By: Ritter, et al. (Senate Sponsor - Fraser) H.B. No. 4
         (In the Senate - Received from the House April 2, 2013;
  April 8, 2013, read first time and referred to Committee on Natural
  Resources; April 22, 2013, reported adversely, with favorable
  Committee Substitute by the following vote:  Yeas 11, Nays 0;
  April 22, 2013, sent to printer.)
 
  COMMITTEE SUBSTITUTE FOR H.B. No. 4 By:  Fraser
 
 
A BILL TO BE ENTITLED
 
AN ACT
 
  relating to the administration and functions of the Texas Water
  Development Board; authorizing the issuance of revenue bonds.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
  ARTICLE 1.  ADMINISTRATION OF THE TEXAS WATER DEVELOPMENT BOARD
         SECTION 1.01.  Sections 6.052(a) and (b), Water Code, are
  amended to read as follows:
         (a)  The board is composed of three [six] members who are
  appointed by the governor with the advice and consent of the senate.
  One member must have experience in the field of engineering, one
  member must have experience in the field of public or private
  finance, and one member must have experience in the field of law or
  business.
         (b)  The governor shall make the appointments in such a
  manner that the members reflect the diverse geographic regions and
  population groups of this state and do not have any conflicts [each
  member is from a different section of the state and has no conflict]
  of interest prohibited by state or federal law.
         SECTION 1.02.  Section 6.053, Water Code, is amended by
  adding Subsection (d) to read as follows:
         (d)  A person is not eligible for appointment to the board if
  the person served on the board on or before January 1, 2013.
         SECTION 1.03.  Section 6.054, Water Code, is amended by
  amending Subsection (c) and adding Subsection (d) to read as
  follows:
         (c)  If the executive administrator or a member has knowledge
  that a potential ground for removal exists, the executive
  administrator shall notify the chairman of the board of the
  potential ground. The chairman of the board shall then notify the
  governor and the attorney general that a potential ground for
  removal exists. If the potential ground for removal includes the
  chairman of the board, the executive administrator or another
  member of the board shall notify the member [next highest ranking
  officer] of the board with the most seniority, who shall then notify
  the governor and the attorney general that a potential ground for
  removal exists.
         (d)  The governor, with the advice and consent of the senate,
  may remove a board member from office as provided by Section 9,
  Article XV, Texas Constitution.
         SECTION 1.04.  Section 6.056, Water Code, is amended to read
  as follows:
         Sec. 6.056.  TERMS OF OFFICE. (a) The members of the board
  hold office for staggered terms of six years, with the term [terms]
  of one member [two members] expiring February 1 of each
  odd-numbered year [every two years]. Each member holds office
  until a [his] successor is appointed and has qualified.
         (b)  A person appointed to the board may not serve for more
  than two six-year terms.
         SECTION 1.05.  Section 6.059, Water Code, is amended to read
  as follows:
         Sec. 6.059.  CHAIRMAN OF THE BOARD [OFFICERS]. [(a)] The
  governor shall designate one member as chairman of the board to
  serve at the will of the governor.
         [(b)     The members of the board shall elect a vice-chairman
  every two years. The board shall fill a vacancy in the office of
  vice-chairman for the remainder of the unexpired term.]
         SECTION 1.06.  Sections 6.060(a) and (b), Water Code, are
  amended to read as follows:
         (a)  The board shall hold regular meetings and all hearings
  at times specified by a board order and entered in its minutes [meet
  at least once every other month on a day and at a place within the
  state selected by it, subject to recesses at the discretion of the
  board].  The [chairman or two] board [members] may hold special
  meetings at the times and places in this state that the board
  decides are appropriate for the performance of its duties. The
  chairman of the board or the board member acting for the chairman
  shall give the other members reasonable notice before holding a
  special meeting [call a special meeting at any time by giving notice
  to the other members].
         (b)  The chairman [or in his absence the vice-chairman] shall
  preside at all meetings of the board. The chairman may designate
  another board member to act for the chairman in the chairman's
  absence.
         SECTION 1.07.  Section 6.061, Water Code, is amended to read
  as follows:
         Sec. 6.061.  FULL-TIME SERVICE.  Each member of the board
  shall serve on a full-time basis. [COMPENSATION; EXPENSES.   A
  member is entitled to receive an amount as provided by the General
  Appropriations Act for each day he serves in the performance of his
  duties, together with travel and other necessary expenses.]
         SECTION 1.08.  Section 6.103, Water Code, is amended to read
  as follows:
         Sec. 6.103.  EXECUTIVE ADMINISTRATOR. The board shall
  appoint a person to be the executive administrator to serve at the
  will of the board.  A person is not eligible for appointment as the
  executive administrator if the person served in that capacity on
  January 1, 2013.
         SECTION 1.09.  (a)  Not later than September 1, 2013, the
  governor shall appoint the initial members of the Texas Water
  Development Board under Section 6.052, Water Code, as amended by
  this Act.  In appointing the initial members of the board, the
  governor shall appoint one person to a term expiring February 1,
  2015, one to a term expiring February 1, 2017, and one to a term
  expiring February 1, 2019.
         (b)  The terms of the current members of the board expire
  September 1, 2013.
         SECTION 1.10.  (a)  Not later than October 1, 2013, the Texas
  Water Development Board shall appoint the executive administrator
  of the board under Section 6.103, Water Code, as amended by this
  Act.
         (b)  The person currently serving as the executive
  administrator of the board ceases to serve in that capacity on the
  date a new executive administrator is appointed under Subsection
  (a) of this section.
  ARTICLE 2.  FUNDING OF WATER PROJECTS
         SECTION 2.01.  (a)  The legislature recognizes the
  importance of providing for this state's future water supply needs.
  The purpose of this article is to ensure that proper funding in the
  form of meaningful and adequate financial assistance is available
  to provide an adequate water supply for the future of this state.
         (b)  To accomplish that purpose, this article creates the
  state water implementation fund for Texas. The fund is intended to
  serve as a water infrastructure bank in order to enhance the
  financing capabilities of the Texas Water Development Board under
  constitutionally created programs and revenue bond programs. The
  fund provides a source of revenue or security for those programs and
  provides a cash flow mechanism under which money used in board
  programs flows back to the fund to provide protection for the fund's
  corpus. Money in the fund will be available immediately to provide
  support for low-interest loans, longer repayment terms for loans,
  incremental repurchase terms for projects in which the state owns
  an interest, and deferral of loan payments. Money in the fund may
  not be used to make grants.  In addition, this article creates the
  state water implementation revenue fund for Texas for use in
  managing revenue bonds issued by the board that are supported by the
  state water implementation fund for Texas.
         SECTION 2.02.  Chapter 15, Water Code, is amended by adding
  Subchapters G and H to read as follows:
  SUBCHAPTER G. STATE WATER IMPLEMENTATION FUND FOR TEXAS
         Sec. 15.431.  DEFINITIONS. In this subchapter:
               (1)  "Advisory committee" means the State Water
  Implementation Fund for Texas Advisory Committee.
               (2)  "Fund" means the state water implementation fund
  for Texas.
               (3)  "Trust company" means the Texas Treasury
  Safekeeping Trust Company.
         Sec. 15.432.  FUND. (a)  The state water implementation fund
  for Texas is a special fund outside the state treasury to be used by
  the board, without further legislative appropriation, for the
  purpose of implementing the state water plan as provided by this
  subchapter. The board may establish separate accounts in the fund.
  The fund and the fund's accounts are kept and held by the trust
  company for and in the name of the board. The board has legal title
  to money and investments in the fund until money is disbursed from
  the fund as provided by this subchapter and board rules.
         (b)  Money deposited to the credit of the fund may be used
  only as provided by this subchapter.
         (c)  The fund consists of:
               (1)  money transferred or deposited to the credit of
  the fund by law, including money from any source transferred or
  deposited to the credit of the fund at the board's discretion as
  authorized by law;
               (2)  the proceeds of any fee or tax imposed by this
  state that by statute is dedicated for deposit to the credit of the
  fund;
               (3)  any other revenue that the legislature by statute
  dedicates for deposit to the credit of the fund;
               (4)  investment earnings and interest earned on amounts
  credited to the fund; and
               (5)  money transferred to the fund under a bond
  enhancement agreement from another fund or account to which money
  from the fund was transferred under a bond enhancement agreement,
  as authorized by Section 15.435.
         Sec. 15.433.  MANAGEMENT AND INVESTMENT OF FUND. (a)  The
  trust company shall hold and invest the fund, and any accounts
  established in the fund, for and in the name of the board, taking
  into account the purposes for which money in the fund may be used. 
  The fund may be invested with the state treasury pool.
         (b)  The overall objective for the investment of the fund is
  to maintain sufficient liquidity to meet the needs of the fund while
  striving to preserve the purchasing power of the fund.
         (c)  The trust company has any power necessary to accomplish
  the purposes of managing and investing the assets of the fund. In
  managing the assets of the fund, through procedures and subject to
  restrictions the trust company considers appropriate, the trust
  company may acquire, exchange, sell, supervise, manage, or retain
  any kind of investment that a prudent investor, exercising
  reasonable care, skill, and caution, would acquire or retain in
  light of the purposes, terms, distribution requirements, and other
  circumstances of the fund then prevailing, taking into
  consideration the investment of all the assets of the fund rather
  than a single investment.
         (d)  The trust company may charge fees to cover its costs
  incurred in managing and investing the fund. The fees must be
  consistent with the fees the trust company charges other state and
  local governmental entities for which it provides investment
  management services. The trust company may recover fees it charges
  under this subsection only from the earnings of the fund.
         (e)  The trust company annually shall provide a written
  report to the board and to the advisory committee with respect to
  the investment of the fund. The trust company shall contract with a
  certified public accountant to conduct an independent audit of the
  fund annually and shall present the results of each annual audit to
  the board and to the advisory committee. This subsection does not
  affect the state auditor's authority to conduct an audit of the fund
  under Chapter 321, Government Code.
         (f)  The trust company shall adopt a written investment
  policy that is appropriate for the fund.  The trust company shall
  present the investment policy to the investment advisory board
  established under Section 404.028, Government Code. The investment
  advisory board shall submit to the trust company recommendations
  regarding the policy.
         (g)  The board annually shall provide to the trust company a
  forecast of the cash flows into and out of the fund. The board shall
  provide updates to the forecasts as appropriate to ensure that the
  trust company is able to achieve the objective specified by
  Subsection (b).
         (h)  The trust company shall disburse money from the fund as
  directed by the board. The board shall direct disbursements from
  the fund on a semiannual schedule specified by the board and not
  more frequently than twice in any state fiscal year.
         (i)  An investment-related contract entered into under this
  section is not subject to Chapter 2260, Government Code.
         Sec. 15.434.  USE OF FUND; PAYMENTS TO AND FROM OTHER FUNDS
  OR ACCOUNTS. (a)  At the direction of the board, the trust company
  shall make disbursements from the fund to another fund or account
  pursuant to a bond enhancement agreement authorized by Section
  15.435 in the amounts the board determines are needed for debt
  service payments on or security provisions of the board's general
  obligation bonds or revenue bonds, after considering all other
  sources available for those purposes in the respective fund or
  account.
         (b)  Of the money disbursed from the fund during the
  five-year period between the adoption of a state water plan and the
  adoption of a new plan, the board shall undertake to apply not less
  than:
               (1)  10 percent to support projects described by
  Section 15.435 that are for:
                     (A)  rural political subdivisions as defined by
  Section 15.992; or
                     (B)  agricultural water conservation; and
               (2)  20 percent to support projects described by
  Section 15.435 that are designed for water conservation or reuse,
  including agricultural water conservation in:
                     (A)  metropolitan statistical areas with a
  population of 325,000 or less; or
                     (B)  counties that are outside the boundaries of
  any metropolitan statistical area.
         Sec. 15.435.  BOND ENHANCEMENT AGREEMENTS. (a)  A bond
  enhancement agreement entered into under this section is an
  agreement for professional services. A bond enhancement agreement
  must contain terms that are consistent with Section 15.433(h), and
  the agreement, including the period covered by the agreement and
  all other terms and conditions of the agreement, must be approved by
  the board. An obligation to disburse money from the fund in
  accordance with a bond enhancement agreement is a special
  obligation of the board payable solely from designated income and
  receipts of the fund or an account in the fund established by the
  board, as determined by the board. An obligation to disburse money
  from the fund in accordance with a bond enhancement agreement does
  not constitute indebtedness of the state.
         (b)  To facilitate the use of the fund for the purposes of
  this subchapter, the board may direct the trust company to enter
  into bond enhancement agreements to provide a source of revenue or
  security for the payment of the principal of and interest on general
  obligation bonds, including bonds issued under Section 49-d-9 or
  49-d-11, Article III, Texas Constitution, or revenue bonds issued
  by the board to finance or refinance projects included in the state
  water plan if the proceeds of the sale of the bonds have been or will
  be deposited to the credit of:
               (1)  the state water implementation revenue fund for
  Texas;
               (2)  the water infrastructure fund;
               (3)  the rural water assistance fund;
               (4)  the Texas Water Development Fund II state
  participation account; or
               (5)  the agricultural water conservation fund.
         (c)  If the trust company enters into a bond enhancement
  agreement under Subsection (b), the board may direct the trust
  company to make disbursements from the fund to another fund or
  account for the support of bonds the proceeds of which are used to
  provide financial assistance in the form of:
               (1)  a loan bearing an interest rate of not less than 50
  percent of the then-current market rate of interest available to
  the board;
               (2)  a loan to finance a facility under repayment terms
  similar to the terms of debt customarily issued by the entity
  requesting assistance but not to exceed the lesser of:
                     (A)  the expected useful life of the facility; or
                     (B)  30 years;
               (3)  a deferral of loan repayment, including deferral
  of the repayment of:
                     (A)  principal and interest; or
                     (B)  accrued interest;
               (4)  incremental repurchase terms for an acquired
  facility, including terms for no initial repurchase payment
  followed by progressively increasing incremental levels of
  interest payment, repurchase of principal and interest, and
  ultimate repurchase of the entire state interest in the facility
  using simple interest calculations; or
               (5)  a combination of the methods of financing
  described by Subdivisions (1)-(4).
         (d)  The board may direct the trust company to enter into
  bond enhancement agreements with respect to bonds issued by the
  board before September 1, 2013, only if:
               (1)  those bonds otherwise satisfy the requirements of
  Subsections (b) and (c);
               (2)  the proceeds of those bonds were or are required to
  be used only for the implementation of water projects recommended
  through the state and regional water planning processes under
  Sections 16.051 and 16.053; and
               (3)  general revenue of the state was appropriated
  before September 1, 2013, for the payment of debt service on those
  bonds.
         (e)  The board may direct the trust company to enter into
  bond enhancement agreements with respect to refunding bonds issued
  by the board to refund bonds issued by the board the proceeds of
  which have been or are to be used for projects included in the state
  water plan and which otherwise satisfied the requirements of
  Subsections (b) and (c).
         (f)  The board may not direct the trust company to enter into
  a bond enhancement agreement with respect to bonds issued by the
  board the proceeds of which have been or are to be used to make
  grants.
         (g)  The board may not direct the trust company to enter into
  a bond enhancement agreement with respect to bonds issued by the
  board the proceeds of which may be used to provide financial
  assistance to an applicant if at the time of the request the
  applicant has failed to:
               (1)  submit or implement a water conservation plan in
  accordance with Section 11.1271; or
               (2)  satisfactorily complete a request by the executive
  administrator or a regional water planning group for information
  relevant to the project for which the financial assistance is
  sought, including a water infrastructure financing survey under
  Section 16.053(q).
         (h)  The board may not approve a bond enhancement agreement
  with respect to bonds issued by the board unless the agreement
  contains a provision to the effect that if the trust company makes a
  disbursement under the bond enhancement agreement from the fund to
  the credit of another fund or account as provided by Section
  15.434(a), the board shall direct the comptroller to transfer an
  amount not to exceed that amount from the fund or account receiving
  the payment back to the fund if:
               (1)  money is available in the surplus balance in the
  fund or account for that purpose; and
               (2)  the money transferred back to the fund will not
  cause general obligation bonds that are payable from the fund or
  account receiving the payment to no longer be self-supporting for
  purposes of Section 49-j(b), Article III, Texas Constitution.
         (i)  For purposes of Subsection (h)(1), the surplus balance
  of a fund or account that receives a disbursement from the fund
  under a bond enhancement agreement is the amount of money on deposit
  in the fund or account, as determined by the board, that is
  attributable to the general obligation bonds or revenue bonds that
  are the subject of the bond enhancement agreement, including money
  received from the sale or other disposition of the board's rights to
  receive repayment of financial assistance, money received from the
  sale, transfer, or lease of an acquired facility, money received
  from the sale of water associated with an acquired facility, and
  related investment earnings, that exceeds the amount required to
  pay annual debt service on the bonds and any other amounts specified
  in the resolution or other proceedings authorizing the bonds and
  any related obligations.
         (j)  The board shall submit each bond enhancement agreement
  and the record relating to the agreement to the attorney general for
  examination as to the validity of the agreement. If the attorney
  general finds that the agreement has been made in accordance with
  the constitution and other laws of this state, the attorney general
  shall approve the agreement and the comptroller shall register the
  agreement.  If the agreement is not submitted at the same time that
  the bonds to which it relates are submitted, the agreement shall be
  treated as a public security solely for the purposes of Section
  1202.004, Government Code.
         (k)  After a bond enhancement agreement has been approved and
  registered as provided by Subsection (j), the agreement is valid
  and is incontestable for any cause.
         Sec. 15.436.  PRIORITIZATION OF PROJECTS BY REGIONAL WATER
  PLANNING GROUPS. (a)  Each regional water planning group shall
  prioritize projects in its respective regional water planning area
  for the purposes of Section 15.435. At a minimum, a regional water
  planning group must consider the following criteria in prioritizing
  each project:
               (1)  the decade in which the project will be needed;
               (2)  the feasibility of the project, including the
  availability of water rights for purposes of the project and the
  hydrological and scientific practicability of the project;
               (3)  the sustainability of the project, taking into
  consideration the life of the project; and
               (4)  the cost-effectiveness of the project, taking into
  consideration the expected unit cost of the water to be supplied by
  the project.
         (b)  In prioritizing projects, each regional water planning
  group shall include projects that meet long-term needs as well as
  projects that meet short-term needs.
         (c)  The board shall create a stakeholders committee
  composed of the presiding officer or a person designated by the
  presiding officer of each regional water planning group to
  establish standards to be used by the regional water planning
  groups in prioritizing projects under this section. The
  stakeholders committee may establish different standards to be used
  by different regional water planning groups as necessary to account
  for different circumstances affecting each region.  Standards
  established under this subsection must be approved by the board.
  The board shall consult the stakeholders committee from time to
  time regarding regional prioritization of projects.
         (d)  Each regional water planning group shall submit to the
  board the prioritization developed by the group under this section
  together with the group's respective regional water plan developed
  and submitted under Section 16.053.
         Sec. 15.437.  PRIORITIZATION OF PROJECTS BY BOARD. (a)  The
  board shall prioritize projects included in the state water plan
  for the purpose of providing financial assistance under this
  subchapter.
         (b)  The board shall establish a system for prioritizing
  projects for which financial assistance is sought from the board.
  The system must provide for giving priority to projects in the
  following order:
               (1)  projects that develop new water supplies, provide
  for the conservation or reuse of existing supplies, or provide for
  the conveyance of new water supplies to a water supply system;
               (2)  projects for new or expanded water treatment
  plants to treat newly developed water supplies; and
               (3)  projects that meet unidentified future water
  supply needs.
         (c)  The system established under Subsection (b) must
  incorporate the following prioritization criteria:
               (1)  the recommendation of the state water plan
  regarding timing of implementation of the project;
               (2)  the scope of the regional benefits of the project,
  considering the number of entities and the size of the population to
  be served by the project or other factors;
               (3)  the type of state financial assistance sought for
  the project;
               (4)  the percentage of the water supply needs of the
  region served by the project that will be met by the project;
               (5)  the status of implementation of the project;
               (6)  the amount of local funds to be used to finance the
  project; and
               (7)  the priority given the project by the applicable
  regional water planning group under Section 15.436.
         Sec. 15.438.  ADVISORY COMMITTEE. (a)  The State Water
  Implementation Fund for Texas Advisory Committee is composed of the
  following seven members:
               (1)  the comptroller, or a person designated by the
  comptroller;
               (2)  three members of the senate appointed by the
  lieutenant governor, including:
                     (A)  a member of the committee of the senate
  having primary jurisdiction over matters relating to finance; and
                     (B)  a member of the committee of the senate
  having primary jurisdiction over natural resources; and
               (3)  three members of the house of representatives
  appointed by the speaker of the house of representatives,
  including:
                     (A)  a member of the committee of the house of
  representatives having primary jurisdiction over appropriations;
  and
                     (B)  a member of the committee of the house of
  representatives having primary jurisdiction over natural
  resources.
         (b)  The following persons shall serve as staff support for
  the advisory committee:
               (1)  the deputy executive administrator of the board
  who is responsible for water science and conservation or a person
  who holds an equivalent position at the agency, or a person
  designated by that person;
               (2)  the deputy executive administrator of the board
  who is responsible for water resources planning and information or
  a person who holds an equivalent position at the agency, or a person
  designated by that person; and
               (3)  the chief financial officer of the board, or a
  person who holds an equivalent position at the agency.
         (c)  The advisory committee shall select a nationally
  recognized bond counsel and financial advisor to serve as the
  advisory committee's independent legal counsel for the purpose of
  advising the advisory committee in connection with the
  administration of the advisory committee's duties under this
  section. The board is responsible for paying the cost of retaining
  a bond counsel and financial advisor and may pay the cost from the
  fund.
         (d)  An appointed member of the advisory committee serves at
  the will of the person who appointed the member.
         (e)  The lieutenant governor shall appoint a co-presiding
  officer of the advisory committee from among the members appointed
  by the lieutenant governor, and the speaker of the house of
  representatives shall appoint a co-presiding officer of the
  committee from among the members appointed by the speaker.
         (f)  The advisory committee may hold public hearings, formal
  meetings, or work sessions. Either co-presiding officer of the
  advisory committee may call a public hearing, formal meeting, or
  work session of the advisory committee at any time. The advisory
  committee may not take formal action at a public hearing, formal
  meeting, or work session unless a quorum of the committee is
  present.
         (g)  Except as otherwise provided by this subsection, a
  member of the advisory committee is not entitled to receive
  compensation for service on the committee or reimbursement for
  expenses incurred in the performance of official duties as a member
  of the committee.  Service on the advisory committee by a member of
  the senate or house of representatives is considered legislative
  service for which the member is entitled to reimbursement and other
  benefits in the same manner and to the same extent as for other
  legislative service.
         (h)  The advisory committee shall submit comments and
  recommendations to the board regarding the use of money in the fund
  for use by the board in adopting rules under Section 15.439 and in
  adopting policies and procedures under Section 15.441. The
  submission must include:
               (1)  comments and recommendations on rulemaking
  related to the prioritization of projects in regional water plans
  and the state water plan in accordance with Sections 15.436 and
  15.437;
               (2)  comments and recommendations on rulemaking
  related to establishing standards for determining whether projects
  meet the criteria provided by Section 15.434(b);
               (3)  an evaluation of the available programs for
  providing financing for projects included in the state water plan
  and guidelines for implementing those programs, including
  guidelines for providing financing for projects included in the
  state water plan that are authorized under Subchapter Q or R of this
  chapter, Subchapter E or F, Chapter 16, or Subchapter J, Chapter 17;
               (4)  an evaluation of the lending practices of the
  board and guidelines for lending standards;
               (5)  an evaluation of the use of funds by the board to
  provide support for financial assistance for water projects,
  including support for the purposes described by Section 15.435(c);
               (6)  an evaluation of whether premium financing
  programs should be established within the funds described by
  Section 15.435 to serve the purposes of this subchapter, especially
  in connection with projects described by Section 15.434(b);
               (7)  an evaluation of methods for encouraging
  participation in the procurement process by companies domiciled in
  this state; and
               (8)  an evaluation of the overall operation, function,
  and structure of the fund.
         (i)  The advisory committee shall review the overall
  operation, function, and structure of the fund at least
  semiannually and may provide comments and recommendations to the
  board on any matter.
         (j)  The advisory committee may adopt rules, procedures, and
  policies as needed to administer this section and implement its
  responsibilities.
         (k)  Chapter 2110, Government Code, does not apply to the
  size, composition, or duration of the advisory committee.
         (l)  The advisory committee is subject to Chapter 325,
  Government Code (Texas Sunset Act). Unless continued in existence
  as provided by that chapter, the advisory committee is abolished
  and this section expires September 1, 2023.
         (m)  The advisory committee shall make recommendations to
  the board regarding information to be posted on the board's
  Internet website under Section 15.440(b).
         Sec. 15.439.  RULES. (a)  The board shall adopt rules
  providing for the use of money in the fund that are consistent with
  this subchapter, including rules:
               (1)  establishing standards for determining whether
  projects meet the criteria provided by Section 15.434(b); and
               (2)  specifying the manner for prioritizing projects
  for purposes of Section 15.437.
         (b)  The board shall give full consideration to the
  recommendations of the advisory committee before adopting rules
  under this subchapter.
         Sec. 15.440.  REPORTING AND TRANSPARENCY REQUIREMENTS. (a)  
  Not later than December 1 of each even-numbered year, the board
  shall provide a report to the governor, lieutenant governor,
  speaker of the house of representatives, and members of the
  legislature regarding the use of the fund, including the use of the
  fund to support projects that are for rural political subdivisions
  or agricultural water conservation or that are designed for water
  conservation or reuse as required by Section 15.434(b).
         (b)  The board shall post the following information on the
  board's Internet website regarding the use of the fund and
  regularly update the information posted:
               (1)  the progress made in developing needed water
  supply statewide and for the benefit of each regional water
  planning area; and
               (2)  for each regional water planning area, a
  description of each project funded through bonds supported by a
  bond enhancement agreement entered into under Section 15.435,
  including:
                     (A)  the expected date of completion of the
  project; and
                     (B)  the current status of the project.
         Sec. 15.441.  POLICIES AND PROCEDURES TO MITIGATE OR
  MINIMIZE ADVERSE EFFECTS OF CERTAIN FEDERAL LAWS. The board shall
  adopt, and may amend from time to time at the board's discretion,
  policies and procedures for the purpose of mitigating or minimizing
  the adverse effects, if any, of federal laws and regulations
  relating to income taxes, arbitrage, rebates, and related matters
  that may restrict the board's ability to freely invest all or part
  of the fund or to receive and retain all the earnings from the fund.
  SUBCHAPTER H. STATE WATER IMPLEMENTATION REVENUE FUND FOR TEXAS
         Sec. 15.471.  DEFINITION. In this subchapter, "fund" means
  the state water implementation revenue fund for Texas.
         Sec. 15.472.  FUND. (a)  The state water implementation
  revenue fund for Texas is a special fund outside the state treasury
  to be used by the board, without further legislative appropriation,
  for the purpose of providing financing for projects included in the
  state water plan that are authorized under Subchapter Q or R of this
  chapter, Subchapter E or F, Chapter 16, or Subchapter J, Chapter 17.
  The board may establish separate accounts in the fund. The board
  has legal title to money and investments in the fund until the money
  is disbursed as provided by this subchapter and board rules.
         (b)  Money deposited to the credit of the fund may be used
  only as provided by this subchapter.
         (c)  The fund consists of:
               (1)  money transferred or deposited to the credit of
  the fund by law, including money from any source transferred or
  deposited to the credit of the fund at the board's discretion as
  authorized by law;
               (2)  the proceeds of any fee or tax imposed by this
  state that by statute is dedicated for deposit to the credit of the
  fund;
               (3)  any other revenue that the legislature by statute
  dedicates for deposit to the credit of the fund;
               (4)  investment earnings and interest earned on amounts
  credited to the fund;
               (5)  the proceeds from the sale of bonds, including
  revenue bonds issued by the board under this subchapter, that are
  designated by the board for the purpose of providing money for the
  fund; and
               (6)  money disbursed to the fund from the state water
  implementation fund for Texas as authorized by Section 15.434.
         Sec. 15.473.  MANAGEMENT AND INVESTMENT OF FUND. (a)  Money
  deposited to the credit of the fund shall be invested as determined
  by the board. The fund may be invested with the state treasury
  pool.
         (b)  The fund and any accounts established in the fund shall
  be kept and maintained by or at the direction of the board.
         (c)  At the direction of the board, the fund and any accounts
  established in the fund may be kept and held in escrow and in trust
  by the comptroller or a corporate trustee that is a trust company or
  a bank that has the powers of a trust company for and on behalf of
  the board and pending their use for the purposes provided by this
  subchapter may be invested as provided by an order, resolution, or
  rule of the board.
         (d)  The comptroller or corporate trustee, as custodian,
  shall administer the fund in strict accordance with this subchapter
  and the orders, resolutions, and rules of the board.
         Sec. 15.474.  USE OF FUND. (a)  Except as provided by
  Subsection (c), money in the fund may be used by the board only to
  provide financing or refinancing, under terms specified by the
  board, for projects included in the state water plan that are
  authorized under Subchapter Q or R of this chapter, Subchapter E or
  F, Chapter 16, or Subchapter J, Chapter 17.
         (b)  Financing or refinancing of projects described by
  Subsection (a) may be provided by using money in the fund to:
               (1)  make loans to fund participants or to purchase
  bonds or other obligations of fund participants bearing interest at
  a rate or rates determined by the board, including rates below
  prevailing market rates; or
               (2)  guarantee debt service payments on obligations of
  fund participants, or to purchase insurance guaranteeing such
  payments, if the board determines that the guarantee or purchase
  will:
                     (A)  improve access to the credit market;
                     (B)  reduce the interest cost of the obligations;
  or
                     (C)  enhance the value of the assets of the fund.
         (c)  The board may use money in the fund:
               (1)  as a source of revenue or security for:
                     (A)  the payment of the principal of and interest
  on:
                           (i)  revenue bonds issued by the board under
  this subchapter; or
                           (ii)  other bonds issued by the board if the
  proceeds of the bonds will be deposited in the fund; or
                     (B)  a bond enhancement agreement; or
               (2)  to pay the necessary and reasonable expenses of
  paying agents, bond counsel, and financial advisory services and
  similar costs incurred by the board in administering the fund.
         Sec. 15.475.  ISSUANCE OF REVENUE BONDS. (a)  The board may
  issue revenue bonds for the purpose of providing money for the fund.
         (b)  The board may issue revenue bonds to refund revenue
  bonds or bonds and obligations issued or incurred in accordance
  with other provisions of law.
         (c)  Revenue bonds issued under this subchapter are special
  obligations of the board payable only from and secured by
  designated income and receipts of the fund, including principal of
  and interest paid and to be paid on fund assets or income from
  accounts created within the fund by the board, as determined by the
  board.
         (d)  Revenue bonds issued under this subchapter do not
  constitute indebtedness of the state as prohibited by the
  constitution.
         (e)  The board may require fund participants to make charges,
  levy taxes, or otherwise provide for sufficient money to pay
  acquired obligations.
         (f)  Revenue bonds issued under this subchapter must be
  authorized by resolution of the board and must have the form and
  characteristics and bear the designations as the resolution
  provides.
         (g)  Revenue bonds issued under this subchapter may:
               (1)  bear interest at the rate or rates payable
  annually or otherwise;
               (2)  be dated;
               (3)  mature at the time or times, serially, as term
  revenue bonds, or otherwise in not more than 50 years from their
  dates;
               (4)  be callable before stated maturity on the terms
  and at the prices, be in the denominations, be in the form, either
  coupon or registered, carry registration privileges as to principal
  only or as to both principal and interest and as to successive
  exchange of coupon for registered bonds or one denomination for
  bonds of other denominations, and successive exchange of registered
  revenue bonds for coupon revenue bonds, be executed in the manner,
  and be payable at the place or places inside or outside the state,
  as provided by the resolution;
               (5)  be issued in temporary or permanent form;
               (6)  be issued in one or more installments and from time
  to time as required and sold at a price or prices and under terms
  determined by the board to be the most advantageous reasonably
  obtainable; and
               (7)  be issued on a parity with and be secured in the
  manner as other revenue bonds authorized to be issued by this
  subchapter or may be issued without parity and secured differently
  than other revenue bonds.
         (h)  Section 17.955 applies to revenue bonds issued under
  this subchapter in the same manner as that section applies to water
  financial assistance bonds.
         (i)  All proceedings relating to the issuance of revenue
  bonds issued under this subchapter shall be submitted to the
  attorney general for examination. If the attorney general finds
  that the revenue bonds have been authorized in accordance with law,
  the attorney general shall approve the revenue bonds, and the
  revenue bonds shall be registered by the comptroller. After the
  approval and registration, the revenue bonds are incontestable in
  any court or other forum for any reason and are valid and binding
  obligations in accordance with their terms for all purposes.
         (j)  The proceeds received from the sale of revenue bonds
  issued under this subchapter may be deposited or invested in any
  manner and in such investments as may be specified in the resolution
  or other proceedings authorizing those obligations. Money in the
  fund or accounts created by this subchapter or created in the
  resolution or other proceedings authorizing the revenue bonds may
  be invested in any manner and in any obligations as may be specified
  in the resolution or other proceedings.
         Sec. 15.476.  SUBCHAPTER CUMULATIVE OF OTHER LAWS. (a) This
  subchapter is cumulative of other laws on the subject, and the board
  may use provisions of other applicable laws in the issuance of bonds
  and other obligations and the execution of bond enhancement
  agreements, but this subchapter is wholly sufficient authority for
  the issuance of bonds and other obligations, the execution of bond
  enhancement agreements, and the performance of all other acts and
  procedures authorized by this subchapter.
         (b)  In addition to other authority granted by this
  subchapter, the board may exercise the authority granted to the
  governing body of an issuer with regard to the issuance of
  obligations under Chapter 1371, Government Code.
         SECTION 2.03.  Section 15.973(b), Water Code, is amended to
  read as follows:
         (b)  The fund consists of:
               (1)  appropriations from the legislature;
               (2)  any other fees or sources of revenue that the
  legislature may dedicate for deposit to the fund;
               (3)  repayments of loans made from the fund;
               (4)  interest earned on money credited to the fund;
               (5)  depository interest allocable to the fund;
               (6)  money from gifts, grants, or donations to the
  fund;
               (7)  money from revenue bonds or other sources
  designated by the board; [and]
               (8)  proceeds from the sale of political subdivision
  bonds or obligations held in the fund and not otherwise pledged to
  the discharge, repayment, or redemption of revenue bonds or other
  bonds, the proceeds of which were placed in the fund; and
               (9)  money disbursed to the fund from the state water
  implementation fund for Texas as authorized by Section 15.434.
         SECTION 2.04.  Section 15.974, Water Code, is amended by
  adding Subsection (b) to read as follows:
         (b)  The board shall transfer back to the state water
  implementation fund for Texas any money disbursed to the fund as
  described by Section 15.973(b)(9) if the requirements of Section
  15.435 are satisfied.
         SECTION 2.05.  Section 15.993, Water Code, is amended to
  read as follows:
         Sec. 15.993.  FUND.  The rural water assistance fund is a
  special fund in the state treasury.  The fund consists of:
               (1)  money directly appropriated to the board for a
  purpose of the fund;
               (2)  repayment of principal and interest from loans
  made from the fund not otherwise needed as a source of revenue
  pursuant to Section 17.9615(b);
               (3)  money transferred by the board from any sources
  available;
               (4)  interest earned on the investment of money in the
  fund and depository interest allocable to the fund;
               (5)  money transferred to the fund from the water
  assistance fund in accordance with Section 15.011(b), including
  proceeds from the sale of political subdivision bonds by the board
  to the Texas Water Resources Finance Authority that are deposited
  in the water assistance fund as provided by Section 17.0871;
               (6)  money from gifts, grants, or donations to the
  fund;
               (7)  money disbursed to the fund from the state water
  implementation fund for Texas as authorized by Section 15.434; and
               (8) [(7)]  any other fees or sources of revenue that
  the legislature may dedicate for deposit to the fund.
         SECTION 2.06.  Section 15.994, Water Code, is amended by
  adding Subsection (i) to read as follows:
         (i)  The board shall transfer back to the state water
  implementation fund for Texas any money disbursed to the fund as
  described by Section 15.993(7) if the requirements of Section
  15.435 are satisfied.
         SECTION 2.07.  Section 17.183, Water Code, is amended to
  read as follows:
         Sec. 17.183.  CONSTRUCTION CONTRACT REQUIREMENTS. (a)  The
  governing body of each political subdivision receiving financial
  assistance from the board shall require in all contracts for the
  construction of a project:
               (1)  that each bidder furnish a bid guarantee
  equivalent to five percent of the bid price;
               (2)  that each contractor awarded a construction
  contract furnish performance and payment bonds:
                     (A)  the performance bond shall include without
  limitation guarantees that work done under the contract will be
  completed and performed according to approved plans and
  specifications and in accordance with sound construction
  principles and practices; and
                     (B)  the performance and payment bonds shall be in
  a penal sum of not less than 100 percent of the contract price and
  remain in effect for one year beyond the date of approval by the
  engineer of the political subdivision; [and]
               (3)  that payment be made in partial payments as the
  work progresses;
               (4)  that each partial payment shall not exceed 95
  percent of the amount due at the time of the payment as shown by the
  engineer of the project, but, if the project is substantially
  complete, a partial release of the five percent retainage may be
  made by the political subdivision with approval of the executive
  administrator;
               (5)  that payment of the retainage remaining due upon
  completion of the contract shall be made only after:
                     (A)  approval by the engineer for the political
  subdivision as required under the bond proceedings;
                     (B)  approval by the governing body of the
  political subdivision by a resolution or other formal action; and
                     (C)  certification by the executive administrator
  in accordance with the rules of the board that the work to be done
  under the contract has been completed and performed in a
  satisfactory manner and in accordance with approved plans and
  specifications [sound engineering principles and practices];
               (6)  that no valid approval may be granted unless the
  work done under the contract has been completed and performed in a
  satisfactory manner according to approved plans and
  specifications; and
               (7)  that, if a political subdivision receiving
  financial assistance under Subchapter K of this chapter, labor from
  inside the political subdivision be used to the extent possible.
         (b)  Plans and specifications submitted to the board in
  connection with an application for financial assistance must
  include a seal by a licensed engineer affirming that the plans and
  specifications are consistent with and conform to current industry
  design and construction standards.
         SECTION 2.08.  Section 17.185(a), Water Code, is amended to
  read as follows:
         (a)  The board may inspect the construction of a project at
  any time to assure that[:
               [(1)]  the contractor is substantially complying with
  the approved engineering plans and specifications of the project[;
  and
               [(2)     the contractor is constructing the project in
  accordance with sound engineering principles].
         SECTION 2.09.  Section 17.187, Water Code, is amended to
  read as follows:
         Sec. 17.187.  CERTIFICATE OF APPROVAL. The executive
  administrator may consider the following as grounds for refusal to
  give a certificate of approval for any construction contract:
               (1)  failure to construct the project according to
  approved plans and specifications; or
               (2)  [failure to construct the works in accordance with
  sound engineering principles; or
               [(3)]  failure to comply with any term of the contract.
         SECTION 2.10.  Section 17.276(c), Water Code, is amended to
  read as follows:
         (c)  The board has the sole responsibility and authority for
  selecting the political subdivisions to whom financial assistance
  may be provided for treatment works and the amount of any such
  assistance. [In consultation with and pursuant to agreement with
  the political subdivision, except as provided by Subsection (d) of
  this section, the board shall determine the location, time, design,
  scope, and all other aspects of the construction of a sewerage
  system for which financial assistance is provided.]
         SECTION 2.11.  Section 17.775(c), Water Code, is amended to
  read as follows:
         (c)  The board has the sole responsibility and authority for
  selecting the political subdivisions to whom financial assistance
  may be provided and [,] the amount of any such assistance[, and in
  consultation with and pursuant to agreement with the political
  subdivision, the board shall determine the location, time, design,
  scope, and all other aspects of the construction to be performed].
         SECTION 2.12.  Section 17.853(c), Water Code, is amended to
  read as follows:
         (c)  The board may use the fund only:
               (1)  to provide state matching funds for federal funds
  provided to the state water pollution control revolving fund or to
  any additional state revolving fund created under Subchapter J,
  Chapter 15;
               (2)  to provide financial assistance from the proceeds
  of taxable bond issues to water supply corporations organized under
  Chapter 67, and other participants;
               (3)  to provide financial assistance to participants
  for the construction of water supply projects and treatment works;
               (4)  to provide financial assistance for an interim
  construction period to participants for projects for which the
  board will provide long-term financing through the water
  development fund;
               (5)  to provide financial assistance for water supply
  and sewer service projects in economically distressed areas as
  provided by Subchapter K, Chapter 17, to the extent the board can
  make that assistance without adversely affecting the current or
  future integrity of the fund or of any other financial assistance
  program of the board; [and]
               (6)  to provide funds to the water infrastructure fund
  created under Section 15.973; and
               (7)  to provide funds to the state water implementation
  revenue fund for Texas created under Section 15.472.
         SECTION 2.13.  Section 17.895, Water Code, is amended to
  read as follows:
         Sec. 17.895.  SOURCES OF ASSETS. The fund is composed of:
               (1)  money and assets, including bond proceeds,
  attributable to the bonds;
               (2)  investment income earned on money on deposit in
  the fund and depository interest earned on money on deposit in the
  state treasury;
               (3)  money appropriated by the legislature;
               (4)  repayments of principal and interest on loans made
  under this subchapter;
               (5)  administrative fees charged by the board under the
  bond program;
               (6) money disbursed to the fund from the state water
  implementation fund for Texas as authorized by Section 15.434; and
               (7) [(6)]  any other funds, regardless of their source,
  that the board directs be deposited to the credit of the fund.
         SECTION 2.14.  Section 17.899, Water Code, is amended by
  adding Subsection (c) to read as follows:
         (c)  The board shall transfer back to the state water
  implementation fund for Texas any money disbursed to the fund as
  described by Section 17.895(6) if the requirements of Section
  15.435 are satisfied.
         SECTION 2.15.  Section 17.957, Water Code, is amended by
  amending Subsection (b) and adding Subsection (d) to read as
  follows:
         (b)  The state participation account is composed of:
               (1)  money and assets attributable to water financial
  assistance bonds designated by the board as issued for projects
  described in Section 16.131;
               (2)  money from the sale, transfer, or lease of a
  project described in Subdivision (1) that was acquired,
  constructed, reconstructed, developed, or enlarged with money from
  the state participation account;
               (3)  payments received under a bond enhancement
  agreement with respect to water financial assistance bonds
  designated by the board as issued for projects described in Section
  16.131;
               (4)  investment income earned on money on deposit in
  the state participation account;
               (5)  money disbursed to the fund from the state water
  implementation fund for Texas as authorized by Section 15.434; and
               (6) [(5)]  any other funds, regardless of their source,
  that the board directs be deposited to the credit of the state
  participation account.
         (d)  The board shall transfer back to the state water
  implementation fund for Texas any money disbursed to the fund as
  described by Subsection (b)(5) of this section if the requirements
  of Section 15.435 are satisfied.
         SECTION 2.16.  Section 49.153(e), Water Code, is amended to
  read as follows:
         (e)  Subsection (c) does not apply to:
               (1)  a note issued to and approved by [the]:
                     (A)  the Farmers Home Administration;
                     (B)  the United States Department of Agriculture;
                     (C)  the Texas Water Development Board; [or]
                     (D)  the North American Development Bank; or
                     (E)  a federally chartered instrumentality of the
  United States authorized under 12 U.S.C. Section 2128(f) to provide
  financing for water and waste disposal facilities; or
               (2)  a district described by Section 49.181(h).
         SECTION 2.17.  Section 49.181(a), Water Code, is amended to
  read as follows:
         (a)  A district may not issue bonds unless the commission
  determines that the project to be financed by the bonds is feasible
  and issues an order approving the issuance of the bonds.  This
  section does not apply to:
               (1)  refunding bonds if the commission issued an order
  approving the issuance of the bonds or notes that originally
  financed the project;
               (2)  refunding bonds that are issued by a district
  under an agreement between the district and a municipality allowing
  the issuance of the district's bonds to refund bonds issued by the
  municipality to pay the cost of financing facilities;
               (3)  bonds issued to and approved by the Farmers Home
  Administration, the United States Department of Agriculture, the
  North American Development Bank, [or] the Texas Water Development
  Board, or a federally chartered instrumentality of the United
  States authorized under 12 U.S.C. Section 2128(f) to finance such a
  project;
               (4)  refunding bonds issued to refund bonds described
  by Subdivision (3); or
               (5)  bonds issued by a public utility agency created
  under Chapter 572, Local Government Code, any of the public
  entities participating in which are districts if at least one of
  those districts is a district described by Subsection (h)(1)(E).
         SECTION 2.18.  (a)  As soon as practicable after the
  effective date of this Act, the lieutenant governor and the speaker
  of the house of representatives shall appoint the initial
  appointive members of the State Water Implementation Fund for Texas
  Advisory Committee as provided by Section 15.438, Water Code, as
  added by this Act.
         (b)  Notwithstanding Subsection (a) of this section and
  Section 15.438, Water Code, as added by this Act, if the lieutenant
  governor and the speaker of the house of representatives do not
  appoint the initial appointive members of the State Water
  Implementation Fund for Texas Advisory Committee as provided by
  Section 15.438, Water Code, as added by this Act, by December 1,
  2013:
               (1)  the presiding officer of the committee of the
  senate having primary jurisdiction over natural resources and the
  presiding officer of the committee of the house of representatives
  having primary jurisdiction over natural resources serve as initial
  members of the advisory committee and as the initial co-presiding
  officers of the advisory committee;
               (2)  the presiding officer of the committee of the
  senate having primary jurisdiction over natural resources shall
  appoint two members of the senate to serve as initial members of the
  advisory committee, including a member who meets the requirements
  of Section 15.438(a)(2)(A), Water Code, as added by this Act; and
               (3)  the presiding officer of the committee of the
  house of representatives having primary jurisdiction over natural
  resources shall appoint two members of the house of representatives
  to serve as initial members of the advisory committee, including a
  member who meets the requirements of Section 15.438(a)(3)(A), Water
  Code, as added by this Act.
         SECTION 2.19.  (a)  Not later than September 1, 2014, the
  State Water Implementation Fund for Texas Advisory Committee shall
  submit recommendations to the Texas Water Development Board on the
  rules to be adopted by the board under Sections 15.439(a)(1) and
  (2), Water Code, as added by this Act.
         (b)  Not later than the later of the 90th day after the date
  the Texas Water Development Board receives the recommendations
  described by Subsection (a) of this section or March 1, 2015, the
  board shall adopt rules under Section 15.439, Water Code, as added
  by this Act.
         SECTION 2.20.  As soon as practicable after the effective
  date of this Act, the Texas Water Development Board shall create a
  stakeholders committee under Section 15.436(c), Water Code, as
  added by this Act.
         SECTION 2.21.  Not later than December 1, 2013, the
  stakeholders committee created by the Texas Water Development Board
  under Section 15.436(c), Water Code, as added by this Act, shall
  submit the standards established by the committee under that
  subsection to the board.
         SECTION 2.22.  (a) Each regional water planning group shall
  prepare a draft prioritization of the projects included in the
  regional water plan most recently adopted by the group in
  accordance with Section 15.436, Water Code, as added by this Act,
  and submit the draft prioritization of the projects to the Texas
  Water Development Board not later than June 1, 2014. The board
  shall provide comments to each regional water planning group on the
  draft prioritization submitted by the group. Each regional water
  planning group shall submit a final prioritization of the projects
  to the board not later than September 1, 2014.
         (b)  Section 15.436(d), Water Code, as added by this Act,
  applies to a regional water plan beginning with the plan that is
  required to be submitted to the Texas Water Development Board by
  January 5, 2016.
         SECTION 2.23.  The Texas Water Development Board shall post
  the information described by Section 15.440(b), Water Code, as
  added by this Act, on the board's Internet website not later than
  March 1, 2014.
  ARTICLE 3. EFFECTIVE DATE
         SECTION 3.01.  This Act takes effect September 1, 2013.
 
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