State Question No. 764 creates the Water Infrastructure Credit Enhancement Reserve Fund; allows the Oklahoma Water Resources Board to issue bonds, according to the ballot.
Any bonds issued by OWRB would provide a reserve fund for water resource and sewage treatment funding programs. This fund would only apply to bond payments and program obligations, according to the ballot.
Other funding sources would need to be used before the bonds could be issued.
State Sen. Brian Crain of Tulsa and state Rep. Phil Richardson of Minco, both Republicans, produced the measure.
The general obligation bonds would not exceed $300 million with the passage of SQ 764. The Legislature would administer the funds.
“The $300 million in bonds would never be issued unless the OWRB went into default on indebtedness that we have,” said Joe Freeman, chief of the Financial Assistance Division of OWRB.
OWRB funds projects through selling bonds. The City of Edmond borrows from OWRB for waste water projects. The city would have a 10 percent reserve when borrowing through the OWRB state revenue loan program.
Theoretically, Edmond would have a reserve fund of about $100,000 if it borrowed $1 million through the loan program.
“If Edmond were to go into default on their loan — start missing payments — that would start hitting that reserve and that reserve would make the loan payments to us so that we never missed any payments,” Freeman said of paying the bonds.
The water board would begin paying bonds from its cash reserves of about $22 million, Freeman explained, in the case that a city such as Edmond had used all of the $100,000 loan in default. If a city had a $100 million loan, it would have a $10 million reserve.
If a city spent that $10 million and continued to go into default, it would become problematic for OWRB’s $22 million in cash, Freeman said. Insurance policies of $28.5 million could become depleted.
At that point the state would begin issue bonds not to exceed $300 million, Freeman said. Only if the borrower would go that far into debt would the state government issue bonds to cover the board’s payments, he said. A reserve fund is necessary when issuing bonds.
“I absolutely am against that one,” said state Sen. Jason Murphey, R-Guthrie. “The state already has $2 billion worth of government debt and another $6 billion worth of business type activity debt. I don’t think we should be issuing any more debt, period.”
The Oklahoma Comprehensive Water Plan estimates that an investment of more than $80 billion will be needed for the state to expand and maintain water and wastewater infrastructure in the state for the next 50 years. The Water Infrastructure Credit Enhancement Reserve Fund would begin addressing those needs.
“Our problem is we’ve reached capacity,” Freeman said. “We cannot issue much additional debt to meet demand of borrowers throughout the state.”
The Credit Reserve Enhancement Fund would relieve the state from putting up cash reserves, Freeman said. Standard & Poor’s would then let OWRB issue 10-1, up to $3 billion to fund water and waste water projects throughout Oklahoma’s 77 counties.
“Since the water board has been lending since 1985, we have never got to where we hit our reserves,” Freeman said. “So the likelihood of those bonds ever being issued, statistically is zero.”
The State Chamber of Oklahoma and the Oklahoma Municipal League endorse SQ 764. Economic growth and the protection of available water resources is needed to ensure the delivery of and access to safe drinking water supplies, according to the Chamber.
“If Edmond were to go out and sell its own bonds for a water and waste water project, the interest rate potentially is going to be higher than what we were able to loan to Edmond,” Freeman said. “We have on our state revolving fund programs, AAA ratings from all three rating agencies, and actually Edmond would be borrowing below that, because we subsidize a portion of the interest of expense.”
Communities would potentially pay higher water and sewer bills if SQ 764 fails to pass on Nov. 6, he said.
State Rep. Lewis Moore, R-Edmond, said the Legislature needs to review who has ownership of water rights, especially when it comes to selling water to out-of-state interests such as Texas.
“We live in a semi arid to arid state. We need to look at how we process water and do so in a more efficient manner,” Moore said. “New technologies can do so in a more cost-effective manner.”
Water can be recovered instead of having to replace used water, Moore continued.
“There’s things we can do that are less expensive so why do bonds and create greater debt with something that’s old technology?” Moore said.
TO LEARN MORE about Oklahoma state questions, go to https://www.sos.ok.gov/gov/proposed_questions.aspx