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Ask an expert: Funding water infrastructure projects through bond sales  Posted on November 9, 2021

TWDB Chairwoman Brooke Paup and TWDB Executive Administrator Jeff Walker at the groundbreaking ceremony for Lake Ralph Hall.

On October 13, the Texas Water Development Board (TWDB) issued revenue bonds to fund water and wastewater projects through the state revolving funds (SRFs). The SRF Series 2021 bond sale followed AAA ratings from financial services companies, continuing a trend of strong ratings for the TWDB’s bond offerings. Hundreds of Texas communities have financed infrastructure projects through the TWDB since its establishment in 1957, and issuing bonds is one method of funding the agency’s loan and grant programs for political subdivisions. To learn more about this and the impact a successful bond sale could have on Texas communities, we asked the TWDB’s chief financial officer, Rebecca Trevino, to share insights on the process.

Can you provide an overview of the TWDB bond sale purpose and process?

The TWDB issues bonds to raise funds that will, in turn, help finance communities’ infrastructure projects. These bonds are offered to investors who, after careful evaluation, may or may not purchase the bonds. If an investor is interested in purchasing a TWDB bond, they work closely with their investment broker to coordinate the purchase. Water infrastructure projects are then financed through the TWDB from the proceeds of that bond sale. Because the TWDB generally repays investors over two or three decades, the communities’ repayment schedules are similar and also usually consistent with the life of a project. 

What types of bonds does the TWDB issue?

The TWDB issues both general obligation and revenue bonds. General obligation bonds are municipal bonds backed by the full faith and credit of the State, which means the State of Texas stands behind those bonds and the State’s general taxing power guarantees their repayment. On the other hand, revenue bonds are authorized by the Texas Legislature and secured by specific revenue streams. 

How do investors evaluate bonds, and why do ratings matter?

The bonds issued by the TWDB have different features that investors evaluate. Some investment committees may use a credit rating as one means to evaluating our bonds. The ratings are generated by credit rating companies with specialists who analyze various investments. Our agency secures two bond ratings for revenue bonds and three bond ratings for general obligation bonds. The credit rating agencies TWDB works with are S&P Global Ratings, Fitch Ratings, and Moody’s. The credit rating is published for each sale, with AAA being the highest, and all our credits are currently rated AAA. Typically, higher ratings will result in lower interest rates for bond sales. Additionally, if there’s a lot of investor interest at the time the TWDB is selling bonds, it could result in lower interest rates. Because the TWDB passes on its lower interest rates to local communities, the borrowing communities benefit directly. 

What types of projects receive funding from bond sales? 

The TWDB funds water and wastewater supply, storage, treatment, and flood control projects. When investors purchase a bond from the TWDB, they are investing in local entities, who use the proceeds from bond sales to pay for planning, acquisition, design, or construction costs associated with their infrastructure projects. Some of our financing programs are the Clean Water State Revolving Fund, the Drinking Water State Revolving Fund, the Flood Infrastructure Fund, and the Economically Distressed Areas Program. When the TWDB lends funds to a community, that community will often pay the agency back with interest. Once that money comes back to us, we can lend those funds out again. In addition, the federal government provides State Revolving Fund grants that we also distribute to communities. 

What is the timeline for bond sales?

Generally, the only TWDB bonds sold on a specific cycle are the State Water Implementation Revenue Fund for Texas (SWIRFT) bonds. The TWDB’s SWIRFT Series 2021 bond sale took place on September 30. These proceeds are used explicitly for water projects identified in the state water plan. The rationale for selling those bonds annually is because each bond series is specific to the projects funded that year. All other programs have different timing needs and we will access the capital markets as needed, based on customer demand.

What are some of the agency’s priorities and goals when it comes to financial policies and practices?

Our priorities and goals are well established and include the preservation and safety of our funds, compliance with various statutory obligations, and exercising prudence and care in all financial activities.

About Rebecca Trevino

As the TWDB’s Chief Financial Officer, Rebecca Trevino oversees the debt and portfolio management team that is ultimately responsible for coordinating the agency’s access to capital markets. She has held various financial leadership roles during her 29 years of state service, including chief financial officer to the Texas Department of Assistive and Rehabilitative Services and deputy chief financial officer at Texas Health and Human Services Commission. She holds a bachelor of business administration in accounting from the University of Texas and is a certified public accountant.



This article is posted in Water Planning / Financial Assistance .