The Nickel Report

After conducting a “listening tour” in 14 cities across the state, the Texas Water Development Board (TWDB) has recently released proposed new rules for flood mitigation funding.  The proposed rules implement new legislation and measures[1] adopted in the aftermath of recent notable flooding events experienced in Texas, including Hurricane Harvey, a storm that resulted in an estimated $125 billion in damages.  As a result, the state will now play a significant role in funding flood mitigation infrastructure.  The new measures include, among other things, the TWDB’s implementation of the legislative transfer of about $800 million from the state’s rainy day fund, mainly funded by oil and gas taxes, to a newly-established flood infrastructure fund (FIF).   With the supporting constitutional amendment for the FIF (known as Proposition 8) now having been approved by Texas voters, new sources of funding through grants or low-cost loans will be made available to local communities for flood control, drainage and mitigation projects.  Political subdivisions in need of additional resources to accomplish their flood mitigation goals will want to regularly monitor and potentially shape the implementation of new funding options such as the one addressed in the proposed TWDB rules currently under consideration.

The TWDB proposal would make changes to 31 Texas Administrative Code (TAC) Chapter 363, Subchapter D[2] to address issues such as the eligible use of funds, application requirements and terms of financial assistance.  Eligible political subdivisions include cities, counties, river authorities and districts.  Flood projects such as, for example, those involving planning and design activities, work to obtain regulatory approvals, construction of structural or nonstructural projects (including those that use nature-based features) are eligible for funding.  Flood mitigation project funding would be based on a two-stage application process whereby only those projects that rank within each cycle’s funding capacity would be invited to submit full financial assistance applications.  The prioritization system, which will have protection of life and property as its focus with consideration given to cost-effectiveness, expeditious implementation and regional benefit, is being addressed in further detail in a separate informational document. This Flood Intended Use Plan (IUP) has been released in draft form by the TWDB for comment.  An important element of the rule proposal is that entities applying for flood control projects funded by the FIF will be required to provide a Memorandum of Understanding that includes the political subdivisions within a project watershed to demonstrate that the proposed projects have resulted from a collaborative process.  A prioritization system will be implemented for the projects to be funded as further detailed in the draft Flood IUP.  The anticipated timeline for the proposed inaugural funding cycle would include submittal of an abridged application as early as April 2020, followed by project rankings, invitations to apply, financial assistance commitments, which are currently being targeted for Fall 2020, and borrower closings following after that.

The TWDB currently anticipates adoption of final rules in February 2020.  The rules may be viewed as an interim step in the implementation of the recently enacted flood resilience measures since the TWDB’s adoption of the state’s first statewide flood plan, which is due in 2024, will direct future use of remaining and future flood mitigation funding.  The overall goal of the new measures is to make implementation of flood projects more affordable and improve Texas programs for flood recovery and resilience.

[1] See Senate Bill 7 relating to flood planning, mitigation, and infrastructure projects and Senate Bill 500 relating to making supplemental appropriations and reductions in appropriations which were adopted during the Texas 86th Legislative Session and are available at https://capitol.texas.gov/ and Proposition 8 (H.J.R. 4) available at https://lrl.texas.gov/legis/billsearch/amendmentdetails.cfm?legSession=86-0&billtypeDetail=HJR&billNumberDetail=4&billSuffixDetail=&amendmentID=690

[2] See Hot Topics at TWDB website at http://www.twdb.texas.gov/.