the requirements of the section are explicitly limited to the grant and
loan programs and not the linked deposit program.
The board proposes new §367.15, Authorization to Execute Agreements,
to provide the specific authorization to the executive administrator to execute
linked deposit agreements with eligible lending institutions for the purpose
of providing money from the fund to be used for the purposes set forth in
these amendments. Pursuant to new Water Code §17.907, the board is authorized
to approve or disapprove an application for a linked deposit agreement submitted
by an eligible lending institution. Water Code §15.907 specifically authorizes
the board to delegate to the executive administrator the authority to approve
or disapprove such applications. Water Code §17.908 provides that upon
approval of the application by the board, the board and the eligible lending
institution shall enter into a linked deposit agreement. Execution of an agreement
of any sort only requires that one person actually sign, or execute, the agreement.
As a six-member board, only one individual need take the action necessary
to execute agreement. The term "execute", in the broader sense of ensuring
performance, is a matter that requires more time and attention than the board
members can perform. Therefore, as a matter of necessity, the board delegates
the function of executing financial assistance agreements to the executive
administrator, both in the narrow and broad sense. As a matter of necessity,
the board delegates the function of executing financial assistance agreements
to the executive administrator. Proposed new §367.15, in conjunction
with new proposed §375.16(b), is proposed to delegate to the executive
administrator the function of reviewing applications for linked deposit agreements
and, if approved, executing such agreements. In addition to the contract provisions
required pursuant to the other sections in this chapter, proposed new §367.15
provides the executive administrator with the discretion to include any additional
provisions in such agreements, as the executive administrator may deem necessary
to fulfill the purposes and intent of the program.
The board proposes new §367.16, Conditions Prior to Execution, to
set forth the minimum requirements that the board has determined must be met
prior to the eligible lending institution and the executive administrator
executing a linked deposit agreement. Proposed new §367.16(a) identifies
the minimum requirements that the board has determined must be met by an eligible
lending institution when submitting a request to the executive administrator
for a linked deposit agreement. These requirements are prescribed by the statute
or are considered prudent application requirements. Proposed new §367.16(a)(1)
requires the submission of the loan application from the person who will be
constructing the conservation project. This proposed subsection requires the
lending institution determine that the submitted loan application to be creditworthy
according to the criteria of the lending institution prior to its submission
to the executive administrator. Proposed new §367.16(a)(2) requires submission
of a draft loan agreement between the lending institution and its borrower
that identifies the amount of the loan, identifies the interest rate applied
to the loan, sets forth the repayment schedule, limits the use of the loan
proceeds to an eligible project, and contains all such other terms as determined
in the sole discretion of the lending institution to be appropriate for its
loan agreement. Proposed new §367.16(a)(1)(A) limits the total amount
of the loan to $250,000 as required by statute. Proposed new §367.16(a)(1)(B)
limits the interest rate under the agreement to no more than four percentage
points above the interest rate charged by the board to the lending institution
as required by statute. Proposed new §367.16(a)(3) requires two certifications.
Proposed new §367.16(a)(3)(A) requires a certification by the lending
institution setting the interest rate that will be charged to its borrower
for the proposed project. Proposed new §367.16(a)(3)(B) requires that
the lending institution provide a certification from a director of the soil
and water conservation district for the district in which the project is located
as to two facts: 1) that the loan recipient has a soil and water conservation
approved by the district, and 2) that the project furthers or implements such
plan. This certification is required by statute to insure that the project
will implement agricultural water conservation project. Proposed new §367.16(a)(4)
requires the lending institution to submit such other documentation that the
executive administrator determines is necessary in order to insure that the
linked deposit, if approved, will fulfill the objectives of the program. This
provision is proposed because the board believes that the executive administrator
should have the discretion to request additional information that may only
be able to be identified as the program develops or after the initial review
of the documents submitted by a lending institution. This provision allows
the executive administrator the discretion to adapt the application requirements
in order to fulfill the objectives of the program. Proposed new §367.16(b)
identifies the minimum requirements that the board has determined to be appropriate
before the executive administrator is authorized to execute a linked deposit
agreement. This proposed subsection requires the executive administrator to
review the documentation submitted by the lending institution and determine
that the institution is eligible to participate in the program, that the documents
submitted comply with the requirements of this section, and that executing
the agreement will effectuate the purposes of the program.
The board proposes new §367.17, Board Obligations in Linked Deposit
Agreements, to identify the minimum responsibilities that the board will assume
if the executive administrator executes a linked deposit agreement. The responsibilities
of the board proposed in new §367.17(a) are to provide money in the amount
identified in the linked deposit agreement to the eligible lending institution
from the fund and to otherwise fulfill the obligations set forth in the linked
deposit agreement. It is proposed to include these requirements by rule because
these are the minimum requirements that the board is expected to fulfill and
which may be enforceable pursuant to a rule of the board. By this proposed
section, eligible lending institutions are informed of the minimum obligations
undertaken by the board with the execution of such an agreement and receive
assurance of compliance with the statutory provisions through enforcement
of this section in addition to contractual remedies available to the lending
institution in event of default. Proposed new §367.17(b) also authorizes
the board or the executive administrator to withdraw money deposited with
a lending institution either according to the terms of the linked deposit
agreement or in the event that the institution ceases to be either a state
depository or a Farm Credit System institution headquartered in this state.
This rule is proposed to implement the requirement set forth in Water Code §17.911.
The board proposes new §367.18, Lending Institution Obligations in
Linked Deposit Agreements, to identify the minimum requirements that an eligible
lending institution will assume upon its execution of a linked deposit agreement
authorized by this section. Proposed new §367.18(a) provides that upon
execution of the agreement, the lending institution shall provide collateral
equal to the amount of the money from the fund placed on deposit with it,
provide the loan for the project substantially according to the draft loan
agreement provided with the application, pay interest on the deposit to the
board at a rate equal to the asking yield for a U.S. Treasury note with a
twelve-month maturity, submit compliance reports on a yearly basis to the
executive administrator, return the funds to the board according to the terms
of the linked deposit agreement, and otherwise comply with the linked deposit
agreement, these rules, and applicable federal and state law. These requirements
are generally set forth in the new Water Code provisions as requirements for
the linked deposit agreement. By this proposed section, eligible lending institutions
are informed of the minimum obligations undertaken in executing such an agreement
and the board receives assurance of compliance with the statutory provisions
through enforcement of this section in addition to contractual remedies that
may be available to the board in event of default. Proposed new §367.18(b)
specifies that payment delays or defaults by the recipient of the loan do
not affect the liability of the lending institution to the board under the
linked deposit agreement. This rule is proposed to implement the requirement
set forth in Water Code §17.908.
The board proposes new §367.19, Requirements after Execution, to identify
the reporting requirements of the executive administrator to the board. Having
delegated the authority to approve and execute linked deposit agreements,
by proposed new §367.19(1) the executive administrator is required to
report monthly to the board the linked deposit agreements that have been executed
and the status of each loans made by the lending institutions. This provision
will allow the board to routinely review the administration and performance
of the program. By proposed new §367.19(2) the executive administrator
is required to report any instances of noncompliance by a participating lending
institution to the board as well as to the Texas comptroller of public accounts.
The comptroller is included in the reporting requirement for instances of
noncompliance because the board has deemed the lending institution eligible
in part due to the comptroller using the lending institution as a state depository.
By reporting the instance of noncompliance to the comptroller, the board potentially
will be assisting the comptroller in the protection of other funds of the
state. This rule is proposed to implement the requirement set forth in Water
Code §17.909.
The board proposes new §367.20, State Liability, to establish as clearly
as possible that the state does not assume any liability to the lending institutions
for any payments that may be due by a borrower of the lending institution
and that the linked deposit is not an extension of credit within the meaning
of the state constitution. This rule is proposed to implement the requirement
set forth in Water Code §17.910.
Ms. Melanie Callahan, Director of Fiscal Services, has determined that
for the first five-year period the amendments and new sections are in effect
there will be no fiscal implications on state and local government as a result
of enforcement and administration of the amendments and new sections. Since
the revisions create a new program that uses money currently available in
the fund for eligible participants on a voluntary basis, there will be no
impact on state or local governments.
Ms. Callahan has also determined that for the first five years the amendments
and new sections, as proposed, are in effect the public benefit as a result
of enforcing the amendments and new sections will be to provide needed capital
at reduced rates for agricultural water conservation projects thereby assisting
in the protection of the state's water resources. Ms. Callahan has determined
there will not be economic costs to small businesses or individuals required
to comply with the amendments and new sections as proposed since the program
is voluntary.
It is estimated that the amendments and new sections will not adversely
affect local economies because the rule pertains to a voluntary program that
provides needed capital at reduced rates for agricultural water conservation
projects. Indeed, by the state financially contributing to these projects,
the local economies should be positively affected.
Comments on the proposal will be accepted for 30 days following publication
and may be submitted to Jonathan Steinberg, Deputy Counsel, Texas Water Development
Board, P.O. Box 13231, Austin, Texas, 78711-3231, by e-mail to jonathan.steinberg@twdb.state.tx.us
or by fax at (512) 463-5580.
The amendments and new sections are proposed under the authority
of the Texas Water Code §6.101 and §17.912 which provides the Texas
Water Development Board with the authority to adopt rules necessary to carry
out the powers and duties in the Water Code, other laws of the State, and
the agricultural water conservation program.
The statutory provisions affected by the proposed amendments and new sections
are Texas Water Code Chapter 17, Subchapter J.
§367.1.Policy Statement.
It is the policy of the board to provide grants
, linked deposits,
and loans to conserve and protect the state's water resources and provide
resulting benefits to all of the state's citizens. This chapter implements
the Texas Water Code, Chapter 17, Subchapter J.
§367.2.Definitions.
The following words and terms, when used in this chapter, shall have
the following meanings, unless the context clearly indicates otherwise.
(1) - (5)
(No change.)
(6)
Eligible lending institution--a
financial institution that makes commercial loans, is either a depository
of state funds or an institution of the Farm Credit System headquartered in
this state, and agrees to participate in a linked deposit program established
under Water Code §17.905 and is willing to agree to provide collateral
equal to the amount of linked deposits placed with it.
(7)
[
(8)
[
(9)
Linked Deposit--a deposit governed
by a linked deposit agreement between the board and an eligible lending institution
that requires that:
(A)
the eligible lending institution pay interest
to the board on the deposit at a rate equal to the asking yield for a U.S.
Treasury note with a twelve-month maturity as of the date five days preceding
the submission of all the documents required of the eligible lending institution
to the executive administrator requesting a linked deposit agreement;
(B)
the state not withdraw any part of the deposit
except as according to the terms of the linked deposit agreement and the terms
of this division; and
(C)
the eligible lending institution agree to lend
the value of the deposit to a person at a rate not to exceed the interest
paid by the eligible lending institution to the board plus four percent;
(10)
Linked Deposit Agreement--a
written agreement between the board, acting through the executive administrator,
and an eligible lending institution providing for the deposit by the board
of an amount of money from the fund with the eligible lending institution
executed pursuant to the authority and according to the conditions of this
chapter.
(11)
[
(12)
[
§367.3.Eligible Uses of the Fund.
To the extent authorized by Water Code §17.899, the board may
use money in the fund to:
(1)
provide a grant to a state agency to pay the eligible costs
for a conservation program or conservation project, including a conservation
program that provides funding to a political subdivision or person for a conservation
project; [
(2)
provide a grant or loan to a political subdivision to pay
the eligible costs for a conservation program or conservation project
; and
(3)
provide a linked deposit to an eligible
lending institution for a loan to a person for a conservation project pursuant
to the terms of §§367.15 - 367.20 of this chapter
.
§367.12.Construction Requirements.
(a)
This section applies to conservation projects
financed
by the board through a grant or loan and
which include construction.
(b)
Prior to the release of funds for construction of a conservation
project, an approved applicant shall:
(1)
submit to the executive administrator engineering plans
and specifications, which shall be as detailed as would be required for submission
to contractors bidding on the work and which shall be consistent with the
engineering feasibility information submitted with the application;
(2)
obtain written approval from the executive administrator
of the submitted engineering plans and specifications; and
(3)
for projects which the approved applicant will execute
construction contracts, prior to receiving bids and awarding the contract,
obtain executive administrator approval of the contract documents, such documents
to include:
(A)
provisions assuring compliance with the board's rules and
all relevant statutes;
(B)
provisions providing for the district to retain a minimum
of 5.0% of the progress payments otherwise due to the contractor until construction
is substantially complete and reduction in the retainage is authorized by
the executive administrator;
(C)
a contractor's act of assurance form to be executed by
the contractor which shall warrant compliance by the contractor with all laws
of the State of Texas and all rules and published policies of the board; and
(D)
any additional conditions that may be requested by the
executive administrator.
(c)
If money from the fund will be used to purchase bonds,
and proceeds of the bonds are required for planning, designing or preparation
of plans and specifications or other activities not related to construction,
the political subdivision may close the loan, receive funds for the money
allocated for planning, designing or preparation of plans and specifications
or other activities not related to construction if the funds for construction
are deposited to an escrow account the agreement for which is acceptable to
the executive administrator in form and substance.
(d)
After the construction contract is awarded, the approved
applicant shall:
(1)
insure adequate inspection of the project by a registered
professional engineer;
(2)
obtain assurance from the engineer that the work is performed
in a satisfactory manner in accordance with the approved plans and specifications,
other engineering design or permit documents, approved alterations, and in
accordance with sound engineering principles and construction practices;
(3)
allow the executive administrator to inspect the construction
and materials of any project at any time; and
(4)
take corrective action as necessary to complete the project
in accordance with approved plans and specifications or contract documents.
(e)
Upon notice from the approved applicant or its project
engineer that the project has been completed in accordance with approved plans
and specifications, the executive administrator shall take such reasonable
actions necessary to confirm that the project has been completed according
to the approved plans and specifications. Upon the determination of the executive
administrator that the conservation project approved by the board has been
constructed in accordance with the approved plans and specifications, the
executive administrator shall issue a certificate of approval to the approved
applicant. After issuance of a certificate of approval, the approved applicant
shall release all remaining retainage under the contract documents.
(f)
Approval of plans and specifications, contract documents,
and project inspection shall not subject the State of Texas to any liability
related to the construction of the project.
§367.15.Authorization to Execute Agreements.
The board authorizes the executive administrator to execute a linked
deposit agreement with an eligible lending institution to provide money from
the fund according to and in compliance with §§367.15 - 367.20 of
this chapter. The linked deposit agreement shall include the obligations set
forth in §§367.15 - 367.20 of this chapter and such other terms
and conditions determined by the executive administrator to be reasonable
and necessary to fulfill the objectives of this chapter.
§367.16.Conditions Prior to Execution.
(a)
Before the executive administrator may execute a linked
deposit agreement, a lending institution shall submit to the executive administrator:
(1)
the application of a person determined by the eligible
lending institution to be eligible and creditworthy to receive a loan according
the criteria of the institution;
(2)
a draft loan agreement with such person that:
(A)
identifies the principal amount of the loan which shall
not exceed $250,000;
(B)
identifies the interest rate to be paid by the borrower
which shall not exceed the interest rate paid by the eligible lending institution
to the board plus four percent;
(C)
includes a repayment schedule which identifies the dates
on which payments are due from the loan recipient to the lending institution;
(D)
limits the use of the funds to a conservation project certified
pursuant to subsection (a)(3) of this section; and
(E)
contains such other terms and conditions determined by
the eligible lending institution in its sole discretion to be reasonable for
the purposes of a private loan agreement;
(3)
a certification from:
(A)
the eligible lending institution of the interest rate applicable
to the proposed loan;
(B)
a director of a soil and water conservation district for
the district in which the project is located certifying that:
(i)
the loan recipient has a soil and water conservation plan
approved by the district; and
(ii)
the project furthers or implements such plan; and
(4)
such other information or documentation as determined by
the executive administrator to be reasonable and necessary to fulfill the
objectives of this chapter.
(b)
Before the executive administrator executes a linked deposit
agreement, the executive administrator shall review the information submitted
in this section and determine that:
(1)
the lending institution is an eligible lending institution
as defined in §367.2 of this chapter;
(2)
the documents submitted by the lending institution comply
with the requirements of this chapter; and
(3)
execution of the linked deposit agreement fulfills the
purposes and intent of this chapter and the public interest.
§367.17.Board Obligations in Linked Deposit Agreements.
(a)
Upon execution of a linked deposit agreement by the executive
administrator and an eligible lending institution, the board, acting through
its executive administrator, shall:
(1)
deposit with the lending institution the amount of money
identified in the linked deposit agreement from the fund; and
(2)
perform such other terms and conditions as specified in
the linked deposit agreement.
(b)
The board or the executive administrator may withdraw linked
deposits from the lending institution according to the terms of the linked
deposit agreement or if the institution ceases to be either a state depository
as designated by the Texas comptroller of public accounts or a Farm Credit
System institution headquartered in Texas.
§367.18.Lending Institution Obligations in Linked Deposit Agreements.
(a)
Upon execution of a linked deposit agreement and receipt
of money from the board, the lending institution shall:
(1)
provide collateral equal to the amount of the money from
the fund placed on deposit with it;
(2)
lend the value of the deposit being provided by the board
substantially according to the terms and conditions of the draft loan agreement
submitted by the lending institution to the executive administrator;
(3)
pay to the board interest on the deposit at a rate equal
to the asking yield for a U.S. Treasury note with a twelve-month maturity
as of the date five days preceding the submission of all the documents required
of the eligible lending institution to the executive administrator requesting
a linked deposit agreement;
(4)
submit compliance reports to the executive administrator
annually providing information on the performance of the terms of the loan
by the person receiving the loan from the lending institution and such other
information or documents as specified in the linked deposit agreement;
(5)
return the amount of funds provided as a linked deposit
as specified in the linked deposit agreement; and
(6)
perform such other terms and conditions as specified in
the linked deposit agreement, this chapter, the rules of the board, and applicable
federal and state law.
(b)
A delay in payment or a default on a loan by the recipient
of the loan from the lending institution does not affect the validity of the
deposit agreement or the repayment of the deposit in accordance with the terms
of the deposit agreement.
§367.19.Requirements after Execution.
After the executive administrator has executed a linked deposit agreement,
the executive administrator shall:
(1)
at the next available board meeting and each month thereafter,
provide a report to the board that:
(A)
identifies all linked deposit agreements; and
(B)
the status of the loans made by lending institutions; and
(2)
in the event of noncompliance on the part of an eligible
lending institution, inform the Texas comptroller of public accounts of the
noncompliance and include information regarding the noncompliance in the monthly
report to the board.
§367.20.State Liability.
The state is not liable to an eligible lending institution for payment
of the principal, interest, or any late charges on a loan made to an approved
applicant. A linked deposit is not an extension of the state's credit within
the meaning of any state constitutional prohibition.
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State on April 21, 2004.
TRD-200402667
Suzanne Schwartz
General Counsel
Texas Water Development Board
Proposed date of adoption: June 16, 2004
For further information, please call: (512) 475-2052
The Texas Water Development Board (the board) proposes the repeal
of 31 TAC Chapter 375, Subchapter C, §§375.301 - 375.306, concerning
the Nonpoint Source Pollution Loan and Estuary Program from the Clean Water
State Revolving Fund. The board also proposes new Subchapter C, Division 1, §§375.301
- 375.302, Division 2, §§375.325 - 375.329, and Division 3, §§375.350
- 375.357, concerning Nonpoint Source Pollution Control Project Financial
Assistance Programs from the Clean Water State Revolving Fund. The proposed
repeal and new sections reflect changes to the Texas Water Code enacted by
the 78th Legislature that authorized the creation of the Nonpoint Source Pollution
Control Linked Deposit Program (NPSLDP).
The current Subchapter C, Nonpoint Source Pollution Loan and Estuary Management
Program, §§375.301 - 375.306 sets out the provisions of the Nonpoint
Source Loan Program (NPSLP) and the Estuary Management Program (EMP). The
NPSLP is currently the only program of the board which provides financial
assistance to individuals and others for nonpoint source pollution control
projects. In the current NPSLP, the board provides loans directly to individuals
and other private or public entities for nonpoint source pollution control
projects using funds from the Clean Water State Revolving Fund, defined in §375.2
as the CWSRF Program Account. Under the proposed repeal and new sections,
the NPSLP and EMP will continue as currently written. The new NPSLDP will
provide financial assistance for nonpoint source pollution control projects
in the form of depositing funds from the CWSRF Program Account into local
lending institutions conditioned on, or linked to, the institution making
a loan to an individual for a nonpoint source pollution control project. The
NPSLP and the NPSLDP share common elements and similar scopes in that both
programs provide financial assistance for nonpoint source pollution control
projects.
Therefore, the board proposes new Division 1 for the purpose of identifying
the common scope of the subchapter, which is providing financial assistance
for nonpoint source pollution control projects and estuary management projects,
and to define common terminology. The board proposes new Division 2 to contain
the provisions appropriate for the NPSLP and EMP. The board proposes new Division
3 to contain the provisions appropriate for the NPSLDP.
The board proposes new §375.301, Scope of Subchapter, for the purpose
of identifying the programs covered by the subchapter, which are the NPSLP,
EMP, and the NPSLDP using funds from the CWSRF Program Account. Since all
these programs will be using funds in the CWSRF program account, this proposed
section also states that the other provisions in Subchapter A may apply unless
a provision in this subchapter specifically applies.
The board proposes new §375.302, Definitions of Terms, to provide
definitions of common terminology used in the subchapter. The board proposes
a definition of Best Management Practices, BMP, to refer to those measures
that are the most efficient, practical, and cost effective means to guide
a particular activity or address a particular problem. This term is currently
used in the NPSLP and EMP and no amendments to the definition are proposed.
The board proposes a definition of eligible lending institution that refers
to a commercial lending institution that is either designated a depository
of state funds by the Texas comptroller of public accounts or an institution
of the Farm Credit System headquartered in this state, that agrees to participate
in a linked deposit program established under Water Code §15.611, and
that is willing to agree to provide collateral equal to the amount of linked
deposits placed with it. This definition follows the language of the new legislation
in order to maximize the number of institutions that are eligible to participate.
The board proposes to define individual water quality management plan as a
land management plan that is developed and approved to conserve or improve
water resources of a particular site after having considered characteristics
such as soil types, slope, climate, vegetation and land usage. This term is
currently used in the NPSLP and EMP and no amendments to the definition are
proposed. The board proposes a definition for linked deposit to be a deposit
governed by a linked deposit agreement which requires that: 1) the lending
institution pay interest to the board on the deposit at a rate equal to the
asking yield for a U.S. Treasury note with a twelve-month maturity as of the
date five days preceding the submission of all the documents required of the
eligible lending institution to the executive administrator requesting a linked
deposit agreement; 2) the state not withdraw any part of the deposit except
as according to the terms of the linked deposit agreement and the terms of
this chapter; and 3) the institution agree to lend the value of the deposit
to a person at a rate not to exceed the interest paid by the eligible lending
institution to the board plus four percent. This definition follows the language
of the new legislation in order to implement the program to maximize extent
possible under the legislation. The board proposes a definition for linked
deposit agreement as a written agreement between the board and an eligible
lending institution that provides for the deposit of funds from the CWSRF
program account with the lending institution according to the conditions of
this subchapter. By defining linked deposit agreement in this manner, the
rules have a ready reference to the contract while leaving the details of
the terms of the contract to be more fully explained in the division of this
subchapter related to the NPSLDP. The board proposes a definition of the national
estuary program to refer to the program created by the Water Quality Act of
1987. This term is currently used in the NPSLP and EMP and no amendments to
the definition are proposed. The board proposes a definition of NPS Loan Program
to refer to the Nonpoint Source Pollution Loan Program which is set forth
in Division 2 of this subchapter. The definition is currently used for the
NPSLP but is amended here for the purpose of reflecting that provisions of
the program are proposed to be set forth in Division 2 of this subchapter.
The board proposes to define NPS management report as the most recent Texas
Nonpoint Source Pollution Assessment Report and Management Program adopted
by the commission. This term is currently defined for the NPSLP but is amended
here for the purpose of referring to the most recent version of the commission's
report because the report is amended from time to time by the commission.
This definition as amended will therefore clarify which report is being referred
to. The board proposes a definition of person to include an individual, corporation,
partnership, association, state, municipality, commission, or political subdivision
of a state or any interstate body, and that explicitly coincides with the
definition of the Clean Water Act. This term is currently used in the NPSLP
and EMP and no amendments to the definition are proposed.
The board proposes new Division 2, Nonpoint Source Pollution Loan and Estuary
Management Program, to contain the provisions previously used for the NPSLP
and EMP. The board proposes new §375.325, Purpose, to clearly state that
the purpose of this division is to set forth the terms of the program by which
the board will make a loan from funds in the CWSRF program account to a person
for the purposes set forth in this division.
The board proposes new §375.326, Eligible Projects; §375.327,
Application for Assistance; §375.328, Promissory Notes and Loan Agreements;
and §375.329, Lending Rates, to contain the exact same provisions as
the former §375.303, Eligible Projects; §375.304, Application for
Assistance; §375.305, Promissory Notes and Loan Agreements; and §375.306,
Lending Rates, respectively.
The board proposes new Division 3, Nonpoint Source Pollution Link Deposit
Program, to implement the newly enacted provisions of Water Code §15.601
et seq. The board proposes new §375.350, Purpose, to identify the purpose
as providing linked deposits from the CWSRF program account to eligible lending
institution so that those institutions will provide loans to persons for the
purpose of nonpoint source pollution control projects.
The board proposes new §375.351, Authorization to Execute Agreements,
to provide the specific authorization to the executive administrator to execute
linked deposit agreements with eligible lending institutions for the purpose
of providing funds from the CWSRF program account to be used for the purposes
set forth in this division. Pursuant to new Water Code §15.614, the board
is authorized to approve or disapprove an application for a linked deposit
agreement submitted by an eligible lending institution. Water Code §15.614
specifically authorizes the board to delegate to the executive administrator
the authority to approve or disapprove such applications. Water Code §15.615
provides that upon approval of the application by the board, the board and
the eligible lending institution shall enter into a linked deposit agreement.
Execution of an agreement of any sort only requires that one person actually
sign, or execute, the agreement. As a six-member board, only one individual
need take the action necessary to execute agreement. The term "execute", in
the broader sense of ensuring performance, is a matter that requires more
time and attention than the board members can perform. Therefore, as a matter
of necessity, the board delegates the function of executing financial assistance
agreements to the executive administrator, both in the narrow and broad sense.
Proposed new §375.351, in conjunction with new proposed §375.352(b),
is proposed to delegate to the executive administrator the function of reviewing
applications for linked deposit agreements and, if approved, executing such
agreements. In addition to the contract provisions required pursuant to the
other sections in this division, proposed new §375.351 provides the executive
administrator with the discretion to include any additional provisions in
such agreements, as the executive administrator may deem necessary to fulfill
the purposes and intent of the program.
The board proposes new §375.352, Conditions Prior to Execution, to
set forth the minimum requirements that the board has determined must be met
prior to the eligible lending institution and the executive administrator
executing a linked deposit agreement. Proposed new §375.352(a) identifies
the minimum requirements that the board has determined must be met for an
eligible lending institution to submit a request to the executive administrator
for a linked deposit agreement. These requirements are prescribed by the statute
or are considered prudent application requirements. Proposed new §375.352(a)(1)
requires that submission of the loan application from the person who will
be constructing the nonpoint source pollution control project. This proposed
paragraph requires that the lending institution determine that the submitted
loan application is creditworthy according to the criteria of the lending
institution. Proposed new §375.352(a)(2) requires submission of a draft
loan agreement between the lending institution and its borrower that identifies
the amount of the loan, identifies the interest rate applied to the loan,
sets forth the repayment schedule, limits the use of the loan proceeds to
an eligible project, and contains all such other terms as determined in the
sole discretion of the lending institution to be appropriate for its loan
agreement. Proposed new §375.352(a)(1)(A) limits the total amount of
the loan to $250,000 as required by statute. Proposed new §375.352(a)(1)(B)
limits the interest rate under the agreement to no more than four percentage
points above the interest rate charged by the board to the lending institution
as required by statute. Proposed new §375.352(a)(3) requires two certifications.
Proposed new §375.352(a)(3)(A) requires a certification by the lending
institution setting the interest rate that will be charged to its borrower
for the proposed project. Proposed new §375.352(a)(3)(B) requires that
the lending institution provide a certification as identified in proposed
new §375.353(a) or (b). These certifications are required by statute
to accurately identify the interest charged to the borrower and to insure
that the project will implement nonpoint source pollution control projects.
Proposed new §375.352(a)(4) requires the lending institution to submit
such other documentation that the executive administrator determines is necessary
in order to insure that the linked deposit, if approved, will fulfill the
objectives of the program. This provision is proposed because the board believes
that the executive administrator should have the discretion to request additional
information that may only be able to be identified as the program develops
or after the initial review of the documents submitted by a lending institution.
This provision allows the executive administrator the discretion to adapt
the application requirements in order to fulfill the objectives of the program.
Proposed new §375.352(b) identifies the minimum requirements that the
board has determined to be appropriate before the executive administrator
is authorized to execute a linked deposit agreement. This proposed subsection
requires the executive administrator to review the documentation submitted
by the lending institution and determine that institution is eligible to participate
in the program, that the documents submitted comply with the requirements
of this section, and that executing the agreement will effectuate the purposes
of the program.
The board proposes new §375.353, Project Certifications, for the purpose
of insuring the proposed project receiving a loan backed by a linked deposit
will be constructing a nonpoint source pollution control project. Proposed
new §375.353(a) applies to projects that are proposed for agricultural
or silvicultural projects. For these projects, proposed new §375.353(a)
requires that a director of the soil and water conservation district for the
district in which the project is located must certify to two facts: 1) that
the loan recipient has a water quality management plan that has been certified
by the State Soil and Water Conservation Board, and 2) that the project furthers
or implements such plan. Proposed new §375.353(b) applies to proposed
projects that are not agricultural or silvicultural projects. In this instance,
the executive director must certify that the loan recipient's proposed project
implements or furthers the most recent nonpoint source pollution management
plan. Both of these subsections are proposed to implement the requirement
set forth in Water Code §15.613.
The board proposes new §375.354, Board Obligations in Linked Deposit
Agreements, to identify the minimum responsibilities that the board will assume
if the executive administrator executes a linked deposit agreement. The responsibilities
of the board proposed in new §375.354(a) are to provide funds in the
amount identified in the linked deposit agreement to the eligible lending
institution from the CWSRF program account and to otherwise fulfill the obligations
set forth in the linked deposit agreement. It is proposed to include these
requirements by rule because there are the minimum requirements that the board
is expected to fulfill and which may be enforceable pursuant to a rule of
the board. By this proposed section, eligible lending institutions are informed
of the minimum obligations undertaken by the board with the execution of such
an agreement and receive assurance of compliance with the statutory provisions
through enforcement of this section in addition to contractual remedies available
to the lending institution in event of default. Proposed new §375.354(b)
also authorizes the board or the executive administrator to withdraw funds
deposited with a lending institution either according to the terms of the
linked deposit agreement or in the event that the institution ceases to be
either designated a state depository by the Texas comptroller of public accounts
or a Farm Credit System institution headquartered in this state. This rule
is proposed to implement the requirement set forth in Water Code §15.618.
The board proposes new §375.355, Lending Institution Obligations in
Linked Deposit Agreements, to identify the minimum requirements that an eligible
lending institution will assume upon its execution of a linked deposit agreement
authorized by this division. Proposed new §375.355(a) provides that upon
execution of the agreement, the lending institution shall provide collateral
equal to the amount of the funds from the CWSRF program account placed on
deposit with it, provide the loan for the project substantially according
to the draft loan agreement provided with the application, pay interest on
the deposit to the board at a rate equal to the asking yield for a U.S. Treasury
note with a twelve-month maturity, submit compliance reports on a yearly basis
to the executive administrator, return the funds to the board according to
the terms of the linked deposit agreement, and otherwise comply with the linked
deposit agreement, these rules, and applicable federal and state law. These
requirements are generally set forth in the new Water Code provisions as requirements
for the linked deposit agreement. By this proposed section, eligible lending
institutions are informed of the minimum obligations undertaken in executing
such an agreement and the board receives assurance of compliance with the
statutory provisions through enforcement of this section in addition to contractual
remedies that may be available to the board in event of default. Proposed
new §375.355(b) specifies that payment delays or defaults by the recipient
of the loan do not affect the liability of the lending institution to the
board under the linked deposit agreement. This rule is proposed to implement
the requirement set forth in Water Code §15.617.
The board proposes new §375.356, Requirements after Execution, to
identify the reporting requirements of the executive administrator to the
board. Having delegated the authority to approve and execute linked deposit
agreements, by proposed new §375.356(1) the executive administrator is
required to report monthly to the board the linked deposit agreements that
have been executed and the status of each loans made by the lending institutions.
This provision will allow the board to routinely review the administration
and performance of the program. By proposed new §375.356(2) the executive
administrator is required to report any instances of noncompliance by a participating
lending institution to the board as well as to the Texas comptroller of public
accounts. The comptroller is included in the reporting requirement for instances
of noncompliance because the board has deemed the lending institution eligible
in part due to the comptroller using the lending institution as a state depository.
By reporting the instance of noncompliance to the comptroller, the board potentially
will be assisting the comptroller in the protection of other funds of the
state. This rule is proposed also to implement the requirement set forth in
Water Code §15.616(b).
The board proposes new §375.357, State Liability, to establish as
clearly as possible that the state does not assume any liability to the lending
institutions for any payments that may be due by a borrower of the lending
institution and that the linked deposit is not an extension of credit within
the meaning of the state constitution. This rule is proposed also to implement
the requirement set forth in Water Code §15.617.
Ms. Melanie Callahan, Director of Fiscal Services, has determined that
for the first five-year period the repeal and new sections are in effect there
will be no fiscal implications on state and local government as a result of
enforcement and administration of the repeal and new sections. Since the revisions
continue an existing program and create a new program that use funds currently
available in the CWSRF program account for eligible participants on a voluntary
basis, there will be no impact on state or local governments.
Ms. Callahan has also determined that for the first five years the repeal
and new sections, as proposed, are in effect the public benefit as a result
of enforcing the repeal and new sections will be to provide needed capital
at reduced rates for nonpoint source pollution control projects thereby assisting
in improving water quality in the state in furtherance of the objectives of
the Clean Water Act. Ms. Callahan has determined there will not be economic
costs to small businesses or individuals required to comply with the repeal
and new sections as proposed.
It is estimated that the repeal and new sections will not adversely affect
local economies because the proposed changes relate to a voluntary program
that provides needed capital at reduced rates for nonpoint source pollution
control projects. Indeed, by the state financially contributing to these projects,
the local economies should be positively affected.
Comments on the proposal will be accepted for 30 days following publication
and may be submitted to Jonathan Steinberg, Deputy Counsel, Texas Water Development
Board, P.O. Box 13231, Austin, Texas, 78711-3231, by e-mail to jonathan.steinberg@twdb.state.tx.us
or by fax at (512) 463-5580.
Subchapter C. NONPOINT SOURCE POLLUTION LOAN AND ESTUARY MANAGEMENT PROGRAM
31 TAC §§375.301 - 375.306
(Editor's note: The text of the following sections proposed for
repeal will not be published. The sections may be examined in the offices
of the Texas Water Development Board or in the Texas Register office, Room
245, James Earl Rudder Building, 1019 Brazos Street, Austin.)
The repeal is proposed under the authority of the
Texas Water Code §6.101 and §15.605 which provide the Texas Water
Development Board with the authority to adopt rules necessary to carry out
the powers and duties in the Water Code and other laws of the State and of
the state revolving loan funds.
The statutory provisions affected by the repeal are Texas Water Code Chapter
15, Subchapter J.
§375.301.Scope of Subchapter.
§375.302.Definitions of Terms.
§375.303.Eligible Projects.
§375.304.Application for Assistance.
§375.305.Promissory Notes and Loan Agreements.
§375.306.Lending Rates.
This agency hereby certifies that the proposal has been
reviewed by legal counsel and found to be within the agency's legal authority
to adopt.
Filed with the Office of
the Secretary of State on April 21, 2004.
TRD-200402668
Suzanne Schwartz
General Counsel
Texas Water Development Board
Proposed date of adoption: June 16, 2004
For further information, please call: (512) 475-2052
1.
INTRODUCTORY PROVISIONS
31 TAC §375.301, §375.302
These new sections are proposed under the authority of Texas
Water Code, §6.101, which requires the board to adopt rules necessary
to carry out the powers and duties of the board, Texas Water Code, §15.605
which requires the board to adopt rules for Subchapter J, Chapter 15, Water
Code including the nonpoint source loan program and estuary management program,
and rules to establish the nonpoint source linked deposit program.
§375.301.Scope of Subchapter.
The provisions of this Subchapter C shall apply to administration of
the nonpoint source loan program and the nonpoint source linked deposit program
under the Clean Water Pollution Control Revolving Fund established by the
Water Code, Chapter 15, Subchapter J. Unless in conflict with the provisions
of this subchapter, the provisions of Subchapter A (relating to General Provisions)
shall apply to this subchapter.
§375.302.Definitions of Terms.
The following words and terms, when used in this subchapter, shall
have the following meanings, unless the context clearly indicates otherwise.
(1)
BMP--Best management practices are those practices determined
to be the most efficient, practical, and cost-effective measures identified
to guide a particular activity or address a particular problem.
(2)
Eligible lending institution--A financial institution that
makes commercial loans, is either a designated as a depository of state funds
by the Texas comptroller of public accounts, herein referred to as a state
depository, or an institution of the Farm Credit System headquartered in this
state, agrees to participate in a linked deposit program established under
Water Code §15.611, and is willing to agree to provide collateral equal
to the amount of linked deposits placed with it.
(3)
Individual Water Quality Management Plan--An approved land
management plan which considers site-specific characteristics (such as soil
types, slope, climate, vegetation and land usage) to improve or conserve water
resources.
(4)
Linked Deposit--A deposit governed by a linked deposit
agreement between the board and an eligible lending institution that requires
that:
(A)
the eligible lending institution pay interest to the board
on the deposit at a rate equal to the asking yield for a U.S. Treasury note
with a twelve-month maturity as of the date five days preceding the submission
of all the documents required of the eligible lending institution to the executive
administrator requesting a linked deposit agreement;
(B)
the state not withdraw any part of the deposit except as
according to the terms of the linked deposit agreement and the terms of this
division; and
(C)
the eligible lending institution agree to lend the value
of the deposit to a person at a rate not to exceed the interest paid by the
eligible lending institution to the board plus four percent;
(5)
Linked Deposit Agreement--A written agreement between the
board, acting through the executive administrator, and an eligible lending
institution providing for the deposit by the board of an amount of funds from
the CWSRF program account with the eligible lending institution executed pursuant
to the authority and according to the conditions of this subchapter.
(6)
National Estuary Program--Program created by the Water
Quality Act of 1987 and administered according to Section 320 of the Act.
(7)
NPS Loan Program--Nonpoint Source Pollution Loan Program,
the loan program established in Division 2 of this subchapter to provide low
interest loans to persons for the implementation of approved nonpoint source
pollution control and abatement projects and estuary management projects.
(8)
NPS Management Report--The most recent Texas Nonpoint Source
Pollution Assessment Report and Management Program adopted by the commission.
(9)
Person--An individual, corporation, partnership, association,
state, municipality, commission, or political subdivision of a state or any
interstate body, as defined by Section 502 of the Act, including a political
subdivision as defined by Water Code §15.602(9), if the person is eligible
for financial assistance under federal law establishing the revolving fund.
This agency hereby certifies that the proposal has been
reviewed by legal counsel and found to be within the agency's legal authority
to adopt.
Filed
with the Office of the Secretary of State on April 21, 2004.
TRD-200402669
Suzanne Schwartz
General Counsel
Texas Water Development Board
Proposed date of adoption: June 16, 2004
For further information, please call: (512) 475-2052
31 TAC §§375.325 - 375.329
These new sections are proposed under the authority of Water
Code, §6.101, which requires the board to adopt rules necessary to carry
out the powers and duties of the board and Water Code, §15.605 which
requires the board to adopt rules establishing the nonpoint source loan program
and estuary management program.
§375.325.Purpose.
This division implements the Texas Water Code, Chapter 15, Subchapter
J related to providing financial assistance to persons for nonpoint source
pollution control and abatement projects and estuary management projects.
§375.326.Eligible Projects.
Projects eligible for funding from the NPS Loan Program must be:
(1)
an identified practice within a Water Quality Management
Plan; or
(2)
a nonpoint source management activity that has been identified
in the Texas Comprehensive Groundwater Protection Program; or
(3)
a BMP listed in the NPS Management Report; and
(4)
must be consistent with the EPA approved Nonpoint Source
Management Plan or the National Estuary Program efforts.
§375.327.Application for Assistance.
An applicant for financial assistance for a nonpoint source or estuary
protection project pursuant to this subchapter shall submit an application
in the form and number prescribed by the executive administrator. The executive
administrator may request any additional information needed to evaluate the
application, and may return any incomplete application.
§375.328.Promissory Notes and Loan Agreements.
(a)
The board may provide financial assistance to applicants
by either purchasing bonds issued by such applicant or by receiving a promissory
note and entering into a loan agreement with such applicant. If, however,
an applicant is a governmental entity that is fully authorized to issue bonds,
the applicant may not enter into a loan agreement as provided in this section.
(b)
If an applicant executes a promissory note and loan agreement
with the board, the executive administrator may waive the hiring or employment
of a financial advisor required pursuant to these rules.
§375.329.Lending Rates.
The interest rate for applicants receiving funding pursuant to this
subchapter will be the 140% of the rate pursuant to §375.52 of this title
(relating to Lending Rates).
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed
with the Office of the Secretary of State on April 21, 2004.
TRD-200402670
Suzanne Schwartz
General Counsel
Texas Water Development Board
Proposed date of adoption: June 16, 2004
For further information, please call: (512) 475-2052
(6)
] Executive administrator--The
executive administrator of the Texas Water Development Board, or an authorized
representative of the executive administrator.
(7)
] Fund--The agricultural water
conservation fund authorized by Section 50-d, Article III, of the Texas Constitution.
(8)
] Person--An individual, corporation,
partnership, association, or other legal entity that is not a political subdivision.
(9)
] Political subdivision--Includes
a municipality, county, district or authority created under the Texas Constitution
Article III, Section 52, or Article XVI, Section 59, an institution of higher
education as defined by §61.003, Education Code, any interstate compact
commission to which the state is a party, and any nonprofit water supply corporation
created and operating under Texas Water Code Chapter 67.
and
]
Chapter 375.
CLEAN WATER STATE REVOLVING FUND
Subchapter C. NONPOINT SOURCE POLLUTION CONTROL PROJECT AND ESTUARY MANAGEMENT FINANCIAL ASSISTANCE PROGRAMS
2.
NONPOINT SOURCE POLLUTION LOAN AND ESTUARY MANAGEMENT PROGRAM
3.
NONPOINT SOURCE POLLUTION LINK DEPOSIT PROGRAM