Proposition 2 will authorize the Texas Water Development Board (TWDB) to issue an aggregate of General Obligation (GO) bonds up to $6 billion dollars.
The bonds do not require any capitalization through general appropriations or create debt for the State of Texas; hence there is not a related tax burden for Texas citizens – as the loans provided by the bonds are paid back once the debt of the bond is retired.
These self supporting general obligation bonds have been utilized by the Water Development Board for some time and the current $4.2 billion authority which has been granted to the Board will be exhausted by 2013.
The loans are issued only when requested by local communities and subject to an extensive application and approval process by the Board to ensure that projects are necessary and recipients are capable of repaying the loans. In the history of the program funded by GO bonds there have been zero defaults which make the bonds attractive to conservative investors.
Prop 2 will actually result in lower costs for ratepayers due to the fact that the TWDB can issue bonds and offer loans at lower interest rates than a municipality, for instance, would be able to receive through a municipal bond. Historically the TWDB bonds have made the difference between necessary projects moving forward – or not – which has benefitted communities urban, rural, small and large across the state.
More specific information about Proposition 2 can be found on the Texas Water Development Board (TWDB) website – including how the bonds will be used, who is eligible to receive the loans and restrictions.