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Ballot initiative could fund Valley's future water needs

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Posted: Tuesday, October 18, 2011 12:00 am

SULLIVAN CITY — A $26 million project to extend sewer lines to this city’s residents for the first time will remove public health hazards and bring needed economic development.

The Agua Special Utility District will open the wastewater treatment plant later this year to provide sewer services to residents in Sullivan City, Los Ebanos and other pockets of western Hidalgo County. But the milestone in Agua SUD’s return from private-receivership will come just as the state funds that made the plant possible threaten to dry up.

In November, voters will consider approving Proposition 2 to authorize the Texas Water Development Board to issue up to $6 billion in general obligation bonds to build water and wastewater projects. One of 10 constitutional amendments that will go before voters, Proposition 2 allows the state to issue more bonds to assist cities, water districts and water supply corporations by financing their projects at a lower rate than they could get on their own.

With the TWDB projected to run out of bonding capacity by 2013, the amendment’s advocates say it will ensure there is financing available for much-needed water projects at a time when population growth and droughts threaten water supplies.

Without state assistance, Agua SUD could not have built the wastewater plant that will improve sanitation and allow for greater business development in western county, said Francisco “Frank” Flores, Agua SUD’s general manager. Just removed from poor financial management that forced the utility provider into a receivership that ended in 2008, Agua SUD would be challenged financing the project on its own.

“If your chief lender and grant provider has no funding, we’re pretty much in a bind,” said Flores, whose agency built the plant using a combination of loans and grants. “We couldn’t do it on our own.”

In the past decade, the TWDB’s bond program has extended $35 million in funding to Hidalgo County to expand wastewater and water services in Agua SUD’s service area, extend city services to colonias outside Donna and Mercedes and aid construction of a wastewater system in northwest Mission.

The TWDB’s self-supporting loan program doesn’t tap state revenues because principal and interest on the loans are paid off by the cities and utility districts that use them to finance water projects. Since the program began in 1957, the TWDB has issued more than $4 billion in state-backed bonds without a single default from a local entity, said Melanie Callahan, the agency’s interim executive administrator. But unless Proposition 2 is passed, the TWDB will exhaust its bonding authority in 2013 and won’t be able to help finance water projects across the state.

Losing the TWDB as an option to finance projects at a low interest rate could be disastrous in smaller communities that lack the stellar credit rating of the state and large cities like Houston or Dallas, said state Sen. Juan “Chuy” Hinojosa, the McAllen Democrat who wrote the legislation to send Proposition 2 before voters. Financing the project on their own could mean higher interest rates that would be passed on to local taxpayers through more expensive utility bills or could keep the project from being built altogether.

“This type of bonding authority lends money to communities that have been very instrumental to the growth in the Valley,” Hinojosa said. “If we don’t develop that water infrastructure, we won’t be able to supply the water we need to meet the growing demand.”

Hinojosa’s legislation to send Proposition 2 to voters garnered near-unanimous support from legislators. But the measure’s opponents claim it would unnecessarily authorize state debt in perpetuity because the TWDB can continually issue new bonds once old debt is paid off. However, the state’s Bond Review Board would continue to review any proposed bond issuance under the constitutional amendment.

Its supporters say the expanded bonding authority is a necessity at a time when demands for water continue to grow.

The TWDB’s 2012 state water plan estimates the state population will expand by 82 percent over the next five decades while water supplies decrease by 10 percent, making long-range planning to meet water needs a necessity, Callahan said. Local regional planning groups identified more than $53 billion in water management strategies and projects to meet the state’s growing needs.

“We have some huge needs out there,” Callahan said. “The best way to address them is for (the TWDB) to be an option.”

The state plan identifies more than $2 billion of capital costs for the South Texas region that includes the Rio Grande Valley as increased urbanization reduces the need for agricultural irrigation. But with the Rio Grande now supplying more than 90 percent of the Valley’s water needs, there must be an effort to reduce dependence on the river by examining alternative sources, said McAllen City Commission Jim Darling, who also chairs the Rio Grande Regional Water Authority. The authority is using a federal grant to evaluate the feasibility of desalinating seawater and the brackish groundwater from local aquifers.

McAllen’s cost to drill a well for groundwater costs about $2 million, about $700,000 less than how much it costs the city to buy the rights to the same amount of surface water, he said. But developing plans to make alternative water sources available in times of drought does no good if they never get off the drawing board.

“We spend money doing water plans but there are really no funding mechanisms to put those in place,” said Darling, whose group supports Prop 2. “It’s time to stop planning and start doing.”

In Edinburg, those plans are taking shape. As part of the budget it adopted last month, the city approved hiring an engineering firm to design plans for expanding the water treatment facility on Freddy Gonzalez Drive, Edinburg City Manager Ramiro Garza said. The expansion plans would double the plant’s capacity, ensuring the city can meet its 5 percent annual growth rate for the foreseeable future.

The city obtained a good rate for a recently completed wastewater plant using its own credit, Garza said. But access to the state’s bonding authority if Proposition 2 is approved could provide a cheaper alternative to fund its water treatment facility expansion.

“We’re just trying to position ourselves for the future,” said Garza, noting that the city would consider the TWDB for assistance. “This is a way for the city to control our own destiny and make sure we have the infrastructure for growth.”


Jared Janes covers Hidalgo County government, Edinburg and legislative issues for The Monitor. He can be reached at (956) 683-4424.

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