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POLICY PROPOSAL
DATE FILE NUMBER SUBJECT Resolution Supporting Passage of PAGE_J_OF 7
on utional Amendment No. 4 on November
PROPOSAL PROPOSED BY: CY MANAGER' RE IEW
Councilman Bert Williams 1
On November 3, the people of Texas will vote on Proposition No. 4 which, with voter
approval, will amend the constitution, as follows:
1. "Authorizing the use of a portion of the excess revenue of the State for
water development, water conservation, water quality enhancement, and
flood control purposes;
2. Authorizing the use of the State's credit, not to exceed $500,000,000, to
guarantee the bonds of cities, counties, towns and other units of local
government in the financing of projects for such purposes;
3. Authorizing a program to retire State bonds; and
4. Increasing the interest rate that may be said on previously approved, but
ffil unissued, State bonds."
"Dedication" of State Surplus
Implementing legislation (HB 8) passed in the 1981 Special Session and relating to
Proposition No. 4 created four funds to be administered by the Texas Water Development
Board (TWDB). The "Water Assistance Fund" is a holding fund from which TWDB will
01111 distribute money to the other three funds. In addition to $40 million appropriated
from general revenue, this fund would receive one-half of the State's "excess revenue''
if Amendment No. 4 passes. The "!,later Loan Assistance Fund" will be used to loan money
to local governments to buy local bonds, and to pay interest on those bonds (not relate
to No. 2 above). The "Storage Acquisition Fund" will be used to acquire, construct,
enlarge or develop water storage projects, or to provide debt service on local
government bonds. The "Research and Planning Fund" will finance research on conserva-
tion, water development and flood control. As a practical matter, the passage of
Proposition No. 4 would have the effect of declaring an intent to dedicate a portion
of the State's surplus revenues to water development purposes since the Legislature
could by law limit the amount of transfers to water funds. It could also allow money
in water funds not obligated by contract to be used for any other purpose.
State Guarantee of Local Water Bonds
The Water Bond Guarantee Program established in HB 8 is contingent upon passage of
Proposition No. 4. The Legislature would be authorized to establish the rates of
LEGALITY 91
FISCAL NOTE
CITY MANAGER'S COMMENTS �x
POLICY PROPOSAL (cont'd) PAGE 2 OF 2
guarantees to total liability. Thus the guarantee of $1 billion of bonds authorized
in HB 8 can be leveraged for greater coverage in lending the State's credit to local
bonds. Since the effect of the water bond guarantee program is to secure improved
ratings and lower interest rates on local bonds, local political subdivisions which
maintain excellent credit ratings would stand to benefit little from this provision.
State Bond Retirement Program
This provision of Amendment No. 4 establishes a program for the retirement of the
State's general obligation bonded debt. Both "surplus" funds and other State revenues
may be placed in this fund by the Legislature. Once this fund has reached a level
sufficient to meet debt service requirements on designated bonds, revenues previously
dedicated for that purpose could be used to make new loans or the Legislature could
appropriate the money for any other purpose.
Increased Interest Rates
The final provision of Proposition No. 4 would increase the present constitutional
limit for interest rates on State bonds from 6 to 12 percent. Also, by a two-thirds
vote of each House, the Legislature would be authorized to raise the rate still higher,
when economic conditions are such that State bonds are not marketable at the 12%
interest level.
Support for Amendment
The Texas Municipal League's Board of Directors, at the September meeting, voted to
support passage of Proposition No. 4. The League's President, Mayor Carole McClellan
of Austin, is also General Chairman of "Water for Texas", a Statewide group working
for passage of the amendment. In addition to Governor Clements' publicized support,
former Governors Briscoe, Smith and Connally are serving on the steering committee
of the Water For Texas organization. Leaders of business and industry throughout
Texas constitute the largest representation on the organization's steering committee.
Legality
Not applicable
Fiscal Note
Not applicable
City Manager's Comment
The City Manager supports Amendment No. 4.
Recommendations
It is recommended that the City Council:
0001, 1. Adopt the attached resolution supporting passage of Proposition No. 4 at the
special election on November 3, 1981; and
2. Authorize the distribution of the Resolution to the news media.
CITY OF FORT WORTH