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<br />. The purpose of this change obviously is to encourage regionalization. Under the '
<br />best of circumstances, regional water facilities. are difficult to plan because .
<br />• they involve extensive cooperative efforts between local governments. While the
<br />• new legislation is by no means a panacea, it will at least offer substantial
<br />financial benefits to localities willing to involve themselves in' regional •
<br />' efforts.
<br />The second exception is for cities which convert from groundwater to surface ~;' ..
<br />_ water supplies. Many cities currently rely on inexpensive groundwater supplies ;.~
<br />'. that will eventually become unreliable because of depletion, contamination or
<br />• land .subsidence. Hopefully, .state ,financial assistance will provide 'an
<br />~. incentive for localities to shift to surface supplies in time to avoid emergency .
<br />situations. - - - --=-:-- - '
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<br />3. Local Bond Insurance Program ~ : ~ ,• '
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<br />~/ A third provision of Amendment 1 would create a state bond. guaranty program to.' ',
<br />underwrite bonds issued by cities and other localities.
<br />' Under the program, which would resemble the municipal bond 'insurance services
<br />• offered by private firms, the state would pledge its credit to guarantee 'the
<br />- payment of principal and. interest on up to $500 million in bonds issued by local.~•, ;
<br />governments to finance water development, flood control and sewerage projects. ~.
<br />' Backed by the• state's promise to pay in' case of default, bonds issued by ,local ... •
<br />' ~• -units would command a higher rating--and; consequently, lower_interest rates--on ~,.
<br />the municipal bond market. • ~ -, _ • .
<br />For smaller issuers, use of the state's leverage could decrease bond interest
<br />' rates by as much as 1.5 or 2 percent; for larger issuers, .the decrease would be
<br />somewhat less. F.-' But „even-a modest reduction in` interest rates would mean .
<br />' .considerable savings for: local taxpayers.' ~ .'
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<br />' If, £or instance, a city has a Ba bond rating, the state guarantee would raise ."~
<br />___it to A.~ If the,city has"a.Baa"rating, the .state's backing would increase it to. ~..
<br />. Aa; and , so on: : ' . - " . ... - ~ , , . '
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<br />_ In the current bond .market, each bond .rating grade is worth about 75. basis '
<br />'," points--in. other:words three-quarters of one percent' of the rate of .interest;,"-'.:,.;,
<br />' payab,leY •on the , ~ bonds: ~ ,.Therefore, . if ;the state were to guarantee $500 million ..
<br />~. worth' of local--,bonds;j.~ssued.;.foi. 25 years, the state _guarantee woul~d,,produce,. ,~
<br />savings `of about ~$50. millionN over the life of~ the bonds. •
<br />4. }•Water Conservation - . ' j ~ ' • •.
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<br />The enabling'iegislation for Amendment ~1 would require each applicant for state
<br />financial assistance to adopt a water conservation program. In this connection,
<br />the Texas Water Development Board would be authorized to mandate cities and '',~ "
<br />. other applications to enact a variety of conservation alternatives, .including
<br />plumbing code .standards requiring water-efficient devices, universal water '~.
<br />metering, conservation-oriented water rate structures, drought contingency plans ~ .
<br />and community education programs.
<br />"~ ~. _Conservation planning also will be incorporated into the state,°s water permit- ` '.
<br />' ting procedures. Under ,the new legislation, prior to granting a water use
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